Rare Gold & Silver Coins: One of the Best Long Term Investment Tools

Coin collecting is a timeless and proven method of not only storing your wealth, but as a reliable long term investment tool. Rare and pre-1933 gold and silver coins not only hold the current value of their metallic content, they hold an intrinsic value of coin type, date, and rarity.

Millions of coin collecting hobbyists are drawn to their beauty, diversity, and value. For these millions, coins are more than just metal. They are both historical memoirs and art forms representative of different epochs and styles respectively. For example, the Morgan dollar reflects the Comstock Lode era and old west Nevada silver rush culture of the mid to late 19th century. Collectors of Morgans are often taken in by the vision of pistol-carrying, cowboys flipping a Morgan silver dollar onto the bar of a saloon. From a more artistic standpoint, the Peace silver dollar represents the art deco style that defined the ambitious 1920's.

For centuries, the most popular mediums have been silver and gold, on which we'll focus. The reason that silver and gold coins are, by far, the most popular coins collected is that they have been used as money for centuries, if not millennia.

Silver: as Good as Gold, Only Better

Overlooked and undervalued by most people, silver seems to be forever in the shadow of more popular gold. However, silver is real money and always has been. In fact, both "silver" and "money" translate to "argent" in French; as well as "plata" in colloquial Spanish. That's because for over a thousand years, silver was used as money for common purchases and exchanges. Since gold has always been more scarce, it has been used for more expensive purchases and exchanges.

Silver makes the best precious metals investment because it's too undervalued in terms of its ratio to gold. For over a thousand years, the two metals have maintained a natural ratio of 10:1 until in recent decades. Now the ratio is more like 75:1, obviously skewed. Not only this, but silver has become a lot more rare than investors realize. For one, silver production has been on the decline in recent years in spite of its high silver-to-gold ratio. In other words, the price is too low and supply is waning--creating a silver shortage.

Silver is the best reflector of light known to man and has purifying properties. Silver has always been sought by the film and motion picture industries--it's largest consumers. University studies have found that silver can purify water in less than a night and colloidal solutions have antibacterial properties. Thus there will always be an infinite demand for the metal.

Thanks to the continuous demand and lower prices, smart investors can't help but buy. This includes the likes of billionaire investor Warren Buffett, who began a massive investment in silver bullion in 1998 and helped launch the first silver ETF. Needless to say that Buffett received ridicule for concentrating on silver because it was and still is scorned. Buffett's investment philosophy, of buying undervalued investments at the right time is the type of philosophy every investor should adopt and because long-term rewards are sure to follow. Since his purchase, silver has run from $ 5 to a high of $ 20 in early 2008--a 400% increase.

Gold: Everyone's Favorite Metal

Gold still represents the ultimate form of payment in the world -Alan Greenspan

Of course, we recommend gold as it's clearly the most preferred metal of exchange for myriad reasons. Its qualities and value make it highly sought, yet still obtainable (whereas platinum and rhodium often seem "too expensive" to most investors). Gold is considered to be one of the most beautiful of all metals and has always been adorned for its brilliance. Gold does not tarnish, corrode, or rust. It is the most ductile and malleable of all metals, which is often why coins will include a small percentage of copper, silver, or platinum in them. It's also used against inflammatory diseases and for millennia has been described as having misunderstood mystic powers.

As an investment tool, gold's price has risen 350% from 2001 to early 2008. During recent market turmoil, gold is the most preferred safe haven. Unlike more volatile industrial metals, gold prices hold well during deflationary bear markets.

Holding Period:

Rare and old coins should be held for many years in order for the values to mature. As previously mentioned, it's best to purchase them a cyclical market lows and sell at highs. After researching, you'll discover that precious metals cycles (the period between a low to a high, back to a high or vice versa) usually last 1 month long. Nonetheless, there are long term cycles as well that vary from specific metal type and rare coin type. In a commentary we posted in May 2008, we explained how rhodium, platinum, gold, and silver each has a 20-year long term upwards trend that starts and ends at different times. For example, gold's price rose from $35 in 1960 to a high of $850 in 1980, then began a downtrend that lasted until 2000. Now an uptrend has begun and is in full swing until, most probably 2020. It's important that we emphasize that the long term uptrend is full of short term cyclical action (fluctuations). Of course, we're speaking in terms of the value of the metal itself, not the rarity or age of your coin. Because there is high demand for specific coin types, their long term yield is greater than their metallic content. So undoubtedly, owning coins is the best way to invest in precious metals:

- Coins almost always carry a premium over the market price of precious metals.

- Most rare coins require no IRS reporting and as collector's items, are not subject to confiscation.

- Rare coin values are less volatile than gold and silver bullion because collectors are more interested in keeping coins for a longer period of time, as opposed to trading them.

- Coins are a very liquid monetary instrument. You can always find buyers on ebay.com, at your local coin dealer, through larger online coin dealers, by advertising your coins in the classifieds, at pawn shops, or by scrap metal buyers.

- Coins are more easily identifiable and verifiable by more people than scrap metal, jewelry, and bullion bars.

- Coins give you a better long term return on your investment:

Part II: Fastest Appreciating Coin Types" >> ;

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