Friday, May 27, 2011

Should You Buy Foreign Gold & Silver Coins?

Starting out as a coin collector when I was seven, and eventually evolving into a precious metal bullion investor as an adult, I consider myself to be pretty knowledgeable about the subject of gold and silver coins. At least USA coins, that is.

Investors are confronted with a myriad of silver and gold coin & bullion choices today. A heck of a lot more than when I first started collecting. There are the American Gold Eagle (AGE) one ounce coins, the American Buffalo gold coin, the half ounce Presidential Spouse issue, the American Silver Eagle (ASE), junk silver (pre-1965 dimes, quarters, halves, silver dollars) among others. Of course, all of the above coinage are US Mint products. When you include the Coins of the World, however, choices expand exponentially. Suddenly, you must contend with the Canadian Maple Leaf, Austrian Philharmonic coins, the French Roosters ( pictured above), the Swiss Gold Helvetia 20 Franc, the Chinese Panda, the Australian Kookaburras, Mexican Silver Pesos and the Silver Libertad, etc.

So, if you're a US citizen interested in acquiring silver and gold coins as hedges against inflation, hyperinflation, and survival trading, should you buy substantial amounts of gold and silver coins from foreign countries? My answer is no, and here's why:

1. Most Americans do not speak foreign languages. A coin featuring anything but English will be treated with suspicion and trading reluctance.

2. Foreign coins originally designed for circulation may not be easily convertible to troy ounces. The Swiss Gold Helevtia has 0.1867 troy ounces of gold. For Americans already challenged in the math department, that type of coins means a lot of multiplication and moving of decimal places. American Gold and Silver Eagles bullion coins in contrast not only feature familiar images but easy-to-read troy ounce information. Even junk silver coins can brag of familiarity benefits, and a quick education course including these 90% silver coins can include a snippet about how $1.40 in junk silver equals one troy ounce of pure silver.

3. Many foreign numismatic coins and bullion products carry higher premiums than US Mint products. For example, the ASE carries a current premium of $4.59 on APMEX.com, but the Chinese one ounce Panda has a hefty $10 added cost above spot! Collectors who anticipate a healthy market for specialty coins in the future may find such high premiums acceptable, but those preparing for anything from hyperinflation to economic collapse may see these tacked on costs above silver spot price as wasteful.

4. Lastly, the knowledge equation. Most Americans today know virtually nothing about gold and silver pricing, much less the differences between US coin and bullion products and those of foreign nations. A crash course will be required before trading with the previously uninformed during a crisis. For US bullion coins, the silver content markings of the US Mint on the hundreds of millions of ASE's in investor closets will tell them all they need to know. The prep course for US 90% junk silver is slightly more extensive, but the fact that they're all dated pre-1965 and that $1.40 in any combination of dimes, quarters, halves, and silver dollars equals one ounce of pure silver, can be absorbed fairly fast.

Note: I think that 40% silver Kennedy halves (1965 - 1969), proof coins, and private bullion products should be avoided mainly due to the fact that they make the education process markedly harder. In addition, Americans have been exclusively using US Mint products as money for over 200 years. I firmly believe, (despite vociferous believers to the contrary), that privately minted bullion "rounds" will be an anathema to the average American. Besides, the US Mint has never to my knowledge been accused of short-changing their products as far as precious metal content is concerned. Mainly, because there is no profit motive to do so. Private companies, on the other hand, have had and would continue to have a powerful incentive to sell debased PM products at full purity pricing.

Rick

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8 comments:

  1. According to MoneyWeek, “Gold has been valued since the dawn of civilization. Unlike most investments it doesn't pay a dividend or any form of income. It's best seen as a hedge against financial instability.” Investors buy gold coins and bars, in addition to investing in gold shares, futures and options.

    us mint gold coins

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  2. The problem I see in buying U.S. Gold, is that the government can recall it. And if they have a record of your purchase (from the mint, or a dealer), they will probably be calling you. And some would feel morally obligated to give it up if the government calls them to ("Render unto Caesar..."). Whereas, if you have foreign gold, a recall of U.S. gold would not effect your holdings

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  3. US Government confiscation is the most common "bugaboo" many disreputable companies use to sell their over-prices foreign gold coins. They state the well-known FDR 1933 Gold call in as the prime example.

    However, there are some major differences between 1933 and today. First and foremost, gold no longer backs the US Dollar in any way, shape, or form. Recalling any gold will have zero effect on our monetary and fiscal problems. Even if all gold was confiscated throughout the US, it wouldn't begin to cover the interest on our debt.

    Secondly, the 1933 call in was not enforced. I believe there was only one person prosecuted under this law. If you turn your gold in voluntarily, the more fool you. If the government wishes to send thousands of agents kicking in doors there's no evidence they wouldn't take all gold, foreign and numismatic.

    If you're still a little paranoid, own some Central Fund of Canada (CEF). It is a close-ended fund started in 1962, with gold and silver reserves that are audited and insured by Lloyd's of London and held in a Canadian bank.

    Rick



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    1. You might also remember that the 1933 event was no confiscation, as all the rare coin sellers call it, but a call in, as you stated. All the gold coins turned in were exchanged for paper dollars at full value. One cannot call that confiscated, but it was a theft. The rip off came AFTER the turn in, when gold instantly went from 20 per oz to 35.

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  4. Apart from the matter of hobby, collection of silver & gold bullion coin can save you a lot for your future. The rate for these precious metals is never going to be down. So it is a very brilliant means of investing your income for your future. The resale rate will be double or triple when compared to what you spend while purchasing.

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  5. I am thinking of buying silver coins for investment because it is profitable & easy to sell & purchase also.

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  6. If you are new to precious metal investment or better yet unsure about the industry’s trade, buying silver coins is a very good start! From inexpensive Junk Silver to highly-sought after Peace Dollars, surely you would find the right silver coin perfect on your budget.

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  7. I don't see any reason not to get foreign gold. Since the value of the coin is dependent on the metal there wouldn't be any difference in value. You should be a bit more careful about foreign coins. Their value varies over time, and it can be harder to find a buyer for them. http://dubinraritiescoinexpert.com/Services/

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