I'm looking for some advice/ info regarding buying bullion vs. numismatic.... Any help is greatly appreciated! A dealer was telling me that numismatic is better because you can make more money, is less of a risk, it cannot be confiscated by the government, and that large purchases do not need to be reported to the government. Does any of this sound legit? Is it good to buy more of one or the other, all of one, etc? Thanks in advance!
Bullion or Numismatic
Why are you buying the metal? For investment (to sell later at a profit)? To hedge against TEOTWAWKI? Because that can have a big impact on the answer.
Personally, I prefer bullion. I don't have the time nor inclination to explore the world of numismatics. Also, any collectable that relies on a certified grading system to determine value has never sat well with me. In my experience, the dealers always hold the advantage in the buy/sell spread and you never make out as well as you expect. YMMV.
Here's my strategy:
Averaging into your position over time. You will find the PM price is up and down more than it should be. If the spot price is low buy bullion when the spot price rises look for and buy quality numismatic - but never pay much if anything above spot if you can help it. The way this works out you will collect numismatic coins that do not fall in price when the spot market drops in one pile and you will collect relatively common bullion that generally averages higher value than the below average market price you pay in the other. I buy most of my numismatic coins at pawnshops, ebay and flea markets (you need to learn to recognize a good specimen from a bad one - ie micro scratched up improperly cleaned coins are a no buy unless dirt cheap. Nasty dirty tarnished coins that are physically dirty but otherwise perfect are the best in terms of numismatic value) You will accumulate your numismatic more slowly than your bullion at first which is good as there is a learning curve and any 'bad buys' will not significantly hurt you while you learn.
I find that my numismatic coins purchased when silver was at $45+ are still selling for what I paid for them or more even when silver plummeted into the high 20's and my bullion purchased at 33-36 was under water.. my average if I were to liquidate today is very near or slightly above even with my total dollars invested because of the numismatic coins.
I have purchased a few rare coins that are worth MANY times their silver value at spot or even below spot - some by accident in large lots and some by shear luck.
Owning rare and very old coins can be quite a bit of fun if you enjoy researching them online and discovering their real value, history and rarity. If your too busy to enjoy them and do not have time to fill your head with detailed info on rare and valuable coin identification... Bullion is the easier path, but not in my opinion the most financially rewarding one.
I tend to strongly agree with Bern ...
IF you think a Controlled Decline/Devaluation in Fiat-Currency is the more likely future scenario, the Numismatics MAY have a reasonable growth potential over & above the inherent silver-content PROVIDED (as Bern makes the point) that you DON'T get conned into paying a hefty scam-premium over the metal value.
IF you think a 1929/German Crash/Depression is more likely or possible, then you would definitely be better off with straightforward "cheap as possible" generic silver coinage at "Max-Ounce-Per-Dollar", which usually translates to Pre-1965 (@ 90% pure in USA) or 1920-1947 (@ 50% pure in UK) National Silver Coinage ... which is generically mis-named as "Junk" Silver.
... As you're just starting to "Stack" for the first time, I would personally recommend going for "Junk" silver initially in order to build up your maximum Bang-Per-Buck in terms of ounces in the early days (AND whilst it's currently in a cheap-phase dip) ... and then perhaps build up to ADDING Numismatic Type/Grade coins such as Eagles/Brittannias/Etc later AS & WHEN YOU feel ready to expand your Stack OR *IF* they drop into your lap at a relatively knockdown/spot price.
That's for Silver, but the same general principles apply to gold stacking.
In terms of "Govt. Reporting" it is usually decided by the £/$ amount you "spend" in one transaction or over a given period, and has NOTHING to do with the "Type" of coinage (Junk/Numismatic).
To my mind, the "Confiscation" issue (in terms of PMs you PERSONALLY HOLD) is something of a "boogey-man" non-issue as the psyche of modern-day peasants is WAY different to our more trusting ancestors. ... BUT I would NOT trust ANY Bank/Storage/Vault/Safe-Deposit facility to safeguard ANY PMs as they must by nature operate "within the system" at Govt. Whim.
Numismatic = Coins whose prices depend more on their rarity, condition, dates, and mint marks than on their gold or silver content..
Eagles, Maples and all modern bullion coins are NOT worth paying premiums for IMO
Eagles, Maples and all modern bullion coins are NOT worth paying premiums for IMO
I'd definitely agree with that ... I will almost never pay over spot for ANYTHING (and my general target for silver is around 5%-20% under spot) unless the item is something really special.
I have fortunately been lucky enough to acquire a fair number of such "Eureka Items" over the years at sub-spot prices which will almost certainly pay off handsomely in the absence of an EOTWAWKI event.
