There is an unprecedented undervalued condition in the rare coin marketplace right now. The premiums on circulated gold coins have plunged to extremely low levels this summer. That means investors can purchase a rare circulated gold coin at a historically low spread price to gold bullion.
The premium, which is simply the price difference between an American Gold Eagle coin and the $20 Saint Gaudens, is very narrow. The Saint Gaudens “Double Eagle,” of course, is considered by many the most magnificent and sought-after U.S. coin of the 20th century. The coin, which is highly prized by collectors and has intrinsic “rarity” value. That means it tends to appreciate faster than the price of gold itself.
Here’s what you need to look at now to understand current market dynamics.
Compare: The price of gold per ounce to the price of the Double Eagle coin.
Current Price (Changes daily)
1 oz. 2017 American Gold Eagle coin $1,340
$20 Saint Gaudens No Motto MS64 Certified $1,526
Precious metals investors understand the value of holding a hard asset. Buying a 1 ounce American Gold Eagle coins is a smart diversification tool that is appropriate for all investors.
The Gold Eagle is a great investment, but this is not a rare coin. The $20 Saint Gaudens series are rare gold coins minted from 1907 to 1933 and have almost the same amount of gold. These coins were minted with .96750 ounce pure gold.
When ratios get out of whack in the marketplace, it offers investors a unique opportunity to purchase nearly the same amount of gold, with a rarity factor. That means once the price of gold begins to climb significantly, the price of the Saint Gaudens will rise even faster. If you are looking to purchase gold right now, it actually makes better investment sense to purchase a Double Eagle over a Gold Eagle coin.
Let’s look back for some examples. Since 2003, the Double Eagle premium has fluctuated from a low of 1.10 above gold to a high of 2.41. In 2003, it took 1.28 Gold American Eagles (1 oz.) to purchase one St. Gaudens Double Eagle.
In 2009 – Gold Spot Price Average $972.35 Then, in 2009, you could trade that one St. Gaudens Double Eagle in for 2.41 Gold American Eagles (1 oz.)
2017 – Current Gold Spot Price $1,283.80 – Buying Opportunity
Right now, we are on the front end of that cycle again, and the ratio is even better than last time!
Based on the past eight years, there is a tremendous buying opportunity based on the premiums of the Double Eagle vs. gold. As the price of gold rises, the premiums will also rise, which creates a better profit potential than gold moving forward.
Saint Gaudens are the rare coins that most often mimic the movements of gold bullion. When gold is trading up, Saints trade up, and vice versa. Saints will track gold price movements, as evidenced by the chart above, but once gold starts a significant run, Saints can significantly outperform gold prices at the same time.
Faster Price Appreciation than Gold
Diversifying 30 to 40% of your tangible assets allocation to rare coins has historically produced the highest long-term investment returns. The appeal of rare coins to investors is their impressive historical price appreciation, which has outpaced the level of the underlying precious metal. Penn State University Professor Raymond Lombra conducted an independent study on the investment performance of U.S. rare coins from January 1979 to December 2016. He found that coins rated MS-65 nearly doubled the performance return of gold over that time.
The current market conditions reveal a truly golden opportunity in investment grade gold. Another 10% move higher in gold prices could produce dramatic investment returns in Saint Gaudens. History shows that this unique undervaluation period won’t last long. Strike now while the iron is hot.