Is the gold you just bought real or is it fake?

Did you pay a fair price for

it? Is it a good investment? The coin you recently purchased, is it real? Did you
get a good deal? What is the best investment strategy with respect to precious
metals? Should you buy silver coins or gold coins? Should you buy silver bars or
gold bars? Should you invest in precious metal ETFs or Mutual Funds and how
do these investments compare to owning physical gold or silver? What rate of
return can you expect from any precious metal investment in any form and from
rare coins? Who do you safely buy from?
I could list questions like these for pages, but I think you get the point.
There is so much interest in rare coins and gold and other precious metals in the
myriad forms they take. And with this vast array of choices comes uncertainty
and the possibility of making a poor decision and being taken advantage of.
Will this book rescue you? I hope so. I am throwing you a lifeline and
inviting you to get on board as we journey down this path together. We will
explore all the forms gold, silver and platinum take – from coins to bars to
rounds to numerous paper forms: ETFs, Mutual funds, ETNs, Futures, Options,
Savings Accounts and so much more. We will travel back and look at the return
these investment types have generated over the years. I will show you the safest
way to buy gold and silver and coins, how to test your products for authenticity,
and how to find gold, silver and coins without running around to yard sales, flea
markets and estate sales! We will examine rare coins and explain how they relate
to the topics mentioned. This book will end with an introduction to coin
collecting: learn how to get started and why it is so important to know about
coins and how they relate to precious metal investing. We will even look at
ancient coins. This journey will begin with baby steps as we cover very basic
information then get much more involved with these topics as the book unfolds.
The road to success starts with knowledge. Why did this 1794 Silver Dollar sell
for $10.5 million and break all coin records? (Answer at book’s end!)
 Copyright, Legal Notice and Disclaimer

This publication is protected under the US Copyright Act of 1976 and all
other applicable international, federal, state and local laws, and all rights
are reserved, including resale rights: you are not allowed to give or sell this
book and the materials contained in it, to anyone else.

Please note that much of this publication is based on personal experience

and anecdotal evidence. Although the author and publisher have made
every reasonable attempt to achieve complete accuracy of the content in
this book, they assume no responsibility for errors or omissions. Also, you
should use this information as you see fit, and at your own risk. Your
particular situation may not be exactly suited to the examples illustrated
here; in fact, it’s likely that they won’t be the same, and you should adjust
your use of the information and recommendations accordingly.

Any trademarks, service marks, product names or named features are

assumed to be the property of their respective owners, and are used only for
reference. There is no implied endorsement if I use one of these terms. All
images in this book are readily available in various places on the Internet
and believed to be in public domain. Images used are believed to be used
within the author’s and publisher’s rights according to the U.S. Copyright
Fair Use Act (title 17, U.S. Code.)

Finally, use your head. Nothing in this book is intended to replace common
sense, legal, or other professional advice, and is meant to inform and
entertain the reader.

Copyright © 2014 Sam Sommer. All rights reserved worldwide.

 Einführung
Who could have imagined that a routine trip to McDonald’s back in the
late 50’s would start a life long journey into the world of coins and the many
forms of gold and silver. My dad took me to this new hamburger joint that he
loved, and as always, he handed me the change. As we were leaving and heading
for the car, I looked at the coins in my hand and was surprised to find one with
an Indian Head on it. I glanced at my dad and showed him the coin. He
exclaimed: “That’s an Indian Head Penny, you can find them in change, why not
keep it and look for more.”
Those few words and that neat looking Indian Head got my mind
spinning. Could it be so easy to find these different looking pennies? In those
days it was! My quest eventually evolved into collecting other coins and
precious metal investing.
Coin collecting and searching is quite exciting and very financially
rewarding. Our younger generation has little patience for such a pastime, and I
fear that it may die out at some point. Who can say for sure?
I am glad we are going on this journey together, and maybe you or
someone you know will take up the hobby after this read. I hope you pass on this
information and reward yourself in the process. And if precious metal investing
is your cup of tea, you are in the right place.
 Table of Contents

The Gold Industry

The Silver Industry
The Coin Industry
Gold Has Many Forms
Silver Has Many Forms
Coins: Gold - Silver – Rare
The Relationship (Gold, Silver, Coins)
Finding Gold, Silver, Coins
Is It Silver?
Is It Gold?
Dealing With Coins
Prospecting
Testing Your Gold and Silver
What About The “IRS”?
Important Terminology
Buying: Gold & Silver Coins
Buying: Bars and Rounds
Selling: Gold, Silver, Coins
ETFs, Mutual Funds, Gold Accounts & More
What To Expect From Your Investment
Gold vs Silver: Who Wins This Fight?
Coin Collecting: What Every Investor Must Know
Coin Collecting: Getting Started (Tools)
Coin Collecting: Clubs and Terminology
How To Start Collecting
Error Coins Can Be Very Valuable
How To Grade Coins
How To Handle Coins
Fake Coins
Children and Pennies
Coin Roll Hunting
Rare Coins
Special Coins
Ancient Coins
Buying Coins
Selling Coins
Investment Strategy – Conclusion
 The Gold Industry
Gold may be the most recognized object on the face of the earth.
Even those who do not know what it is have a fascination with its
color and shine, even children. Its beauty and appeal seem
everlasting.

I can think of no better place to start this journey than by looking at the
gold industry: Where does gold come from? What countries are involved? How
much is available and how is it consumed? What is the gold industry worth in
dollars and cents? How did we become interested in gold as an investment?
Have Americans always been allowed to own gold?
What most people fail to realize is that of all the gold ever mined, almost
all of it, is still with us; it hasn’t gone anywhere. This is a difficult concept to
grasp. If gold has been mined for centuries, even thousands of years, why hasn’t
it been used up?
You see, gold is only consumed in very small amounts (about 10%), 90%
of gold mined each year goes into jewelry and investing, so it is always available
in one form or another. Most of the gold ever mined, a staggering figure
estimated at 6.5 - 9 trillion dollars worth, is still here. Let’s look at the
consumption breakdown: (Please note that most charts show metric tons or
tonnes. A “tonne” is a metric system unit of mass equal to 1,000 kilograms
(2,204.6 pounds) or 1 megagram (1 Mg))

It’s easy to understand why most gold is still with us – only 10% goes into
technology and much of it can be recycled when no longer needed. Gold mines
account for most of the world’s gold. Stories of the oceans being rich with the
yellow metal are true, but the cost of extraction is currently much greater than
the price.
This list of countries by gold production is from a report on the U.S.
Geological Survey website.
For many years, until 2006, South Africa was the world’s dominant gold
producer. Recently, other countries with large surface area have surpassed South
Africa, including China, Russia, the United States, Peru and Australia.
 About 2,700 tons (metric tonnes) are mined each year – 82 million ounces.
The value is estimated to be 125 billion dollars. It may seem like a lot of gold is
coming out of the ground, but when compared to Walmart’s annual sales of $200
billion, the figure appears small. The chart on the next page from Morgan
Stanley shows current and future supply-demand dynamics. Future gold prices
on the chart are estimates.
 This Morgan Stanley chart based upon the World Gold Council figures
clearly shows that supply is greater than demand: 4000 tonnes vs 3700 tonnes
demand for 2013.
However, there is some debate about this supply-demand dynamic.
Figures for the gold supply usually come from the World Gold Council, and
according to some experts, these figures can be misleading. For example, Eric
Sprott, a world gold expert, claims that the demand actually exceeds the supply.
This should be mentioned because even though the price of gold (we will look at
this topic later) is not determined by the supply vs the demand; this dynamic can
influence many market factors that indirectly impact the price of gold.
This is critical to know because it can influence investing decisions. What
is important then is not so much demand vs supply, but how gold is consumed.
With 43% used for jewelry, 47% used for investing, and only 10% used for
consumption, gold ends up being a product that, for the most part, we can do
without. When the price was high from 2001 – 2011, the demand for jewelry
went down each year. Again, when the price goes way up, investors tend to shy
away, feeling that the profit potential is weak.
Gold has always been valued as a form of money and adornment and
saved by many for centuries. Gold as an investment is a fairly recent
phenomenon. Let’s take a look at this.

The worldwide interest in Gold as an investment vehicle, is due

in part, to the universal appeal, large number of sales and recognition
of the South African Gold Krugerrand

This coin is 22 karat gold and contains 8.33% copper. Its fineness is
91.67% or 92% gold. It was introduced in 1967 to help market South African
gold and produced by the South African Mint.
In 1974 the U.S. Government repealed the Gold Reserve Act (we will
address this topic later), and Americans could once again freely own and trade
gold. As a result, investing in Krugerrands skyrocketed. The U.S. became the
biggest market for them, accounting for over 50% of all sales. From 1975 to
1984, 22 million Krugerrands were imported into the U.S..
By 1980, the Krugerrand accounted for 90% of the global gold coin
market. The name itself is a compound of “Kruger” (the man depicted on the
obverse [rear] and “rand”, the South African unit of currency.
During the 1980’s some Western countries (including the USA) forbade
import of the Krugerrand because of its association with the apartheid
government of South Africa.
Investors today owe a debt of gratitude to this coin. Its worldwide sales,
amounting to over 48 million ounces of gold, and its association with an
apartheid type government provided the impetus for the birth of the Canadian
Gold Maple Leaf in 1979, the Australian Nugget in 1981, the Chinese Gold
Panda in 1982, the American Gold Eagle in 1986 and the British Britannia coin
in 1987.
As mentioned, the repeal of the Gold Reserve Act in 1974, played a key
role in the future of gold, especially as an investment asset. Prior to 1974,
Americans could not own gold. This was significant. When gold ownership
rights were restored, the demand for, and the nature of the gold investment
marketplace, began to change dramatically.
The events leading up to the repealing of this Act are momentous and of
great historical investing interest. During the great depression Americans
hoarded gold. They feared that money might become valueless and the
tangibility of gold gave sensible security in a faltering economy.
In an effort to help stabilize a weak economy and stop gold hoarding in
1933, President Franklin Roosevelt issued Executive Order 6102. It made it
illegal to own gold coins, gold certificates and gold bullion. The flier on the next
page was posted everywhere: magazines, newspapers, post offices, train stations
and other public places.
An interesting exception to the Order were gold coins that had numismatic
value. In other words, any gold coins that are part of a coin collection were
exempt from the order.
As you can see from the Order, criminal penalties were quite severe.

The Gold reserve Act was passed a year later. It outlawed most private
possession of gold, forcing individuals to sell it to the Treasury. The Act also
changed the nominal price of gold from $20.67 per troy ounce to $35. Just
before it was passed, the Federal Reserve paid out $20.67 an ounce or $376.58 in
today’s dollars, based upon the consumer price index. It was a good deal for the
U.S. Government. Forcing a sale at $20.67, then raising the price to $35, yielded
an immediate paper gain of $2.8 billion, a considerable sum of money in those
days.

With an inventory of gold worth billions of dollars, the U.S. Government

decided to build a massive depository inside a fort, and so Fort Knox was born in
1936. Sitting on 42 acres adjacent to Fort Knox Army Base, in Fort Knox,
Kentucky, this massive structure held many important documents and historical
items over the years, aside from the over $200 billion in gold, currently believed
to be housed there. During World War II it is believed to have held over one
trillion dollars worth of gold in today’s dollars.

During World War II, the depository held the original U.S. Declaration of
Independence and U.S. Constitution. It held the reserves of European countries
and key documents from Western history. For example, it held the Crown of St.
Stephen, part of the Hungarian crown jewels, given to American soldiers to
prevent them from falling into Soviet hands. The repository held one of four
copies (exemplifications) of the Magna Carta, which had been sent for display at
the 1939 New York World’s Fair, and when war broke out, was kept in the U.S.
for the duration.
During World War II and into the Cold War, until the invention of
different types of synthetic painkillers, a supply of processed morphine and
opium was kept in the depository as a hedge against the U.S. being isolated from
sources of raw opium.
In 1974 the “Privilege” not the “Right”, to own gold, was given back
when the Gold Reserve Act was repealed. Some say the “Right” to own gold
was lost forever. Even though you can buy and own gold today, many experts
argue that the government maintains the right to confiscate gold under certain
circumstances:
In a great article by Josephine Mason, called “Gold Confiscation: Legal
situation in the U.S.” she states: “Although private ownership of gold in the
United States was legalized, the power to confiscate gold remains in the hands of
the President. At no time during this century has the U.S. government
recognized the right of private gold ownership. The Trading with the Enemy
Act, which President Roosevelt invoked in 1933 to restrict private gold
transactions, remains law. The President still retains the right, under the
Emergency Banking Relief Act, to “investigate, regulate or prohibit...the
importing, exporting, hoarding, melting or earmarking of gold” in times of a
declared national emergency. It is highly unlikely that either the Courts or
Congress would successfully argue that confiscatory powers are not implicit in
the Emergency Banking Relief Act if a currency crisis or other fiscal emergency
prompted the President to, once again, nationalize gold.”
It is highly unlikely that gold would again be confiscated, but this
information is sometimes used to invoke a sense of fear in investors who often
store their gold in other countries. Also, in 1971 when President Nixon ended
trading of gold at the fixed price of $35 per ounce, we came off the gold
standard, which had allowed governments to sell their gold to the U.S. at that
fixed price. Formal links between major world currencies and real commodities
were severed as a result.
Once we came off the gold standard, Fort Knox lost most of its appeal.
When the “Privilege” to own gold was given back in 1974, gold started to gain
momentum as an investment tool, which continues to this day. When asked:
“Why still hold gold there?”, former Fed Chairman Alan Greenspan said: “You
hold onto it because it’s the ultimate form of money”.
 The Silver Industry
Silver production equaled about 26 tonnes in 2013, or about 8 times that of
gold. The dollar value of 26 tonnes (800,000,000 ounces) is roughly $16 billion,
far less of a value than the $125 billion in mined gold. The top three producing
countries are Mexico, China and Peru.

There are many major differences with respect to gold. When we look at
the way silver is consumed and compare it to gold, we see major shifts in usage.
The chart on the next page clearly shows this fact:
 Notice how most need is industrial in nature and not ornamental or
investment, like we saw with gold. This implies that over time silver has the
greatest investment potential because if supply runs short of demand you have
actual need, vs investment and adornment factors found to make up most of gold
usage.
In fact, The Silver Institute, a non-profit organization devoted to providing
information to those with interest in silver, offers detailed data that clearly shows
how the supply vs demand dynamic will continue to put upward pressure on the
price of silver. Their chart on the next page is of interest:
 Notice the supply figure of 978 million ounces for 2013. Then take a look
at the demand side. Physical demand is 1,081 ounces, leaving a net deficit of
-113 million ounces. When we look at how silver is used in some detail you will
realize how significant these figures are. If demand is greater than supply, how
does the supply keep pace? Some supply comes from recycled scrap silver and
some from inventory. Let’s take a look at how silver is used:
Silver is the best electrical conductor of all metals - making it an absolute
must in conductors, switches, contacts and fuses. Silver use in electronics is due
to its unique chemical properties: low contact resistance, mechanical wear
resistance, chemical stability, low polymer formation, a long functional life and
the highest electrical and thermal conductivity of any metal. It is an important
element in many types of batteries. Quartz watch batteries contain a silver oxide
cell to increase power and battery lifespan. Aside from rechargeable batteries,
disposable batteries also use silver.
In the medical field silver is utilized for its antimicrobial properties. Due
to its ability to inhibit microbial growth, it is used for wound dressings, gowns,
catheters, stethoscope diaphragms, implants and other medical equipment. Silver
sulfadiazine is topically applied to burn victims to prevent infection, and silver
nitrate is utilized to inhibit the herpes simplex virus (type 1). Silver nanoparticles
are also grafted into textiles to manufacture antimicrobial bedding and clothing.
In air travel and the military, silver is employed as a dry lubricant in giant
engines with high speed parts that otherwise run the risk of oil interruption and
serious damage. It is also a component of coated bearings in jet engines.
In brazing and soldering, silver produces a smooth leak-tight and
corrosion resistant joint. Purified water tanks possess silver to prevent bacterial
growth and silver tin solders are used for bonding copper pipe in homes to
eliminate lead and provide built in antibacterial action. Silver alloys provide a
strong bond for ceramic to ceramic joints, silicon chips to metallic surfaces and
surface mounted electronic components soldered to print circuit boards.
Silvers unique chemical properties make it the ideal component for an
extensive list of manufactured materials. It is used in handles for stoves, key tops
for computers, electrical control knobs, domestic appliance components,
electrical connector housings, and in Mylar tape.
It has widespread use in jewelry, silverware and coins. It is indispensable
in the high tech arena, particularly in cell phone production. Silver membrane
switches, which require only a light touch, are used in buttons on televisions,
telephones, microwave ovens, children’s toys and computer keyboards. These
switches are highly reliable and last for millions of on/off cycles. Silver is also
used in conventional switches like those used for controlling room lights.
It is used for inks and films when applied to composite boards to create
electrical pathways which are used in hundreds of millions of products to
prevent theft.
 The Coin Industry
The coin industry is valued at $10 billion in America. Worldwide figures
put the total at $100 billion. As you can see, it is quite substantial. Did you know
that many international financial heavy weights invest in the U.S. rare coin
market? Why do you think that is?