I wouldn't buy anything minted in the last 50 years as a bullion product as a 'proof ' because I don't see any additional value in the extra shiny w/o actual rarity and scarcity being a factor. (there are some rare exceptions) Actual RARE circulated coins that are scarce will increase in value far faster than a modern minted proof of a bullion only coin (uncirculated investment coin)
I'm sure others would disagree - and it depends on your time horizon. ie if you purchase a pristine proof today and sell it 2 months from now you will probably get your premium back but no more. If you plan to hold the coin for say a decade or more. It will be no rarer then nor no better preserved than the majority of the other investment bullion coins sold as these will not be circulated nor likely in any shorter supply than they are today. In such a case why would that premium increase? at best you will get it back and at worst if gold doubles or triples I would think the additional premium will NOT increase by the same multiple as the underlying asset (plainly said - your better off using said additional dollars to purchase more of the underlying asset and avoid the added premium) IMHO
Numismatics and bullion is comparing apples and oranges. It also depends on how much wealth you have.
Numismatics can be put in the category along with fine art, stamps, collectibles, real estate, vintage cars etc... They are indeed non-dollar assets. During a hyperinflation, such as WW2 Germany, fine art held it's value while anything currency related didn't. When money ie fiat currency disappears any non-dollar asset will hold it's value. You can not compare it to a stacker who won't pay anything over 2 bucks over spot for a coin that holds the mentality silver is silver. Even in bad times wealth still exists and rare art including numismatics are very desirable forms of wealth. Wealthy individuals don't all of a sudden dump their fine art like a trader would dump their silver to take profit. Obviously, it's a much more exclusive market and often done through brokers and dealers. It also requires a good deal of knowledge and expertise and it helps to know others who can guide you through the process.
Bullion is bullion, more or less. Sure we can argue the benefits of eagles vs bars or junk silver vs maples but in the end of the day, it will only be the price of gold and silver. Nothing more and hopefully nothing less. This is a defensive way to protect your wealth as fiat currency becomes worthless. A 1 ounce piece of gold from a ship wreck can run thousands of dollars beyond the spot price.
If I am Daddy Warbucks, which I am certainly not, I would be investing in both bullion as well as a diverse collection or rare art including numismatics. However, with the fine art including numismatics, you must be more patient. A large portion of Numismatics have not come into their own as of yet and novices have become impatient and selling their numismatics for spot. This would be the time to begin looking at fine art including numismatics in a deflationary like envirnoment (I'm not saying we are experiencing true deflation) It would be in a hyperinflationary scenario that a person would want to hold their wealth in fine art. Anything not tied to the fiat currency.
My guess is if you are asking the question, you have yet to become a collector of fine art so I'd start with bullion and only dabble in numismatics if you have a real passion for the coins and their history.
I'm hearing Eagles are not worth the premium.... How do you not pay any premiums or anything over spot? Are you just buying from private individuals or do dealers offer this periodically?
People disagree on this point and you'll have to come to your own conclusions. I personally like eagles and maples and don't mind paying the extra premiums. I like that they are still considered currency issued by the mint of each country. They are highly recongized and for me that makes it desirable. I like junk silver for the same reason.
The other day I went to my lcs and he tried to sell some rounds that I've never heard of. It would be fine if all i did was sell it back to him but I have no idea who made them and I figure the next fellow won't know either. He said they came from APMEX and had some kind of official looking eagle on it. I will buy rounds and bars but they need to be from one of a few reputable makers. I am assuming that the crowd that comes in will be even less knowledable than I and if I want to sell, how am I going to sell a no name round to somebody who never heard of it. It it says Englehard, Sunshine, Pan American or NW Treasury Mint, I would have bought.
I am also sold on the fact that silver and gold will go so high that I won't feel bad about the premium and I'll be selling them at a much greater profit. I would buy an eagle or maple from a stranger but I wouldn't buy a no name bar or round from a stranger. I figure I am not the only one. And if it gets to the point that we are bartering our silver, if I am the individual receiving, I am free to say NO to you if I don't like the form of silver or gold you are offering me. What makes something money is that I trust it.
In the end, I like a nice diversity but I lean toward coins.
Rounds vs Eagles = Eagles are ridiculously over priced - I would rather buy 10% more weight than pay 10% more premium to have an eagle. If your purpose is to take advantage of the future rise in price buy bars, rounds, 90% (junk silver) 80% Canadian and the like. Take advantage of promotional offers when they pop up if you must have an eagle or two wait until you can get it at minimal or no premium. (just bought one at Eastern numismatics for spot (29.89 I think during a promo) Drop stink bids on ebay and eventually you will score at or even below spot. Make friends with your local pawn shop owner etc...
If your only investing a few hundred to a thousand or so a month it's easy to accumulate at or below spot. If your trying to preserve much more you will likely have to buy from a dealer... get the lowest premium you can find and ignore the form as ultimately you cannot get more than the weight x the price regardless of the aesthetics of the object. (Speaking bullion only - not numismatic)
Proof American Gold Eagle (AGE) coins and sets are issued by the US mint with a certificate of authenticity. Buyers of proof coins (and numismatic coins in general) range from sophisticated collectors to newbies. The sophisticated collectors knows what they want and what they are getting and the newbies, well they don't.
