Out of Proof Gold American Eagles By Patrick A. Heller,
May 12, 2009
week, the Numismatic Guaranty Corporation (NGC) and participating
vendors are announcing the debut of a new coin service - certification
of authenticity of bullion coins that can be held by precious
metals Individual Retirement Accounts.
The main bullion-priced product for which this is expected
to be used is the one-ounce gold American Eagle. One requirement
of precious metals IRAs is that the merchandise must be stored
at an independent facility.
If an investor is holding a 20-coin tube of American Eagles
in an allocated account, for instance, there really isn't
any proof that a particular group of 20 coins is the same
one originally received for that investor.
With the new NGC certification, each coin will be encapsulated
in a holder that identifies the coin by issuing country, denomination,
date, gold purity and content, and by an individual serial
number. This makes it possible for each of the 20 coins in
this hypothetical example to be specifically identifiable
as being the exact same coins as originally received.
This certification service will cost less than others because
NGC will not be grading the coins. It looks like the retail
cost for this certification will be about $10-15 per coin.
For most knowledgeable investors, this is an unnecessary expense.
But, for those who are not as knowledgeable or who are extremely
wary, this extra certification of authenticity could be considered
as low-cost insurance.
The initial thrust of the marketing campaign for this new
product is to displace demand for proof gold Eagles in precious
metals IRAs. The U.S. Mint has not yet been able to manufacture
any proof Eagles of gold, silver, or platinum this year. Combined
with aggressive marketing campaigns by some companies, prices
of proof gold Eagles have soared by a few hundred dollars
in the recent past.
The angle used by the companies that market proof Eagles
in IRAs is that this is a way to own "numismatic"
coins in an IRA. The reason why these companies push proofs
rather than the uncirculated coins is that the marketers make
much larger profits. They have no incentive to want to persuade
customers to purchase products on which they make lower profits.
Still, I expect this new product to make significant inroads
into demand for proof gold Eagles, which will have the effect
of knocking down the prices for them. Just in the past week
or so, as news of this new product has been leaking, the wholesale
price of proof gold Eagles has dropped about 10 percent! There
are hundreds of thousands of proof gold Eagles around, far
too many to support any significant premium to the bullion
issues over the long term.
If you own any proof gold Eagles of any and all sizes, sell
or swap them immediately to take advantage of their current
extra high premium. By all means, feel