Should You Invest in Collectible Coins?
As a gold and precious metals guy, I'm very often asked about investing in collectible coins.
And I've always thought that was kind of odd. What do collectible coins have to do with gold?
I mean, you wouldn't ask a farmer about fishing poles. You'd probably ask a fisherman.
Still, there does exist an undeniable connection between precious metals and collectible coins. And you'll find that many (if not most) precious metals guys do, in fact, have significant interest in collectible coins. And vice versa — many coin collectors are interested in gold investing. What's the deal with this?
Well, before we go any further, let's differentiate between what we're talking about here.
Collectible coins are any coins that have collectible appeal and value. That appeal and value is often based on rarity, historical significance, and beauty. These are typically government-issued coins meant for currency, but they can also include collectible precious metal bullion.
Precious metal bullion, on the other hand, is typically government or privately issued coins or bars, which don't have significant collectible appeal or value.
In short, you can think of bullion as a piece of metal and collectible coins as a piece of art made of metal.
So right off the bat, you can see there's an intrinsic connection between the two. But it's also very important to note that between 1934 and 1975, it was illegal for Americans to own gold bullion. This began under FDR's infamous Gold Reserve Act and closed with the end of the Bretton Woods system.
But during that time, not all gold was illegal to own.
See, there were exemptions to the law. Those exemptions included gold jewelry, art, and — you guessed it — collectible coins.
So if you wanted to invest in gold prior to 1975, the most affordable way to do that legally was to own gold collectible coins.
Today, most gold bullion dealers are still also collectible coin dealers. Look to buy gold or precious metals anywhere, and you'll find almost every dealer also sells collectible coins.
The fact is, the margins on buying and selling gold and precious metal bullion are very low. There's really no money in it. So bullion dealers supplement their business with collectible coins, which have much higher profit margins.
So there's that, too: Collectible coins are still sold alongside precious metal bullion. That often exposes bullion buyers directly to collectible coins and vice versa.
There's also the fact that some precious metal bullion has become collectible. Bullion coins with low mintages such as the Mexican Gold Libertads have recently become popular among collectors.
There are a lot of reasons precious metals guys have significant interest in collectible coins.
And yes, dear reader, that includes me. I've been wrapped up in numismatics for decades. My specific focus for years was the Roosevelt dime. I have more information about that coin in my head that anyone needs.
So what do I tell people about investing in collectible coins? Is investing in collectible coins advisable?
Answer: No, not really... and yes, but not in the way you're probably thinking.
Of course, that answer requires explanation.
Right off the bat, I'm going to say that it's highly arguable whether or not someone can actually even “invest” in collectible coins. Technically, buying collectible coins in hopes they'll be more valuable in the future is speculation.
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But let's forget the semantics. It's still not a great idea for several reasons.
First is liquidity. I'm probably going to say this a lot: Buying collectible coins for investment is like buying art for investment. The value for things like collectible coins and fine art may go up over time. But they are generally not easy to sell immediately at fair value. And that can mean a host of investment consequences ranging from opportunity costs to profit losses to changing market conditions.
Also important to note: Most high-end collectible coins (again, like fine art) get sold at auctions with a limited audience. That can be very risky for sellers.
Moreover, it's nearly impossible to make any kind of prediction about demand. There's no telling what coin collectors will be interested in next.
At the end of the day, investing in collectible coins is, again, very much like investing in fine art: It's probably not ideal for an investor looking for safe, future profit.
I did say that yes, investing in collectible coins is a good idea, didn't I?
Well, what I mean is the hobby of collecting coins can be very rewarding. And investing your time into it might have more benefits than you think.
Let me get personal with you for a minute: I'm a bit of a perfectionist... even though I'm well aware there's probably no such thing as perfection. Coin collecting gives me a vehicle to dump all those perfectionist tendencies into.
Fact is, no one will ever have a perfect collection of any coin. Truly perfect coins don't exist. However, that doesn't mean you can't tinker with your collection to make it as close to perfect as possible, which I think every coin collector does.
Numismatics is a black hole for all those perfectionist tendencies that might get in my way in life. So for me, investing my time into coin collecting is well worth it.
Maybe that's something for you. But as far as investing for profit, there are better options.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bubble and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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