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Introduction to Rare Coins Overview

Posted on: 2016-01-07

Investors own precious metals for a variety of reasons, including their ability to hedge against inflation, protect against currency devaluations, and to provide instant worldwide liquidity.

Investment quality gold and silver rare coins deliver these benefits AND three additional advantages over gold and silver bullion. They offer a favorable supply and demand dynamic, improved privacy, and freedom from potential government restrictions on private gold ownership.

Favorable Supply and Demand

Market values of rare coins are set by the daily interplay of supply and demand. The supply of investment quality 70- to 225-year old gold and

silver coins is tiny and can NEVER be expanded. Demand, on the other hand, is growing over time – especially for high quality coins of proven rarity and desirability. This favorable supply/demand situation frequently leads to superior long-term appreciation.

Improved Privacy 

The government considers rare coins as collectibles -- not investments.

Therefore (unlike for some bullion investments), numismatic investors are not required to file any government reporting forms when buying or selling investment quality rare coins.They provide an extra layer of privacy that is very attractive to many investors.

Confiscation Protection

In 1933, President Franklin D. Roosevelt confiscated the American public’s gold bars and coins with Executive Order No. 6102. Only “collectors of rare and unusual coins” were exempted. The exempted collectors benefited handsomely when the government devalued the dollar by raising the price of gold by some 75% -- from $20 an ounce to $35 an ounce. The President still has the emergency power to confiscate gold bars and gold bullion coins today. But, by law, he cannot demand your rare and unusual gold coins.

A Friendly Reminder 

Coin Trader is not required to file any government forms when buying or selling investment quality rare coins. However, you must report all gains earned when you sell your rare coins – as you would with any successful long-term investment. 

What Are Investment Quality Coins?

Investment Quality Coins are the Blue Chips of the numismatic world. Without getting too technical, these are coins that meet each of the following ten elite criteria to be considered:

-- They are coins minted by the U. S. government prior to 1933.

-- They are minted of either gold or silver.

-- They have a long history of being desirable.

-- They have a favorable supply and demand imbalance.

-- They have a proven history of long-term appreciation.

-- They are in design series that are popular with collectors and investors.

-- They are among the top few percent of all surviving examples.

-- They have been certified by one of the leading independent grading services.

-- They are actively traded, providing liquidity.

-- They have been carefully selected to assure their superior quality

As you can see, it takes a very special coin to qualify as Investment Quality. Still, there are a fair number of coins that may appear to qualify for this elite description but do not. At Coin Trader we can help you properly structure your portfolio around investment quality rare American coins.

The Superior Profit History of Investment Quality Rare Coins

The depth, vitality, and long-term growth in values in the numismatic marketplace are well known to experienced collectors, investors, and academic researchers. Consider the work of Dr. Raymond Lombra, Dean of Economics at Penn State University. He conducted a study entitled: ”Managing Portfolio Risk: An independent economic analysis of the investment performance of rare U.S. coins in diversified portfolios for the period January 1979 to December 2003.”

Dr. Lombra, after his exhaustive research, concluded that adding rare coins to a portfolio:

1) added to its safety through diversification;

2) successfully fought the effects of inflation;

and 3) increased the portfolio’s appreciation.

That’s quite an endorsement of rare coin ownership from a member of academia! And it’s not the only one…

The widespread expectations of market participants were also documented and reinforced by Dr. Robert A. Brown, Ph.D., CFA in his study Asset Class.” Dr. Brown reviewed the marketplace for rare coins and identified these real-world examples to show the numismatic market’s growing depth, liquidity, and price appreciation:

-- In a July 2002 auction a 1933 $20 double-eagle gold piece sold for $7,590,020. In 1960, this coin traded for $25,000. That’s a 14.6 percent annual rate of return over 42 years.

-- In an August 1999 auction, an 1804 proof silver dollar sold for $4,140,000. In 1960, this coin traded for $30,000. That represents a 13.5 percent annual rate of return over 39 years. 

-- In a 2004 auction, a 1913 Liberty nickel sold for $3 million. In 1960, this coin traded for $50,000. That’s a 9.8 percent annual rate of return over 44 years.

-- Finally, in a May 1999 auction, a 1907 ultra high-relief $20 double-eagle gold piece sold for $1,210,000. In 1960, this coin traded for $20,000. The owner enjoyed an 11.1 percent annual rate of return over 39 years.

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