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Key Date Gold

Posted on: 2016-01-07

America's Golden Heritage

From 1795 to 1933, the United States produced gold coins for use in commerce, both within the U.S. and internationally with our overseas trading partners. Mintages ranged from a few hundred of certain coins to several million for others.

U.S. gold coins were issued for circulation in six denominations: $1.00, $2.50 (Quarter Eagle), $3.00, $5.00 (Half Eagle), $10.00 (Eagle) and $20.00 (Double Eagle).

The total mintage of U.S. gold coins exceeded 100 million pieces from eight mints, yet very few of these coins, ranging from seventy to over two hundred years old, remain today. It is estimated that upwards of 95% of the original mintages are forever lost to collector hoarding, mishandling or melting.

What is a Key Date Coin?

A Key Date coin is a coin originating from a certain date from which samples are difficult to locate due to rarity resulting from low survival rates and/or low original mintages. However, the survival rate of the coin takes much greater precedence and significance in determining the quality of the coin, while the age and original mintage have little bearing on the piece's current value.

Rare coins no longer are being produced, and in fact, once a coin was minted, the original die was destroyed to prevent further replication. However, the number of examples surviving in a particular condition today determines the rarity of a coin. While original mintage figures indicate the number of coins struck lifetimes ago, these figures are not necessarily indicative of current rarity. In 1986, the rare coin market was revolutionized by the creation of nationally recognized, independent professional graders, or numismatists, who examine each coin for authenticity, and grade them according to established standards, setting a universally accepted grading scale in the marketplace. Population reports published by these two services, Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC), have revealed that many issues considered rare for years are actually relatively common.

Where Did All The Gold Coins Go?

Twice during the 200-year history of U.S. coinage, U.S. gold coins were recalled and melted by the government. These two government meltdowns helped transform U.S gold coinage from common monetary units into excellent investments since the meltings left a relatively small surviving population of U.S. coins minted from 1795 to 1933.

The first melting occurred in 1834 when the gold content of U.S. coins was reduced and nearly all gold coins minted from the period 1795 to 1834 were melted because their intrinsic value exceeded their face value.

The second melting resulted from the great Gold Confiscation of 1933, when 90% to 95% of all U.S. gold coins held by individuals, banks, and the Treasury were recalled, thrown into huge melting pots, and poured into 100-ounce and 400-ounce gold bars. Franklin Roosevelt's Gold Confiscation of 1933 marked the end of regular issue, legal tender U.S. gold coinage.

Among the surviving populations of coins currently remaining, not all are actively traded on the market, but instead many have been obtained in complete sets or long-term investment portfolios.

Static Supply, Increasing Demand

U.S. gold coins are among America's most popular and sought collector coins. The availability of high profile, valuable coins through European bank vaults and famous collections have sparked enormous interest in U.S. gold that is matched by few other areas in U.S. numismatics. Numismatic investments expand investors' options to diversify and stabilize their portfolios in a volatile stock market because tangible assets have intrinsic value and provide certain financial protection that cannot be gained with paper assets. An independent study of the investment performance of U.S. rare coins between 1979 and 2006 by Professor Raymond E. Lombra, PhD., Professor of Economics at Penn State University, concludes that including rare U.S. coins within an existing portfolio can improve investment performance and provide portfolio stability.

Due to the popularity of U.S. gold coins, the rarest samples within this sector generally tend to appreciate the greatest over the long-term. The best performing coins are those that are difficult to obtain because they require relatively small increases in demand to drive prices higher. Therefore, serious collectors and professional coin dealers seek ideal coins that few or no other collectors could acquire.

An excellent way to examine the relative scarcity of Key Date Gold examples is by considering their populations compared to other rare coins. Key Date Gold populations of 1, 2, 3, 5, 10, 20, 50 or 100 coins compare to populations of 350,00+ for uncirculated Morgan Dollars, 150,000+ for uncirculated Peace Dollars, 100,000+ for Franklin Half Dollars, or even 150,000+ for certain Mint State Gold coins.

Outstanding Performance

One of the most well known success stories of hard asset investing is the collection of New York attorney Harold S. Bareford. Between 1945 and 1955 Mr. Bareford accumulated one of the most complete collections of U.S. coins ever seen. The total cost of the collection was $13,832, yet when auctioned on 1978, it realized $1,287,215.

A more substantial collector, Louis Eliasberg, built a collection that originally cost approximately $300,000. In 1982, it brought a staggering $12,400,000 at auction.

Key Date Gold has outperformed many investment areas since 1989, posting impressive gains for two primary reasons: (1) a small, fixed supply and (2) increasing demand.

Key Date Gold

Key Date Gold has performed as the rare coin forerunner in the numismatic market, which can prompt concern over a decline in the investment. On the contrary, economic conditions are more favorable today and indicate continued growth in the year ahead.

The forces that have driven commodity prices higher in the past couple of years remain largely in place. Global economic growth is strong, liquidity is plentiful and investors appear to still have an appetite for risk while simultaneously securing stable and diverse investment portfolios. Historically, gold coins realize their greatest performance during times of increased inflation and rising gold prices. Furthermore, they serve as an excellent hedge against falling stock and bond prices. Rare coins top even gold bullion as a hedge against inflation and have proven to produce significant profits even when the price of gold is falling, making them an excellent addition to a well-balanced portfolio.

We are currently experiencing the early stages of a gold bull market and economic factors point to a rise in inflation. These conditions have historically resulted in rising rare coin prices due to increases in demand and market activity.

Key Date Gold coins have historically outpaced rising gold bullion markets and rare coin markets for one simple reason: the market for Key Date Gold coins is one of the thinnest markets in all of hard assets. At the same time, Key Date Gold coins offer the intrinsic security of gold. Not only have Key Date Gold coins secured preservation of wealth in the flat gold market of the 1990's, but they also provide investors the ultimate protection from the effects of inflation in a gold bull market.

While Key Date Gold coins may be scarcer and more expensive than common date coins, their historic performance proves that they are well worth the investment.

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