Since the precious metals bull market began in 2000, investor interest in rare gold and silver coins has increased immensely, driving up prices and creating new opportunities. Though some investors prefer to buy bullion, or precious metals by weight, others enjoy collecting gold and silver coins both as an investment and hobby. Collecting rare gold and silver coins allows investors to both preserve history and make large potential gains in investments. Rare gold and silver coins can be purchased reliably and with confidence.
The Rising Popularity of Numismatics
With soaring debt levels among Western governments, and in particular the U.S. government, the major central banks of the world have been making massive purchases of sovereign bonds to prevent a collapse of the global financial system. With the inflation of the paper money supply in the world, commodities such as precious metals, which are not so easily inflated due to their scarcity, have risen in value relative to the paper money.
Since spending by Western governments continues to increase, due to aging populations, welfare programs and militarism, and because the major financial institutions of the West refuse to accept losses on their investments in sovereign bonds, the debts of Western nations are likely to increase substantially in the next decade. Due to continuing deficits, governments will encourage the central banks to continue printing money to cover the expenses. This negative outlook for the global economy has encouraged massive investments in gold and silver, since they are expected to continue to outperform other assets as more paper money gets printed. Since coins were commonly minted in gold and silver from ancient times to the first half of the twentieth century, investors have started purchasing these coins both for their investment and historical value.
Why Coins Were Minted in Gold and Silver
For about 5,000 years, gold and silver have been regarded as money because they are rare, durable, divisible, ductile and fungible. Coins, which function as a medium of exchange, were thus commonly made of gold and silver, each with a standard size, weight and composition. Due to the rarity of gold and silver, coins made of copper and bronze were also produced, although they had significantly less value.
In modern times, governments began phasing out gold and silver coins and instead producing coins primarily of base metals. The major government mints of the world still produce gold and silver coins, although they are intended mainly to satisfy the demand of collectors rather than to be used as actual currency. With the continuous money printing by the world’s central banks, some economists believe coins should once again be minted using precious metals, or be officially convertible to them.
Pre-1933 Gold Coins
From the late-eighteenth century to the early-twentieth century, the United States Mint produced gold coins in various sizes and denominations. The composition of these coins has generally been 90 percent gold and 10 percent copper. From 1849 to 1889, the United States Mint produced small gold coins denominated at $1. One version features Lady Liberty and the other two versions feature an Indian princess on the obverse. Also in the nineteenth century, Liberty Eagles, depicting Lady Liberty on the obverse and an eagle on the reverse, were minted. They were made in denominations of $2.50, $5 and $10, referred to as Quarter Eagles, Half Eagles and Eagles, respectively. Later, the United States Mint produced a larger Liberty coin with a denomination of $20, referred to as a “Double Eagle” because its face value is twice as much as that of an Eagle, and stopped minting it in 1907.
From about 1907 to 1933, the United States Mint produced new Eagle coins depicting a Native American on the obverse and an eagle on the reverse, in denominations of $2.50, $5 and $10. The United States Mint also minted a new Double Eagle featuring Lady Liberty holding a flaming torch on the obverse and an eagle on the reverse.
Pre-1933 gold coins from the United States Mint sell at a significant premium to their melt value, due to their rarity and history. Since 1986, the United States Mint has minted gold bullion coins that have attracted investor interest due to their lower premiums relative to their melt value.
Early Silver Dollars
The word dollar is derived from “thaler,” which was a standard silver coin circulating in Europe for centuries. During the time of colonial America, the Spanish dollar was a popular form of currency. From these two internationally recognized coin types, the first American silver dollars drew their name and inspiration. From 1795 to 1839, various silver dollar types were minted in the U.S. with their own peculiar designs.
From 1840 to 1866, the United States Mint produced the Seated Liberty dollar, featuring a seated Lady Liberty on the obverse and an open-winged eagle on the reverse. This coin has a diameter of 38 mm, and has a composition of 90 percent silver and 10 percent copper. Seated Liberty dollars sell for a considerable premium compared to more modern silver dollars, due to their age and rarity. The United States Mint also minted Seated Liberty coins in smaller sizes and denominations.
Morgan and Peace Silver Dollars
From 1878 to 1904, and again in 1921, the United States Mint produced the Morgan dollar coin. This coin features Lady Liberty on the obverse and an open-winged eagle grasping arrows with its talons on the reverse. This coin, with a 38 mm diameter, is made of 90 percent silver and 10 percent copper. Each Morgan dollar contains about three-quarters of an ounce of silver. The Morgan dollar was not used very often by Americans to purchase goods and services, and those who had them tended to keep them as collectibles. In the Wild West, they were commonly used to purchase whiskey.
Today, more than a century after they were first minted, the Morgan dollar is the most popular silver coin among American collectors, and is recognized internationally for its beauty and detail. Many remain in great condition due to having been stored in large bags in bank vaults for many decades. Though Morgan dollars have risen in value due to their silver content, they can still be purchased at reasonable prices, with the potential of increasing much more in value.
The Peace dollar was minted by the United States Mint from 1921 to 1928, and again from 1934 to 1935. This coin was designed to promote the ideal of world peace, following the devastation of World War I. This coin features Lady Liberty on the obverse and a closed-winged bald eagle on the reverse. On the reverse, the word “peace” is clearly visible. It is of the same size and metal composition as the Morgan dollar, and therefore also contains about three-quarters of an ounce of silver. Though Peace dollars are not as popular as Morgan dollars among collectors, some collectors believe they are undervalued due to the fact that not as many Peace dollars were minted as Morgan dollars.
The United States Mint also produced silver coins in smaller sizes and denominations during and after its minting of Morgan and Peace dollars. Dated before 1965, dimes, quarters and half-dollars produced by the United States Mint are composed of 90 percent silver and 10 percent copper. Today, all of these coins are worth significantly more than their face value.
The Future of Gold and Silver Coins
Given the rising value of gold and silver due to global economic instability, and given the fact that gold and silver coins remain undervalued as investments compared to other assets, investing in gold and silver coins offers enormous potential for gains in value in the coming years. Collecting gold and silver coins also allows investors to develop a new hobby while making money at the same time.