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KP NUMISMATICS DIGITAL DOWNLOAD
American Eagles
More Than Just Bullion
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E
veryone loves gold coins. The problem of course for most is the cost of assembling anything close to a top quality gold coin collection. In the case of early U.S. gold coins, they are scarce. In some cases they almost impossible to find even in Mint State. That problem of finding Mint State examples continues through the Cor-onet Head types produced during the mid 1800s and there are significant rarities as well. If you try the gold dol-lar or $3 gold piece, there are similar difficulties and even more recent is-sues can be extremely expensive as is seen by the fact that a Saint-Gaudens double eagle collection now has four coins in it likely to bring $1 million or much more in the form of the ultra high relief 1907, the 1921, 1927-D and 1933.Looking for other gold collecting options, the only other place many can turn to are gold commemoratives. There in the case of historic gold com-memoratives there are not many coins and the Panama-Pacific $50 is going to be very expensive especially in top grades. In the case of modern gold commemoratives, while many can af-ford the collection, there is a reason-able question as to whether you can keep up with the new issues while also acquiring some of the older ones which in some cases are soaring. That area’s potential has been iden-tified by David L. Ganz in
Rare Coin Investing
and Eric Jordan in
Modern Commemorative Coins
. All things considered, you have to come to the conclusion that there are challenges no matter where you turn. But there is another area to consider. These coins are the American Ea-gle gold coins issued since 1986. The American Eagle gold coins come in ounce, half-ounce, quarter-ounce and tenth-ounce sizes with face values of $50, $25, $10 and $5. The face values were intentionally placed at well be-fore the value of the metal in the coins so that people would not try to spend them at the corner grocery when they ran short of money. The reason for face value at all is that by having a legal tender value, the round disk becomes a coin rather than a medal. Coins are preferred in the international markets.If you don’t believe that, take a look at American Arts Gold Medallions. With gold bullion in the strato-sphere we are now at a crossroads. Can you actually collect coins that are intended solely to serve the investor market? The answer is yes. Collectors will collect anything. However, this can require nerves of steel because some-times the market gets so crazy that coins with mintages of a mere fraction of others trade for the same price. Since 1986 the United States has
American Eagles more than just bullion
Opportunity knocks
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issued a large number of gold coins priced virtually at their gold value. That’s why the American Eagles are called bullion coins. The Mint issued sold them to its network of authorized purchasers, who then sold them to investors for their metallic value. In some years when demand was high, mintages soared. In other years, when demand was low, mintages contract-ed. In the long term, these mintages should have an affect on prices. The scarce ones should be more than the common ones.When the price of bullion soars, as it is now doing, nearly all of the coins are treated as just so much bullion. But collectors shouldn’t lose sight of the fact that some are much tougher than others, making for further poten-tial profits when the rest of the market wakes up to that fact again.Understanding what the American Eagle gold bullions coins have to offer and why they have been overlooked in many cases requires that we con-sider the situation when they were introduced.For many years Americans had been frustrated when it came to buy-ing gold coins. For decades the restric-tions imposed on ownership starting with the Gold Recall Order of 1933 had prevented Americans from buying any gold coin dated after that date. It did not matter if the coin was a Canadian commemorative or an interesting is-sue of another country, the prohibi-tions were the law.It might be little remembered to-day, but it was illegal for Americans to own gold until the last day of 1974. This allowed Americans to purchase modern gold coins without restric-tion. If you wanted a gold coin con-taining an even troy ounce of gold in it, it had to be a Krugerrand of South Africa, which was created in 1967 as the first coin made containing precise-ly one ounce. The U.S. $20 came close at 0.9675 ounces, but that is not what gold buyers of the time wanted. They wanted the convenience of knowing that if gold was trading for $1,350 an ounce, that was the value of the gold in the coin.Canada copied the idea in 1979 with its Maple Leaf.Other countries followed. Ameri-can gold buyers wanted to own Amer-ican gold coins, but the government was slow and indirect in granting that wish. It seemed actively indifferent to gold investors and their needs. The introduction of the American Eagle gold coins came as something of a surprise then as it represented a complete change in policy. But the purpose was not helping investors so much as attacking the apartheid gov-ernment of South Africa at the time. It became illegal to import Krugerrands. There is no doubt that the 1984 Los Angeles Olympic gold commemora-tive $10 was an enormous success and helped to pave the way for the Ameri-can Eagle program. It was a simple evolution of thinking on the part of of-ficials of the 1970s who initially feared that somehow gold coins would cre-ate problems.At least for officials getting to know gold coins in the 1980s was getting to like them and as the fears vanished, eyes were opened to the idea that there was money to be made by pro-ducing gold coins. The report of the U.S. Gold Commission in 1982 might have ruled out a return to