The premium over the spot price that you pay for proof AGEs is at least twice the premium you pay for random year AGEs. When dealers try to direct you toward numismatic gold coins, 99 out of 100 times it's because they know that you are new to PM ownership and they are trying to go deep into your pocket. When you go to sell a proof or graded coin to a dealer, they are reluctant to pay you any premium over the spot price. And yes, these are the same dealers who try to get you into those coins by telling you how much more valuable they are than ordinary bullion coins. CMI Gold & Silver has an article on their website called "Myths, Misunderstandings and Outright Lies" that will answer a lot of the questions you have about numismatic coins (link below).
Why would you, Bum, want to buy proof AGEs? The only advantage I know of is that you can make certain proof American Gold Eagle coin sets part of an IRA. If you are preparing for the collapse of the great Keynesian experiment, and I believe you wrote in one of your comments over on the main board that you are, then I think that you want to have your gold close at hand, not in the custody of an IRA. So proof AGEs are probably not for you. Look at bullion coins and bars instead, especially coins.
The three most widely accepted for trade one-ounce gold bullion coins in North America are the AGE, Canadian Maple Leaf and South African Krugerrand. Do a little homework here and then find a local coin shop (or two or three if possible) where you live. Take your newly acquired knowledge into the shop and talk to the owner about what your objective is and see if he or she is inclined to work with you. Honest dealers like repeat customers. If a dealer tries to push you into something that you don't want, just turn around and walk out the door. If you can't find an honest dealer in your area, buy online from one of several reputable dealers. Good luck, and welcome to Turdville!
As I said, no two people seem to agree on the subject and will defend the wisdom of their purchases.
So I offer the following for your consideration.
APMEX Top 40 sale items. (I have no idea what the overall sales of US Minted coins vs rounds or bars. But if apmex is giving honest figures, you can see that it seems that US minted coins far outweigh the popularity of no brand bars and rounds)
Re: counterfeiting and the potential problem with bars and no name bars.
I'm not 100% sure, but AGE proof coins may be the only products that you can utilize in a physical gold IRA and that is why the big PM dealer that we work with will buy as many AGE proof sets as we can find for him (which explains the hefty premiums). Since I never went the IRA and 401k route, I have not looked closely at rolling an IRA into physical gold. If you're looking to roll over an IRA into physical gold, your dealer just might be giving you good information. There must be somebody in Turdville who has some experience doing this, either for themselves or a relative. Search the forum topics and see if anything comes up.
Edit: I found this information at website run by an IRA custodian:
What is eligible for a precious metals IRA?
American Gold Eagle gold coins are approved for IRAs. Other gold coins, to be eligible as IRA investments, must be at least .995 fine (99.5% pure) and be legal tender coins. This provision puts Canadian Gold Maple Leafs, Australian Kangaroo Nuggets, Austrian Philharmonics, and the Perth Mint’s Lunar Series on the approved list. Also approved are minimum .995 fine gold bars fabricated by refiners who have been approved by The Commodities Exchange (COMEX).
Conversely, many gold coins, such as Krugerrands (91.67% pure) and old U.S. gold coins (90% pure), are not legal investments for IRAs.
American Silver Eagle silver coins are approved for IRAs. Other silver approved investments must be .999 fine, which makes Canadian Silver Maple Leafs, Australian Kookaburras, Mexican Libertads, and even .999 fine silver rounds also eligible. Bullion bars are acceptable as long as they were fabricated by COMEX-approved refiners. This is necessary for the bullion to be stored and recorded at the custodial facilities of HSBC. Pre-1965 U.S. 90% silver coins are not eligible for IRAs.
Platinum coins are eligible for your IRA as well. American Eagle platinum bullion coins, including proof versions, are most commonly used in IRAs. Also acceptable are minimum .9995 fine platinum legal tender bullion coins such as the Australian Koala, Canadian Maple Leaf, Isle of Man Cat, and Isle of Man Noble. Platinum bars that are minimum .9995 fine and fabricated by refiners approved by The New York Mercantile Exchange (NYMEX) are acceptable as well.
Last but not least, minimum .9995 fine palladium bars fabricated by refiners approved by NYMEX are accepted.
Most people are not aware that you can take possession of the PM's in your IRA account. That's what I am going to do through a dealer. Rollover an entire an IRA and take possession of the PM's.
The dealer thinks Gold Eagle Proofs but I'm not so sure about that route...
This is an entirely different question than the bullion vs numismatics question. You absolutely can't hold fine art and rare coins in your ira.
Here is your list of government IRA approved coins and bars.
You can't take possession of your gold without tax consequences unless you love paying the US Goverment. You can however hold it in a depository.
Apparently, the benefit of the gold proofs is that under the 1933 gold confiscation act, gold proofs were except from confiscation.
Whether or not the goverment will resort to confiscation is an entirely another issue.
start over - obviously my efforts to help you do not apply to your particular situation at all. Good luck with your IRA portfolio brother, I was speaking more towards PM investment choices outside of tax differed / exempt vehicles and the rules that apply. Completely different situation for sure. =].