Why Are Premiums on Pre-1934 U.S. Gold Coins Now So Low?

In today’s market, it is possible to purchase circulated Pre-1934 U.S. Gold Coins such as the $10.00 Liberty, $5.00 Liberty, and $5.00 Indian at a lower cost per ounce of gold content than it would cost to acquire the comparable-sized $25.00 ½ Ounce and $10.00 ¼ Ounce Gold American Eagle bullion coins.  Other circulated issues, such as the $20.00 Liberty, $20.00 Saint Gaudens, and $10.00 Indians, are available for not much more than the cost per ounce for the $50.00 1 Ounce and $25.00 ½ Ounce Gold American Eagles.

How can it happen that supposedly numismatic coins are selling at a lower or close to the same premium as bullion coins?

The answer comes down to supply and demand. Demand for older U.S. gold coins is much smaller than it is for modern bullion coins. As the spot price of gold has increased more than 75% from the end of 2023 to this week, in America, there has been a significant increase in the number of sellers liquidating their holdings compared to the number of buyers wanting to purchase such products. 

Note that demand right now for bullion-priced physical gold almost everywhere else around the world is keeping pace or exceeding how much is being liquidated by owners.  However, these foreign buyers have comparatively little interest in Pre-1934 U.S. Gold Coins.

As a result of the substantial increase in the gold spot price, consequently, there has been a significant jump in the quantity of the earlier U.S. Gold Coins available on the market at the same time demand has diminished.  Therefore, relative premiums at which they trade above their gold value have dropped.

In decades past, when there was a significant rise in gold prices, there was usually a time lag of as much as six months before the Pre-1934 U.S. Gold Coin prices kept up with the percentage gain in the spot price.  But, back then, there were fewer alternative bullion-priced options available to potential buyers.  Invariably, the earlier U.S. Gold Coins eventually caught up with the percentage increase in the spot price, and sometimes even outperformed the gain in the spot price.

In 2008, gold’s price began the year at about $840.  It surpassed $1,000 for the first time ever in the middle of that year.  Then, when the spot price dropped below $700 later in the year, a massive groundswell of demand for bullion-priced physical gold coins and ingots developed.  Demand was far stronger than government mints and private fabricators could satisfy.  Premiums for immediate-delivery bullion-priced coins and ingots rose.  These higher premiums rose to such levels that some buyers seeking immediately available product were willing to acquire Pre-1934 U.S. Gold Coins if they could buy them for around 10% above the value of their gold content.

Because markets can and do change, collectors of gold need to keep on top of the impact of changing supply and demand.  I would not be surprised to see the premiums on Pre-1934 U.S. Gold Coins rise from current levels, but it may require that the gold spot price stabilize or even decline before that might happen.

Last time I asked—Which US coin depicts a mythological hippocampus?  The hippocampus was a mythical seahorse, with the upper body of a horse and the lower body of a fish.  It was most known in Greek mythology, but was also mentioned in Etruscan, Phoenician, Roman, and other stories.  This animal is depicted on the obverse of the 1915-S $2.50 Panama-Pacific Quarter Eagle Gold Commemorative, with Columbia riding on it.

Here is this week’s question.  Which language(s) is/are used for the text on US coins?  Come back next week for the answer.

Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He also received the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, the 2017 Exemplary Service Award, the 2012 Harry Forman National Dealer of the Year Award, and the 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild, Professional Numismatists Guild, National Coin & Bullion Association, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan, and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries, "Things You ‘Know’ That Just Aren’t So,” and “Important News You Need To Know,” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).

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