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It is fairly common today for dealers to attempt to convince investors to buy European gold coins. They pitch a couple of standard marketing lines that get investors thinking the coins have advantages over bullion coins that warrant the high price.
The first claim is that the coins have some special numismatic value. In reality, European coins in particular have very little numismatic value. While the occassional old U.S. coin has gained special value that causes them to trade at higher than bullion prices, this simply doesn’t happen with European coins. Even if it did occur, it probably wouldn’t do you any good because collectors tend to collect the coins of their own country. You would have to trade with someone in the European country the coin came from to redeem it for the full numismatic value. They’ll point to the fact that the coins are quite old (and they are, by American standards) without informing investors that age alone does not create value. Gold coins were very common in Europe and can be bought readily at bullion prices in those countries. Indeed, this is exactly how the coin dealers acquire them in the first place. The dealers buy European gold coins in bulk at bullion prices and resell them in America at marked up prices. Wise gold investors shouldn’t be buying numismatic coins in the first place, but if you are looking at coins don’t be fooled into buying foreign bullion coins at collectible prices.
The second claim is that the coins are non-confiscatable. Because a large number of European gold coins predate the 1933 Exeutive Order that confiscated gold in the United States they say this coins are exempt from confiscation. We already exposed this marketing ploy in another article, but it bears repeating. There is no law or statute that prevents future confiscation of any gold. Period. Anyone telling you this is either grossly misinformed or, more likely, outright lying to you. In either case you shouldn’t be doing business with them over something as important as your gold invesments.
What about European gold coins at bullion prices?
So it’s apparent that investors shouldn’t buy gold coins from Europe that are sold as collectible prices, but what about buying European coins at bullion prices? We still don’t recommend doing this. As you’ll find by browsing prices at various mints and dealers, the cost of true bullion coins are already higher than the costs of gold bars and gold rounds. This doesn’t necessarily make bullion coins a bad investment because they do hold one advantage: exchangeability. If you are buying properly marked bars and rounds from reputable mints this advantage doesn’t mean much when dealing with other gold investors, however these coins are readily recognized by both gold investors and the average person. This means that you won’t have to go through expensive verification processes to trade them. This is especially important if you are purchasing gold coins to be used in a financial disaster situation. In such an event, people will be wary and only the most common and trusted items will be readily tradeable.
Based on this you probably already see the trouble with European coins. Since these coins aren’t as common in the United States they don’t have the same exchangeability as more common coins or even recognizable bars and rounds. The European coins are stamped in the language of the country of origin, which in most cases is not English, so there’s no easy way for potential buyers to verify the coin’s identity on the spot unless they are already knowledgeable about coins. Moreover, European coins rarely have the gold content of the coin marked on them, so verification almost requires a very expensive full metal assay. European coins were also cast in a variety of sizes that we would now consider non-standard. Buyers in America don’t want 6.92 gram coins and .1947 oz coins. They want coins in full or fractional ounces that are familiar and easy to calculate with.
We always recommend evaluating whether or not you need to buy gold coins instead of bars or rounds. If you do decide that the ease of trading is worth the hit to your returns, we only recommend purchasing the most common bullion coins in full or simple fractional ounces. The American Gold Buffalo, American Gold Eagle, Canadian Maple Leaf, and South African Kruggerand are your best bets.
A special note to our readers that aren’t in America: This is obviously a U.S.-centric article. If you’re from a European country or elsewhere some of this advice may change. In general you still only want to buy gold coins that are stamped in the language of the country you expect to sell them in (presumably the country you live in). Additionally, you have the option of working with coins stamped in English as they are recognizable world wide. That said, most coins available to you don’t have the gold content stamped on them so they . If you really want to hedge you might hold a mixture of the most common coins of your country and more common, properly marked english language coins such as the South African Kruggerand.
The bottom line is this: Why would you pay the coin premium for exchangeability without actually getting a highly exchangeable item? This is what you’re doing if you buy European gold coins (or coins that aren’t optimal for your location). It’s wasting money, and that’s not wise gold investing.
