A Closer Look at Bullion Coins

July 9th, 2012

In last week’s Money Monday feature, I shared my first experience buying gold and silver bullion coins for the purpose of protecting my savings from inflation and the risk of a major run on the global banking system, which many sound money advocates believe is imminent. I also promised to cover bullion coins in more detail for this week’s Money Monday feature. Here’s what I said about them last week:

“Here was my strategy: I did a bunch of research the day before on all the world’s most well-known bullion coins, that is, coins minted after the year 1800 out of 90% or more of a precious metal, and are or were a legal tender in their country of origin. I prefer these to junk metal because they are in a form that people are comfortable viewing and using as money, and they are more-readily recognizable as trusted pieces of metal bullion with metal content in amounts that are already well-established and known. They have a reputation.”

When buying bullion coins, you’re going to spend a little more than for the same amount of metal in the form of a bar or ingot. I think it’s worth it. Now this is just my own reasoning. I haven’t read this in financial newsletters from libertarian finance experts who are well-informed enough to charge for their advice (but they might say the same thing for all I know either). Feel free to comment and share your thoughts whether you agree or disagree, but as I look into the future and see how people will react to a monetary collapse, I see bullion coins as being particularly valuable because of their reputation. Few people today can tell silver apart from other metals by its look, by its weight, by its sound. Few people have the experience or knowledge to appraise the purity and value of a random ingot of metal. But information about bullion coins is public-knowledge and readily available. Markets can use and disseminate this information, easily price bullion coins relative to the goods they can purchase, and use them as a conventional and widely-accepted medium of exchange.

Now I’m not advising you to waste your money on rare collectable coins. We’re not going for collector’s value here. If you want to speculate on collectable coins, you might as well go buy a bunch of baseball cards or beanie babies (remember those?). While some bullion coins have a little extra collector’s value (like the Chinese Panda, probably because it’s so darned cute), what you’re looking for should not cost ridiculously more than the same amount of metal in junk form. Be careful out there and don’t get scammed into spending fifty dollars on a one ounce silver coin when its spot price is running at $26. I’m not bashing speculating on collectable items or buying them for sentimental value, but I just want to be clear that this is not what I’m talking about here and if your purpose is to find an inflation-proof store of value for your savings, then what you want is the precious metal value of a coin, not its numismatic, or collector’s value. That said, we can proceed.

American Bullion Coins

If you expect to be spending your precious metal bullion coins in America (or really the entire Western hemisphere (or really the entire world)), then it seems to me that United States bullion coins will have a certain reputation and credibility that makes them well-suited for the purpose. These are in great supply and can be purchased in a number of ways online or at a local coin shop. The rule of thumb is this: any United States legal tender coins in the denomination of half-dollar, quarter-dollar, or dime minted before 1964 are bullion coins made of 90% silver and 10% copper, an alloy known as “American coin silver.” Click on any of those links and the Wikipedia article has a list of designs by year so you can see what to look out for. You’ve also got American Gold and Silver Eagle Coins as well as the American Gold Buffalo coin that are all more pure in precious metal content.

Non-American Bullion Coins

If we want to step outside the US border without straying too far, the Canadian Silver, Gold, and Platinum Maple Leaf coins and the Mexican Libertad are both recognizable bullion coins that come in different metals and denominations. For some reason (if someone knows why and would like to share in the comments, that’d be awesome), the South African Gold Krugerrand is a very globally-popular and reputable bullion coin. The UK has its Gold Sovereigns and its Gold and Silver Britannias. China’s Gold and Silver Pandas are very globally popular and recognizable, and since they’ve been minted by the government of the most populous nation on Earth, they’ll probably hold their “reputation value” as units of metal currency post-monetary collapse. Because they are popular with collectors, their price reflects a little bit of demand that is unrelated to their metal content, so they may not be what you’re looking for. We’ve touched on bullion coins minted by English-speaking, Latin, and Asiatic people. Let’s throw in one more big culture group for good measure: Slavic people. The Russians have the Gold and Silver Saint George the Victorious Coin.

Again, note carefully that I’m placing some level of importance on the reputation of bullion coins as adding value to precious metal for use as currency in the event of a monetary collapse. Feel free to challenge that assumption if you disagree. If you do agree, agree because it makes sense to you and don’t simply take for granted that I’m right. Here during precious metals week, we’re hoping the entire community at The Silver Underground, readers and commenters like you included, can share all of our disparate knowledge and reasoning to sharpen each others’ understanding of precious metal. If you found this post informative, please share it and help get people (especially the kind who will be interested in reading and learning from this) familiar with this information as we head ever more swiftly into the monetary oblivion of global fiat collapse.

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About the Author: Wes

Wesley Messamore, 24, is an independent journalist and political activist who believes in the Founding Father's vision of a free, enlightened, and moral America. He also blogs at HumbleLibertarian.com