Gold Lunar Coins: Bullion Coins with Numismatic Potential

Gold coin investors should always, when the opportunity presents itself, invest in bullion coins that have the potential to attain collector status. Such coins offer the opportunity to profit from an increase in the price of gold and from premium increases. The Perth Mint's Lunar Series coins are such coins.

All the Lunar Series coins, except the year 2000 Dragons, sell at only a few dollars more than the popular American Gold Eagles.  Dragons, which have already reached their production cap, already sell at significant premiums in the secondary collector market.

Production of the 1-oz coins for each year is limited to 30,000. By comparison, Gold Eagles have unlimited production. In 1998 and 1999, the U.S. Mint turned about 1.5 million 1-oz Gold Eagles each year; in 1996, a low mintage year, the Mint produced 189,148. Because of the production caps, a mere $9 million, assuming $300 gold, would buy all the 1-oz Lunar Series coins for any year (see table above).

Lunar Series coins are .9999 fine gold, which is traditionally preferred in Asia. In contrast, gold coins in the Western World have nearly always been alloyed with a little copper, which makes the coins more durable and protects against loss of gold during use. Because the Lunar Series coins are soft .9999 fine gold, each coin is encapsulated at the Mint in a protective hard plastic capsule.

Many coin dealers promote old US gold coins or obscure European gold coins as having numismatic potential. CMI urges investors to stay away from both old U.S. and European gold coins. Old U.S. coins can attain high premiums; however, old U.S. gold coin premiums have shrunk over the recent years, some by as much as $300 each. CMI believes those premiums will fall further and that old U.S. coins will be good investments only when they can be bought near spot. Generally, this means XF/AU grades at spot and MS62/MS63 coins within $30-$40 of spot, or even at Gold Eagle prices.

Despite what the promoters say, European coins rarely attain genuine premiums. The coins being promoted are bullion coins and in Europe sell within a few dollars of the value of their gold content. Promoters bring them to the U.S., mark them up 20%-30%, and claim they have numismatic potential. Furthermore, promoters often compare the European coins with old U.S. gold coins, which, at times, do trade with big premiums. Equating old U.S. gold coins to European coins is misleading.

(Click here for a further discussion of the drawbacks of European coins) 

Two Ways to Profit

CMI believes that investors can profit two ways by going with the Lunar Series 1-oz coins, by an increase in the price of gold and by an increase in the premiums. Going in, investors pay only a few dollars more than they would for Gold Eagles. However, Gold Eagles have little, if any, potential for premium increases. They are strictly bullion coins. The Lunar Coins, on the other hand, are sold mostly to collectors who are used to paying premiums for collector coins. CMI believes there are several reasons to expect the Lunar Series coins to achieve premiums. 

In 2008, China will host the Summer Olympics. As those Olympics approach, we can expect the media to pound us with stories, articles, interviews, etc. about China, its land, people, and culture. More people will learn about the Lunar Calendar, and we can expect Lunar Calendar promotions of everything from trinkets to gold coins.

In the past, collectible coins have risen to very high prices during precious metals bull markets. Actually, sometimes those markets have overheated, and collectibles have achieved unrealistic prices. CMI believes that precious metals prices have bottomed and are headed higher. If so, the Lunar Series coins could do very well as more collectors are drawn to coins.

Please note that this is not an endorsement of any and all coins promoted as "collectibles." CMI is aware of the constant efforts of telemarketers to promote "numismatic" coins. Generally, those coins are old U.S. gold coins, but sometimes unheard of old European coins are touted. Investors not familiar with the dangers of "collectible coins" should read Old U.S. Gold Coins and Myths, Misunderstandings, and Outright Lies.

CMI recommends that investors buy bullion coins that have numismatic potential. When (if) those coins do pick up premiums, they should then be traded for other bullion coins, preferably other bullion coins with numismatic potential. This way, investors may increase the number of ounces of gold they own without additional cash outlays. Investors wanting to further discuss the merits of the Lunar Series are invited to call CMI at 1-800-528-1380. 

(For a discussion as to why you should buy gold and silver, click here).