Know Thy Coins: The First Step Of Collecting Gold Coins

Some people collect gold coins as a long-term investment strategy. Others collect gold coins for their rarity, aesthetic value or significance in history. Either way, collecting gold coins can be a fulfilling and even profitable venture. The following provides more information on the three predominant types of coins collected throughout the U.S.:

Rare and Antique Coins

Many coin collectors seek out rare and other hard-to-find coins for the thrill of it. This often includes valuable gold and silver coins made centuries or possibly even millennia ago. Some of these treasures can be found right in your backyard, while others are located in hard-to-reach locations. It's not uncommon to hear about someone discovering a shipwreck filled with gold coins that were thought to be lost ages ago. Of course, you can also purchase rare and valuable coins from other collectors and brokerages.

Research is always the key when it comes to collecting rare coins. After all, you'll never know that American Double Eagle with a very rare minting flaw could be worth a lot of money without researching it first. Having the right tools is another important consideration if you intend on finding your own coins. Metal detectors, plenty of good leads and an eye for exploration are pre-requisites for seeking out rare coins on your own.

Commemorative Coins

Commemorative coins are quite common in the gold coin market. Many of these coins mark special events, such as the 2014 National Baseball Hall of Fame and the 1996 Olympic Games commemorative coins. Others, such as the 1998 Robert F. Kennedy coin, are designed and minted to honor famous figures.

These coins are often called "numismatic coins," as they're commonly assigned an official face value in spite of their actual value in the eyes of collectors. However, many commemorative coins aren't made with circulation in mind. For example, the 1996 Olympic Games coins were struck as non-circulating coins for display purposes.

Commemorative coins tend to have a lower gold or silver content than bullion-based coins, which commonly feature a gold content of 90 percent. Along with other factors, this makes the average value of a commemorative coin lower on the open market. While many people do make investments with commemorative coins, bullion-based coins generally offer a better return on investment.

Bullion-Based Coins

While many gold coin collectors pursue their hobby for the novelty or historic value, there are plenty who see gold coins as a viable investment vehicle. Bullion-based coins allow gold coin collectors to invest in the precious metal through the purchase of high-quality gold coins. For many investors, it's a convenient way to own precious metals.

In the U.S., gold, silver and platinum bullion coins are produced by the U.S. Mint. These coins usually take two forms:

  • Uncirculated bullion coins – These coins are usually minted for investment purposes and, as a result, are typically sold to select customers in bulk quantities. Prices for uncirculated bullion coins depend on the current spot price, plus an additional charge from the Mint.
  • Proof bullion coins – Proof coins are minted specifically for collectors. As a result, far more effort goes into their presentation. For instance, most proof bullion coins are packaged in a protective display case with a certificate of authenticity included.

Unlike numismatic coins, the value of bullion-based coins is derived from their gold content and the spot price of the precious metal on the open market. Proof coins tend to come with a markup that raises its price to a degree, but that's to be expected.

If you're a first-time collector, it's a good idea to know what you're getting into before you start your coin collection.