The Australian, Wealth – Gold report
THERE are two stories about gold coins, no matter how you look at it.
There are the bullion coins linked to the rocketing gold price. Then there is the price of numismatic or collectable coins, which are not directly linked to the gold price but which are outperforming.
The underlying fact is that when anything goes wrong in the financial system, investors turn to gold and gold coins. There are other investment options, such as gold bars and jewellery, but they are not as attractive as coins, which are one of the easiest ways to enter the gold market.
“Coins have proved to be more flexible and more negotiable,” says Robert Jaggard, owner and CEO of coin dealer Jaggards.
“You don’t pay much more to have a 1oz gold coin than a bar – it’s only a couple of per cent difference in it. And its easier to go and sell a one ounce coin any time than a one ounce bar. Most people you show both items to will take the coin nine times out of 10.”
Jaggard says that back in the 1980s there were some cases of forged gold bars, which he expects may happen again if the commodity’s price keeps surging. “It’s much easier to produce a forge bar. A coin is a little more difficult to do. There was never any cases of forged coins.”
Jewellery isn’t worth the investment, according to Tony Richardson of coin dealer Monetarium, because the mark-up is so large.
“Jewellery, you just pay too much for it. 18-carat jewellery is sold from $70 to $80 a gram while the actual gold value is $24. With jewellery you are paying for the manufacturing. Jewellery is not something you’d buy to invest in gold.”
Richardson says part of the attraction of coins is that people can physically own them.
While there are thousands of gold coins collected worldwide, in Australia the market is for mainly gold sovereigns and half sovereigns.
Locally, sovereigns and half-sovereigns were struck in Sydney between 1855 and 1926, Melbourne between 1872 and 1931 and Perth between 1899 and 1931.
Nowadays the Perth Mint still strikes coins although only a small portion are collectable and sovereigns are only struck on special occasions. Because of the jump in the gold price, sovereigns have gone up in value.
Jaggard says: “Australian sovereigns in uncirculated condition have gone and doubled over the last 12 months. These things were selling for $150 only, say, two years ago, and they are about $350 today.”
He thinks they could easily hit $400 if the gold price keeps increasing at its current rate.
“More and more people are wanting to have some uncirculated sovereigns. If you get them in mint condition, there is a lot of potential. There are no more coins around. They are all out there and more and more people want them. So it is going to force the price up.”
Richardson says that a common gold sovereign, in average condition, for example a 1898 coin, may sell from 10 per cent above the price of gold, currently oscillating towards $US1000 an ounce. “That, of course, is directly affected by the increase in the gold price,” he says.
“But if a rare sovereign is in mint condition, that coin could be three or four times the gold price because the rarity of the coin in that condition dictates the price.” There are three things that influence the value of a coin: its rarity, quality and the demand for it. Coins produced by the Franklin Mint, which no longer markets in Australia, may have been produced in small quantities and to a high quality. But because there is no demand for them among collectors, they are only worth bullion value.
There are 250 Australian sovereigns of different dates and mint marks. Rarer still are the half-sovereigns, of which there are 64 in different dates and mints.
“Out of those 64, 50 of them are all scarce to rare. Whereas in sovereigns out of 250, 150 we call common,” Richardson says.
“If the coins are worn flat, you’ll only get bullion value. But coins that are in quality grades, from extremely fine to uncirculated, they can go from $200 for the most common coins up to $200,000 for the rarest coins.”
The 1855 half-sovereign is the first one made in Australia. “That coin even in virtually worn-out grade is still worth $10,000,” Richardson says. “In uncirculated condition, you are probably looking at $200,000 to $300,000.”
These prices are detailed in the annual Australian Coins and Banknotes, by Greg McDonald. Uncirculated Sydney Mint common date single sovereigns are worth $2000 to $3000. But the cheapest uncirculated Sydney Mint half-sovereign is worth $25,000 and more than $50,000 for rarer dates.
These are the only coins that have “Australia” written on them, which makes them popular among collections. But in 1871, the Royal Mint made the Sydney Mint move back to minting British-style coins. In Europe, the market for ancient classical gold coins is huge. According to Richardson, there is a thriving market for coins struck with the images of the 12 caesars from 50BC to 50AD.
“Julius Caesar gold coins can be extremely rare and expensive,” he says. Ancient English gold coins are also popular, especially for monarchs such as Henry VIII.
But Australian half-sovereigns are worth more than most ancient gold coins. “The age has nothing really to do with it. There are two factors: the rarity and the market,” says Richardson. “Age is a misnomer.”
Rare coins have outperformed gold, which itself in five years has increased in US dollar terms by over 170 per cent to about $US940/oz and in Australian dollar terms, because of the strength of the currency, by about 74 per cent.
Jaggard says half-sovereigns have performed particularly well. An uncirculated 1856 half-sovereign has increased from $28,500 five years ago to $68,000. The 1893 Sydney jubilee proof sovereign in five years has gone from $39,000 to $82,500.
The 1852 Adelaide pound is Australia’s first official gold coin. There are thought to be up to 30,000 of these minted in 1851 after gold was discovered at Mount Alexander in Victoria. There are thought to be less than 30 type 1 Adelaide pounds (which had a small crack in its die) in existence, with the highest quality worth about $350,000. But even the second striking of the coin, of which there now are a few hundred remaining, has performed astonishingly well. “Five years ago an uncirculated (type 2) Adelaide pound had a market value of $28,500,” says Jaggard. “Today it’s $120,000. That’s how it’s gone in five years.”