The coin industry has many components:

• Governments that mint coins

• Companies that buy and sell coins
• Companies that appraise coins
• Companies that make and sell coin supplies • Companies that hold coin
auctions – eBay and Amazon e.g.
• People and institutions who collect coins • People who save coins
• People and companies who invest in coins It is very hard to get a handle
on the exact size and scope of the coin industry because there is no central
gathering tool or facility to reference. In other words, no one keeps track
of what goes on. By rough estimates there are over 5000 coin dealers in
the U.S. To get a sense of the size and scope of the coin marketplace, a
major auction house (called Heritage Auctions, we will look at them later
on in the book) had a sale in January 2014, that brought in $75,000,000.
Two of the lots being sold went for over $5,000,000.
The “rare coin market” has fueled interest in coins for a number of
reasons; not the least of which are investment returns averaging over 11%.
There are at least ten companies with sales exceeding $100,000,000 per
year. Heritage Auctions alone touts annual rare coin sales of over $500,000,000.
The Professional Numismatic Guild has around 300 members, most of which
have large annual sales of numismatic material. There are also quite a few mass
marketing companies with annual sales over $100,000,000. These companies
specialize in modern and world coins.
The worldwide sales of gold and silver coins from government mints are
in the tens of billions of dollars. The U.S. Mint publishes an annual report
showing sales figures. Here is a link to the figures; some are listed below:
http://www.usmint.gov/about_the_mint/?action=annual_report
 Notice the 3.2 billion dollars in the chart above and below for bullion
(gold-silver-platinum) coins in 2013.

The U.S. Mint states that 140 million people have invested in the new
state quarters. You do not need any special knowledge or skill to get involved
with coins, and almost no money. By book’s end, you will have all the
knowledge you will need to not only start collecting coins, but to invest in
bullion coins, bullion bars and other precious metal forms.
 Gold Has Many Forms
When you mention gold what usually comes to mind? Most people think
of some form of physical gold: • Bars and rounds
• Jewelry
• Scrap gold
• Gold objects
• Gold coins
• Nuggets

Gold, however, can come in other forms – investment forms. Some are
listed below: • ETFs
• Mutual funds
• Gold certificates
• ETNs
• Futures
• Options
• Gold related stocks

We will look at all the forms as this book unfolds. Jewelry, gold nuggets,
gold electronics and dental work all posses scrap gold that can be recycled.
Scrap gold accounts for 20% of all the gold used each year.
Physical gold can be in the form of a round or bar:

This picture (above) of gold bars and rounds (also called medallions)
comes from the Perth Mint in Australia and shows various gold products made
of 99.99% pure gold. As you can see there is a wide range of sizes and weights.
This chart shows some of the sizes and weights you can buy from gold suppliers:

To help visualize sizes and weights: (Source: demonocracy.info) From left to

right – 1 Gram, 5 Grams, 10 Grams, 20 Grams, 31 Grams (One Troy Ounce)

From left to right: 50 Grams (1.76oz), 100 Grams, 250 Grams, 500 Grams, 1KG
(35oz)
Gold nuggets are found in the ground or near the surface using sight and
metal detectors. Some time ago, prospectors used to find nuggets the size of
potatoes lying on the ground near Prescott, Arizona. The nuggets displayed

below were found in Arizona:

Gold coins have been part of monetary systems for over 2,500 years and
used in trade. The Roman Empire had a vast amount of gold coins that can still
be found and purchased today. This gold coin of Titus was minted just 80 years
after the death of Christ!

Many governments mint gold coins and have been doing so for hundreds
of years. Purchasing gold coins is now very popular with investors. The U.S.
Mint started making gold coins for circulation in the mid 1800’s. In 1933 it
stopped making gold coins and most of the coins minted that year were melted
down. This is a picture of a rare 1933 Gold Double Eagle that survived. Perhaps

one of only a dozen or so in existence:

We mentioned Order 6102 issued by President Franklin Roosevelt and
how it made it illegal to own gold in any form, including coins, unless part of a
collection. When this Act was issued the U.S. Mint melted all the coins it had
made that year. It is important to remember this point and we shall see why later.
After 1933 the U.S. Mint never made a gold coin again that was part of the
general circulated coinage. Gold coins were only made for special sets such as
commemoratives and coins sold in limited quantities via the U.S. Mint and
through special distributors. In other words, gold coins are no longer put into the
coin supply like pennies, nickels, dimes, quarters, halves and dollars are.
You don’t have to buy physical gold to have a stake in the gold precious
metal market. There are ways to have exposure to gold and the gold marketplace
without actually buying the physical metal and holding on to it.
What’s so nice about the investing marketplace of today is the wide
variety of ways you can invest in precious metals, like gold, but never get your
hands dirty. Just a play on words to indicate that you never have to touch the
precious metal and yet you can own it either directly or indirectly. Let’s briefly
look at some of the options and later we will cover this subject in more detail.
An obvious way to invest in the gold industry is by owning gold stocks.
For example, there are mining stocks: companies that own gold mines,
exploration companies, gold processing companies. Most investors prefer a more
balanced approach where they invest in a wide variety of gold related companies
to provide safety. There are also ways to own gold in a group setting - you own a
piece of the action. Many investors pool together and own a large block of gold.
Let’s briefly look at options, futures, mutual funds and ETF’s. Later we
will explore these and other types of investments in much greater detail. For now
we just need to know that many investment forms are available to us with regard
to precious metals, like gold, and here are some examples: A “future” is a
financial contract obligating the buyer to purchase an asset such as gold or for
the seller to sell an asset at a predetermined future date and price. Options are
similar to futures but they differ in that the holder of an option has the right to
buy or sell the underlying asset at expiration. A futures contract requires the
terms to be fulfilled. However in real life, the actual delivery rate of the
underlying goods specified in the futures contracts is very low. This is a result of
the fact that the hedging or speculating benefits of the contracts can be had
largely without holding the contract until expiry and delivering the good(s).
An exchange traded fund or ETF, is an investment fund traded on stock
exchanges. It holds assets such as gold and is attractive because of its low cost,
tax efficiency and stock like features. By owning an ETF, you get the
diversification of an index fund as well as the ability to sell short, buy on margin
and purchase as little as one share.
Another advantage is that the expense ratios for most ETFs are lower than
those of the average mutual fund. There are gold related ETFs, such as; short
gold ETFs, double ETFs and reverse gold ETFs.
A Mutual Fund is an investment vehicle that is made up of a pool of funds
collected from many investors for the purpose of investing in securities such as
stocks, bonds, money market instruments and similar assets. Mutual funds are
operated by money managers, who invest the fund’s capital and attempt to
produce capital gains and income for the fund’s investors. A mutual fund’s
portfolio is structured and maintained to match the investment objectives stated
in its prospectus, such as a precious metal, like gold.
A Gold Fund is a mutual fund or exchange-traded fund (ETF) that invests
primarily in gold-producing companies or gold bullion. The price of shares
within a gold fund should correlate very closely to the spot price of gold itself,
assuming the fund holds the majority of its assets in bullion or in the stocks and
bonds of gold miners and manufacturers.
 Silver Has Many Forms
Everything mentioned in the last chapter on gold applies to silver as well
(physical and paper forms: ETFs, Mutual Funds, etc...). There are a few slight
differences. Silver nuggets cannot be prospected like gold. Silver is tied up with
other minerals and has to be mined and extracted. It can be found in nugget
form, but this is an extremely rare event. A picture, like this of a silver nugget, is
a very unusual occurrence:

Another difference is how easily silver can be recycled and how many
billions of silver coins exist vs fewer gold coins. Because so many ornaments are
made of silver and there is so much silver jewelry, recycling - turning scrap into
silver, is a really big business. Also there are many billions of silver coins in
circulation and they can be found in change. Gold coins are few and far between
and much harder to find and are not in circulation.
Typical sizes for silver bars from U.S. Sources:

1 oz Silver Bars and Rounds. One ounce silver bars are the smallest, and
because of that, they typically carry the highest premium over spot price as it
costs the mints the most in fabrication costs per ounce of any sized bar.
5 oz Silver Bars. Five ounce silver bars are the next smallest, but they
actually carry roughly the same premiums as 1 oz bars because they are a bit less
common than 1, 10 or 100 oz bars.
10 oz Silver Bars. Ten ounce silver bars are some of the most widely
traded on the market, and are produced by nearly every silver bar manufacturer
out there. The premiums start to get more reasonable at this size.
 1 kg Silver Bars. One kilogram silver bars are more of a specialty bar,
and aren’t produced by many of the major manufacturers. You will likely have
to look long and far to find these, and because of that, you’ll usually pay an
inflated price.
100 oz Silver Bars. The largest commonly traded form of silver bar is the
100 oz bar, which is about the largest bar that can be held comfortably in your
hands (and that might even be pushing it). Nearly every provider produces 100
oz bars.
Like gold there are metric sizes as well: Left to right 5 grams, 10 grams, 1
Troy ounce, 28.35 grams, 100 grams, 250 grams (8.82 oz)

Steve Mitchell, KTXK general manager, holds the 100 ounce silver bar
that was given to the station by an anonymous donor to cover the cost of needed
repairs for damage that silenced the station for several days. Just days after
Texarkana College’s radio station repaired a $3,000 part to get KTXK back on
the air, an anonymous donor dropped off a present of equal value. (December
2011 – price of silver was around $30 an ounce).
 Silver coins are abundant and can be found in change, if you know how to
locate them. I will tell you how. Let’s take a look at the many types of gold,
silver and rare coins that can be purchased and found.
 Coins: Gold - Silver – Rare
Gold and silver have many forms. Besides physical bars and rounds and
investment forms there are gold and silver coins. In this chapter we will briefly
examine them. What comes to mind when you mention the word “investing”
with respect to precious metals? Certainly gold and silver coins are at the top of
the list. However, “rare coins” are also considered a great investment
opportunity, even though they may not be made of silver or gold. Rare coins can
be classified as an investment because they are scarce and have value. Rare coins
that are in exceptionally good condition can hold higher value. The rate of return
on rare coins ranks as one of the highest investment assets over time.
Gold coins are coins that have some amount of gold in them. It could be
over 99% or a much smaller amount, say less than 20%. No coin is 100% gold.
Gold always has some impurity in it. Gold coins made by the U.S. Mint up until
1933 were available to the general public as part of the circulated coin supply,
just like pennies and quarters were.
Executive order 6102 made ownership of gold illegal so coins minted that
year were melted down. A few survived. Prior to 1933 some of these coins were
melted, but most survived and many ended up in Europe. The Europeans loved
to hoard gold, and American coins were available to them. Millions of pre-1933
coins still exist today.
In 1986 the U.S. Mint started minting a few types of gold coins again, but
they were not part of the circulated coin supply. These coins are only sold
through authorized distributors, and some of them are only available from the
U.S. Mint directly.
Gold coins are not an exclusively U.S. product. Coins were made of gold
for thousands of years. Coins are made in many countries, like Canada. Ancient
Roman coins were sometimes made of gold.
Silver coins can have over 99% silver in them or as little as 10%. Most
U.S. minted coins for circulation contained 40% - 90% silver. Starting in 1965,
the U.S. Mint stopped making silver coins for circulation, (the exception to this
rule is the 40% silver Kennedy Half Dollar minted from 1965-1970) but they
continued to make silver coins in special issue sets. Like gold, starting in 1986 a
few select silver coins were offered through a distribution network and the U.S.
Mint. The 1 oz Silver American Eagle Dollar is an example of a silver coin
offered via this network. It is in high demand because it is 99.9% pure and can
be purchased in small quantities. A total of 337,031,982 of these coins were
minted from 1986 – 2012.
Prior to 1965, dimes, quarters and half dollars were made of 90% silver
and billions were made. Some war time nickels had silver in them. From 1965 –
1970 half dollars had 40% silver, as just mentioned. There are currently over one
billion 40% silver halves in circulation, and these coins can be found in change.
The reason the U.S. Mint stopped making silver coins for circulation in
1964 has, in part, to do with cost. The U.S. Mint used the equivalent of 67% of
today’s total worldwide silver mining production to mint 1964 dimes, quarters
and half dollars for everyday use. This should tell you why they stopped making
silver coins. The silver value of the 549,549,066 ounces in those coins (at $19.35
an ounce) is worth more than $10.5 billion.
Many silver coins come from other countries as well. Investors love 1 oz
Canadian Silver Maple Leafs because of their purity (.9999 vs .999 for the 1 oz
American Eagle) and lower cost. They can sometimes can be purchased for $1
less than the American Eagle, and they have a $5 face value vs $1 for the Eagle.
According to data released by the Royal Canadian Mint, there were 28.2 million
Silver Maples sold in 2013. This is an astonishing figure as it was a 56%
increase over the 18.1 million ounces sold in 2012.
Let’s talk about “rare coins” for a few minutes. This subject is very
complex, but let’s looks at some basics for now. Rare coins that are incredibly
valuable only have this value because they are in high demand. Coins that are
old can be rare, (only a few minted) but not of great worth because the demand
is not strong. People that have old
coins and claim they have value are misinformed. For example, I have seen 200+
year old pennies worth only several dollars. The point is that old age does not
necessarily mean more value.
Coins that are old but in pristine condition generally are worth much more
money than similar dated coins in average condition. We will look at this subject
in great detail when we examine coin collecting and investing. For now, here is a
good example: A 1793 penny in average condition is worth about $2,500.
However, one in excellent condition sold for $632,500 at auction in 2008.
Examples of coins that are in great demand (and often made part of an
investment portfolio) are pre-1933 U.S. minted gold coins in high grades or in
pristine condition. Are they a good investment? No! They are often referred to as
rare and valuable. Here is a picture of some pre-1933 Gold Double Eagles:
 A pre-1933 $20 Gold Double Eagle (dated 1895) that is in a very high
grade or condition (62 out of 70) is shown above. These types of coins are often
over sold. To suggest that they are valuable and rare and a good investment is
not true. They are not rare, not valuable and not a good investment. I will show
you why in future chapters.
Real valuable and rare coins come in many forms, such as highly sought
after pennies, like this 1909 S VDB Lincoln Cent, which sold for $900:

