Brasher better than gold bullion

On Friday I wrote about the sale price of Walter Perschke’s Brasher doubloon on Jan. 9 at the Platinum Night sale conducted by Heritage Auctions.

It brought $4,582,500. When Perschke bought it in 1979 he paid $430,000. It produced a very nice profit.

This works out to a compound annual gain in price of 7.1 percent a year over the course of the 34.5 years that he owned the famous coin.

This morning I thought it would be interesting to see what the result might have been if he simply had bought gold bullion rather than a famous gold coin with his $430,000. After all, gold advocates were as vocal in 1979 as they are now. And just as now, there were numismatic rarities also available in the market.

Which avenue was the better one to take? Bullion or numismatic rarity? Let's see.

I looked up the closing gold price on July 27, 1979, when Perschke bought the coin. It was $308.70 an ounce.

At that time he could have purchased 1,392.9381 ounces of gold. I am going to round that to 1,393 ounces. Also, I am taking just the exchange price that day and I am not figuring in what premiums might have been in play for various coins or bars that he might have chosen for his gold holdings.

Last Thursday gold was $1,230 an ounce in round numbers. That puts the value of the gold hypothetically purchased in 1979 at $1,713,390.

Obviously, Perschke did far better, almost $3 million better, by holding the famous numismatic rarity rather than having simply bought bullion.

This proves that in the numismatic market, there is still room for making intelligent purchases. The resulting profits can be far larger than simply squirreling the money away in bullion.

When making any kind of purchase, though, even when making a very intelligent one like the Brasher doubloon, it is still important not to put all one’s investment eggs in one basket.

And as every collector knows, there are other reasons at work when buying coins than simply making a profit.

Buzz blogger Dave Harper is winner of the 2013 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."