Gold and aging babyboomers should be words that are comfortable used together. They are not. Babyboomers have traditionally looked to companies retirement plans, 401K and 457’s and such but not gold.
Now, with the increase in the price of gold and silver, aging babyboomers are trying to familiarize themselves with the different avenues presented to them. The use of coin speculation is one of those avenues and that is what we will look at today.
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High MS Coins for Speculation – The Wrong Road for the Wrong Reasons
One of the two biggest scam techniques in the coin industry is the recommendation by unscrupulous coin shops for people to buy high mint state (MS) numismatic (having collector or antique value) coins for investment purposes. They tell you that these high, MS numismatic coins are a tremendous speculative investment. And when gold goes up in an economic crisis these high mint state coins will appreciate tremendously in value, and you will be able to sell them and make a lot of money. Well, that sounds all right on the surface, but when you examine the logic of it all, it is complete foolishness. Why? First of all, the only reason to buy gold is for wealth preservation, so that in an economic crisis you would have some real money in your possession when our fiat (false or paper) money system collapses, or we get into hyperinflation, or the stock market crashes. The very last thing you would ever want to do when our electronic and paper money system is collapsing is to sell your gold and turn it back into worthless paper money. This doesn’t make sense at all, but that is what these coin companies are telling you to do.
The Two Independent Grading Firms – PCGS & NGC
Now we will take a look at some of the things you should know about grading and some of the scam tactics of coin companies. First, a little explanation about grading coins and the two independent grading firms is necessary. During the 1980 panic into gold, great numbers of people were buying gold as a hedge against inflation. As a result of that run on gold, many coin shops sprung up around the country. Every coin company graded its own coins in-house. Naturally, the temptation to over-grade the coins was hard to resist, and almost every coin shop was guilty of doing it. The coin grading system starts at the bottom of the ladder with VF for Very Fine, EF for Extra Fine, AU for Almost Uncirculated, MS60, for Mint State (MS)60, all the way through MS70.
The way it works is, the higher the number, or grade up the ladder, the better the condition of the coin, and the more premium you pay for it. Coin certification starts with MS61. Certification simply means that the coin has been professionally graded by an independent grading firm to guarantee its grade. A certified coin is graded, encapsulated in a clear plastic case to protect the quality of the coin, and stamped with the insignia of the independent grading firm which graded it. The problem in the coin industry in the early 80’s was that every coin company was certifying its own coins. For example, a person could buy an MS65 $20 gold piece from one company for roughly $2,500, and take it across the street to another coin company. They would look at it, bad-mouth it, and say that it wasn’t even an MS61, and offer you $850 for it, a $1,650 difference in price from the coin shop across the street. As you can imagine, this in-house grade inflation was bringing a lot of consternation and reproach to the coin industry, and everybody’s credibility was suffering.
In-house grading continued until the mid-1980’s, when two independent grading firms came into existence, Professional Coin Grading Service, or PCGS, and Numismatic Guaranty Corporation, or NGC. In order to standardize and stabilize grading in the coin industry these two grading firms would certify every coin MS61 and above. Once either PCGS or NGC grades a coin, then the person who bought it is guaranteed that grade anywhere in the country – no fights, no hassles, no questions asked. A specific rule to remember is: if you ever buy an MS61 or above coin, either PCGS or NGC must grade it. If it is not, don’t buy it – the grade is not guaranteed.
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More Next Time,
George Hollis