This can be considered a rare and valuable coin, unlike the pre-1933 Gold
Double Eagles. The Gold Double Eagles are worth their gold content, but not
more than that. This 1909 penny, however, is worth 90,000 times its face value.
 The Relationship (Gold, Silver,
Coins)
The purpose of this book is to convey information that will make it easier
for you to find, buy, sell and invest in gold, silver, and coins, including gold and
silver coins and rare coins (certainly a wide range of topics). I have noticed that
interest seldom focuses on just one of these topics, for example gold bullion
(bars, rounds or gold coins). All of these topics seem to overlap on many levels,
so it is imperative to include them all in one document. Coin collectors usually
have silver and gold coins and also invest in gold and silver bars and rounds and
continue to buy rare coins and coins made of gold and silver, it is ongoing. Gold
and silver investors, on the other hand, usually invest in all types of silver and
gold, including coins, but they do not know enough about the coins they invest
in and they often pay too much for them.
Investment houses usually suggest at least a 5% portfolio exposure to
some form of precious metal, and some even suggest as high as 20%. As you can
see, it’s hard to limit yourself just to gold or just to silver or just coins, there is
too much overlap. Because the condition of coins has a profound effect on their
value and because coins over time have demonstrated to be one of the best
investments, it is important to cover all of these topics together. You have to
draw comparisons. You can’t just look at paper investments like ETFs or Mutual
Funds.
Another way of looking at this is to realize that many investors have
exposure to the gold and silver coin market yet do not understand anything about
coins. If you are trained in this topic you can make much better decisions with
regard to your financial future. Also, coin collecting is a hobby that is being lost,
as young people seldom have interest in it. Need proof? Just go to a coin club
meeting; if you are 50 years old, you feel out of place because you are so young
compared to the old timers present.
If you have children, getting them into this hobby costs little and can end
up being rewarding on many levels (it improves their math skills, helps them
save for the future and teaches them how to make money by investing in their
collection).
To illustrate how important it is to have a better understanding of rare and
valuable coins and how they can impact your bottom line, let’s take a look at one
of the most unusual and the biggest treasure finds in U.S. history. This event
occurred right in some ones back yard. I am speaking about the Saddle Ridge
gold coin find of 2013 in Northern California. A total of 1,427 gold coins were
found in a couple’s back yard valued at over $10 million, as of July 2014! Part
of this hoard was auctioned on Amazon, in their new Coin Collectibles category.
Yes, this is an unusual find, but don’t you think knowing about coins can
serve a useful purpose. This point will become very clear as more information is
revealed throughout the book. The next picture shows part of the actual Amazon
auction. Notice the 14 finest coins selling for $2,750,000.
 Finding Gold-Silver-Coins
This topic: “finding gold and silver and coins”, when mentioned, often
results in an unusual response: “How do you find gold and silver and coins? No
one can imagine that finding these valuable assets is a possibility. Yet, coin
collectors and investors all use a technique that will be described in this chapter,
to find and buy gold, silver and coins. In order to get a handle on this concept
you have to factor several variables into the equation.
First of all there are large numbers of people who have coins and gold and
silver jewelry and other forms of these assets and need money, but do not know
how to sell them, and get the best result. Also, the demographics of our
population illustrates that tens of millions of baby boomers are getting older and
passing away, often leaving coins and precious metals behind to someone who
knows little about them, but would rather have their dollar value than the actual
asset itself.
Before we look at this technique to find these valuable assets, let’s address
a common problem that often prevents people from using the tools needed to
acquire precious metal assets from other people. In particular, the challenge
many of us face is the issue of how to buy precious metals, including coins, if we
do not have extra money or disposable money (as some describe it).
With this topic in mind it will be advantageous to spend a few minutes
talking about an investment strategy. First of all everyone should have an
investment strategy. Even though most people live pay check to pay check (76%
do), visualizing an improvement in one’s financial picture is advantageous. How
then can we take advantage of this book material if we do not have extra money?
There are two ways to look at this, start saving or just give up. Let’s assume you
will not give up.
One way to budget money and set some aside each month, is to use a
grocery list (20% of food shopping is impulse). So, if you spend $150 per week
on food by the end of the month you can save $120 by cutting your weekly bill
by 20%. Cut out alcohol, cigarettes, candy etc…Turn off lights, turn off the
computer, the cable box, modem, when you leave the house. Also turn the
thermostat down when leaving for a few hours or more. Here are some more
ways to save and make extra money:
Go through your house and set aside every item you no longer want and
then knock on your neighbors doors and ask them flat out if they have anything
in the house they no longer need. I guarantee you that you will end up with
dozens of items that you can sell on eBay. Hit every yard sale on Friday morning
and look for cheap items that you can also sell on eBay. Almost every type of
item imaginable can sell on line.
One way to save lots of money and few people think of this, is your hot
water heater, mine is electric. Buy a new one when the time comes and pay for a
more expensive digital one, such as a Whirlpool Model: ES40R92-45D (Lowe’s
Item #: 345706). Yes, it costs $150 more than the cheap ones but I have saved
over $200 a year with it and the digital dial lets you set the water temp in a few
seconds. And it comes with a 9 year guarantee.
You will need some money to get started finding and buying gold and
silver and coins. I apologize for getting off target a little, talking about saving
money, but it upsets me when I hear that someone has no extra money to invest,
when in reality they can be saving. Okay, then what is the best way to get
started?
There is a system that you can use to start your investing that has worked
for many coin collectors and I want to share this information with you. It is
called the poor man’s system for finding gold-silver-coins. Remember all gold,
silver and rare coins have value, getting your hands on them at a fair price is a
good investment strategy. How can you do this?
Believe it or not I have acquired thousands of dollars worth of silver and
gold jewelry, silver and gold coins, and rare coins with a simple method. Please
note this is one of many investment strategies that I have used and you should
know about this one in particular. I run ads looking to buy gold, silver, gold
coins, silver coins, rare coins and jewelry. Here are the steps to follow:
First invest in a cheap business card. This helps establish credibility. The
business card should have your name, phone number and business name and
some slogan such as “Cash For Gold, Silver, Coins, Jewelry” on it. If you do not
have a business name, make one up (take your last name and add “& associates”
to it). In addition to your name, add you wife’s name if you are a man and if you
are a woman ad your husband’s name. If not married, ad a male or female name
of any one you know. Why?
It is very important to build some trust with someone so they will be
willing to work with you. For example, if you meet someone at the library to see
a coin they want to sell and you hand them your card, the information on the
card reassures them. So before running ads and looking for gold, silver and
coins, you must establish credibility. Having references written down also helps.
Okay you have a business card, now what? Place fliers everywhere you
can and run ads everywhere you can. If you don’t have the time for fliers don’t
worry, just run ads. Fliers can be placed in the library, post office, church, senior
center, supermarket, laundromat and any other wall you can think of.
Ads that work best can be placed on Craigslist and any other place that lets
you run ads for free (Backpage, local classified, etc...). Also go around to yard
sales every Friday or Saturday morning with your business card. Talk to
everyone there, including
the yard seller, and let them know what you are looking for.
Here are a few other ways to find gold, silver, coins and jewelry. Look for
ads from anyone wanting to sell their coins or gold or silver or jewelry. Look in
the newspaper for legal notices. Sometimes estates or items left over from deaths
have to be sold and the public is invited when bank owned collections acquired
from loan debt are being sold. These were loans taken out against a coin
collection as collateral and the bank took the collection in when the loan was not
paid, and now has to sell it.
Churches are often given coins and other items. Let them know who you
are and that you will buy them. Senior centers are the best place to post ads and
speak with groups about your interest in buying coins and old jewelry. Also coin
clubs have auctions. Join your local coin club and get involved. Detailed info on
this subject will come in the chapters on coin collecting.
Why is this method so valuable? Why use it? First of all, it works, and
many people use this system. Just to give you an example of how many people
are out there who have valuable coins and jewelry but do not know what to do
with them, an investment adviser told me that 1 in 15 people he consults with,
have, as part of their assets, rare coins and gold and silver but need help in trying
to get rid of them. And they have no idea of their value or what to do with them.
A very important point to make is not to worry if you have absolutely no
knowledge of coins, jewelry, gold and silver. By the end of this book you will
know exactly how to be successful at this!
Let’s take a look at some typical ads that have worked well for me and
others: “Cash For Coins, Gold, Silver or Jewelry - Immediate Payment” or
“Let me sell you coins and jewelry on eBay” or “Cash For Coins” or “Free
Coin Evaluation” or “Free coin and jewelry evaluation” or “We Buy Coins
and Gold and Silver”
Place both names in the ad, such as “John and Sally Smith”. Protect
yourself and provide credibility. Always meet people in a neutral place for your
protection and to make them feel secure: library, coffee shop, mall, senior center,
book store etc…Tip: If someone sounds fishy or you gut says no, back off.
When someone responds to your ad and you are able to speak with them
on the phone, a good response is: “Thank you Mrs. Smith for responding to my
ad. My name is John Watson and my wife and I and our three beautiful children
have lived here in ………….. for 20 years. I am a Deacon in our local church
(name of church) and have had the pleasure of collecting coins for over 40 years!
I would love to learn more about what you have? You can see the wisdom of this
easy going, yet informative approach.
When interviewing them you must gather some basic information. First
you need to find out what they have. Get some details. If they have lots of coins
ask them how they acquired them and what types of coins they are? Do they
have pennies for example. How old are they? Are they in coin books? Just get all
the details so you can decide if these items are worth pursuing.
Let’s look at some more situations that may come up when you run your
ads. These I consider Red Flags. Someone contacts you and says “I have a very
rare coin that was passed down in my family”. This is probably a fake coin they
are trying to get rid of. A single valuable coin is not something people usually
have unless it is a gold coin.
Another Red Flag: I have many old coins in a jar or box that I have been
saving for many years and they are valuable because they are old. Probably a
bunch of worthless coins but worth asking more questions: How many coins?
How old? What denominations? Let’s look at some of the opposite situations,
not red flags:

• I have an old coin collection passed down to me.

• I have some gold and silver coins that my husband saved.
• I have boxes of old coins that my wife saved since she was a child and she
is 80 years old now.
• I have a bunch of Indian Head Pennies I saved over the years.
• I inherited some coins and jewelry.
• I have old jewelry that I no longer want.
• I have my husbands rolls of coins that he started buying over 60 years ago.

Keep in mind, many people need money and they may want to sell their
coin collection and other items.

Okay, so you might be thinking that you do not have enough experience to
do this. What do you pay for gold or coins or silver or jewelry on the spot and
how do you tell if the gold or silver is real? Let me reassure you, this is really
easy, and I am going to show you how. Some inexpensive tools needed to make
all this work are listed below. These and other tools will be explained in more
detail in a later chapter, particularly how to buy them, but for now you will need
to understand how they are used:

• A powerful magnet: Gold and Silver are not magnetic, if it sticks to a

magnet the gold or silver item is not made of a precious metal ($5)

• The current edition of “The Red Book”: This book lists every U.S. Coin
minted and shows what they are worth and their weight ($10)

• A magnifying loupe or jewelers loupe is used to examine coins and look

for stamps on gold and silver ($5)

• A gram scale: Used to weigh coins and silver and gold (bigger scale might
be needed for heavier silver items) ($10)

• A non glazed ceramic plate or tile: the smooth surface is used to rub gold
onto to check color – gold color means item is gold ($5)

• A gold and silver testing kit ($15)

The Red Book (fully titled, The Official Red Book - A Guide Book of
United States Coins) provides the retail value of every U.S. coin minted. So
when you look up a coin and it says it is worth $10, then offer the seller $5
(50%), never more. The
condition of the coin is important, and the Red Book lists values based upon
condition. The loupe lets you see a coin close up and see stamp marks on gold
and silver. The scale is used to weigh certain coins and weigh gold/silver. Please
note - the Red Book tells you the weight of each coin. You must weigh every
gold and silver coin and use the magnet test. This helps verify authenticity.
When it comes time to meet with someone and see what they have, you
must have your tools with you so you can easily determine the weight of the coin
or object and look it up in the Red Book (Don’t let them see the Red Book – put
a cover on it). If they have gold or silver in bulk, or jewelry, you need to weigh it
(Small gram scales usually only go up to about 8 ounces).
Okay, it is now time to negotiate a price for an item or items that the seller
wants you to make an offer on. First and foremost do what the master does. Did
you ever watch Rick from the “Pawn Stars TV Show”. Notice how he looks at
an item and then says: “What are you looking to get for it?” He never makes an
offer first. The reason he does this is simple. Suppose someone is looking to get
$50 for a coin and Rick knows it is worth $200 and he is willing to pay $100 for
it. That being said, the $50 the seller is asking is a good deal for Rick, so he buys
it at that price even though he would have gone as high as $100. Remember you
have to make a profit. If you are unable to agree on a price take the eBay route.
A situation may come up where you do not have enough money to buy the
item(s), so rather than walk away from the deal I suggest: Offer to sell the items
for them on eBay. Tell them you will take the pictures, create each listing and
package and insure the items and the seller can watch the auction happen and
they hold onto the pieces until they sell. As I said before, a 40% commission
after expenses is fair. Explain the eBay fee structure to them.
The eBay fee structure is subject to change but eBay takes 10% of the total
sale (item and shipping). PayPal takes 2.9 % of the total sale plus 30 cents. The
maximum amount eBay takes is $250 per item, so if your item sells for more
than $2500 you only pay $250. We will revisit this topic when we discuss selling
(Amazon is another selling venue to consider).
With eBay in mind, a situation may come where you are looking at a very
valuable coin or coin collection and you feel the eBay route will not get the best
return for the seller. Another option exists. There are some very reputable coin
auction companies that can appraise the coin(s) and for a percentage of the sale,
auction them for you. These are typically better coins, those worth many
thousands. So what you can do is tell the seller that the best bet for them is to
have them auctioned by a professional dealer and you can make all the
arrangements.

The two most recognized auction companies are:

Heritage Auctions: http://coins.ha.com/

and
Stack’s Bowers: http://www.stacksbowers.com/Home.aspx

I suggest you contact them and find out what their policies are with regard
to referrals (You refer a good customer to them). In other words, do they pay a
referral fee or finders fee. If not, I suggest you draw up an agreement with the
seller so you can get a piece of the sale. Without you, they would never know
about these auctions companies who get top dollar. It’s win win for both parties.
Never tell them the names of these two auction companies.
Many coin shops are now willing to pay spot or close to spot for gold and
silver in the hopes that it will increase in value over time so they can make a
profit. Spot refers to the actual price of gold or silver at the time of the sale, so
you may find yourself competing with them. If you offer 50% of the spot value
you may loose the sale. So I like to make my offer (50%) and see if they bite.
If they bite, close the deal. If they hesitate then you know they have gotten
another quote or have a sense of what the item is worth. That’s why it is good to
ask up front what they want for it. You can always counter, but do not go to
actual spot price because if gold or silver goes way down you will be sitting on
the item for a long time.
A few final thoughts. Never argue with someone. If you disagree, it is
better to agree with them first, and then tell a story as to why you do not agree.
Suppose they say: “Well I was offered $500 for the gold necklace, why are you
offering me $200?” Your answer: To be honest, I weighed it and it only has
$200 of gold in it so that’s all I can pay. Here’s $200 cash. Hold it in front of
them. You have no way of knowing if they actually got a $500 offer, and when
they see the cash, they may just take it.
It is important to mention a few more tips so you can use this method
successfully. When someone responds to your ad you should be prepared to
meet them with cash in your pocket. You need to close the deal on the spot. Give
them time to think and you will loose. Never pay more than 50 cents on the
dollar for any item you buy. Only pay 50% of what you think it is worth.
Otherwise you will not make any profit. Trust me, most coin shops, pawn shops
etc.. only pay 50%. Some say they will pay spot, but I have serious doubts about
it.
Because you will have cash it is important to go as a team and meet in a
neutral place. When speaking to someone suggest several places to meet:
Starbucks, the library, the mall, the senior center, somewhere where you both
feel safe and secure.
Let’s go over certain situations that may arise and you have to know how
to handle them. If the person you meet knows the value of what they have and
insists on 100% value payment you remind them that they will never get 100%
at a coin shop, pawn shop or anywhere else.
A good way to handle this is if they insist on more than you are willing to
pay is to offer them a percent of the sale.
What a percent of the sale means is that you will pay them say 60% of
what you sell the item for. If you auction it on eBay offer them 60% of the profit
(after all fees come out). Tell them that you are doing the work: the listing,
shipping, etc... and they reap most of the reward, and they hold onto the item
until you sell it. You will need pictures of the products. They can follow your
eBay listing so they feel they are not being cheated and can see the results. I
have used this approach before and it works. Never go below 40% and even
consider a 50-50 split. Trust me, I helped a friend out once and only took 20%
for myself, but in the end the $200 I made hardly covered the weeks of work. He
had many silver coins that I sold for him on eBay and it was very time
consuming.
When people respond to your ads they usually have coins to sell, but in the
event they have a silver item, it is important to have a complete understanding of
how to tell real silver from fake silver, which we will look at first. Then we will
look at gold verification and then how to deal with coins.
 Is It Silver?
A good YouTube video from Rick of the TV show “Pawn Stars”,
illustrates how he evaluates silver items:

http://www.history.com/shows/pawn-stars/videos/certified-silver

Having a list of purity stamps that may appear on a silver piece makes it
easy to understand what you are looking at. This list illustrates various levels of
silver purity that you may come across as stamps on a piece and also shows coin
silver values:

