Can Collector's Coins Hedge Your Bullion Purchases?

Let’s say you really like how the financials are looking, and wish to invest. Do you only buy Wells Fargo? Or do you buy more than just one stock? Similarly, if you really like how the precious metals are looking, do you buy only bullion?

I personally like Mike Maloney. I think he has done a great job building awareness about precious metals and their ability to hedge for one in an uncertain economic landscape. I buy bullion, both gold and silver, and believe in the coming years it will appreciate off of the nadir of Summer/fall 2013.

But, I think Mike Maloney, and others like him, have put too much emphasis on the scams people fall victim to when buying collector’s coins.  First of all, people fall victim to scams no matter the industry. Even bullion buyers have been ripped off. The problem isn’t the collector coins, it is dishonest dealers and uninformed customers.

For a bullion buyer, collector’s coins such as Morgan Dollars and Pre-1933 Gold seem mysterious. But, really, they could act as a legitimate hedge against the volatility in the bullion market, if the bullion buyer learned to understand the rare coin market.

The people who understand collector’s coins love them.

There are three levels of precious metals: 1) bullion 2) semi-numismatic and 3) numismatic.

The semi-numismatic coin market is a stepping stone from bullion to numismatic. There are lots of good values for individuals within the semi-numismatic space. Someone merely needs to be educated on why a MS-64 Saint at $1,800 represents a tremendous value in relation to a bullion coin. For many, once they understand this, they decide that buying a bit of semi-numismatic coins might be in their interest, at least as a hedge against their bullion.

The premiums on these coins have been much higher historically.

Premiums on collector’s go down when precious metals go up in price, whether it be sterling statues or Pre-1933 gold coins. The premiums will return as the upward volatility settles. And that doesn’t mean the metals go down, it means that metals simply maintain the levels they have increased to in the past decade. It takes time for the semi-numismatic coin premiums to return. Making now a good time to buy, if you understand what you’re doing.

Coins have price histories. There is not much of a gamble in the semi-numismatic gold because the prices are well-defined and the premiums are low in relation to the gold price, and price history. For an informed individual, this can be made clear, and the right purchases can be made.

– Peter Kevorkian, United CPM President