Coin Market Fundamentals: What Is Security Worth?

PCGS - What is security worth? Many factors drive rare coin and bullion markets. Inflation, interest rates, oil prices, and world unrest are just some of many possible factors that might influence the prices of bullion metals - or any other product, for that matter. These often-extraneous factors, while they certainly influence our buying decisions, often cloud our judgment.



Currently, it's all about the gold.

I love the analogy another dealer shared with me recently when discussing bullion metal trading. The gist of the quote was that "while bullion markets might 'step up' pretty briskly in a rising market, they 'fall' like an elevator when the market drops."

Curiously the gold rush affects the grading business also. During the early days of the Covid pandemic in 2020, dealers took a shortcut and forewent encapsulation of many modern bullion items (as well as many vintage pre-1933 gold coins), choosing to just flip these items directly purchased from other dealers, the U.S. Mint, or other international mints to other wholesalers without having any of this merchandise authenticated or graded.

While that may have saved the dealer a few bucks when flipping a coin, what about the consumer? Don't you want to know what you are buying is first authentic and second "as represented," in terms of quality or grade?

While you can't control the market, you can control what you purchase.

Whether you are an investor, hoarder, stacker, or collector, the bullion-metal markets have been quite active since the beginning of 2024. The movement has been steadily stepping up with a couple of quick elevator descents thrown in to keep folks on their toes.

Lots of market factors that many of us generally take for granted change when there is a fast-moving bullion market. Supply, and/or lack thereof, is usually the underlying wildcard in any bullion market. While the spreads between the buy and sell prices of bullion items might be fairly consistent in a flat market, those spreads can fluctuate wildly when the market levels are moving quickly.

We are in new territory for gold bullion prices, with record price levels having been set almost daily in the spring. Interestingly, prices for rare coins are mostly flat, except for scarcer and rare-date material. Bullion-related rare coins, while enjoying some price appreciation, have lagged behind bullion-related items more from lack of attention than from any diminished value.

Interestingly, while the melt value of your rare coin might have appreciated also. In active bullion markets, many may not seem to care because they're busy with buying and selling bullion items. Yes, this is counterintuitive, but it has happened before.

Regardless of your definition of "value," gold and silver bullion is pretty straightforward. Generally, bullion items are worth at least what their bullion melt value might be. Any work involved in refining or processing bullion items is a cost and will be part of any cost, fee, or mark-up involved in any trade. Indeed, scrap gold oftentimes in the form of old or broken jewelry is discounted from the melt value to cover both a dealer's handling and profit.

Dealers will most often pursue the most profitable route. And as business owners, why wouldn't they?

More desirable bullion items almost always trade for a premium over their melt value. American gold and silver eagle coins are one of the most desirable bullion forms, but there are many gold and silver rounds and bars that trade in a relatively tight buy/sell spread. There are also a myriad of choices available from other government and private mints.

Canadian Maple Leaf and Chinese Panda bullion coinage are two examples of government-mint-produced bullion products, but privately minted gold and silver bullion rounds and bars are quite popular, too. U.S. 90% silver coinage produced before 1965 appeals to many, too.

If your focus is strictly on investing in bullion, you will want to pay as small a premium over the melt value on any item, but you always need to consider the point of sale. Will this item be easily saleable once you're ready? Can you easily determine how much you will receive without any hassles or risk?

In this mostly buoyant bullion market, the physical supply of both gold and silver has been strained. The classic supply-demand curve explains the price increases, but there is also a frantic gold fever atmosphere that influences individuals to take shortcuts in their zeal to catch a rising star - or a falling knife?

Whether you are buying or selling, you always have to consider the security and underlying authenticity of your coins or bullion. The proverbial "rubber meets the road" at the point of sale. You have the ability to quickly and efficiently liquidate your merchandise, whether it be rare coins or bullion when that merchandise is both PCGS authenticated and graded. No inspection, no delays - just results.