Numismatic coins are a type of gold coin distinct from bullion coins. The main difference between them is that the value of a numismatic coin depends on what its obverse and reverse show, the supply and demand for the coin, in addition to what it is made of. It is also influenced by its rarity (i.e. the number of coins in circulation), condition, age or purity. Numismatic coins, unlike bullion coins, are made not only of precious metals, like silver, gold or platinum, but also of common metals like copper, bronze or iron.
Numismatic coins are usually bought by collectors or hobbyists, but can be used as an investment as well. They are perfect works of art, which makes it hard to counterfeit them. Making such perfect coins is very expensive and only the biggest mints that enjoy economies of scale can actually afford it.
The value of a numismatic coin made of a precious metal will never fall below the price of the metal itself. It can, however, be much higher because of coin rarity or its obverse/reverse. It is much less correlated with the metal prices on world markets. Its value depends on how much collectors are willing to spend on it.
Numismatic coins can very often be used as a legal tender. Nevertheless their collector value is usually much higher than their nominal value. The majority of numismatic coins are intended for collectors’ purposes right from the time of issue, but coins that were in circulation a few decades or centuries ago, and enjoy high value because of their age, can also be considered numismatic.
The main disadvantage of numismatic coins is their lower liquidity compared to bullion coins. The market for numismatic coins is usually very limited. Selling such a coin means that one has to find the other party of the transaction – a collector willing to pay a satisfactory price. This task may be very difficult. However there are many auction services on the internet that can make it easier.
The price of the numismatic coin can be divided into two parts: the price of the metal itself, and the price of the remainder. The remainder includes production costs and numismatic value. If you want to take advantage of rising precious metals prices, you buy the metal, not “the remainder.” If the value of the numismatic coin were to rise at the same rate as the value of bullion coin, “the remainder” would also have to rise at this rate. Investing in numismatic coins can produce some very handsome profits, but requires a long period of time. The older the coin, the greater its numismatic value. These profits, however, may be much higher than with bullion coins.
Coin value = metal value (gold value) + numismatic value + other costs
1. Gold price = $800, Numismatic value = $600, Other costs = $100
Value of a numismatic coin = $800 + $600 + $100 = $1500
Value of a bullion coin = $800 + $100 = $900
2. Gold price = $2000, Numismatic value = $600, Other costs = $100
Value of numismatic coin = $2000 + $600 + $100 = $2700
Value of a bullion coin = $2000 + $100 = $2100
Return on numismatic coin = 2700 / 1500 – 1 = 80%
Return on bullion coin = 2100 / 900 – 1 = 133%
If there is no change in numismatic value, grater profits can be achieved by investing in bullion coins. In the long run, however, numismatic value may increase much more and the return on the numismatic coin may be much higher.
Investing in numismatic coins has different rules than investing in precious metals. To succeed in this field, apart from knowledge of precious metals, knowledge of numismatics is also necessary. Numismatic investors should also familiarize themselves with planned issues of new coins and various numismatic collections.
Where to buy numismatic coins in the United States?
The most popular U.S. internet sites offering numismatic coins include:
- L&C Coins (lccoins.com)
- G.R. Tiso Numismatics (grtiso.com)
- The Executive Coin Company (executivecoin.com)
- Mount Vernon Coin Company (mountvernoncoinco.com)
- Tangible Investments (tangible-investments.com)
- American Rare Coin and Collectibles (americanrarecoinstore.com)
- Zack’s Jewelry and Coin (zaksjewelryandcoins.com)
- Yellow River Rare Coins (yellowriverrarecoins.com)
- Great Coins (greatcoins.com)
- Redford Jewelry and Coin (refordjewelryandcoin.com)
- American Federal (americanfederal.com)
- American Rarities (americanrarities.com)
- National Coin Brokers (nationalcoinbrokers.com)
- Northeast Numismatics (northeastcoin.com)
- Great Coins (greatcoins.com)
Auctions / fairs
Numismatic coins can also be bought through various auction services like eBay or on many events and conferences organized by the American Numismatic Association.Back