When you first get into gold investing you often hear the term: numismatic coins. But what is numismatic gold coins? What are they good for and is it a smart idea to invest in them or not?
That’s some of the questions that I want to get answered with this post.
Numismatic coins are collector coins. The best way to describe numismatic coins are that they are collectible, meaning that the numismatic coin is rare. Because the coin is rare (not that many of them in the world and not produced anymore) there are people that like to collect them.
Let’s have a look at the definition of numismatic
Numismatics is the study or collection of currency, including coins, tokens, paper money, and related objects.
The word numismatic derives from the Greek word numisma, meaning “current coin”.
When people first get into gold investing one of the first question they have is usually: “Should I invest in numismatic coins?”. A quick answer is often “If you really know what your doing then go for it but it’s not how I invest in gold.”
What’s the downsides of investing in numismatic gold coins?
So why don’t I invest in numismatic gold coins might be your question. Well, there are a few reasons why and the very first one is:
You don’t get as much gold for your money. There are three layers of cost built into a numismatic coin. That is the actual metal, the numismatic value and the dealers profit. In regular gold bars there is only two layers of cost: the metal and the dealers profit.
The numismatic cost is different from every coin and can range from a few dollars to a few millions. The most expensive coins, the rarest of them all, will probably always be a good investment because there is just a few of these coins. However, only the world’s wealthiest collectors can afford to buy them.
I hope you understand what I mean by numismatic cost. It’s the extra cost that someone is willing to pay for an item because it’s rare and it has a collectible value. The same thing as when people buy collector cars, or any other item that people collect.
This numismatic cost can vary a great deal from year to year and is largely dependent on the state of the economy and the mood of the public. If the economy is good and people have lots of money, it’s easier to get a higher price for the coin.
When people invest in numismatic coins what they are hoping for is that the numismatic cost will go up for the coin. They hope that the coin will be rarer and more valuable in 10 years than it is now. If that is true it means that they can sell the coin for more money then they bought it for, if they can find a buyer for the coin.
Because of this extra numismatic cost you do not get as much gold as if you bought gold bullion. For example you can maybe buy 5 regular coins for the same price as 1 numismatic coin. This way you get 5 times as much gold by buying regular (not rare) coins than if you bought a numismatic coin.
And when I invest in gold, I want to get as much gold for my paper dollars as possible because there are lots of fundamental reasons to why you should invest in gold. You don’t need to play with the numismatic value to make money on gold.
That’s one of the biggest reasons why I do not invest in numismatic collector coins.
It’s easy to get scammed. When you invest in numismatic coins you need to know more about the coin (and the collectors market) than the dealer. Because a numismatic coin gets it’s value not just from the physical gold in the coin but from it’s rarity. That way you need to know all there is to know about how rare this coin is.
If the dealer knows more than you he can be saying things like “This coin is very rare and there is only 500 of them every created and there is not any more of them being created.”.
This might be true but it also might not be true. This is why investing in numismatic coins is very time consuming. Because you need to know how rare the coin is, if there is going to be more of them created and how easy it is to sell the coin. Just to name a few of the headaches.
You constantly hear about horror stories where a person has invested in numismatic coins that a dealer recommended to him. Just to realize a few years later that these coins wasn’t rare at all. There was a ton of them being created and there is no way that anyone will buy them for the same price as you did. That person got scammed by the dealer because he didn’t know all the things there was to know about the coin.
It’s hard to sell. Another reason that I do not invest in numismatic coins is because once you want to sell the coins it’s very hard to find a buyer.
Say that you need to sell your gold because of an emergency or something else. Then you have to find a buyer for your rare coin that is willing to pay what you want for the coin. This can take months, even years. Or it might not even happen.
There is a saying: “The only thing rarer than a rare coin . . . is a buyer for a rare coin.”.
You might not be able to sell the coin or if you really need to sell it, the dealers will always buy it back. Although they will offer you a very low price. If you want to get cash for your gold quickly, you just have to accept their ridiculous offer and loose a lot of money on your gold “investment”.
What’s the benefits of investing in numismatic coins?
Okey, I have just been explaining the downsides of investing in numismatic coins but are there any benefits?
Of course there are and there are people that have made a lot of money selling and investing in numismatic coins. As long as you know what your doing and you know the collectors market then go for it. But be aware of all the risks and pitfalls that I explained above.
Having a numismatic coin can be a very pleasing feeling. The coins are often very well done and have some type of history behind them. For me it’s a very nice item to own but I do not see it as an investment. If I buy a numismatic coin it’s because I want to collect this coin for some reason. My number one reason why I buy it is not because I want to make money on the coin, but because I like it.
You can make a lot of money fast if you really know what your doing. If you can find a coin somewhere that you know is very rare and you can get it for cheap. Then you can sell it fast and make a lot of money.
But once again:
Make sure you know what your doing, otherwise you WILL get scammed by people that know more than you.
I hope that I answered the question: what is numismatic gold coins with this post. They are collector coins. This is not the way that I personally invest in gold because you get less gold for your money, if you don’t know more than your dealer it’s easy to get scammed and it’s very hard to find a buyer when you want to sell.
If your just getting started with gold investing I do not suggest that you go with numismatic coins. You can read about how I invest in gold where I talk about investing in gold bullion instead.
If you have any questions or any other input please post a comment below and I will for sure answer them.