These values are percentages, such as 925 sterling silver, which means 92.5
% pure silver

999.9 (four nines fine) Ultra-fine silver used by Royal Canadian Mint in the
Canadian Silver Maple Leaf
999 (Fine silver or three nines fine) Used in Good Delivery bullion bars
980 Common standard used in Mexico ca.1930 - 1945
958 e.g., Britannia silver
950 e.g., French 1st Standard
925 (Sterling silver)
900 (one nine fine or “90% silver”) e.g., all 1892-1964 U. S. silver coins
835 A standard predominantly used in Germany after 1884
833 A common standard for continental silver especially among the Dutch,
Swedish, and Germans
830 A common standard used in older Scandinavian silver
800 The minimum standard for silver in Germany after 1884; Egyptian silver;
Canadian silver circulating coinage
750 An uncommon silver standard found in older German, Swiss and Austro-
Hungarian silver
720 e.g., many Mexican silver coins

When you are confronted with a silver item and do not see a purity or
silver stamp on it, such as 92.5 for sterling silver, what do you do? While most
items you come across will be silver plated and not worth much, some items that
do not have stamps of purity can however, be solid silver, and quite valuable.
Remember, some silver plated items are collectible and also have value.
A good way to become familiar with marks you may come across is by
investigating the silver encyclopedia web site:

http://www.925-1000.com/

This silver encyclopedia site will show you the marks on silver pieces that
indicate genuine silver when a percentage mark may not appear. Also as a rule
of thumb, stamps that will most likely appear and mean real silver, are:

Sterling, Ster, 925 are the most common indicators

Other silver indicators:

‘999’ ‘950’ ‘900’

‘0.999’ ‘STG’ ‘850’
‘Fine Silver’ ‘COIN SILVER’ ‘835’
‘9854’ ‘COIN’ ‘800’
‘BRITANNIA SILVER’ ‘PURE COIN’ ‘750’
‘CONTINENTAL ‘STANDARD’ ‘VERMEIL’
SILVER’

The marks ‘silver’ or ‘silver’ followed by the name of a country may

mean silver but some mark this way, and it is not silver. Some marks clearly
indicate that the item is not silver:

‘silver plate’ ‘old Sheffield’ ‘EPB’

‘sterling inlaid’ ‘old Sheffield plate’ ‘EPC’
‘afghan silver’ ‘German silver’ ‘EPCA’
‘nickel-plate’ ‘Austrian silver’ ‘EPGS’
‘nickle silver’ ‘wolf silver’ ‘EPMS’
‘Mexican silver’ ‘Venetian silver’ ‘AA’
‘Mexican silver’ ‘Venetian silver’ ‘AA’
‘British silver’ ‘Yukon silver’ ‘EP’
‘1000’ ‘Sterline’ ’18/10’
‘ARG1000’ ‘EPNS’ ‘silverware’
‘English silver’ ‘EPWM’ ‘pewter’
‘Sheffield plate’ ‘EPBM’

Valid Platinum marks: ‘PLAT’ ‘PT’ ‘850PLAT’ ‘800PT 150IRID’ (This means
that it has Iridium in it – another precious metal).

Once you determine that the item in question is silver you can go on line
and calculate its value. Calculating silver scrap is easy. There are many silver
scrap calculators on line. Coinapps.com is a good on line silver calculator. This
is the direct link to it:

http://coinapps.com/silver/scrap/calculator/

Let’s look at it: In this example below you can see that the unit of measure
selected was ounces and the item weighed 5ozs. The item is sterling silver or
92.5 % pure. The calculator keeps track of the current price of silver, so it is able
to calculate that 5ozs of sterling silver is worth $79.88.
 Is It Gold?
Silver is the most common form of jewelry and coin you will encounter
when you run ads, but having knowledge of gold jewelry is helpful. Most gold is
stamped with a gold carat value. Typical carat readings on jewelry are as
follows:

Correlation between carats and fineness (gold)

24 carats = .999 fine or above

23 carats = .958 fine

22 carats = .917 fine (the UK gold coin standard)

21 carats = .875 fine

20 carats = .833 fine

18 carats = .750 fine

16 carats = .667 fine

14 carats = .583 fine

10 carats = .417 fine

The fineness is of ten conver ted to a percent, as well. If a gold coin or ring has a
finen ess of .900, then it is 90.0% pure gold. If it has a fineness of .850, then it is
85.0% pure.

Some gold stamps may not be easy to recognize:

Here are a few stamps which signify the piece is NOT gold:
• 14K 1/20 (1/20 gold is basically gold-filled}
• 14K G.F. [gold-filled)
• 14K G.P. (gold-plated)
 • 14KH.G.E. (hydrostatic gold electroplating) • 14K G.E.P. (gold
electroplating) • .925 (sterling silver)

Anything with one of these stamps is not gold. It is made out of a different metal
with a very thin gold layer that will wear off over time. These pieces do not have
any real metal value and most gold buyers won’t purchase them from you (with
the exception of sterling silver).

Stamps that mean your piece IS gold:

• A plain 14K stamp
• 14K P (The ‘P’ stands for plumb gold) • 14K with a company logo after
such as 14K <3
• 417 (10K, means 41.7% gold) • 585 (14k, means 58.5% gold) • 750
(18K, means 75% gold) • 917 (22K, means 91.7% gold) • 999 (24K,
means 99.9% gold) That being said, even if your piece is stamped “14K”
you cannot be 100% sure it is gold. There are a number of fake stamps out
there and the only way to be 100% sure is to test the metal with a gold
tester using nitric acid. On the other hand, even if there is no stamp it
could still be gold.
(Information: Jewelry Gold Blog)

Remember that most jewelry should be stamped and keep in mind that
many fake pieces are also stamped. We will learn how to test for authenticity
later. Some jewelry is real but has no stamp on it, why?

• It is very old
• The stamp has worn off
• The item has been modified and in so doing the stamp was covered over or
removed • The stamp is behind something – under a stone or inside a
watch for example Locating the gold stamp can be problematic at times,
especially if it is very small and hidden. It is important to inspect every
square inch of the item for the mark. If you do not find the mark, don’t
worry. I will show you how to determine the gold content later on. Keep in
mind that gold can come in many colors: white, yellow, red, green, pink,
rose. It depends upon the base metal content. Let’s assume the item is real
and you find the mark – then what?
First let’s use the weight of the item and its carat content to determine it’s
value (we will assume for now the item is real gold) and you know the weight. A
simple on line calculator tells you the value. Most jewelry is stamped, such as 20
carats. Please note that if it is not stamped it can still be real, for example when
rings are re sized they often loose their metal stamp, as mentioned earlier. Go to
this web site again and click on the Gold calculator: http://www.coinapps.com
Let’s look at it and see how it works on the next page:

In this example we put 10 grams of 20 carat gold into the on line

calculator and it tracks the current spot price of gold and tells us that the gold in
question is worth $353.78.
Please remember that some items may be gold plated or have very small
amounts of gold in them but may be worth money as collectibles or ornaments
that are in high demand. eBay is a good way to check the value of items. Do a
picture search and see if you find matches on eBay or other sites for the item. A
very important point to make concerns children’s jewelry and adult bracelets.
Sometimes the charms on them are all fake except for one or two that are real
gold or silver. Check each one carefully.
 Dealing With Coins?
This was stated before, but it bears repeating: The Red Book (fully titled,
The Official Red Book - A Guide Book of United States Coins) provides the retail
value of every U.S. coin minted. So when you look up a coin and it says it is
worth $10, then offer the seller $5 (50%), never more. The condition of the coin
is important, and the Red Book lists values based upon condition. The loupe lets
you see a coin close up and stamp marks on gold and silver. The scale is used to
weigh certain coins and weigh gold/silver. Please note - the Red Book tells you
the weight of each coin. You must weigh every gold and silver coin and use the
magnet test.
Let’s imagine someone calls you and wants to sell 2 gold coins they have.
You have no coin experience so you wonder how to handle this situation. Well it
is really easy. Look up the coin date in the Red Book and you will see the value
of the coin and the Red Book will tell you if it is gold. You will then want to be
sure it is not a fake (this topic will be covered in more detail in the coin
sections).
The easiest way to do this is by weighing the coin. The Red Book tells you
the weight of each gold coin. If the weight is correct it is probably gold. Also
you can place the coin next to your magnet. If it sticks, it is not gold. There are
some more tests that I will show you later.
Let’s say that someone wants to sell two coins: Liberty Head Gold $20
pieces. These were minted from 1849 -1907. There are fake versions out there
that weigh the same and we will look at this subject later on but for now, using
the magnet and weight test is a pretty reliable way to determine authenticity
(most fake coins will not pass the magnet or weight test). The next picture from
The Red Book shows this coin’s detailed information:
 The Red Book provides a clear picture of the coin and describes
conditions that it may be in and shows the weight and metal composition. Notice
the weight is 33.436
grams. Any coin you look at should be very close to this weight. Slight
differences can occur if the coin is worn down.
This list below for gold purity, has some good coin reference information
in it. Notice it lists many foreign coins not found in The Red Book. So if you
find a coin not listed but know its gold purity, you can weigh it and determine its
metal value.

999.999 (six nines fine) The purest gold ever produced. Refined by the Perth
Mint in 1957.

999.99 (five nines fine) The purest type of gold currently produced; the
Royal Canadian Mint regularly produces commemorative coins in this
fineness

999.9 (four nines fine) E.g., ordinary Canadian Gold Maple Leaf and
American Buffalo coins

999 (24 carat, also occasionally known as three nines fine) E.g., Chinese
Panda coins

995 The minimum allowed in Good Delivery gold bars

990 (two nines fine)

986 (Ducat fineness) Formerly used by Venetian and Holy Roman Empire
mints; still in use in Austria and Hungary

958.3 (23 carat)

917 (22 carat) Historically the most widely used fineness for gold bullion
coins; currently used for British Sovereigns, South African Krugerrands and
American Gold Eagles

900 (one nine fine) Mostly used in Latin Monetary Union mintage (e.g.
French and Swiss “Napoleon coin” 20 francs)

833 (20 carat)

750 (18 carat) 625 (15 carat)

585 (14 carat)

417 (10 carat)

375 (9 carat)

333 (8 carat) Minimum standard for gold in Germany after 1884

The condition of a coin can improve its value. The better the condition, the
more it is worth (detailed information on this topic and more coin information
will appear later). Please keep in mind that foreign coins are valued for their
metal content and not condition, so if you come across foreign gold or silver
coins they will not appear in the Red Book. Also, you can always go to eBay and
see what they are selling for.
In addition to “The Red Book” there is a web site similar to coinapps.com,
called coinflation.com:

http://www.coinflation.com/silver_coin_values.html

Coinflation has charts that show you the current value of gold and silver
coins based upon the current spot price of silver and gold. Coinapps.com also
has this feature.
Let’s look inside coinflation.com: The next image shows the silver value
of most U.S. Coins minted for circulation.
 Notice the last entry on the list, for Silver Eagles. These coins are 99.9%
silver and were made available to the general public though U.S. Mint selected
distributors. They are sold at a premium each year (above spot price) and many
investors include them in their precious metal inventory.
The image below shows gold values for coins minted for circulation.
Notice how 1933 was the last year the U.S. Mint produced gold coins for general
circulation. Special gold coins however, are now available. We will look at this
later in detail. These charts are in real time so when you come across a silver or
gold coin you can look it up and determine its precious metal value only. Its
value as a collectible can only be determined by looking at The Red Book and
on line.
 To sum up, the coinflation and coinapps web sites tell us which coins are
gold and which are silver. These sites even list many foreign coins. The Red
Book also tells us this (U.S. Coins) and in addition, provides clear pictures and
the metal composition of precious metal coins. For example: Morgan Silver
Dollars are very common and people often want to get rid of them. So how much
are they worth? There are fake versions out there that weigh the same as real
Morgans and we will look at this subject later on, but for now, using a magnet
(silver and gold coins are not magnetic) and weight test is a pretty reliable way
to determine authenticity (most fake coins will not pass the magnet and/or
weight test). The next image from The Red Book shows this coin’s detail:
 The Red Book explains that the coin weighs 26.73 grams and is 90%
silver. Various types of condition are described and this helps determine coin
value. By looking at a coin you can match it with the condition listed in The Red
Book and see where it fits. The higher the grade, the more it is worth. Notice the
condition list above (VF-20 for example). So when you buy silver dollars and
pay the silver value of the coin, it may be worth much more because it is in a
high grade or condition!
 Prospecting
What exactly is prospecting? Most of us are familiar with gold
prospecting: That age old story of the miner who searches the land for signs of
yellow metal on or in the ground, looking for “The Mother Load”. When I think
of prospecting today, I think of sophisticated equipment, like metal detectors,
that can find valuable objects in the ground and provide a drawing of the object,
such as a half dollar. So as far-fetched as it may seem to you, metal detecting is a
great way to locate precious metal in any form, and you can do it anywhere,
even in big cities.
The beauty of it all is that it no longer matters where you live: the country,
the city, the desert, you name it; you can find valuable objects anywhere in the
world. Suppose you live in or near a big city. Where and how do you locate
treasure? It’s simple. Any place that people gather or have lived or gathered in
the past or present has collected coins (old and current), jewelry (rings mainly)
and other objects that a metal detector can identify. A simple stroll on the beach
can also yield great results, especially after a storm.

Spending a fun day on the beach looking for buried treasure

 Associated Press photo of ancient Roman gold coins found using a
metal detector

Here’s a list of places that will produce metal detecting results: • Walking
trails – running trails

• Beaches
• Ball parks
• Park fields where people play and hang out • Gold sites – by water and
by land that has gold (Arizona – Ca) • By rivers where people swim
• In the water
• Old battlegrounds
• Known historical sites
• Abandoned places where people once lived – old towns e.g.

If you would like to learn more about prospecting I suggest you locate
forums in your area and join them to start learning. I belong to these two:
http://www.treasurenet.com/forums/gold-prospecting-forum/
http://www.nuggetshooter.ipbhost.com/index.php?showforum=7

For a list of prospecting clubs in your area follow this link:

http://www.goldminershq.com/clubs/gold1.htm

The link below is a great article on buying gold nuggets on eBay:

http://www.gold-nuggets.org/how_not_to_get_ripped_off.htm

There are several things you need to know with respect to these forums.
First, they are free. Upon joining, announce yourself and say something nice. For
example, “My name is John Doe, and I just joined and am eager to learn from
the experts. Thank you for putting up with a newbie!” Proceed very slowly with
questions and comments.
If you consider buying a metal detector, then ask the members what works
best for your part of the country, and what it is you are looking for: gold or silver
or coins. Remember this important point: the value of a gold nugget depends
upon how much gold is in the nugget. Did you know that gold nuggets average
anywhere from 60 to 98% gold, depending on where they came from?
I would not buy a metal detector without extensive research. If you plan
on taking it seriously, and spending quality time, then I suggest you invest in a
better detector (over $500). Here is a link to a product supplier that has a good
reputation: http://www.kellycodetectors.com/metaldetectors/topselling/?
gclid=CNfo_dH-474CFRRsfgodXDUAHA
 Testing Your Gold and Silver
In order to take full advantage of the information presented here,
necessary tools include: • A powerful magnet ($5)

• The current edition of the Red Book ($10)

• A magnifying loupe or jewelers loupe ($5)
• A gram scale ($10)
• A non-glazed ceramic plate or tile ($5)
• A gold and silver testing kit ($15)

We spoke about these tools before. There are some simple inexpensive
ways to verify that the item in question is gold or silver and what carat gold it is.
Most jewelry stores use the acid test (we will look at it in detail in this chapter),
to determine the value of an item. The acid test along with some others, can
ensure success. Let’s start with the most basic test you can use for gold and
silver verification: the magnet test.
The magnet test is very easy. Using a good quality (not small refrigerator
magnet) you simply hold the gold or silver item up to the magnet. If it sticks, it
is not gold or silver. It could however be gold or silver plated with a base metal
underneath that is not magnetic so be careful. Even though it may not be solid
gold or silver it could be very valuable as a collectible.
This method is not fool proof. Some gold looking items are made of non-
magnetic material, and you can be fooled into thinking it is gold or silver
because it does not stick to the magnet. This is a very basic test and needs to be
followed up with more accurate tests. If it does stick to the magnet you know it
is not solid gold or solid silver.
When you examine a piece of gold or silver you will want to find the
stamp or marking on it that indicates carat of gold or silver purity. The jewelry
loupe is now used to look closely at the piece so you can find the mark. Finding
the mark is helpful in the process of determining if the item is gold or silver. If
you find the mark, then you must test further because many fake items have fake
marks on them. And some real items have no marks for reasons mentioned
earlier: worn off or hidden. So do not rely on the purity mark as a final way to
determine authenticity.
Another reliable way to test an item for gold is to rub the gold piece on the
surface of a non-glazed ceramic plate or tile. Rub it where you will not notice
any mark this may leave on the item, and for items that have extreme value, be
careful. After rubbing the gold on the plate a mark will be left on the plate. Gold
colored means the item is gold. A dark mark means no gold.
Another way to test for gold, and again, this can damage the item, is to
press a sharp object against the gold piece. If a mark appears, it is gold. Gold is
soft and easy to dent. But again, fake items will mark as well because they may
have lead under gold plate.
Believe it or not many experts can spot gold just by looking at it. Also if a
gold item is worn out in spots, look at the worn marks. If you see gold under
them, you can be pretty certain it is real gold. If you see another color under the
gold plate, then the item is gold plated and has a base metal under it. Remember,
gold is very heavy. So if you pick up a piece that you suspect is gold, and it
seems very heavy, then it probably is gold. Another simple and easy test is to
take the gold item and try to scratch glass with it. Gold is soft and will not
scratch glass.
The density test can also be used to test the item. Even though it requires
some patience and practice, is very accurate. It can be used for both gold and
silver. Let’s explain how to do it with gold: • First, weigh the gold in grams.

