NumisMedia Market Report: US Gold Premiums Lowest in Years

Posted on 7/11/2011

While fluctuating metal prices may cause some consternation amongst investors, most collectors understand that in the long run it is the true rarities that will craft their collections.

Over the years many well-known collections have crossed the auction block and many of the prices realized for true rarities have amazed us all. But with today’s market, much of the talk and trades consist of bullion or generic related coins and premiums for most US Gold prior to the 1930’s are currently at 10 year lows. Now, we are not suggesting that premiums for generic US Gold can be compared to those of their more rare counterparts, but they do compare favorably to Modern Gold.

Many dealers are certain that generic US Gold will regain much of the premiums that have been lost over the last several months. As the industry has gained many new collectors over the past several years, most have come to realize, or will soon, that the older US Gold coins should have more potential in the long run over modern coinage.

The current FMV for common one ounce Gold Eagles in MS 69 is $1,830, while the FMV for a 1928 $20 St. Gaudens is $1,910 in MS 60. The premium over the gold value for the Modern $50 Gold Eagle is 22%. This is based on the current price of gold bullion at $1,501. And the premium for the $20 Saint in MS 60 is 31%. However, in June 2006 the premium for the $50 Gold Eagle was 24% based on gold at $625 an ounce. At the same time, the premium for the $20 Saint was 39%. The following chart shows the FMV comparison for the common Modern $50 Gold Eagles versus the generic $20 Saint in MS 60 since June 2006. Included is gold bullion nearest the same dates.

Date $50 Modern Eagle $20 Saint Generic Gold Bullion
June 2006 $775 $850 $625
June 2007 $790 $830 $667
June 2008 $1,080 $1,130 $888
June 2009 $1,150 $1,460 $981
June 2010 $1,480 $1,800 $1,228
June 2011 $1,850 $1,910 $1,534
July 2011 $1,830 $1,910 $1,501

The next chart shows the comparative premiums since June of 2006. This represents how much the FMV is above the value of the gold in each coin.

Date Premium $50 Eagle Premium $20 Saint
June 2006 24% 40.5%
June 2007 18.5% 28.7%
June 2008 21.6% 31.5%
June 2009 17.2% 53.8%
June 2010 20.5% 51.5%
June 2011 20.5% 28.7%
July 2011 21.9% 31.5%

From June 2008 to June 2010, demand for all generic US Gold was so strong that premiums swelled to excessive percentages over the price of gold bullion. This is not unusual as we have seen this several times in the past 30 years when markets get hot and demand outstrips supplies. However, during the last several months, the premiums for common US Gold coins have drifted lower to almost ridiculous levels. It has become a difficult choice for buyers when choosing between Modern Gold Eagles or the older classic US Gold minted 1930 and before.

The chart also shows that the common Modern Gold Eagle has had a fairly stable premium from 18% to 22% since June 2007. This is what buyers expect to pay and it varies only slightly over the course of normal markets. Since the late 1970’s we have been through numerous cycles that have seen premiums for US Gold fluctuate dramatically. Buyers, who jump into the market when premiums are very tight, profit dearly when the premiums expand in a hot market with demand outpacing supplies. In March of this year, we pointed out the merits of the Saint Gaudens in MS 65 based upon the highs and lows of a market. This is somewhat different in that there are several denominations of US Gold that can be purchased at advantageous levels in today’s market.

After a major increase in Morgan and Peace Dollars in the first quarter of this year, these two series have taken a dramatic turnaround. MS 65 Morgan’s are down to $206 FMV since they reached a high of $263 in early May. The MS 64 is now at $86, down from $126. Peace Dollars are down as well, now with an FMV of $85 in MS 64 and $200 in MS 65. In May, these were $102 and $231, respectively. Despite the fact that previous buyers are taking profits, there are still a number of dealers in this market who feel Morgan and Peace Dollars will stabilize and head back up in the near future.

This article is a guest article written by:

The thoughts and opinions in the piece are those of their author and are not necessarily the thoughts of the Certified Collectibles Group.

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