the gold standard, but it helped open the door to positive thinking about gold. More-over, if Americans were going to buy millions of ounces of gold every year anyway, it might as well be American gold.By the time the American Eagle program was introduced in 1986 the public was really way ahead of offi-cials in terms of their view toward gold coins. The general view had changed in the 1970s with rising gold prices. Gold hit almost $200 a troy ounce at the end of 1974, coincident with its legal-ization. Just three years earlier it had been $35 an ounce, an official price that had not changed since 1934.Americans in large numbers dis-covered that gold coins were capable of moving in price and they wanted a chance to be in on the action. This atti-tude was reinforced when gold soared from just over $100 in August of 1978 to $850 in January 1980. That time seems to be very similar to the present.By the time the first American Eagle gold bullion coin appeared in 1986, the price of gold had settled down to the $400 level and most Americans were already old hands at investing in gold and that probably caused some uncertainty as to what the reception of the United States entry into the bul-lion coin market would be like. The extent of the American Eagle gold bullion program probably sur-prised many. The United States not only issued a one-ounce gold coin, but
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tually anyone can afford. That has also made the $5 popular for use in jewelry although other denominations have been used as well, but not in the same numbers as the $5 and the jewelry use makes the mintage totals of the $5 potentially suspect as indications as to how many might really be available if there was suddenly significant collec-tor demand. The $25 and $10 generally post far lower sales totals. With indifferent han-dling and few collectors to save nice examples, there is a situation where the possibility is real that some will turn out to be in short supply. This is not a prediction. It is a fact as a couple dates have already jumped to price levels far above their gold value. A good example is the 1990 $25. It had a mintage of 31,000 pieces – a stark contrast with the largest $25 mintage of almost 600,000. The 1990 is up again to a current listing of $1,450 as opposed to the available date price of roughly $774. Certainly those pay-ing almost double the gold related price are doing so for a reason and that reason is that 31,000 mintage. The 1991 is even more dramatic with its lower mintage of 24,100. That mintage has produced a price surge to $2,075, making the 1991 at least for now the key $25 American Eagle.A similar situation can be seen with the $10. The sales in 1986 of the $10 were 726,031, but that number had dropped by 1990 to just 41,000, which slipped even further to 36,100 in 1991. Naturally the 1990 and 1991 are tougher than the 1986. However, their current prices are hardly more than bullion value.Smart bullion buyers today might look to purchase the scarce issues for the current gold price. The trend is less apparent in the case of the $5 which has seen mint-age as high as 912,609 and as low as 165,200. There are a couple dates like the 1988 and 1991 where we are seeing some indication of potentially higher prices, but collector interest in the $5 so far appears to be modest, possibly reflecting the fact that small coins in general have not been very active in recent years. There is another factor as well and that is the mintage totals in the case of the $5 are many times higher even for the lowest mintage dates than they are in the case of the $10 and $25. That has an impact as it means a greater supply.For prices to rise to premium levels the supply must be threatened and that is far easier in the case of the $10 and $25. That is also potentially the case with the one-ounce $50. The $50 with the highest sales of all denominations naturally has the largest supply avail-able of any specific date. It would be safe to suggest that while the most heavily produced, the $50 also prob-ably has the largest number of coins that do not receive proper care.While that might cause thousands of any $50 date to fall to grades where collectors are not interested, the fact remains that the lowest $50 sales so far were the 2001, which had sales of 143,605, more than 1 million pieces lower than the highest year for sale. Even so, current demand does not ap-pear to be enough to dry up the sup-ply of the 2001 or any other $50 date for that matter so there are no pre-mium prices for the bullion coins. That could certainly change over time. The situation is different with the proofs. Premiums there come and go. Buyers pay to put them in their Indi-vidual Retirement Accounts.Collectors are attracted to issues like the 2006 reverse proof and the availability of new proof issues after what happened in 2009 cannot be taken for granted.Over time there are likely to be dates with special collector value. Generally speaking the probability is that the prices of the proofs eventu-ally will follow very directly their mint-ages. It will be interesting to watch.Some day many will be as much interested in the mintage differences as you are. When that day comes, they will realize that they missed a real op-portunity to acquire a great collection for just a bullion price. The indications are clear based on better $25 and $10 dates that there are some better gold American Eagles that are already bringing prices far higher than their gold value. This trend seems likely to continue after the price of gold has had its day and as more discover that American Eagle gold coins are collection in their own right that many can assemble and enjoy.For those wishing they could have been around to get in on the ground floor for Saint-Gaudens double eagles or other historic coins of the past this is your second and probably last op-portunity to really assemble a great gold coin collection.