"Old Gold" versus
Modern Bullion Coins
Recently, it seems that
many Precious Metal firms have been praising the virtues of older (usually
European & fractional ounce) Gold Coins.
There are some differences of
opinion on the matter and many of our repeat clients have contacted us for
advice regarding the pros and cons of the issue. We've decided that there
is a need to address this issue on our website for the benefit of all.
CONFISCATION ISSUES
The most frequently used
technique to promote these coins is to raise the issue of confiscation.
Many sellers tell investors that old gold coins are not "subject to
confiscation," leaving the impression that modern gold bullion coins are
subject to confiscation!
As a result of this
misinformation, many investors Buy old gold coins at prices significantly
higher than the value of their gold content.
ARE OLD GOLD COINS
COLLECTABLES?
Many precious metals firms
maintain that because old gold coins are "collectables," they would not be
subject to another gold recall. Some firms say that premiums of at least
10 - 15% automatically make coins "collectibles." No current Federal
law or Treasury Department regulation or directive supports these
statements.
The statements that specific
types of gold coins are not subject to confiscation are based on an
Executive Order that President Roosevelt issued in 1933 prohibiting
private ownership of Gold Bullion & Gold Bullion coins. The executive
order exempted "gold coins having a recognized special value to collectors
[of rare and unusual coins]," but it did not define "special value" or
"collector". The evidence suggests
that sellers promoting old gold
coins propagate this myth because it makes it easier to sell high-priced
"old gold" coins.
Although Roosevelt's Executive
Order required U.S. citizens to turn in their gold coins and gold bullion,
foreigners continued to redeem paper dollars for gold until 1971. From the
end of World War II to 1971, the United States gold reserves were reduced
by more than 50%.
It is widely believed that all
the gold coins surrendered under Roosevelt's prohibition were refined into
.999 fine bullion bars. This is not true. It was to the government's
advantage to pay foreign debt holders with (22 karat) gold coins versus
(24 karat) bullion bars. With the official price of gold at $35 an ounce,
a foreign bank redeeming $70 million paper dollars received 2,000,000
ounces of gold (if the Treasury delivered gold bullion bars of 24
karat).
However, when the Treasury
delivered gold coins of 22 karat (with a face value of 70 million) it
delivered only 1,935,000 ounces of gold, thus retaining 65,000 ounces of
Gold in the U.S. reserves. Therefore, it was to the U.S. Treasury
Department's advantage to pay out U.S. gold coins instead of bullion
bars.
The entire prohibition &
recall issue revolves around the fact that it was most beneficial (if not
very shrewd), to pay U.S. foreign debt with 22 karat Bullion Coins versus
24 karat Bullion Bars. If this required that the Government confiscate
[any & all] Bullion coins which are privately owned versus releasing pure
Gold for payment of national debt, then confiscation it would be!
A widely overlooked fact
about the Fixing price of Gold Bullion (1933):
Before the "fix" was placed (at $35 per oz.),
Gold was trading in the mid $20 range. Any persons holding Gold [bought
before the Fix] reaped substantial profits at the time of surrender. And
during the middle of the Depression (1933), the next best thing to hold
[other than precious metals] was cash!
RECALL OF OLD EUROPEAN
COINS
For several years, sellers
have been importing European gold bullion coins dated before 1933 and
claiming that these coins would be beyond the reach of the U.S. government
in the advent of another recall or prohibition.
The imported coins most widely
promoted are:
Austrian Ducats
French Francs / Roosters / Napoleons / Angels
British Sovereigns
Swiss Twenty Francs & Helvetias
Regardless of the date minted,
there is no precedence excluding them from confiscation. In addition,
these coins hold very little, if any, numismatic potential. European
"old gold" coins are simply not worth the high prices asked.
| European old gold coins
are often compared with old U.S. gold coins, which have been known
to reach substantial premiums at times. But European old gold coins
are simply bullion coins, and historically, they are unlikely to
gain any substantial numismatic premiums. |
Most of these coins have been
in general circulation for decades, and they have always sold for just a
few dollars above the value of their gold content (i.e.: melt value). This
is why sellers promote them. They Buy the European coins near (or at)
bullion prices and mark up the pricing, ensuring big profits for
themselves.
European gold coins also
contain unusual and varying amounts of gold, such as .1867 oz., .2354 oz.,
or .1110 oz. Most Buyers/investors prefer full-ounce coins, or fractions
of ounces that are easily understood and accepted, such as 1/2 oz., 1/4
oz. or 1/10-oz.
There are unique circumstances
that may require purchasing "Old Gold" Bullion coins, and depending on
your needs, sometimes these types of purchases do make great sense. Buy
the "Old Gold" coins for their intrinsic beauty or the appeal and sheer
pleasure of owning them-- but not as an investment.
For the typical investor in
Precious Metals, the wisest purchases are almost always modern Gold
Bullion coins such as:
Modern Bullion coins have
their gold content stamped in English and come in sizes in which the
majority of Buyers & sellers are used to dealing. Even when you find
European coins at bullion prices, fractional-ounce Gold Eagles, Maple
Leafs, or Krugerrands are comparably priced. Most Modern Bullion coins are
available in 1 oz., .50 oz., .25 oz., and .10 oz. weights. Some of these
coins are of normal 22 karat purity while others are 24 karat pure gold.
The 24 karat Gold coins require extra attention in care and storage as
pure gold is soft by nature & is easily scratched, dinged or dented.
Modern Bullion Coins are
accepted in trade worldwide. The majority of these coins are issued
with a Face Value (such as the $50 1 oz. U.S. Gold Eagle, or $100 1 oz.
U.S. Platinum Eagle). Because these coins are globally recognized and
accepted, Modern Gold Bulllion coins are much easier to liquidate
versus European "Old Gold."
