During times of economic dislocation and massive stock market volatility, such as the present coronavirus crisis, investors often flock to gold as a safe haven and buy gold coins, which has recently led to an influx of new buyers. Unlike the last major economic crisis that began in 2008, when spot gold prices declined by 30% as the economy and markets tanked, this time gold is increasing in value after a brief period in March when equities suddenly turned sharply down. Investors needed to raise cash by selling their gold. Since then, gold has reached as much as $1750 per ounce -- its highest level since 2012, only $150 below its all-time high of $1900 in August 2011.
There has also been an unprecedented increase in demand for physical gold, which has resulted in a shortage of gold coins on the market and pushed their premiums up substantially. While the premiums on modern gold bullion pieces, especially popular American Gold Eagle coins, are at their highest levels in years, premiums on pre-1933 gold coins – common date, or generic, legal tender gold coins issued until 1933 – are still at or near historic lows.
The major supply crunch today for gold coins of any type is due also to the shuttering of gold mines. Which has been exacerbated by the U.S. Mint’s move on April 15 to temporarily shut down the West Point Mint, where American Gold Eagles are produced due to the rise of coronavirus cases in Orange County, New York where the mint is located.
Historical background and advantages of pre-1933 gold
On April 5, 1933, President Franklin D. Roosevelt famously issued Executive Order 6102, which made it illegal to own more than $100 face value in gold coins. This order also required Americans to surrender any gold bullion or gold coins beyond that amount to the Federal government unless they had numismatic value. This action was taken because FDR was trying to stimulate the economy to end the Great Depression that began in 1929 and needed to finish the backing of the dollar with gold to raise the federal deficit enough to pay for his New Deal programs.
For More information about the Great Depression and United States coinage, read this Coin Authority article!
The U.S. Government and some private banks continued to pay foreign debts by shipping U.S. gold coins to Europe, where much pre-1933 gold coinage remained for decades. In 1974 President Gerald Ford ended the prohibition against owning gold as of 1977 and paved the way for the emergence of modern bullion gold coins in the late 1970s. In recent years, as gold prices have increased, the large European hoard of pre-1933 gold has made its way back to the U.S., vastly increasing the supply of these beautiful coins with intrinsic, historical and numismatic value.
The net effect of the repatriation of pre-1933 gold back to the U.S. has been a significant decrease in the premiums on these beautiful old gold coins, which until the recent spike in demand for all gold coins made coins like common-date $20 gold Double Eagles available at wholesale even in uncirculated condition for less than 10% percent over their spot value.
Today much of the hoard has been dispersed into the coin market, which is another reason why premiums have started to rise recently. However, by historical standards, those premiums continue to remain low, making pre-1933 gold coins a lovely way to buy physical gold.
Also, although generic pre-1933 gold coins are common, they still have numismatic value, and that may increase in the future as lower-grade pieces are melted, and pre-1933 coins become harder to find. They are also very liquid, always in demand, and will increase in value as spot gold increases. For all these reasons, pre-1933 gold can be an attractive way to invest in the yellow metal.
Different Strategies for Collecting Pre-1933 Gold Coins
Pre-1933 gold often refers to common-date $10 and $20 gold coins issued before 1933 that typically trade for a small premium over their gold content apart from high-grade graded examples, better dates, and coins from certain mints like Carson City. It also includes $2.50 and $5 gold coins from the same period that sell for a higher premium over their gold value even for common dates.
Collecting Pre-1933 Gold by Type Set
Perhaps the most popular way to collect pre-1933 gold is to build one of several possible type sets. These can be four-coin sets that include one of each of the four primary denominations of two main design types – Liberty Head and Indian Head motifs. Another popular set is the 8-piece version that consists of both four-coin sets, and there is also the twelve-piece set, which includes: the coins from the 8-coin set plus three $1 gold coins (Liberty Head and with and without motto Indian Head) and the $3 Indian Princess gold coin.
Type sets can be assembled with either raw or graded pieces, and over time the quality of the coins could be upgraded, or common dates could be substituted for more scarce coins with substantial numismatic value.
Collecting Pre-1933 Gold by Denomination
Another option would be to assemble each type of one denomination with the most popular one being the gold Double Eagle because buyers tend to prefer large gold coins.
For the Liberty Head series that would mean three coins: one motto and one no motto coin with the denomination inscribed as “Twenty D.” and one as “Twenty Dollar” coin, and for the St. Gaudens $20 pieces, that would, in theory, mean four coins: with and without motto, high relief and ultra-high relief. However, the last two are beyond the budget of most collectors.
For the other denominations, there are often with and without motto types, and over time the collector could go back to earlier, more valuable types from the 18th century such as the various Capped Bust coins. A complete gold type set (except for the very rare $4 gold Stella and 1907 UHR Double Eagle) would include about 35 coins and require substantial money to assemble.
Collecting Raw Versus Graded Pre-1933 Gold Coins
Pre-1933 gold coins can be purchased either raw or graded by Numismatic Guaranty Corporation (NGC), Professional Coin Grading Service (PCGS) and other third-part grading services. While some buyers like raw coins because they can hold them in their hand and wonder how they may have been used long ago, there are many advantages to buying graded examples. The first is to guard against counterfeit coins since graded pieces are guaranteed to be authentic by the grading services.
Also, while the highest graded coins carry substantial premiums, usually those graded Mint State 65 and above for Double Eagles for example, common graded coins in nice uncirculated grades of Mint State 62-64 are typically available for only a small premium over coins that just make the uncirculated grade.
Finally, for the discerning collector, higher grade coins that have been reviewed by CAC and received green or gold stickers are the best-quality coins available in the marketplace. With so many mint state examples of the more common dates in the marketplace, learning to tell the differences between coins of different mint state grades as well knowing how to pick coins with strong eye appeal can be difficult for many buyers. CAC-stickered coins meet those standards and have greater liquidity in the marketplace.
Whether you are new to buying gold and just want a couple old legal tender coins, want to build one of the gold type sets, or have the means for a more advanced collection, pre-1933 gold coins have a lot to offer and will always be one of the most popular segments of the coin market. In the current market in which modern bullion gold coins carry the highest retail premiums seen in many years, it is well worth considering pre-1933 gold as an alternative to modern bullion issues that has a lot of potential as an appreciating asset and a fun collectible.
David Bowers, A Guide Book of United States Type Coins, 2nd edition (Whitman, 2008)
“Collecting and Investing in Pre-1933 Gold,” www.ngc.com, April 14, 2020
Joshua McMorrow-Hernandez, “Lower Gold Premiums Deal Excellent Opportunities for Promoting Pre-1933 Gold Type Sets,” www.greysheet.com, Nov. 16, 2018
Steve Mariotti, “When Owning Gold was Illegal in America: And Why it Could be Again,” www.huffingtonpost.com, Dec. 6, 2017