Let’s get one thing straight: very few gold dealers around today make their living selling bullion coins.

They often advertise coins like American Eagles and Canadian Maple Leafs at low prices to attract buyers, and sometimes they may actually sell them to you at the advertised prices.

But the reality is that these coins are just used as bait. Most dealers’ goal is to get you on the phone, where their ‘boiler room’ brokers will try to get you to switch from bullion to numismatic coins, which they might call “rare,” “historic,” or “limited edition.”

Unless you are a very serious collector who has substantial knowledge of the numismatic world, here are four reasons you should avoid numismatic coins:

1. The Commissions are Extreme

If you’re buying a numismatic coin, you will not be paying a fair price for the bullion contained in the coin. Dealers sell numismatics at prices of 30-50% or more over the coins’ bullion value, and a large chunk of that will simply go into the dealer’s pocket.

2. They’re Hard to Liquidate

Even if your numismatic coins do rise in value, good luck trying to sell them. While bullion coins are accepted at near spot price around the world, there is no ready market for numismatics.

You could try selling the coins back to your dealer or at coin shows, but chances are they’ll offer much less than what you paid. eBay doesn’t work because the buyer can’t verify that the coin is actually rare. And it’s nearly impossible to sell them to the general public, as you probably don’t have the persuasive power of the fast-talking broker who sold the coins to you.

3. The Charts are Cooked

Numismatics salesmen might show you a chart comparing the performance of numismatic coins against regular/bullion coins.

Of course, the chart shows the numismatics performing much better. But these graphs almost always track particular rare coins that are cherry-picked with the benefit of hindsight. For every one rare coin that outperforms, there could be ten that severely underperform. Only afterwards would you know which coin you should have bought.

Comparing the wide index of rare coins issued by the Professional Coin Grading Service (PCGS) against the spot price of gold bullion shows that numismatics have in fact missed most of the gains of the last decade.

4. Confiscation is a Con

Many unscrupulous dealers tell customers that only numismatic coins will be exempt from a coming “gold confiscation.” This is based on a little piece of history taken way out of context.

In 1933, President Roosevelt issued Executive Order 6102, prohibiting the private holding of gold and requiring US citizens to turn over their gold bullion or face a $10,000 fine ($167,700 in today’s dollars) and/or 10 years’ imprisonment.

For private citizens, the order listed the following exemption:

“Gold coin and gold certificates in an amount not exceeding in
the aggregate $100 [about 5 troy ounces at that time] belonging to any one person; and gold coins having a recognized special value to collectors of rare and unusual coins.”

Seizing on this “rare and unusual” language, many coin dealers try to convince unsuspecting customers that regular bullion coins are not safe, but that their “unique” numismatic coins would be exempt from a Roosevelt-style confiscation.

However, even in the heat of Roosevelt’s confiscation scheme, government troops did not break into people’s homes. The singular prosecution under the order took place when a New York lawyer tried to withdraw 5,000 troy ounces of gold from Chase Bank, and he wasn’t even convicted! Ironically, all the gold actually collected by the Treasury was willfully surrendered in a wave of misguided patriotism, while many “law-breakers” simply kept their gold.

2 Points to Take Away

Buy Gold for Gold

Gold is a commodity. Bullion coins are pre-measured units of this commodity, stamped with a design as a quick signal of authenticity. Gold is also history’s most reliable form of money, which makes it a good commodity to own when the world’s paper money system is in upheaval. The only people who should be buying numismatics are serious and knowledgeable collectors – those who appreciate the coins for their aesthetic value and take pleasure in owning them.

Just Don’t Fall For It!

Many shady gold dealers will advertise incredible deals with low priced bullion, to attract your interest.

Once these dealers have you (their “prey”) on the phone, their sales force is trained to avoid selling the advertised low-priced bullion…

And instead they hard-sell you on their “premium”, highly marked-up items, like pre-1933 gold coins, numismatic coins, “fancy” bullion and so on. All while explaining how much more valuable and safe these “rare” coins are.

Be very wary about the “Bait & Switch.”

Tomorrow I’ll share with you Scam #2.