If avoiding loss is goal, choose gold

Many coin collectors are dismayed to discover that they have coins they purchased years ago that have lost value. That is not pleasant. But nobody promised that every coin would rise in value over time. That is the collector hope, but reality is different.

Coins that hold value or increase are generally classic rarities. Putting the Pogue 1804 silver dollar in your retirement holdings would probably be a good thing. Many other classic rarities tend to rise in value with collector incomes.

Other coins that have done well for this generation of collectors simply had to be made of silver. Every single Roosevelt dime, Washington quarter or Franklin half dollar that I stuck in a Whitman album 50 years ago is worth 12 times face value even if they are well worn or I put my fingerprints all over them sticking them into the albums.

Knowing this, what’s the next generation of collectors supposed to do today? Silver coins can’t be obtained for face value and most will never have the millions of dollars necessary to purchase a rarity like an 1804 dollar.

First thing I would recommend for the next 40 years is to avoid clad coins and other base metal coins like a plague. At the end of the next four decades, you likely will have a heap of rubbish. Sure, they will be worth at least face value, but what will $1 face value buy in 2057? What will the $31.95 you spend on the most recent clad proof set look like all those years hence? I’m betting not very good.

It turns out that those angry collectors that I was one of in the immediate aftermath of the Coinage Act of 1965 were generally correct in denouncing clad trash. Sure, there are exceptions to the base metal rule. I would love to own a 1969-S doubled die cent. The whole large cent and half cent series have been oases of numismatic life. But if you had to have a simple rule of thumb to be followed by the average collector after 1965, avoiding base metal coins is hard to beat.

I wrote a blog on March 10 saying a kind word about modern commems. Before you laugh me off this page, consider this. I looked up the prices of the 1981 proof and uncirculated coin sets. I picked this year because in 1982 and 1983 the government had abolished the uncirculated coin set. They were $11 each. Today you can buy them for $8.95 and $7.95, respectively. You lost money.

If you had purchased the proof Olympic coin set for $352 when it came out in late 1982, you have actually made money. Melt value is $608. Retail price is higher. A general rule of avoiding base metal coins and buying precious metals would have led a collector then to have avoided the loss and made money on the Olympic set, which for a long time looked foolish when bullion prices were low.

It all boils down to what you believe will happen to the price of gold and silver in the coming decades. If you can’t buy the classic U.S. rarities, you could do worse than buying gold and silver coins, even modern issues, and holding them for many years.