Buying Odd and Old Gold

buying-odd-old-goldYou can many times get a break on premiums paid if you purchase uncommon types of gold.

So that you can compare “apples to apples,” when buying this stuff, you want to ask for (or better yet, determine for yourself before going shopping) the AGW – the Actual Gold Weight.

This tells you how much gold is actually present in the particular coin you’re considering:

Weight in troy ounces x Purity = AGW

For instance, as many gold buyers are aware, the $50 American Gold Eagle and the $50 American Gold Buffalo both contain 1 ounce of pure gold.  The Eagle is minted in 22 karat gold, so it weighs more – 1.0909 troy ounces. The Buffalo, being 24k gold, weighs exactly an ounce.  The AGW for both coins is 1.0.

The math:

22k = .9167 pure (22k/24k)

.9167 x 1.0909 (weight of a Gold Eagle) = 1.00 AGW

If you’re going to go gold buying for “odds”, I would suggest you make a list with four columns: Coin name, Gross Weight, Purity, AGW.

Why would you need to know the gross weight of the coin? For authentication purposes. BEFORE YOU LEAVE THE STORE, you want to see with your own eyes that a given coin has the correct gross weight.

If you walk out of the store and then find that the coin doesn’t weigh the correct amount, I can guarantee you that the shop will not take the coin back. How are they to know that you didn’t go home and swap out the coin you bought with a forgery?

Forgeries are getting very good, and the coin can appear to be legit, but will be off – usually in the weight. When we buy coins, we weigh and measure each gold coin. We break out the micrometer and measure the diameter and thickness. In a legitimate coin, the weight can be off by 1/10 of a gram or so, and the measurements by a few tenths of a millimeter, but not much more.

I want to assume ALL coins shops do this, but you know what they say about assuming…

Odd Gold (odd at least to American buyers)

  • British Sovereign (.2354 AGW)
  • French 20 Franc/Belgian 20 Franc/Swiss 20 Franc/Italian 20 lira (all are .1867 AGW)
  • Austria 100 Corona/Hungarian 100 Korona (both are .9802 AGW)
  • Austria 4 Ducat (.4438 AGW)

All of these are fractional gold – gold in sizes less than one ounce – that you can many times get for pricing premiums close to full ounce gold (premiums of 2% to 5%) as opposed to premiums of up to 18% for American and Canadian fractional gold.

These tend to sit in the shops gathering dust. Most shops would prefer to get them sold.  Make an offer!

On the flip side, expect to take a heavier than normal discount when selling these coins to a shop – 8% to 12% behind spot. The shop is going to make its margin on every sale. If it’s a slow seller, you won’t get paid as much that a fast-selling American coin of the same or similar size.

Old Gold (aka Pre-1933 Gold)

The United States minted gold coins up to 1933, when the government halted production, confiscated virtually all privately held gold, and melted it all down.

Well, most of it. Many coins weren’t turned in, and many were sent overseas. Once Tricky Dick Nixon took us off the gold standard for foreign trade, and Ford re-legalized private possession of gold by US citizens at the end of 1974, many of these illegal coins miraculously reappeared.

As opposed to “modern” US coins, these old ones were only 90% pure (21.6 karat, if you’re so inclined). They came in a bunch of denominations, but the most common were $20, $10, $5 and $2.50. They used the term “eagle” to let you know which one you were looking at. An Eagle was $10 gold. A Double Eagle was the $20, the Half Eagle the $5 and the Quarter Eagle the $2.50.

Don’t confuse this with the modern American Gold Eagle, which has a $50 denomination, and is 22 karat (Hey! Yell at the mint, not me for the confusion!).

There were also two “flavors” of the gold coins: The Liberty Head and the Indian Head. So, if someone said, “I want a Liberty Double Eagle”, you know they’re talking about a $20 gold piece with Lady Liberty on the front (obverse). A call for, “Indian Half Eagle” is a $5 gold piece with the Indian Head on the front.

The Indian Head gold only went up to the $10 level. At the $20 level there is the Liberty Head and the St. Gaudens. The St. Gaudens (named after the designer) is considered by many to be the most beautiful gold coin ever minted in the US.

To further the confusion with these coins, the AGW is a bit odd, to say the least.

Double Eagle – .968 AGW

Eagle – .484 AGW

Half Eagle – .242 AGW

Quarter Eagle – .121 AGW

It’s linear – in that an Eagle has half the gold of a double Eagle, and twice that of a half Eagle, but the, “not quite an ounce” or half ounce, etc., can be a pain in the butt!

In an “up” economy, these coins all generally command a hefty premium because of their history and beauty. At times, though, you can find deals. For instance, a Liberty Head Double Eagle has 0.968 AGW. At a spot price of $1223, that puts the gold content at $1184. You could pick one up for $1275, or an 7.7% premium.

Yes, that’s a pretty big premium for essentially a one ounce coin, but is about where the $50 Gold Eagle falls, and their premium is usually in the 15% range. If you’re a long-haul holder (as I hope you are!), you have much more up-side potential if you believe the economy will eventually turn around. If you don’t think that will happen, stay away from these coins.

Timing Is Everything

What’s the very best way to buy fractional gold on the cheap? Go to a shop with cash in your pocket, and ask what gold coins have the lowest premiums.

For instance, recently, we had a butt-load of British Sovereigns (just under a quarter ounce) in the case. We were selling them for 2% or 3% over spot. The more you buy, the better the price.

If you can get fractional gold for 4% or less over spot, jump on it, it’s tough to go wrong. If you can’t find any at that shop, go to another. It can be a hit-or-miss proposition, but by investing a little bit of time, you can save (make?) yourself some decent money.

What’s the best time to buy and sell?  In a stable market.  The shop owner will have confidence that they won’t get “stung” holding a bunch of gold that is worth less one day after it is purchased, so we’ll pay you a better price.  If there is too much economic turmoil, or one politician (or Fed Chairman) makes an off-hand comment, the market can spike or plummet.

This unpredictability ticks some people off. Learn to deal with that.  Sorry, it’s not our job to pay you a perceived “fair price” for your gold.  We’re in business to make money, not to ensure you get paid what you think your gold is worth.

A flat or moderately growing market is your best time to buy or sell.  Try and plan your sales and purchases! If you have to have your cash right this minute, chances are you’re not going to do as well as being able to watch the market and move when the timing is right.


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