New York (Vocus) February 2, 2010
The price of gold is currently experiencing an unprecedented high. Many buyers are asking themselves, what exactly is involved when considering gold purchases. Stack’s, home to some of the most respected numismatic experts in the world, has created a list of frequently asked questions on the topic:
Generally, reputable outlets sell gold in three ways:
The most popular way to buy gold is to establish a relationship with a reputable company that is financially stable and has weathered fluctuating markets. You will learn from a knowledgeable representative and usually can receive free advice about balancing your gold acquisitions. An advantage of purchasing gold at a store is that you can immediately take possession of your gold.
Many companies have Web sites where you can inquire about the current price of bullion or order numismatic gold. It is common for these transactions to require a confirmation by e-mail or phone to avoid scams (of which there are many). If you plan to be an active gold buyer, credit verification will be required. Always buy from a reputable company, as there are counterfeits among bullion and numismatic gold coins.
Gold coins sold in public auctions or mail bid sales are mostly numismatic, as the market for gold bullion is too volatile for the processing time of a major auction. The guidelines for bidding in an auction are normally outlined in the “Terms of Sale.” Each auction company has a representative to answer bidders’ inquiries about coins offered at auction and help you register to bid in-person, online, or by phone, fax or mail. Auctions are a primary source for educated buyers of valuable numismatic gold coins. Unless you are an expert, buy only gold coins certified by a well known third party grading service such as the Professional Coin Grading Service (PCGS) or the Numismatic Guaranty Corporation (NGC). Beware of “bargains,” as such are usually scams or fake offers. Always take possession of your gold, to avoid it being mingled with that of others, and to be sure it actually exists. A number of frauds in the past have involved selling gold coins that were “safely stored” by the seller.
There is a certain element of trust involved. Deal only with a company that has a long standing numismatic presence. Be wary of firms that may have been recently established to take short-term advantage of the active gold market.
What types of gold should I buy?
Bullion refers to any form of gold (bars or coins) whose value is based solely on the intrinsic value of the gold. The value is affected by the weight (Troy ounces, grams or kilograms) and purity, which is often referred to as fineness. A small premium is charged over bullion cost when you buy, and a small commission is deducted when you sell.
Numismatic gold is defined as coins made more than a few years ago that were struck for circulation in commerce or for sale to collectors, as commemorative, souvenir, or other special issues. Such coins can be collected as part of a set and have value beyond their gold content. To avoid counterfeit coins, it is advisable to purchase only numismatic gold certified by PCGS or NGC.
Is numismatic gold worth more than bullion?
- By definition, numismatic gold is worth a premium over gold value. Generally, the numismatic market for U.S. gold coins includes regular issues from 1795 to 1933.
- Historical factors, quality and scarcity also affect value. Numismatic gold was also issued and utilized in daily commerce, whereas bullion is a convenient form of owning gold.
- Many bullion buyers move into the numismatic market once they become more experienced.
What drives the price of gold?
- Gold prices fluctuate for various reasons including demand, economic conditions, unstable currencies, inflation, financial world events, the stock market, interest on other investments and popular psychology. People tend to flock to tangible hard assets to retain value when interest rates fall and the stock market tumbles. Then, popular passion and psychology contribute, driving up the price of gold with accelerated market action. Recent examples of gold price fluctuation include:
--November 6, 2009 – After a long period of directionless trading around the benchmark of $1,000, gold moves above $1,100 an ounce.
--January-March 2009 – Investors buy record amounts of physical gold as a safe haven as major economies face recession and the dollar falls.
--September 17, 2008 – Gold rises by nearly $90 an ounce, a record one-day gain, as investors seek safety amid turmoil on the equity markets. The situation changes when panicked liquidation of gold investments occurs as investors sell in order to raise cash. Gold falls back to $680.
In other times and markets, many people find security in having a percentage of their assets in gold, “just in case.”
Why is there a push toward U.S. gold right now?
- U.S. gold is the most valuable and most popularly traded component of day-to-day gold bullion activity. Gold coins and bullion from the U.S. are struck by the U.S. Mint, a branch of the Treasury Department. U.S. material retains its value as it is so actively traded, and large numbers of consumers create a higher demand. Additionally, the weight, content and purity of U.S gold are guaranteed by the U.S. government. Worldwide gold coins are of variable fineness because they are made in different places with different degrees of care. The phrase “Made in the USA” lends itself to a greater confidence and trust in the genuineness of the product.
Gold coins are subject to certain accounting, financial, and tax rules, for which your accountant can provide the latest information.
How do you store gold?
- Gold should be stored in a secure place, such as a safety deposit box or home safe. Although the last is not advised, if you do so, keep such arrangements secret. To ensure your gold actually exists and to remove the possibility of financial or other problems with any other entity holding your gold, it is always advisable to take physical possession of gold.
I have a gold collection. How do I evaluate price?
- A basic evaluation begins with the current spot price of gold. Then it must be determined whether you have items that command a high or low premium. American Eagles or Canadian Maple Leaf coins have small premiums, whereas $20 gold (or Double Eagles) from the late 1800s or early 1900s carry high premiums. Numismatic rarities are not as affected by the spot price of gold. The rarer the item, the less the spot price of gold affects its value.
- Bullion value is determined by weight and fineness. Numismatic gold values are determined by condition and rarity. Basic reference guides like “A Guide Book of U.S. Coins” can assist in your evaluation. Monthly and weekly publications with current pricing information are available at your local newsstand.
- When the time comes to sell, you will benefit by having an appraisal by a professional numismatist, such as a member of the Professional Numismatists Guild (PNG).
How do I sell numismatic and bullion gold?
- The best way to sell bullion gold is in person where the buyer can provide up-to-the-minute market price and pay immediately. If you have established yourself with a firm, there is much more flexibility. Numismatic gold can be sold outright, or it can be consigned for auction sale. The last is especially desirable if the coins have a high numismatic worth in comparison to their bullion value.
Founded in 1935, Stack’s is home to some of the most respected numismatic experts in the world. The company holds many records in the numismatic business including the most expensive single coin ever sold at auction, the famous 1933 Double Eagle, which sold in conjunction with Sotheby’s for $7.59 million; and the most valuable collection ever sold, the collection of John J. Ford, Jr., for nearly $60 million. In addition, Stack’s holds the #1 position in the American numismatic auction scene in terms of longevity, number of sales conducted, lots sold and great rarities handled. The company has offices in New York City and Wolfeboro, New Hampshire. For more information, please visit http://www.Stacks.com .