• Next, fill a vial with water – mark the level with tape or marker.
• Place the gold in the vial – note the new water level with tape or marker.
Measure the difference in milliliters (ml). (1 milliliter = 0.3937 inch) •
Density = mass/volume displacement.

A result close to 19 g/ml indicates either real gold, or a material with a

density similar to gold Here is an example calculation: the gold item weighs 38
g, and it displaces 2 ml of water. Using the formula of [mass (38 g)] [volume
displacement (2 ml)], the result would be 19 gml, which is very close to the
density of gold (24K).

Bear in mind that different gold purity will have a different g/ml ratio: •
14K – 12.9 to 14.6 g/ml
• 18K yellow – 15.2 to 15.9 g/ml
• 18K white – 14.7 to 16.9 g/ml
• 22K – 17.7 to 17.8 g/ml
• 24K – 19.2 g/ml

The test used by jewelers (produces the best results) is the nitric acid test.
There are two versions of it. No doubt, you have heard of the term “acid test”.
This phrase comes from the gold test using nitric acid. Nitric acid is caustic and
should only be handled with gloves, eye and mouth protection.
With respect to gold, you simply place the gold in a stainless steel pot and
place a drop of the acid on it. Most gold (14kt and above) will not be damaged
by the acid. Cheap gold may show a mark. If there is no reaction from the acid,
then the item is gold. A green color reaction indicates a base metal under the
gold. A milk colored reaction indicates gold plate over sterling silver.
Below are more detailed reactions to look for when using the straight
nitric acid method.
• 10 KY (Yellow GOLD) - Brown color
• 14 KY - Very slight brown color
• 18 KY-No color change
• 10 KW (White Gold) - Dark brown, after 20 seconds the acid starts to
fizz • 14 KW - Slight brown
• 18 KW - Faint brown
• Sterling Silver - Milky whitish color with some faint brown • Pot metal -
Grey color, no fizzing
• Base Metal - Fizzes green, smokes (brass or copper present) see base
metal plated bangle below (See the green residue present on the test below

- this fake was stamped 14k)

Another way to use Nitric Acid on jewelry is to rub the item on a rubbing
(slate) stone (make sure you use the correct stone so no damage results). When
you rub the gold or silver on the stone, a mark is left behind. Next you will use
the correct acid marked for the carat mark on the gold item. If the mark on the
stone does not change after dropping some acid on it, then you know the item is
the carat that is marked on it. If the mark disappears, then test again using lesser
strength acid for lower quality gold. Each test kit has instructions.
If the acid bubbles up or turns green or smokes, this indicates base metal,
not gold.
Let’s take a look at an inexpensive silver and gold testing kit that I
recommend you buy on eBay.
 http://www.ebay.com/usr/goldtestempire

The next two pages show what the test kit looks on the eBay site:

This kit has six bottles of acid, tests for silver and gold and has a rubbing
stone. For under $15 with free shipping, you can’t go wrong. The seller has a
pretty good track record with some negative feedback, but I feel confident this
kit will work as advertised.
 This kit tests for gold, silver and diamonds. It includes a gram scale,
jewelry loupe, and some other items.
Let’s talk a little about silver, and checking for authenticity. Quality silver
usually has a stamp of purity or the word sterling on the back or bottom: such as
.800 or .925 (sterling silver – 92.5%) as mentioned earlier. Most silver looking
jewelry, plates and cups and other serving items are silver plated. If they are very
old, they may have value as a collectible.
Silver has such a high conductivity rate that when you place an ice cube
next to a piece of silver it will start to melt almost immediately. This test works
well for coins and bars. To test silver, you can also tap on the silver piece with a
coin to listen for a bell ringing sound, meaning silver. Don’t tap on the exposed
part of an item.
The testing kit is the best method for testing silver. I recommend one that
comes with a rubbing stone so you can rub your silver or gold on it (which
should not cause any damage) and then test the residue left on the stone, since
acid directly on the silver can damage it. Acid placed on a coin will damage the
coin. So, if you must place a drop of acid on a coin, use the coin edge only.
Here are typical silver color results from placing acid on a mark left on the
rubbing stone. Each kit may differ, so refer to kit instructions:
 A great short and entertaining you tube video from the Pawn Stars TV
Show is worth watching. Rick shows you how he tests for silver:
http://www.youtube.com/watch?v=e6mqbQtr9DM
 What About The “IRS”?
Mention the letters “IRS”, and everyone gets nervous. The fact of the
matter is, the IRS does not care about coins or bullion you purchase or sell, per
se. What they care about are the amounts of money involved in the transactions
and more importantly, what form the money takes, the number of transactions
that occur in a short time period and the type of product you are selling or
buying. For example, some bullion coins are exempt from government reporting,
no matter how many you purchase.
What is so unfortunate is that aggressive sales people tell you that certain
purchases are not subject to government reporting, when in reality they have no
idea of what they are talking about. While there may be some truth to what they
say, they do not convey the whole picture.
Several things must be kept in mind when buying and selling any form of
gold or silver or any coin type. Before you do, make sure you understand what
you are liable for with respect to taxes, and what the company you buy from, or
sell to, is required to report as a result of the sale. Some sales and amounts are
reportable and some are not. Also keep in mind that laws change over time,
therefore before making any large purchase or purchases consult an accountant
first. Remember you may not be aware of what the company you buy from or
sell to, is doing behind your back. Don’t worry; I am going to explain this
subject to you. It is really very basic.

Selling: With respect to selling bullion, and this means selling to a dealer, the
dealer has to file a 1099B when the following thresholds are met:
 Why is it only these items and why these quantities? The types and forms
of bullion that trigger reporting are related to the regulations that are placed on
brokers. The brokers are required to report some of the proceeds from stock and
bullion transactions. For example, regularly traded items on the commodities
exchange used to be 1,000 oz Comex bars, or 1 Kilo gold bars. This is why the
1099B report is triggered at those levels.

Gold Coins That Do Not Trigger IRS Reporting:

Gold Eagle:
American Gold Buffalo:

Austrian Gold Philharmonic:

American Gold Eagles, American Gold Buffaloes and Austrian Gold

Philharmonics do not require any 1099 IRS reporting. You can sell as many as
you want and no 1099B will be reported to the IRS.

Silver Coins That Do Not Trigger IRS Reporting:

American Silver Eagle:

Canadian Silver Maple Leaf:

Austrian Silver Philharmonic:

American Silver Eagles, Canadian Silver Maple Leafs and Austrian Silver
Philharmonics do not trigger any 1099B IRS reporting. You can sell any
quantity of these coins you want and bullion dealers are not required to report it
to the IRS.
Please keep in mind that sales tax laws differ from state to state, so when
buying, make sure you know what applies. Some states have sales tax
exemptions for bullion purchases. However, there may be minimum purchase
requirements in order to qualify for this exemption. If you live in such a state, it
may make sense to save your money until you’re able to buy in bulk, rather than
buying a single coin at a time.

Buying: In most cases, bullion and rare coin transactions are not reportable. If
you pay with a personal check, credit card, or bank wire, there are no reporting
requirements. If you pay with cash, money orders, cashier’s checks, or travelers
checks, and the purchase price is at least $10,000, it must be reported to the
government.
The dealer is required to submit IRS Form 8300, “Report of Cash
Payments Over $10,000 Received in a Trade or Business”. This document is
required for all cash transactions over $10,000 in the United States, not just
precious metal purchases. It requires information such as your name, address,
and social security number.
Given the $10,000 price at which IRS reporting becomes mandatory, some
investors try to skirt the rules by making multiple smaller purchases. This is
known as “structuring,” and doing so is not legal. $10,000 in related transactions
must still be reported, even if the purchases occurred in separately in one day or
even on separate days.
If you wish to avoid the IRS reporting requirement, consider using a
payment method that does not require reporting, such as a bank wire. There are
other reporting requirements for precious metal dealers. The Suspicious Activity
Report (or SAR), part of the 2001 Patriot Act, requires financial institutions
(which includes coin dealers) to report suspicious transactions. However, there
are no firm rules about which transactions should be considered suspicious.
Know the rules, but keep in mind that most purchases and sales are not
subject to any form of reporting because they are either too small or because of
the method used to pay for them. The company you buy from or sell to should be
able to help you with this.
These links do a really good job in helping to explain this in detail. But
remember, before buying or selling in quantity, consult an accountant:

http://www.coinweek.com/news/industry-insider-irs-reporting-rules-for-
cash-transactions-and-precious-metals/

http://www.cmi-gold-silver.com/gold-confiscation-1933/

http://goldsilver.com/article/irs-1099-gold-reporting-private-gold-private-
silver-bullion/
 Important Terminology
Uncirculated:
Because so much of what we have, and are going to speak about, has to do
with coins (whether in the form of coin bullion or rare coins), it is important to
define some words and terms that will help us better understand this subject
matter, especially if you are new to coins.
A word that is used often when speaking about coins, but not well
understood, is “uncirculated”. A coin that is considered to be uncirculated is a
coin that was issued but never got into the coin supply and has no wear on it.
Now here comes the tricky part. Some coins have been handled or touched by
people but can still be considered “uncirculated”. As an example, you go to the
bank and ask the teller for a roll of new pennies. The teller says you are in luck;
we just got these rolls in. The U.S. Mint just made the coins, rolled them and put
them into the money supply.
So, in this case the roll has 50 brand new pennies, never touched, put into
the roll when minted. These are “uncirculated” coins. Okay, let’s say you go
home and open the roll and pour them out onto the table and exclaim: “Wow,
these coins are brand new; I am going to save them.” So you put them back into
the roll and set them aside. My question to you is: Are these coins still
uncirculated? The answer is, yes! The coins still have no signs of wear at all.
Please note, a coin can still be considered “uncirculated” even if it has a few
blemishes on it.
With this in mind, some coin sellers use the term: “Brilliant Uncirculated”,
BU for short. What does this mean? It really means nothing at all. The pennies
we just described were brand new and shiny and even though they were dumped
out of the roll they were not blemished in any way. They are considered
uncirculated and BU, too (still shiny). So a BU coin and an “uncirculated” coin
are basically the same thing. When sellers use the term “BU” they are trying to
dress the sale up, make it seem like a better product even when it is not.
It is advantageous to ask the dealer you are buying coins from what
condition they are in. For example, American Eagles should be “uncirculated”
when you buy them because they have never been handled (perhaps only
touched for repackaging purposes). Dealers that say their coins are uncirculated,
while others are not, may be practicing questionable sales techniques.

Bullion vs Bullion Coins:

Bullion refers to a precious metal, such as a silver bar.
Bullion Coins are also a precious metal, but in the form of a coin, like a
silver or gold coin, for example.

Other Terms:
Gold A precious yellow metallic element (Atomic Number 79) that is
resistant to oxidation and is highly ductile and malleable.
Silver A soft-white lustrous metal, silver (Atomic Number 47) has the
highest electrical and thermal conductivity of any metal and occurs both in
minerals and in free form (rarely).
Platinum A heavy, malleable, ductile, precious, gray-white metal,
platinum (Atomic Number 78) is resistant to corrosion. Platinum coins and bars
are now very popular investments.
Palladium A rare silver-white metal of the platinum group, palladium
(Atomic Number 46) resembles platinum chemically and is primarily used as an
industrial catalyst and in jewelry.
Pure Gold A term sometimes used, but is very misleading. There is no
such thing as 100% pure gold or silver. To be considered “pure,” gold, silver and
palladium products must be at least .999 fine (99.9% pure), and platinum
products must be .9995 fine (99.95% pure).
Coin Grades The condition or grade of a coin helps push its value up in
most cases. We will address this subject in detail later, but for now it should be
mentioned that higher grade coins are very desirable and often become part of
one’s investments, either in the form of old coins or new coins with high grades.
“Uncirculated” coins are high grade coins and usually start at MS60 and go can
go higher (grading scale 1 – 70) “MS” means mint state. MS70 is a perfect coin.
It is very important to mention that because a coin has been certified and
the grading is very high, let’s say MS66 out of a grade of 1 – 70, logic dictates
that MS66 is very high on the scale and suggests that a coin in this condition
may have much higher value than a coin with the same date in lower condition,
this is not the case! A coin with a high grade may not be worth much more than
a coin of the same date in a lower grade. For example, if there are many
thousands available of a coin that is in a high mint state, the coin is really
considered common, in some sense of the word, and has no greater value
because of the condition it is in, because there are so many of them available.
On a practical level what this translates to is the fact that if you are being
told a coin has great value because of its condition, and therefore, you should
pay a premium for it, you are getting a marketing pitch and not the whole truth.
Examples of this will follow in future chapters.
Numismatic Coins Coins whose prices depend more on their rarity,
condition, dates and mint marks than on their gold or silver content, if any.
Certified Coins Coins that have been graded by a grading company (such
as PCGS or NGC). The company assigns a value to the coin in terms of its
condition. In theory, the better the condition of the coin the higher the value.
Graded coins are placed in a sealed case once they are certified. The case is
labeled as to the grade, name of company that certified it, and date of coin.
Obverse The front of a coin.
Reverse The back of a coin.
Slabbed Coins Coins encapsulated in plastic for protection against wear.
Slabbed coins are graded by an independent grading service (certified
coins and slabbed coins mean the same thing).
Proof Coins Specially made coins that are only made by and sold by the
U.S. Mint. They have a polished mirror like surface and come in their own
container. They are never touched and should never be touched (oils from your
hands can damage them). If they need to be handled, only an expert should do so
by wearing cotton gloves.
For a complete list of words and terms with respect to investing and coin
investing please refer to this link:
http://www.apmex.com/glossary#a

Certified Silver and Gold:

Let’s look at gold and silver bars or rounds with respect to certification.
An extremely important topic that needs to be examined is certification. We
know that certified coins have been slabbed; they have been graded and certified
by a coin grading company. Certified coins are genuine coins because in order to
obtain certification, they must be inspected to verify that they are not fake.
A very similar situation exists with respect to gold and silver. Gold and
silver can be certified. Certified gold is gold that is issued or minted by an entity,
such as the U.S. Mint, to grade and purity. The certification process will include
an analysis of the metal for weight and purity, meaning its ore composition. The
process is not complicated, but must be completed by a licensed certified
appraiser. The key difference between regular bullion and certified, is that the
question of content is eliminated. Unlike a bar of bullion of unknown origins,
certified gold or silver will be stamped and accompanied by a letter of
certification stating, in no uncertain terms, the content and weight. The only
thing certified metal leaves to question is the actual value, meaning its worth if
sold for currency. This amount cannot be certified as the price per ounce is
constantly changing.
Please note that gold and silver that is not certified is also valuable. But
when it comes time to sell, certification does help and may actually result in
higher prices. The flip side also holds true, when you buy certified product it can
cost more.
 Buying – Gold & Silver Coins
Past chapters focused on buying from individuals who responded to
advertising so we could buy low and sell high, to make profit. What about
buying gold, silver and coins through direct purchase from companies and
auction sites? We need to take a close look at how to buy gold and silver bars or
rounds, gold and silver coins and other coin types. Many people are taken
advantage of when they purchase coins and metals, so this information will
prove very valuable. Hopefully, after reading, you will be protected.
As you can imagine, there are many companies that sell gold, silver and
coins. Companies range from big to small and domestic to international. Not all
companies are created equal. There are many companies selling fake gold and
silver bars and rounds and fake coins.
A fake gold bar:

Deviously crooked companies will purchase real gold bars that are
certified with serial numbers and papers. They then hollow out the bars and sell
the removed gold. The hollow bars are filled with tungsten, and then the bar is
closed up. That is a sophisticated operation!
High quality fake silver coins and small fake silver bars are also being
produced in high volume in China. In particular, there are fake Silver Eagle
coins being struck and distributed and priced as low as 50¢ a piece (with
capacity of wholesale production lots of 100,000+ pieces).
Above: Image of fake Silver Eagle coin factory in China.

