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What You Need To Know About Commemorative Coins

Karen Gibbs

commemorative coinsHi Karen, what do you think about commemorative coins as an investment?
    Carl, Silver Spring

Carl, thanks for your question.  In my opinion, commemorative coin are not a good investment, but are a hobby similar to stamp collecting.

To be a good investment, an asset must have liquidity – a large number of buyers and sellers.  There should also be a quality standard so that you are confident in what you are buying and selling.  Many of the advertisements you see on TV are for coin which have little or no intrinsic value – the value of the components that make up the coin – as opposed to market value.

Coins struck by the United States Mint’s Bureau of Engraving and Printing have intrinsic value as they are made out of gold and silver.  Many other countries issue gold and silver coins.  The quality and scarcity of those coins affect the price along with the intrinsic value.  They are generally called “bullion coins” and are sold in even weights such as an ounce, half ounce or gram.

Examples of bullion coins include the U.S. Gold Eagle, the South African Krugerrand, and the Canadian Maple Leaf.  These coins are 99.99% pure gold – also known as 24 karat (24K).   With gold currently priced at around $1250 per ounce, expect to pay at least that much for a one ounce coin plus a dealer premium.

The same goes for pure silver coins, marked .999 to denote pure silver.  Current price for an ounce of silver is just under $19.  Just like gold, you can buy coins or bars (ingots) in standard weights of one troy ounce, half ounce or grams.

Numismatic coins are coins made for a special reason or in limited quantity and are priced not only for their intrinsic value (which may not be pure) but their “perceived” scarcity.  The price may also include dealer premium and sales commission, which is often not recovered upon resale.

At the bottom of the pile you’ll find commemorative coins marking the anniversary of some event.  These coins contain scant amounts of precious metals, are not issued by any government, have no liquid secondary market where you can sell your “investment” and are the subject of many Better Business Bureau complaints.

If you still want to “invest” in coins, go with the government issued coins, but don’t expect a windfall of profits. Appreciate them for the pleasure you get from your “hobby”.   If you’re looking for an investment in precious metals, look to the various exchange traded funds that track the price movement of the underlying metal.  GLD is the symbol for the SPDR Gold Trust, one of the most liquid gold exchange traded funds.  SLV is the symbol for the iShares Silver Trust, one of the most liquid silver exchange traded funds. 

Exchange traded funds act like stocks and are attractive because of their low cost, liquidity and tax efficiency but they carry risks just as any investment. Make sure you know what you’re getting into.  Do your homework before you invest your money.

Good luck!

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