The High Price Of Bullion

It will be interesting to see what the American Eagle 2025 Gold Proof Four-Coin Set sells for when it goes on sale in a couple of days (March 20th, according to the mint's website). With gold currently at around $3050/oz, the bullion value alone of the 1.85 ounces of gold in the set would be around $5600. Add in the standard 25% "numismatic" premium and it should be around $7000 for the set if my math is correct.

[Can that possibly be right? $7000 for a Gold Proof Four-Coin Set?]

Anyway, here's where it gets interesting. Back in 2012, I happened to be visiting the U.S. mint branch office in Washington DC and bought a Gold Proof Four-Coin Set as a souvenir. Gold was around $1600/oz. at the time and I think I paid around $3700 for the set which would have had a bullion value of around $3000. Given the cost of gold today, the set now has a bullion value of around $5600. But if the newest set from the mint actually does sell for $7000 in a couple of days, does that mean that my set from 2012 would have a similar premium, or would it "just" be worth the bullion value of $5600?

For whatever it's worth, a quick search on ebay shows similar sets from other years listing (not necessarily selling) for anywhere from $6200 to $6900, but that might not reflect the rapid increase in gold prices over the last few days. My guess is that my old set would still have a premium over bullion value, but not as much as the inflated premium the mint is likely going to add on the set coming out on the 20th.

EDIT: I just found a U.S. Mint gold pricing chart from 2024. Assuming the information still applies for 2025, it looks like if the price of gold is between $3000-3049 at the time of sale then the price of the Gold Proof Four-Coin Set will actually be $7,275. If it's above $3050, then the price will be $7,367.50. Unbelievable!

The shameful thing is that, materials aside, it does not cost the mint appreciably more to strike a proof gold coin than a proof clad half dollar. Gouging, do you think?

All I can say is that bullion continues to rise and price me out of collecting gold coins. The gold spouse coins back in 2007 were a goal of mine at $430 each but by the end of the first year they had gone up 25% ending my ability to continue purchasing from the mint. The same is happening to me with the $5 commemoratives each having a bullion value at $725 it is becoming difficult to complete the type series. I will try but the USMC $5 has gone from $750 initial preorder to now $933. That's just in 2 months!

I miss being able to get graded specimens for near melt price.

All coins have, in theory, three components to their value, because they have three different groups of people each of whom are prepared to pay you a certain amount for the coin. These three components all, in theory, go up and down independently of each other, depending on the separate but interrelated supply and demand equations for that component.

You have the face value, which is in effect the amount the government and/or banks will buy the coin off you for. For bullion coins this is a token amount and not usually worth considering, but does offer some kind of price floor for bullion coins in the event of an inexplicable collapse in bullion prices, which other bullion products lack. However, this value remains constant and does not change unless the government alters or revokes a coin's legal tender value for some reason; changing the face value of a coin after it is struck is not something the US government has ever actually done but it does remain something that Congress does in theory have the power to do, under Article 1 Section 8 of the Constitution.

You then have the bullion premium, which is the additional amount above the face value which a scrap metal merchant or bullion dealer will pay you for that piece of metal. This of course goes up and down with the price of bullion, though with the caveat that a coin's "total bullion value" is not a simplistic summation of the value of all a coin's components as is done on certain coin-value-calculating websites, but rather the value of the most valuable component, minus the cost of purifying that component and removing the other components.

Finally you have the numismatic premium, which is the additional amount above the bullion value which a coin collector/investor is prepared to pay you for that specific coin, which rises and falls according to the fickle and unpredictable sentimentality of coin collectors, who know that their coins are made of precious metals but don't necessarily care all that much about that fact as it is the coin itself, rather than the metal the coin is made from, that they desire.

If bullion prices are rising, then the bullion component of the coin's value must increase. But if the overall value of the coin does not correspondingly increase, this must therefore mean that the numismatic premium is falling. This of course spooks investors, who don't like holding on to anything that is falling in value when markets overall are rising and when there are non-falling alternatives available, so they dump their collectable coins portfolio and switch to pure bullion items - which of course makes the problem even worse as it leaves just the coin collector core to try to carry the burden of increasing the numismatic premium to match the bullion price rises.

If coin collectors cannot or will not force the numismatic premiums to increase by significantly raising demand (and historically, they aren't very good at doing this), then the numismatic premium falls to zero or near-zero and lots of formerly "collectable coins" become "bullion coins". And when that happens, they are likely to meet the same fate as bullion coins, in terms of arbitrary melting.

TLDR: if collectors aren't prepared to keep up with rising bullion prices and pay those increased prices for those coins, then the scrap metal merchants are prepared to pay those prices, and coins will end up getting scrapped as a result.

I wonder what dealers are willing to pay for the 4 coin US gold proof set with current spot price? what sort of premium will there be with spot prices this high.

Well, with the value of the gold content alone worth around $5,600 and the latest set from the mint likely selling for either $7,275 or $7,367.50...

Meh. Dealers will still probably lowball us and we'd be lucky to get full bullion value. They, of course, will then turn around and try to resell it for anywhere from $6,200 to $7,000.

Sap almost always says it better than I can.

$7300 is a lot to pay I would think that most are going to stay away from such a number. In a year gold could be 1500 an oz (but I would bet against that) . That situation would be very disappointing to most my self included.