Fakes come in many forms. There are plated gold and silver coins and
bars, consisting of a thin layer of gold or silver covering base metal alloys
underneath. Then there are hallowed out gold and silver bars and coins with
thicker covers of gold and/or silver, filled with tungsten, lead, copper, and/or
nickel. Many of these elements are not magnetic so the magnet test would fail.
How do you prevent this from happening? There is only one way. Buy
from the dealers that have a long positive track record. Since there are a variety
of gold, silver and coin types, some companies will only sell a limited selection,
while others may carry all forms of gold or silver or coins.
Let’s take a close look at buying coins, and how to safely do this. Some
coins can only be purchased directly from the U.S. Mint. Some coins can only be
purchased from U.S. Mint certified dealers. Most coins, however, especially
older coins, can be purchased just about anywhere. To gain a better
understanding of this topic, the U.S. Mint has issued this statement (this applies
to bullion coins, not older coins): “Congressionally authorized American Eagle
Bullion coins provide investors with a convenient and cost effective way to add
a small amount of physical platinum, gold, or silver to their investment
portfolios. The American Eagle Bullion program was launched in 1986 with the
sale of gold and silver bullion coins. Platinum was added to the American Eagle
Bullion family in 1997.
A bullion coin is a coin that is valued by its weight in a specific precious
metal. Unlike commemorative or numismatic coins valued by limited mintage,
rarity, condition and age, bullion coins are purchased by investors seeking a
simple and tangible means to own and invest in the gold, silver, and platinum
markets. American Eagle Gold Bullion Coins are available in four
denominations: one ounce, one-half ounce, one-quarter ounce, and one-tenth
ounce while the American Eagle Silver and Platinum Bullion Coins are only
available in the one ounce size.
How to Buy American Eagle Bullion Coins. Aside from the proof version,
the United States Mint does not sell American Eagle Bullion coins directly to the
public. Instead, the Mint distributes uncirculated bullion coins through a network
of wholesalers, brokerage companies, precious metal firms, coin dealers, and
participating banks, a network known as Authorized Purchasers.
This method provides effective and efficient distribution, which
maximizes the availability of the coins in retail markets as well as major
investment markets. For more information about American Eagle Bullion Coins,
call 1-800-USA-GOLD.”

Coins sold only through “Authorized Distributors” are illustrated above.

You may find these coins being sold in a variety of ways. If you buy from
“Authorized Distributors” you greatly lesson your chances of fraud and
deception. Notice the four sizes for the Gold Eagle.
What is so nice about the coins shown above, is the fact that, they can
become part of your IRA. The U.S. Mint states: “American Bullion coins are
considered investment-grade bullion coins and are the only official investment-
grade coins in the United States. As such, these coins can be used to fund
Individual Retirement Accounts (IRAs). Major investment markets around the
globe also accept them. Additionally, the Internal Revenue Service (IRS)
exempts them from IRS 1099 reporting, which provides the investors with an
added level of privacy.”
In addition to these three American Eagle Series coins, there is also the
1oz gold American Buffalo coin with a face value of $50 that can be purchased
from some “Authorized Distributors”. It is 24kt gold (.9999) and became
available in 2006 in an uncirculated version (instead of a proof version) due the
great demand for a gold coin of this fineness. The coin was created in order to
compete with foreign 24kt gold bullion coins. Since investors sometimes prefer
99.99% pure gold over the 91.67% gold used in the American Gold Eagle, many
were choosing non U.S. coins, such as the Canadian Gold Maple Leaf, to meet
their bullion needs.

The picture above of the Gold American Buffalo is a 4th U.S. Mint bullion
coin, often not mentioned because the emphasis is placed upon the Eagle Series.
There is actually a fifth bullion coin that is part of the U.S. Mint bullion
offering that is often overlooked by investors: The America The Beautiful 5oz
Silver Coin.
 This coin weighs 5 ounces, has .999 per cent fine silver and measures 3
inches across. It is available from distributors in a circulated version and from
the mint in a better uncirculated condition, for more money. Distributors often
sell the uncirculated version as well. I don’t think there is any real difference
between what is referred to as uncirculated and circulated. However, some coins
grade much higher than others and come in protective cases. These coins never
really touch any hands. Technically they are all uncirculated but some grade
higher than others. The U.S. Mint explains why this coin was issued: “The
United States Mint America the Beautiful Quarters Program is a multi-year
initiative to honor 56 national parks and other national sites in each state, the
District of Columbia and five U.S. territories—Puerto Rico, Guam, American
Samoa, U.S. Virgin Islands and the Northern Mariana Islands. Under this
program, five new reverse designs will appear on the quarter-dollar each year
beginning in 2010 and through 2020, with one final coin in 2021.
The United States Mint will also mint and make available for sale silver
quarter-dollar uncirculated coins that replicate the designs of the United States
Mint America the Beautiful Quarters. These coins are made of .999 fine silver,
have a diameter of three inches and weigh five ounces.”
Note: mintage figures for this silver coin are very low, with averages
about 30,000 per year, so it may increase in value as a collectible and as a silver
investment. A good way to check potential investment for any bullion coin is to
look at production figures. This link allows you to do that:
http://www.usmint.gov/about_the_mint/index.cfm?
action=PreciousMetals&type=bullion

Some bullion coins, as mentioned, are only sold through authorized

distribution and other bullion coins (very special types) are only sold by the U.S.
Mint. According to the U.S. Mint, its (non-special) bullion coins are not sold
directly to the public, instead: “We distribute the coins in bulk, through a
network of official distributors called “Authorized Purchasers” who, in turn, sell
them to secondary retailers”.
Let’s take a look at these authorized distributors. They can be found on
this link: https://www.usmint.gov/mint_programs/american_eagles/index.cfm?
action=lookup
There are 27 names on this list:

A-Mark Precious Metals

429 Santa Monica Blvd, Suite 230
Santa Monica, CA 90401
310-319-0200

American Bullion
12301 Wilshire Blvd, Suite 650
Los Angeles, CA 90025
800-326-9598

American Precious Metals Exchange (APMEX)

226 Dean A. McGee Ave, Suite 100
Oklahoma City, OK 73013
405-595-2100

Assets Strategies Int'l (ASI)

1700 Rockville Pike, Suite 400
Rockville, MD 20852
800-831-0007

Blanchard & Company

909 Poydras Street, Suite 1900
New Orleans, LA 70161
800-880-4653

California Numismatic Investments, Inc

525 West Manchester Blvd
Inglewood, CA 90301
800-225-7531
Chicago Precious Metals Exchange
30 S Wacker Drive, 22nd Floor
Chicago, IL 60606-7542 312-854-7084

CMI Gold and Silver Inc.

3800 N. Central Avenue, 11th Floor
Phoenix, AZ 85012 800-528-1380

CNT
350 Bedford Street
Bridgewater, MA 02324
508-697-9600

Dillon Gage, Inc.

15301 Dallas Pkwy, Suite 200
Addison, TX 75001
800-375-4653

Fidelitrade
3601 North Market Street
Wilmington, DE 19802
800-223-1080

Fisher Precious Metals

2151 W Hillsboro Blvd, Suite 210
Deerfield Beach, FL 33442
800-390-8576

Gaithersburg Coin Exchange

16 East Diamond Avenue
Gaithersburg, MD 20877 800-638-4104

Guilford Coin Exchange LLC

69 Whitfield Street
Guilford, CT 06437
203-453-9363

Investment Rarities Inc.

7850 Metro Parkway, Suite 121
Minneapolis, MN 55425
800-328-1860

Jack Hunt Coin Broker

2746 Delaware Avenue
Kenmore, NY 14217
716-874-7777

JMRC, Inc/dba ModernCoinMart

5565 Broadcast Court
Sarasota, FL 34240
800-362-9004

Liberty Coin Galleries

2201 E. Willow Street, Suite Aa
Signal Hill, CA 90755-2149
800-400-0824

Miles Franklin LTD

801 Twelve Oaks Center Dr, Suite 834
Wayzata, MN 55391
800-822-8080

Northwest Territorial Mint

2505 S 320th St, Suite 110
Federal Way, WA 98003
800-344-6468

Rocky Mountain Coin Exchg

538 South Broadway
Denver, CO 80209
800-781-4653

Rust Rare Coin Company

252 East 300 South
Salt Lake City, UT 84111
800-343-7878

Sam Sloat Coins, Inc.

606 Post Road East
Westport, CT 06880
800-243-5670

Texas Precious Metals

959 Hwy 95N
Shiner, TX 77984 361-594-3624

The Gold Center

3000 West Iles Ave
Springfield, IL 62704
217-793-8000

Upstate Coin & Gold

511 E Genesee St
Fayetteville, NY 13066
800-588-2646

Water Tower Precious Metals

141 West Jackson Blvd, Suite 130-A
Chicago, IL 60604-2901
312-435-1620

It is important to list them because they have been screened by the U.S.
Mint. So when you deal with them, you can feel comfortable that you will be
dealing with reputable companies. It is not easy to qualify to become an
authorized distributor. Remember, as stated before, the best way to prevent
yourself from being cheated is to buy from reputable dealers.
Three dealers in particular have a very good reputation, track record and
good prices, and I want to look at them in more detail.

American Precious Metals Exchange (APMEX)

226 Dean A. Mc Gee Ave, Suite 100
Oklahoma City, OK 73013
405-595-2100

JMRC, Inc/dba ModernCoinMart

5565 Broadcast Court
Sarasota, FL 34240
800-362-9004

Texas Precious Metals

959 Hwy 95N
Shiner, TX 77984 361-594-3624

Here is a snapshot from eBay showing the listings (and there are over
1800 of them) for APMEX. Dealers that sell on eBay have to compete with other
dealers, so the prices are usually low. You also have the backing of eBay if
something goes wrong.

This listing on eBay from APMEX for five 1oz Silver Eagle coins
appeared in July 2014. Notice the price of $123.32 with free shipping. Over
10,000 of these have been sold.
 The exact same item was listed at the same time on eBay from another
authorized company mentioned, MCM. Their price was $118.88, about $5 less
than APMEX, and it included free shipping.
 An even better deal from MCM was on eBay at the same time, but as an
auction style listing. The winning bid was $116.80, which was even less than the
$118.88.
 In case you are wondering about this price of $116.80, it comes out to
$23.36 an ounce. The day this auction ended silver was trading at $18.98 an
ounce, so the winner paid $4.38 over spot. When you consider that the coin
dealer has to pay for shipping, eBay fees, PayPal fees and do all the work, and
the fact that eBay stands behind the sale, this is not a bad way to get your hands
on silver and gold coins or bullion.
Is it the cheapest deal in town? I know you can find these coins for less
money at other sites. However, most require a shipping fee and many have a
minimum purchase, so keep that in mind.
These U.S. Mint distributors sell gold coins as well (we focused on silver
so far) and many sell gold and silver bars and rounds through eBay and other
websites (including their own). Let’s look at the third U.S. Mint distributor:
Texas Precious Metals. They have a great reputation and 5 star reviews.
Let’s look at their prices:

They have a $1000 minimum purchase price. To meet the minimum

purchase, you would have to order 50 coins at $21.92 per coin. When the $25
shipping and insurance fee is added, it comes out to $22.42 per coin (vs $23.36
an ounce or per coin for MCM).
 I am sure there are many other good companies to buy from, but I would
never buy from any source outside the U.S. other than Canada. Many eBay
dealers sell fake silver and gold bars and fake coins, so stick with “Authorized
Purchasers” like the three we just examined. Two of them had eBay stores.
Remember they also have their own websites where the price might be less.
They also sell Canadian coins. The Canadian Maple Leaf 1oz silver coin is
in high demand, is .9999 pure silver and has a face value of $5. It is purer than
the American Eagle .999. Canada also has gold coins. Most of the dealers (27) I
listed sell these coins as well, and the three dealers we looked at, sell Canadian
Maple Leaf 1oz silver coins and Canadian gold coins.
An organization that provides up to date information on the Silver
Industry and one that can be of great help in furnishing information to you is the
Silver Institute. They are nonprofit and have been around since 1971.

Here is a link to their web site:

https://www.silverinstitute.org/site/

They have a free newsletter that you can sign up for, and they have a list
of approved retailers. The list is on the following pages and shows some of the
same names listed by the U.S. Mint. Link to these names:
https://www.silverinstitute.org/site/silver-investment/
 What’s so nice about this list is that it shows all the types of silver sold by
these companies. Some of these companies are the same ones mentioned earlier
as authorized U.S. Mint distributors. This overlap is a good sign.
 The only way to guarantee that your buying experience will be a good one
is to buy from a reputable company like those listed here and on the U.S. Mint
list. Remember, price is not the only factor to consider.
Now, let’s take a look at coins sold through the U.S. Mint directly to the
public. Some of these coins are sometimes sold via these authorized distributors,
so do your homework and compare prices.
Keep in mind the fact that U.S. Mint prices tend to be on the high side,
and the investment potential of the coins you buy from them depends upon
future improvement in the gold and silver markets and the demand for the
coin(s) as collectibles. Many of these coins never increase in value. We will
address this issue in more detail, but for now let’s look at some of these special
coins sold directly from the Mint to the public.
Coins that are sold directly from the U.S. Mint are similar to the coins sold
through the authorized distribution network. The main difference is that the U.S.
Mint coins are in a higher grade or have a better finish to them. Let’s look at
some and you will get a sense of what I am speaking about.
This picture shown below is of a 1oz Silver Eagle in a “proof” state. If you
read the description below, next to the coin, you see the fancy language the Mint
uses: “frosted”, “sharp relief”, “brilliant”, “mirror like”, “cameo”. It almost
sounds like a movie star. It boils down to one thing: they are selling an American
Eagle 1oz silver coin for $52.95 or about $32 above the spot silver price. So the
question is: “Is it worth the price?” The answer is yes, if the price of silver goes
way up, but no, if it does not. In other words this coin will never be in high
demand because too many have been made, and the sale price is too high.

