First published in the May 31, 2010 issue of Coin World
As jittery investors react to global economic troubles, they are heading to gold as a safe haven asset.
On May 12, gold traded as high as $1,245.40 an ounce, based predominantly on an increase in demand, rather than a weakening of the U.S. dollar. The price represented a new record high for gold.
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For Coronet gold $20 double eagles, while prices for circulated examples have gone up with the current rise in gold, Mint State examples are trading between dealers at generally substantial discounts to six months ago.
A major wholesale market maker's gold sell list provides examples.
In the past six months, MS-63 Coronet double eagles have fallen in price 17 percent, MS-64 examples have declined 22 percent and MS-65 examples have fallen 23 percent, all while gold increased nearly 5 percent.
Saint-Gaudens gold $20 double eagles show similar drops in prices in Mint State grades.
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For the smaller denomination gold coins, the declines when compared to six months ago are nearly across the board. The drops are smallest on circulated and low-Mint State grades, which trade for lower premiums over their gold content than their more expensive Mint State counterparts.
Part of the reason for the decline in wholesale prices for generic gold coins while gold prices go up is perhaps that large market-making dealers are reluctant to tie up operating capital inventorying these relatively expensive coins, as long as there is so much uncertainty in the gold market.
But these wholesale prices do not always translate neatly into retail price reductions. Many dealers who do not deal in large volumes of generic gold may raise retail prices slightly in response to the increase in gold's value.
The current market still could translate to opportunities for savvy collectors to acquire high-end generic gold at levels discounted from their 2009 prices, as it appears that buyers can now afford to be choosey in the coins they select.
