Avoid shelling out excessive sums for verified coin grades: Understanding gold's lure and why such coin price premiums are unnecessary.
Exhibiting exquisite craftsmanship, the gold collection housed at Bogota's Museo del Oro showcases an array of diadems, helmets, and crowns, rings, necklaces, bracelets, beads, and even fishhooks, intricately designed with gracious precision. The goldsmiths of ancient South and Central America were lauded for their extraordinary talents, with their abilities surpassing those of their European contemporaries, as attested by the Spanish explorers who encountered their works.
In Mexico, the conquistadors unearthed life-sized figures of men and women, intricately sculpted jars and pitchers, and half-pottery, half-gold vases embellished with relief artwork of birds, animals, and insects. In Peru and Ecuador, miniature gardens were discovered, crafted from gold - earth formed with gold granules, gold cornstalks, and gold figurines of men and llamas.
Unfortunately, the treasure that lies in the Museo del Oro is but a mere fraction of what once existed. The Spanish valued gold primarily for its weight, neglecting the artistic, aesthetic, and technical merits of the pieces they discovered. These valuable artworks were often melted down upon their return to Europe, as described by a young priest traveling with conquistador Francisco Pizarro, who lamented the loss of masterpieces that surpassed what the Spanish had in their possession.
History has shown that this pattern of destroying gold artworks is not unique to the Spanish conquistadors. The scarcity of surviving gold artifacts should warrant a higher premium, given the risk of being melted down. However, this is not always the case.
Gold is renowned for its durability and irresistible luster, having existed since the formation of the solar system and residing within the Earth's crust throughout its history. Despite its ancient origins, gold artifacts seldom command the premium one might expect due to their age.
A modern gold sovereign typically sells for £600 to £630. A Victorian sovereign, minted more than 150 years ago, holds the same gold content but fetches only a 10% higher price. Sovereigns are relatively common, with an estimated billion coins struck, so rarity value remains limited.
The main exception to this trend is the 1937 sovereign struck for Edward VIII, which was never circulated due to his abdication shortly before minting. One of these coins sold for £1 million in 2020, demonstrating the potential premium such rarities can command.
Ten years ago, I acquired a Justinian solidus, a coin minted in 600AD, for a twenty percent premium above the spot value of the gold content. Purchased from a W1 shop, the premium I paid included the Mayfair premium.
In 2021, an ingot recovered from the SS Central America, which famously sank off the Carolina coast in 1857 carrying Californian gold to New York, went up for auction. Weighing 649 ounces, it was 21-carat gold, and if melted down, it would have yielded 568 ounces of pure gold. With today's price of $3,300 per ounce, the spot value would have been $1.9 million. It sold for $2.1 million, including the buyer's premium - barely more than the spot value.
Antique gold rarely garners the premium one might expect, given its age and history. Unscrupulous coin dealers may try to sell graded coins as extremely rare, providing false certificates and jacking up the price. These premiums are often difficult to recoup when selling. Investors are advised to avoid such graded coins.
Fractional coins or older coins do trade at a higher (though not excessive) premium. These coins may trade for fifteen to twenty percent above the spot value of the gold content, and the premium is typically recoverable when selling.
When investing in gold, one should aim to maximize the gold content for their money rather than trying to capitalize on rarity or as yet undiscovered value. Gold investments should serve to preserve purchasing power, not deplete it.
Gold, as an investment, often does not command the premium one might expect due to its age and history, as demonstrated by the valuation of antique gold coins. For instance, a Victorian sovereign, minted over 150 years ago, fetches only a 10% higher price than a modern gold sovereign. On the other hand, fractional coins or older coins trade at a higher (though not excessive) premium, often fetching 15% to 20% above the spot value of the gold content. When investing in gold, it is advisable to focus on maximizing the gold content rather than seeking rarity or undiscovered value to preserve purchasing power.
