How to Determine the Value of Gold Coins

The Value of Gold Coins depends on two factors

When determining the value of gold coins, one must consider two factors: Intrinsic Value and Collectors' Premium.

Intrinsic Value and the Selling Price of Gold Coins

The intrinsic value of a coin is the value of the gold itself. In other words, if you melted the coin and sold it as bullion, that would be the intrinsic value of the coin. With modern bullion coins (most of the coins on the market), the intrinsic value equals the value of the coin. Bullion coins are offered for sale online and at gold coin dealers. Make sure you determine what the dealer's commission and shipping are for the coin before you buy it. The coin should be priced just above the spot price, so as to include the dealer's commission. Coins priced below the spot price of gold should be avoided-they are most likely fake coins.

Collector's Premium

The collector's premium can greatly add to the value of gold coins. As an example, a rare $20 gold piece from 1861 in mint condition sold for $2.5 Million! Many investors and dealers advise that collectors' coins (also called numismatic, rare or scarce gold coins) perform better as investments than gold bullion coins. There is a barrier to entry though: knowledge. You must do research and know what you are buying and how much it is worth so you do not get duped. For most investors, keeping up with the dynamic collectors' market is a daunting task-they would rather just buy gold bullion coins.

The four factors that contribute to a coin's collector's value are:

1. Rarity
2. Grade (or Condition)
3. Quality
4. Popularity (often linked to historical significance)

Bullion or Numismatic?

As mentioned above, the choice between investing in numismatic coins versus bullion coins is not always a clear choice. The goals of the investor play an important role, and it comes down to personal choice. Those who select numismatic coins argue for the possibility of a better return on investment over time and the fun of being a collector. Those who select bullion coins argue for the simplicity of the investment and not depending on the collector's market for the value of the coin.

So, there you have it. A gold coin's value can be broken down into intrinsic value and collector's premium. You can make it even simpler by electing to purchase bullion coins, which do not have any collector's premium.

Brian is an expert on gold investing and gold prospecting. His website, The Gold Spot [http://www.the-gold-spot.com/index.html] is a comprehensive guide to gold investing and gold mining for hobbyists. For more information on the value of gold coins, go to http://www.the-gold-spot.com/value-of-gold-coins [http://www.the-gold-spot.com/value-of-gold-coins.html]

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