Let’s look at another example. Here is a proof set containing a fancy

holder and some 90% silver coins. The price of $53.95 for 14 coins seems very
high, and the fact that so many are available, leads me to believe that you will
have a really hard time making your investment back (assuming you purchase
for investment purposes). If you are a collector, then price is not an issue.
 Another example is of interest. First, the price of $154.95 for 5 ounces of
silver is not bad. Suppose the price of silver goes up to $30 per ounce, then you
at least break even. But what I want to point out to you, and this example is
dramatically different from the coins we looked at before, is the low mintage
figure of 30,000. This means that only 30,000 of these 5 ounce uncirculated
coins were made. In the grand scheme of things this is a very low figure. Again,
the future value of this coin is hard to predict, but the 5 ounces of silver and low
mintage adds to the possibility that it may increase in value.
High grade versions of this coin have sold for as much as $350 each. If
people are paying these prices as part of an investment strategy, they may be
kidding themselves.
 Another coin, and one similar to what we saw before, is a one ounce gold
proof American Buffalo selling for $1,590 (about $400 over the spot price of
gold). The special finish on the coin and attractive holder is what the Mint wants
you to believe justifies the added dollar value. Is it hype? Or is it a great
investment? You decide.
 Let’s look at another coin type that many of the authorized distributors
that we mentioned sell, and one that is not available from the Mint because it is
so old: the pre-1933 gold coins that the U.S. Mint once made for circulation.
These coins are usually sold in a certified version but non certified ones are
available. The reason I mention these coins is because many investors buy them
as part of their investment portfolios or investment strategies. It is generally
believed that the higher the grade or condition of the coin the more money it is
worth. This topic will be examined in detail as the book unfolds but for now I
want to review some very basic facts as they relate to these coins. Many
investors buy these coins and are convinced that they have made a wise decision.
This is not the case. Here are some examples of these coins as they appear on the
APMEX web site:

Here is a listing from their web site showing a 1927, $20 Saint-Gaudens
Gold Double Eagle that has been graded (certified) by PCGS. The asking price
of $2,545 is over $1000 more than the actual gold value of the coin. Again, the
high condition (MS66) seems to provide the seller with justification for the high
price. This would be a good price if very few of these coins existed,
unfortunately, this is not the case.
 The same coin in a lesser grade and no encapsulation or grading is worth
over $1000 less, according to APMEX.

Note the price of $1423 for a coin that is described as almost uncirculated:

In future chapters we will examine coin grading. You will become an

expert on it, and now you can see how important it is as we mentioned in
previous lectures. The higher the condition, the more valuable the coin can be.
However, these pre-1933 gold coins are graded for the express purpose of
driving the price up. Their actual value is not increased by grading them, but for
uneducated buyers this technique works. (Pre-1933 Gold Double Eagles that we
just looked at have been priced up because they have been certified and done so
for questionable reasons.) Please keep in mind that some coins that are in a high
grade are very valuable because they are scarce, unlike these pre-1933 gold
coins. So a high graded coin that is scarce is very valuable, if it is not scarce it is
not valuable, no matter what the grade. Please note that there are a few
exceptions to this statement, but for almost every situation you will come across
this statement holds true.
 Buying: Bars and Rounds
I want to examine a topic that often is ignored by gold and silver bullion
investors. How is the price of gold and silver determined? It is strange that
investors don’t understand how the price of gold and silver is computed or ever
ask about it! Let’s look at this topic in depth, and let’s look at where gold and
silver bars come from and how they are made, as this will help you in the buying
process.
A common misconception is that gold and silver pricing relates to supply
and demand. The demand for gold and silver is greater than the supply each
year. This is especially true for silver, and even though gold charts do not
indicate that the supply is less than the demand, many experts argue to the
contrary. This lack of supply does not push the price up higher and higher as you
might expect it to. In fact, consider what happened in 2008:
“A common misconception amongst investors is that when the silver and
gold price falls there is a larger amount of physical metal on the market, but this
simply isn’t true. It is extremely likely in the current environment to see the
price of silver and gold fall and not be able to get a hold of physical silver. A
great example of this was back in 2008. During this time silver fell to $9 an
ounce and so many investors wanted to get in, but very few investors could buy
the physical metal. Why? Because while paper silver was being sold investors
holding physical metal were hoarding and were only buying more.” (Lone Star
Bullion)
The dynamics of the marketplace do not follow a logical theme at times,
so keep this in mind. So how does the price get determined?
“Spot prices are determined by futures contracts. Futures contracts are
traded in much the same way as stocks and other commodities. A future contract
exchanges delivery of an item (gold and silver in this case) for a set price, with
quantity and exact order details being specified from contract to contract.
When considering gold and silver, the most well-recognized platform is
COMEX, which stands for commodities exchange. COMEX is based in New
York, much like the majority of financial trading companies. COMEX is part of
the NYMEX, the New York Mercantile Exchange. Gold and silver both find the
bulk of their pricing determined by the trades that happen here. When futures
contract trades take place in New York (and around the world), the prices of
gold and silver adjust accordingly.
 The reason futures contracts are used to set the spot prices is because the
majority of the daily traded volume of gold and silver is done electronically as
opposed to physically. Since more gold and silver are traded electronically via
futures than physically delivered, the futures markets provide the most accurate,
up to date prices for both gold and silver.” This is the best description I have
seen. Thanks to JM Bullion for this information.
Did you ever wonder where gold and silver bars or rounds come from?
Well it may surprise you that anyone can produce gold and silver bars, and some
sellers on eBay even produce their own. Their product is genuine. They get scrap
gold and silver, melt it down and put their stamp on it. But if you are going to
invest, you should be made aware of how the industry is set up.
Fortunately there is a system in place that helps protect buyers from fraud
and guarantees high quality product. Please note: I am not saying that producers
who are independent are in any way fraudulent, but there are better ways to buy
product and be certain of what you are getting.

Accredited Gold and Silver Bar Manufacturers:

There are approximately 110 active gold refiners around the world whose
relevant gold bars are accepted as “good delivery” by one or more of the major
associations and exchanges involved in worldwide gold and silver trade. They
also produce silver bars.
The Good Delivery specification is a set of rules issued by the London Bullion
Market Association (LBMA) describing the physical characteristics of gold and
silver bars used in settlement in the wholesale London bullion market. It also
puts forth requirements for listing on the LBMA Good Delivery List of approved
refineries.
These are the four major market associations that help determine gold and
silver pricing and gold and silver accredited refiners:
• London Bullion Market Association (LBMA)
• CME Group – Market Contract (COMEX)
• Tokyo Commodity Exchange (TOCOM)
• Dubai Multi Commodities Centre (DMCC)

Here is a list of the newly accredited refiners – four are in the U.S.:
 These refiners are very important. If you see product with their stamp on it
you can be secure in knowing that the product is genuine (assuming you are
buying from a reputable dealer). Reputable dealers carry product from these
accredited refiners.
Here is a list of accredited refiners from the U.S.:

The sixth name on the list above “Johnson Matthey” is one of the better
known refiners.
 So what does all this mean? It is very simple. Buy a product that comes
from an accredited refiner, and you know that you have purchased the genuine
article. The chances of getting a fake are almost zero, the resale value will
remain high and it will be easier to sell when the time comes because of brand
recognition.
The image below shows a listing on the APMEX website picturing a
Johnson Matthey product. Notice the Johnson Matthey logo, the serial number
(A219232) and the buy back price of $19.78 on the bottom left. The selling price
is $22.77 if you pay by check or wire and $23.45 via credit card. The spread is:
$22.77 - $19.78 or $2.99. In percentage terms, this is 13%. So, the buy back
means a 13% loss. Please keep this figure in mind. This is an important concept
that will be examined when looking at ways to sell your products.
 Highly respected and recognized stamps and marks from refiners who are
accredited from around the world are displayed below. Fake bars can have fake
stamps and marks, please keep this in mind. But you can prevent this from
happening when you deal with reputable companies like APMEX. Notice the
Johnson Matthey stamp.

Some important points to consider when buying gold and silver bars are
displayed below. Reference is made to allocated and unallocated bars. What
does this mean?
Allocated gold bars are held in your name. The weight and purity and
serial number are recorded. Storage charges may apply.
Unallocated gold is an investment. The actual gold is held along with
other people’s gold. Storage charges may apply. Another form of unallocated
gold is when the actual gold is used for other purposes but is guaranteed. When
used for other purposes, the dealer can generate more income and wave storage
charges. Your product is not kept in the form of a bar, but in name only.

PACKAGING AND CERTIFICATES

Some brands are sold by dealers in open or sealed packaging, and
some with certificates issued by the refiner.

Where this is the case, you should retain the certificates and store
the bars in their packaging — to facilitate their sale back to a
dealer at some stage in the future.

BUYING AND HOLDING BARS IN OTHER

COUNTRIES
If you intend to do this, it would be prudent to buy brands that are
traded in both the foreign country and your own, in the event that
you should wish to transfer them to your own country.

When transferring bars between countries, it can be borne in mind

that restrictions, duties and taxes may apply.

BASIC CHECKLIST FOR NEW INVESTORS

Dealer Does the dealer have a good reputation?
Brand Is the bar manufactured by an accredited refiner?
Is the bar well known in your country?
Pricing What is the current gold price?
What is the quoted price to buy the bar?

Calculate the % premium (mark-up) of the bar

above the current value of its fine gold content.
What is the quoted price if you were to sell back
the bar?

Calculate the “spread” — the difference between

the purchase and sell-back price of the bar.
Are the bars allocated or unallocated?
 Are the bars allocated or unallocated?
Storage — What are the storage costs?
If
applicable
Delivery — What is the delivery and insurance cost?
If
applicable
Other Are there any other transaction-related costs? For
Costs example, taxes.

Did you ever wonder where gold is held when you buy it, and it is stored
for you? There are many places where gold is stored. It can be held by the
company that sells it or by the bank that sells it, but usually it is sent to a storage
facility. Two of the biggest need mentioning, one is not open to the public:
The Federal Reserve Bank of New York holds the prize as the world’s
biggest known stockpile of gold. Some 550,000 glistening bars are buried deep
into the bedrock of lower Manhattan. That’s $203.3 billion worth of gold in a
single place. Just 2% to 5% of it is owned by the U.S. government, though. The
rest is owned by foreign countries.
Many gold sellers and dealers store their customers’ gold in Delaware. All
bullion stored with the Delaware Depository is fully allocated and held off-
balance sheet, subject only to customers’ instructions. This means that, at all
times, customers are recognized as the sole owners and title holders of the
bullion. Delaware Depository never lends, pledges or encumbers any bullion in
its care. Delaware Depository is America’s largest precious metals depository
located outside New York City.
 Selling: Gold, Silver, Coins
When it comes time to sell your precious metals, including gold and silver
coins, there are many possibilities that can be imagined: the local pawn shop,
local jewelry stores, ads online and in papers, local coin and gold shops, friends,
dealers and others. So the 64 dollar question is: How do you get the best price
for your product? It certainly does not hurt to price your product with local
sellers, such as a jeweler. While local stores seldom pay much, if nothing else
you will know that you have compared options, and you will not have to think
about what might have been.
The rule of thumb is that online auctions, like eBay, and selling back to
the dealer you purchased from, are probably going to be your best bet. Before
you sell, it is advisable to ask yourself why you are selling now? This may seem
like a strange question, but if you are selling just to raise some cash, but are not
hard pressed for money, then it is wise to consider these factors:
Is the price of gold and or silver on the rise or decline? If it is on the
decline then selling is not a good option, so you might want to wait. Buyers pay
less when the price is going down.
If it is on the rise, then you can get a premium price. This is especially true
with respect to coins. Buyers pay more during the upward swing. If it is on the
rise and you do not need the money now, why not wait and see when it starts to
plateau, then sell.
Another factor to consider is the amount of gold, silver or coins you have.
I have noticed that you can get more money when you have a larger lot to sell,
such as 50 silver coins vs 5 silver coins or 5oz of silver vs 20oz of silver. So you
might want to wait until you buy more before you sell.
When it comes time to sell you may be surprised to learn that odd ball
products are very hard to unload. Gold and silver bars and rounds from foreign
countries and gold and silver coins from foreign countries are sometimes
difficult to sell. (This does not apply to Canadian coins). Gold or silver from
China or South Africa, even though it may be genuine, does not draw as much
attention as American and Canadian sourced product and may get a lower price.
Products without stamps and serial numbers on them can be problematic.
Certification is an issue at times, especially with bigger bars.
With this in mind, you can see the benefit of buying from a reputable
source. When purchasing from a reputable source do not buy odd ball products,
stay with the name brands. Also keep in mind that gold and silver coins are
easier to sell than gold and silver bars and rounds. Silver coins are easier to sell
than gold coins. Do not sell your products to TV advertised companies that buy
gold and silver. They pay on average 11% – 29% of the melt down value. The
road shows that travel from town to town typically pays 40 cents on the dollar.
Coin shops and jewelers typically pay 50 - 70% of the actual value. In a
previous chapter we mentioned that they sometimes buy close to spot to be
competitive, but this is usually not the case. Again, it does not hurt to shop
around. Remember price varies from store to store and town to town. The
companies (authorized distributors) that I suggested earlier that you buy from,
tell you their buy back price on their web site, so it is only logical to buy
products that have high buy back prices. Typically they will pay very close to
what you actually paid for the item, assuming that the price of gold or silver has
not changed.
If in a big hurry and in need of immediate money, local shops will be your
best bet. Compare prices and don’t be influenced by their pressure tactics. If you
walk into a store and they offer you what seems to be a good price, and exclaim
that if you walk out the door the price walks with you, then run out of there as
fast as you can and never go back. You do not need to be treated that way.
A gimmick that you need to be aware of occurs when some unethical local
shops test your product using acid. They will tell you that even though it is
stamped 14kt gold, for example, it is really 10kt. Unless you know what you
have, and used the test we mentioned earlier, you will get cheated.
Another way to sell is through gold parties. This method yields poor
results. A final way to sell that you might consider is auctioning. This method is
usually the best way to sell, assuming you are not in a hurry.
There are many auctions sites online: eBay, Amazon, Etsy and coin sites.
Over the past 15 years I have found that eBay is the easiest and most cost
effective way to sell any form of gold or silver, especially gold and silver coins
and rare coins and eBay yields the best results. If you do not have an eBay
account, register for one, it is free. You will also need a PayPal account. You can
register on eBay for a PayPal account, it is free (you will need a credit or debit
card to put on file so you can set up your PayPal account). Use a debit or credit
account that has little money in it. For example, I use my Wells Fargo debit card
because I rarely have more than $100 in it. I do this to be on the safe side, but
during the last 15 years I have never had a problem with eBay or PayPal.
If interested in learning more about eBay please visit my online course at
this web site: www.udemy.com It is called: “Learn How Power Sellers Make
Millions On eBay”.
 Listing an item on eBay is easy. Take some clear pictures and set a low
starting price, say 99 cents, and watch as your item price goes up through biding.
Silver and gold in any form usually always sells for at least spot, so don’t worry
about a low starting price. The low price attracts more bidders. Make sure you
set your shipping fees high enough to cover your costs. Weigh your item and
compute the charges and include insurance costs as well.
Using eBay is a very good option when:
• You cannot get a good price locally.
• Your supplier will not buy the item back, for whatever reason, or their
price seems low.
• Your item has special appeal. For example, coins in very good condition
that may sell for more than spot value.
• You have a rare jewelry item that you bought using our system to find
gold and silver.
• You have an object that has wide appeal, such as a silver pendant.
• You have junk silver coins (The term used to describe 90% silver coins
and 40% silver coins). These do well on eBay and can often sell for more
than spot.
A common question often asked with respect to eBay is: “What does it
cost to sell on their site?” Remember a few chapters back when I said pay close
attention to the 13% buy back loss with respect to your purchase from a dealer.
Well it is strange, but eBay costs are roughly 13% also. The flat eBay fee is 10%
of the total sale including shipping, plus 30 cents for PayPal and 2.9% of the
entire sale, also for PayPal. Add it up and it comes out to roughly 13%. Please
note that volume sellers and sellers with special status
pay lower fees, and there is a per item fee cap of $250.
Remember: You will always get at least spot price for any form of gold or
silver that you sell on eBay. I want to mention again that junk silver (90% silver
coins and 40% silver coins) sometimes sells for more than spot, especially if the
coins you are selling are in a high grade. I find my junk silver by coin roll
hunting, but you can actually buy it. With regard to junk silver, you can purchase
it from many vendors that I listed and some not listed. It usually sells for $3 over
spot and although it is not a good silver investment if you have to pay too much
for it, it can serve a useful purpose if you are collecting coins and are looking for
pre-1965 dates: dimes, quarters or halves.
If you decide to buy some, make sure you get a variety of denominations.
Some vendors only send a bunch of dimes even though they advertise a variety
of coins, so ask them what you will be getting!
In the coin collecting chapters to follow these topics will be addressed
again. Bottom line, eBay is probably the fastest and easiest way to sell you silver
and gold coins, silver and gold bars and rounds, and you will always get spot
value and maybe more. I have sold silver coins for more than spot value on
many occasions. You can sometimes make up for the eBay and PayPal fees by
charging extra for shipping, but be careful, neither eBay nor the buyers like this
tactic.
For purposes of review and to make a key point, I want to mention that we
took a look at bullion and bullion coins and jewelry, how to find them, sell them,
and ways to buy them safely. We mentioned that pre-1933 gold coins are not a
good investment and we will examine this in more detail again. Other types of
gold and silver that can be purchased, or what I like to call, paper versions of
precious metals need to be looked at. As this book unfolds we will come back to
coins again and cover topics not mentioned earlier. A key point I want to make:
We have intentionally not spoken about “rare coins” because this information is
better explained when we cover the topic of coin collecting. Investing in “rare
coins” is one of the most important subjects we will discuss, and even though
these coins are typically not made of gold or silver, they yield very high returns.
In fact, when it comes to investing, some believe, and the data backs this, that
“rare coins” as an asset class, have no equal.
 ETFs, Mutual Funds, Gold Accounts
& More
Investing in precious metals and coins (gold and silver and rare coins)
represents an enormous set of topics. The objective here is to shed light on these
topics to help you make better financial decisions. We want you to get good
results. The only way this can be done is by comparing all the options, looking at
the pros and cons, and examining the dollar results or return on investment. For
some, one type of investment may make sense, and for others, this same strategy
might not be practical, so in this sense there is no right or wrong. The potential
for a favorable outcome in increased when given good information.
I have noticed over the years that precious metal and coin investors are
highly motivated and will buy with fervor. Yet, very few of them have any
practical sense with respect to why they are making certain decisions. And it gets
worse, they often do not compare the different options. In other words, they are
investing with blinders on and buying based upon habit and convenience.
The classic argument often used as a basis for precious metal investing is
as follows:
Concerns over the growing U.S. deficit, the devaluation of the U.S. dollar,
giant amounts of money being poured into the economy, inflation (just check
your food purchases lately) and troubling world events encourage gold and silver
investing (including coins), which is perceived to be a hedge against inflation
and provide a safe alternative to other investment options and a blanket of
protection if the economy fails. In recent years the dramatic rise in the price of
gold has helped fuel this fire and of course investors hope to make money as the
price of coins and precious metals goes up over time.
With this in mind, let’s take a look at the many different investment
opportunities relating to the precious metal marketplace. For now just a brief
review. By doing so it will establish a baseline or foundation, so you can get a
feel for the many choices. We will look at the pros and cons of each as we delve
into this subject in more detail.
Most investors have never considered the rate of return as it pertains to
assorted investment types, particularly their own. Buyers of gold and silver
bullion seem to think that as long as the price goes up over time, they come out
ahead. This logic is very flawed, and I will show you why.
 But first let’s explain what “rate of return” is and how it is computed: The
rate of return is the increase or decrease percentage in value of an investment
over time, usually a year.
The return over a single period is:

