All too often, buyers of investment gold tend to forget the quality of the coins they are buying, until they come to sell them, when they are greeted with an unpleasant surprise. In reality, when you sell gold coins they are evaluated as numismatic objects.
Saying “it’s a Liberty Double Eagle so I can sell it with a premium of 40% in the event of a crisis” can very quickly turn to ashes if you have not taken the trouble to understand the quality that you are buying.
The quality of investment specific gold coins
The dealers who buy your coins do not want to negotiate the quality of the coins that you offer them and will use any argument to reduce the premium. They will want to buy your coins by weight, less their commission and any standard reduction due to the fact that you have handled the coins. In short, at the end of the day, you have made no profit.
Obviously, the greater the rarity of a coin, the lower the quality required to get a good price. However, this is purely a numismatic argument and we are speaking about investment here. Obviously, we are not going to buy a rare coin in the same way as investment gold. In practice, a rare coin is not greatly effected by crisis or the rise and fall of gold but mainly by the supply and demand for coins of the same type.
What is the minimum condition for a coin to have a premium?
A good magnifying glass to detect defects on gold coins
Usually, it’s the EF or VF quality level that is required to obtain a premium with current coins. Your purchases of investment gold should be concentrated on this type of coin. With the exception of a few rare coins, the VG and F quality coins are sold for their weight in gold. As for the UNC (uncirculated new coins), we recommend that you do not buy these as an investment because they are rare coins with a base premium (average premium over gold value) that is already high and a low premium differential( the difference between base premium and the highest actual premium). These are very good quality coins that should be reserved for the pure numismatist.
Avoid to buy worn coins.
If, despite the following table, you are not able to judge the quality of the coins you buy, we recommend that you do not buy from private individuals and, generally, avoid on-line auction sites, such as Ebay (where you can only evaluate your purchase based on photos, which tend to mask defects). Remember that it’s the most worn side that determines the coin’s general condition. One third of coins sold by on-line auction sites are not of an adequate quality. Worse still, they are often sold by unscrupulous dealers who know that they can not sell them directly to their own clients…
Be wary of coins that are too shiny and where the details are blurred. It’s the sign that they have been cleaned with abrasive products or instruments, initially to mask defects but which has ended up removing some of the gold. The weight test is usually determinant to a standard quality. The Sovereign weighs 7.93g to 7.98g. so avoid anything that weighs less than 7.93g (0.7% from newly minted weight). Coins can be verified using a Fisch gold coin gauge which tips the balance at 0.7% of the newly minted weight or as above weighed on an accurate digital scale to detect gold loss through wear.
Table of the different conditions or degrees of conservation for coins
- UNC (Uncirculated). Coin in perfect condition (no scratches, no wear, no traces of shocks) just as it left the minter’s die. This condition assumes that the coin has not been in circulation, only the patina and oxidation indicates that the coin is old. UNC is in its mint condition with all its mint sheen. No defect is acceptable. This is a rare condition because even coins that have never entered circulation but which have been transported in bags do not have this quality due to the fact that they have had shocks during their transport. These coins are reserved for numismatists. They are not considered as part of a strategy of investing in gold because of their high base premium.
Equivalent terms in other countries:
– France : FDC (Fleur de Coin)
– Germany: STG (Stempelglanz)
– Italy: FDC
– Spain: SC
- EF or XF (Extremely Fine). This is the condition of an almost perfect coin that has not circulated much where the defects, hardly visible to the naked eye, can only be seen clearly with a magnifying glass (slight scratches, slight wear on some reliefs such as the hair, beard, moustache, feathers…). The mint sheen has gone and there are minor shocks related to transport.
Equivalent terms in other countries:
– France : SUP (Superbe)
– Germany: VZ (Vorzüglich)
– Italy: SPL
– Spain: EBC - VF (Very Fine). Condition of a coin where the wear shows clearly that is has been in circulation but it still presents very well with slightly tired reliefs, a rim that may be a bit flattened but which is still net. The signs of wear are visible but the coin is still in a good condition. This is an average plus state of conservation which still allows the coin to obtain a premium.
Equivalent terms in other countries:
– France: TTB (Très Très Beau)
– Germany: SS (Sehr Schön)
– Italy: BB (Bellissimo)
– Spain: MBC - F (Fine). Condition of a coin that has been in circulation for a long time. Some details of the engraving start to disappear (ribbons, hair, inscriptions on the side, etc.). The metal’s surface is dull (or, in contrast, too shiny ‘to be true’), criss-crossed by little scratches and accidents may be visible (shocks to the rim, large scratches). Its appearance is still acceptable to a numismatist but investors avoid this type of coin because it is usually bought without a premium when it is a current gold coin.
Equivalent terms in other countries:
– France: TB (Très Beau)
– Germany: S (Schön)
– Italy: MB (Molto Bello)
– Spain: BC+ - VG (Very Good). Often referred to as “Good”, the condition of these coins means they are relegated to being bought and sold for their weight in gold. These are worn or very worn coins with a mediocre appearance. You can only just determine their type. The writing is partially deleted, the effigy is no longer sharp, many accidents can be seen. This is a coin that has been in circulation for a very long time and which will end up one day soon in a smelter unless it is a rare type.
Equivalent terms in other countries:
– USA / UK: VG (Very Good)
– France: B (Belle)
– Germany: SGE (Sehr Gut Erhalten)
– Italy: B (Bello)
– Spain: BC