Certified Gold Coin Investment
Posted by Adam King on November 02, 2010
November 02, 2010 – Recent predictions of skyrocketing gold prices has interesting implications for gold investing and especially investments in certified gold coins.
The major advantage of certified gold coins is their rarity premium, added value arising from their scarcity and desirability. Because that value is independent from that of their gold content, investments in certified gold coins have two paths to positive returns. Today we have a rare opportunity to combine the long term security of certified gold investment with the potential of great near term returns.
The price of a certified gold coin starts with the value of its gold content. Coins with a grade of MS 62 carry a modest premium, which increases exponentially through the higher grades due to diminishing supply. Nothing in the premium reflects the spot price, making the value of certified gold coins relatively immune to daily fluctuations.
Suppose, however, that the price of gold climbs threefold by 2013, as predicted by hedge fund manager, John Paulson. The market price of certified gold coins must track their melt value, a growth that would swamp the rarity premium of mid grades and produce returns close to that of bullion.
On the other hand, should the unthinkable happen and gold prices mysteriously level out, certified gold investments would lose none of their long term potential. It’s a win-win situation.
And we cannot completely ignore the doomsday scenario either. As our government scrambles to find a way out of the current economic mess, confiscation of publicly held gold remains a concern and rare coins are the most likely form to be exempt. Although the idea of melting down certified gold coins is anathema to collectors, it is investors’ option of last resort to preserve their wealth.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market