Gold Coin Secrets
Investing in gold bullion has become fashionable and financially prudent for savers who have grown frustrated with the low base rate and high volatility of banks. After all, why save money in a traditional savings account when the next Barings Bank, Northern Rock or Iceland might be just around the corner?
Available in bars and coins, gold bullion provides some degree of protection from volatile economic conditions such as inflation and recession. Indeed, the price of gold has continued to rise despite the turmoil that has gripped international markets for the past several years. Although investing in gold bullion is becoming more popular, not all investors are particularly shrewd when it comes to looking for the most lucrative deals. Provided below are several secrets (a term used loosely to describe points that are often overlooked by investors) of gold coin trading.
Scales
Scales are important for understanding more about the secrets of investing in gold bullion coins. These are the kind used to assess the rarity of gold bullion coins. As might be expected, the rarity of gold bullion coins greatly influences the price at which they are sold. The rarer the coin, the higher the value but not necessarily the higher the sale price, as many traders fail to realise the rarity of the coins that pass through their possession.
There are two main scales used to determine the rarity of gold coins - the Universal Rarity Scale (URS) and the Sheldon Rarity Scale (SRS). The latter was devised over half a century ago by William Sheldon, who categorised coins on a scale of R1 to R8, with R1 being the most common and R8 unique or virtually unique. Other points on the Sheldon Rarity Scale include: R2 (less common), R3 (scarce), R4 (very scarce), R5 (rare), R6 (very rare) and R7 (prohibitively rare). Despite being widely used by coin and gold experts, the SRS requires a degree of subjectivity.
The URS, meanwhile, uses a 20-point scale to establish rarity. Unlike Sheldon's scale, the URS determines the rarity of coins by listing the number of known coins. The most rare gold bullion coin in existence, therefore, would rank either URS 0 (none known) or URS 1 (unique) on the scale. Further ranks on the scale include: URS 2 (2 known coins), URS 3 (3 or 4), URS 4 (5-8), URS 5 (9-16) and URS 6 (17-32). The scale continues up to URS 20 (250,001-500,000 coins).
The Most Rare Coins
Using the URS or SRS scale to establish the rarity of coins is useful for investors who wish to find coins that are on sale for the market price of gold bullion, a more common occurrence than many traders would care to admit. In addition to understanding and using one or both of these scales, it is sensible for investors to learn more about specific types of rare coin that are in high demand. The Saint-Gaudens Double Eagle, for instance, which was minted in the US from 1907 to 1933 and has a gold composition of 90 per cent (10 per cent copper), is arguably one of the most rare coins in existence. Although more than 400,000 were minted, only one is known to currently exist in private circulation and that coin fetched over $7.5 million in 2002.
Gold is Tax-Free
Tax seems to be applied to anything and everything these days. Except gold. Politicians have been reluctant to charge tax on gold bullion investments for a variety of reasons. Suffice it to note that VAT is not paid on gold (unlike some other precious metals), so gold bullion coins are likely to offer a greater return on investment than many savings accounts and inheritance funds (gold bullion can escape inheritance tax by being listed as collectors' items, but tax can also be avoided through careful management of equitable trusts).
Finally, the best kept secret of gold bullion coins is prudence. There is simply no substitute for carefully analysing the market conditions, evaluating the reputation and position of the trader and understanding how gold coins are valued. Careful management of gold bullion assets and a watchful eye on changes in the market (not merely fluctuations in the price of gold) are as good as any secret.