When it comes to investing in coins there are two main ways of going about it. One is to collect bullion coins, valued primarily for their silver content, while the other is to collect numismatic coins, valued for both their silver content and collectible value. In this article we will be covering exactly what numismatic means, helping you to decide whether it is the right choice for you or not.
What is Numismatics?
The term numismatics refers to the practice of collecting coins and other forms of currency. It can also refer to the general study of money and not just the collection of coins. People who collect and deal in coins are known as numismatists, although this term also applies to those who study coins.
What are Numismatic Coins?
Coins of numismatic value are generally those which are sought after by coin collectors. These coins might have only been in circulation for a brief period of time, may be a commemorative edition, or are coins that were produced with some kind of error that occurred during the minting process, known as a mint error.
Collectable coins could also be those with an unusual degree of beauty, a proof edition, or perhaps have an extraordinarily high coin grade for their period in history. While they can sometime contain precious metals, this is not always the case.
Are These Coins a Good Investment Choice?
If you are interested in investing in precious metals for financial purposes then you might have been recommended numismatic coins by a dealer. The truth is, bullion coins are a better investment choice than numismatic coins. This is because when you buy bullion coins made from precious metals such as silver and gold, you are only really paying for the precious metal content of the coin.
This is the opposite of collectable coins with a numismatic value, for which you are paying for the precious metal content, but also for their scarcity, beauty or history. This makes their resale value in the future less of a known outcome as they may no longer be in demand, whereas bullion coins, that are only valued on their metal content are more likely to retain their attractiveness from a financial point of view.
Also, if you are interested in collecting coins in preparation for a future situation when fiat currencies no longer hold their value, such as could occur after a market crash or natural disaster, numismatic coins again, aren’t the best option.
In the event of such a situation people will be less interested in the value of a coin for its beauty or rarity as they are for its silver or gold content. As you paid a premium for this type of coin based on these attributes, it is very unlikely you will get the same value from them when these features are not in consideration.
This all means that coins labelled as numismatic are more suited to those who love to collect coins for their history, appearance and the stories they can tell about our past. While this is a very valid form of collecting, it is not the best approach for those looking for a financial return on their investment, and as possible use as a backup currency.
One reason why people who want to invest in coins choose numismatic coins, instead of bullion coins, is due to a widely circulated story about government gold seizures. As the story goes, when the US government attempted to seize gold in 1933 from the general population, numismatic coins were exempt from the seizure.
Therefore scare stories abound that should the government decide to seize gold again in the future, they will exempt these coins again. However, there is no reason to believe the government will attempt to seize gold again, and there is also no reason to assume that if they did, they would not include numismatic coins in the program.
Despite the lack of substance to these fears, they are readily propagated by unscrupulous coin dealers, wishing to divert customers towards investing in numismatic coins instead of bullion coins. Perhaps the higher mark-up on these coins has something to do with this.