Where:
V f =Final value, including dividends and interest
V i=Initial value

For example, if you hold 100 shares, with starting price of $10, then the
starting value is 100 x $10 = $1,000. If you then collect 0.50 per share in cash
dividends, and the ending share price is $9.80, then at the end you have 100 x
0.50 = $50 in cash, plus 100 x $9.80 = $980 in shares, totaling a final value of
$1,030. The change in value is $1,030 - $1,000 = $30, so the return is 30 / 1,000
= 3%.
Another topic that should be considered is taxation as it relates to precious
metal gains. I want to mention it because there is a big misconception that floats
around the precious metal marketplace: Precious metal gains are taxed at
28%!
I am not sure why everyone thinks this is true. The reality is that precious
metal gains can be taxed at 28%. It depends upon your tax rate. The tax rate is
determined by your annual income.
Long term gains, bought one year, sold another year, are taxed at 28% if
you are in the 28% tax bracket (figures shown apply to 2013). If your income
falls within these ranges, then your precious metal gains are taxed at 28%.
Otherwise your rate can be much lower than 28%, if you make less than these
amounts.
You are in the 28% tax bracket if you earn:
• $146,400 – $223,050 (Married filing jointly)
• $87,860 – $183,250 (Single)
Okay, now that we have covered some basic concepts, namely “rate of
return” and “28% taxation”, let’s take a brief look at advantageous precious
metal investments. After a brief overview, we will go into depth and discover
their potential by evaluating the pros and cons of each.
ETFs are one way to invest in gold and silver and are very popular these
days. What is an ETF? It is an exchange-traded fund. It is an investment fund
traded on stock exchanges, much like stocks. An ETF holds assets such as
stocks, commodities, or bonds, and trades close to its net asset value over the
course of the trading day. Most ETFs track an index, such as a stock index or
bond index. ETFs may be attractive as investments because of their low costs,
tax efficiency, and stock-like features. ETFs are the most popular type of
exchange traded product.
Only authorized participants, which are large broker dealers that have
entered into agreements with the ETF’s distributor, actually buy or sell shares of
an ETF directly from or to the ETF, and then only in creation units, which are
large blocks of tens of thousands of ETF shares, usually exchanged in-kind with
baskets of the underlying securities.
There are precious metal ETFs. For example, there are many gold ETFs.
Remember gold ETFs allow you to own an interest in physical gold or some part
of the gold industry. You never actually own the physical gold. Some ETFs have
as their only asset gold bullion. One of them that is widely known is SPDR gold
shares (GLD). The image below looks at it in closer detail. A gold exchange
traded fund then consists of only one principle asset, gold. However, the fund
itself may consist of gold derivative contracts that are backed by gold. You do
not actually own any gold. Even when you redeem a gold ETF, you do not
receive the precious metal in any form. Instead, an investor receives the cash
equivalent. Notice the dollar figure in the lower right corner showing that this
fund has over 32 billion dollars invested in it.
 The performance of ETFs and many other investment types can be tracked
using a great on line tool. It is provided by U.S. News and World Report in the
form of a real time interactive listing and chart display. Here is the link to gold
related ETFs:
http://money.usnews.com/funds/etfs/rankings/gold-oriented-funds
When you click on this link, up pops a ranked list (displayed on the next
page). Notice that the SPDR fund we mentioned is ranked #3. These rankings
change all the time. What is so nice about this web site is that it provides
detailed information about each fund and allows you to compare each fund to
many other funds in other categories. Notice how the SPDR fund is up 4.56 %
year to date. We can go in and look at any time period and go back many years
to see how it has performed. You can even compare any fund, such as this ETF,
to the S& P 500 and Dow Jones Industrial Average on the same chart. This way
you can see how your ETF compares to a broad index. You can also compare the
ETF to a mutual fund and other asset types using the same chart.
 The # 1 rated Gold ETF Fund on the previous page is iShares (IAU). So in
order to find out why, let’s look at the criteria used to evaluate and rank these
funds. The graph below shows the five year performance and it is up from 2010.
The price per share is $12.23. It is rated on the best fit scoreboard below. The
fund description is also listed below. The criteria used to identify best fit funds is
shown on the next page.
 “Best Fit funds are ranked by an overall score calculated from four
component measures: a fund’s expense ratio, tracking error, bid/ask ratio, and
diversification. For each component measure, funds receive a score between 0
and 100, based on their
performance on that measure in comparison to other funds. The top-scoring fund
within a given measure (lowest expense ratio, for example) receives a score of
100 for that measure. The four component scores are then weighted (see below)
to create an overall score. The overall score defines a fund’s rank within its
category.
Components measures and their weightings:
• Expense Ratio (30%)
• Tracking Error (30%)
• Bid/Ask Ratio (20%)
• Diversification (20%)
Funds without data for the components outlined above are excluded from
ranking.
About the Component Measures
1. Expense Ratio
What is it? Expense ratio is the percentage of fund assets a fund manager may
withdraw each year to pay for operating expenses.
Why is it important? Lower expense ratios mean better returns for comparable
ETFs. How is it measured? Data is for a fund’s total annual expense ratio.

2. Tracking Error
What is it? Tracking error is a measure of the volatility of excess returns relative
to a benchmark. Excess returns are the investment’s return in excess of its
primary benchmark, which is based on a broad asset class. The tracking error is
calculated for the past six-month period. Benchmark indices are provided by
Morningstar.
Why is it important? Tracking error tells investors whether the ETF they’ve
purchased is actually following the performance of its underlying index.
How is it measured? Tracking error is calculated by a linear regression of the
ETF’s daily net asset value returns on the underlying index’s daily total returns
for the past six months.

3. Bid/Ask Ratio
What is it? The bid/ask ratio measures the spreads between bid and ask prices
among various ETFs. It is calculated by dividing the bid price minus the ask
price (the “spread”) for a fund by the mid price between the bid and ask prices.
Why is it important? Bid/ask spreads can measure “hidden” transaction costs for
an ETF, as well as liquidity (higher bid-ask spreads imply lower liquidity).
How is it measured? The bid/ask measure is calculated daily and based on a 30-
day average of closing bid/ask spreads. Narrower spreads receive higher scores.

4. Diversification
What is it? Diversification in a fund is determined by two variables: the relative
weight of the 10 largest holdings in a fund and the fund’s turnover ratio, which is
the rate at which a fund replaces its holdings on an annual basis.
Why is it important? A greater diversity of weightings of a fund’s constituents
provides better diversification when comparing funds, and reduces the likelihood
of a few large holdings dragging down a fund’s overall performance. At the
same time, higher fund turnover can lead to higher costs for owning a fund, and
turnover in index funds should generally be low, which is why we’ve included
turnover in our fund rankings. While this measure gives a slight edge to equity
funds, its lower weighting in the overall rank means low costs and great index
tracking ability will be the largest determinants of fund rank.
How is it measured? There are two components used to measure
diversification: the overall weight of the fund’s 10 largest holdings and the
published annual turnover ratio for each fund. Each component receives a 10
percent weighting to determine the total 20 percent weighting for diversification
in the overall rank.”
Let’s look at some silver ETFs: This link to a silver ETF database has a
multitude of useful information:
http://etfdb.com/type/commodity/precious-metals/silver-etfs/#overview

The next image shows an overview of some of them, and the following
image shows their performance over time:
 This image shows rate of return over time. Notice the 23.99% gain for the
Silver Trust over 5 years and the negative return of -94.37 % for the UltraShort
Silver ETF over the same time period:
 As you can see there is high risk here, and like gold ETFs some have done
very well and others very poorly. You can see the value of these web sites, but it
clearly opens the door for sound investment advice.
Another investment that is often compared to ETFs are mutual funds.
There are hundreds of mutual funds in many investment categories. Many of
these funds are focused upon precious metals, just as some ETFs are. I want to
take a minute and point out a web site that is indispensable. It has many useful
features, including an extensive investment dictionary and many fine articles:
www.investopedia.com

This site provides a good definition and explanation of what a mutual fund
is:

Definition of ‘Mutual Fund’

An investment vehicle that is made up of a pool of funds collected from many
investors for the purpose of investing in securities such as stocks, bonds, money
market instruments and similar assets. Mutual funds are operated by money
managers, who invest the fund’s capital and attempt to produce capital gains and
income for the fund’s investors. A mutual fund’s portfolio is structured and
income for the fund’s investors. A mutual fund’s portfolio is structured and
maintained to match the investment objectives stated in its prospectus.

Investopedia explains ‘Mutual Fund’

One of the main advantages of mutual funds is that they give small investors
access to professionally managed, diversified portfolios of equities, bonds and
other securities, which would be quite difficult (if not impossible) to create with
a small amount of capital. Each shareholder participates proportionally in the
gain or loss of the fund. Mutual fund units, or shares, are issued and can
typically be purchased or redeemed as needed at the fund’s current net asset
value (NAV) per share, which is sometimes expressed as NAVPS,

Net asset value (NAV) is significant only for open-end mutual funds. It is
a simple calculation. Just take the current market value of the fund’s net assets
(securities held by the fund minus any liabilities) and divide by the number of
shares outstanding. Thus, if a fund has total net assets of $50 million and there
are one million shares of the fund, then the NAV is $50 per share (fund liabilities
include items such as fees owed to investment managers).
For open-end mutual funds, NAV is a useful determinant for tracing share
price movements. However, it is not useful for evaluating overall fund
performance. This is because mutual funds are required by law to distribute at
least 90% of their realized capital gains and dividend income to investors each
year. When a fund pays investors the required distribution, its NAV is reduced
by the amount of the distribution. Investors tracking only NAV may become
concerned about the drop, but in fact, the net value of their investment is
unchanged; the reduction in NAV is offset by the amount of distribution they
have been paid.
The most important thing to keep in mind is that NAVs change daily and
are not a good indicator of actual performance because of the impact yearly
distributions have on NAV (it also makes mutual funds hard to track).
U.S. News and World Report lists its 18 best Precious Metal Mutual
Funds. Here is the link:
http://money.usnews.com/funds/mutual-funds/rankings/equity-precious-
metals

The next page shows some of this information. Notice how the
performance for the past year for the top four rated precious metal mutual funds
is in negative territory. But this is misleading. You have to look closer to see the
actual performance over a bigger time span.
 What is so nice about this link to the U.S. New and World Report web site
are the real time charts that show daily performance and also cover many time
periods. The #1 rated mutual precious metal fund shown below, reveals an
upward trend (year to date it’s up 6.7%). The 10 year return is 5.9%. The
ranking is the result of extensive analysis from the investment industry’s best
firms.
 Investors and potential investors often ask what the basic difference is
between these two investment types, mutual fund vs ETF. Here is a very brief
comparison for now. If you’re trying to track the performance of a large index,
your results will be similar whether you choose a mutual fund or an ETF. But
which is right for you will come down to whether you want to invest a big chunk
of money all at once or smaller chunks of money over time.
If you want to invest a big chunk at once, for example, you’re doing a
rollover of a 401(k) or an IRA, you’re better off with an ETF. By contrast, if you
want to invest $100 a month (or you tend to invest sporadically with modest
amounts of money), you’re probably better off with a mutual fund because the
fees will be lower.
ETFs offer tax advantages to investors. As passively managed portfolios,
ETFs (and index funds) tend to realize fewer capital gains than actively managed
mutual funds. ETFs are more tax efficient than mutual funds because of the way
they are created and redeemed. We will revisit this topic later.
Let’s take a brief look at futures and options, another investment type:

Definition of ‘Futures’
A financial contract obligating the buyer to purchase an asset for the seller to sell
an asset), such as a physical commodity or a financial instrument, at a
predetermined future date and price. Futures contracts detail the quality and
quantity of the underlying asset; they are standardized to facilitate trading on a
futures exchange. Some futures contracts may call for physical delivery of the
asset, while others are settled in cash. The futures markets are characterized by
the ability to use very high leverage relative to stock ma rkets.

Futures can be used either to hedge or to speculate on the price movement of the
underlying asset. For example, a producer of corn could use futures to lock in a
certain price and reduce risk (hedge). On the other hand, anybody could
speculate on the price movement of corn by going long or short using futures.

Okay, what is an option:

Definition of ‘Option’
A financial derivative that represents a contract sold by one party (option writer)
to another party (option holder). The contract offers the buyer the right, but not
the obligation, to buy (call) or sell (put) a security or other financial asset at an
agreed-upon price (the strike price) during a certain period of time or on a
specific date (exercise date).

Call options give the option to buy at certain price, so the buyer would want the
stock to go up.

Put options give the option to sell at a certain price, so the buyer would want the
stock to go down.

Investopedia explains ‘Option’

Options are extremely versatile securities that can be used in many different
ways. Traders use options to speculate, which is a relatively risky practice, while
ways. Traders use options to speculate, which is a relatively risky practice, while
hedgers use options to reduce the risk of holding an asset.

In terms of speculation, option buyers and writers have conflicting views

regarding the outlook on the performance of an underlying security.

For example, because the option writer will need to provide the underlying
shares in the event that the stock’s market price will exceed the strike, an option
writer that sells a call option believes that the underlying stock’s price will drop
relative to the option’s strike price during the life of the option, as that is how he
or she will reap maximum profit.

This is exactly the opposite outlook of the option buyer. The buyer believes that
the underlying stock will rise, because if this happens, the buyer will be able to
acquire the stock for a lower price and then sell it fo r a profit.

According to Investopedia the difference between an option and future is:

Investopedia explains ‘Futures’

The primary difference between options and futures is that options give the
holder the right to buy or sell the underlying asset at expiration, while the holder
of a futures contract is obligated to fulfill the terms of his/her contract.

In real life, the actual delivery rate of the underlying goods specified in futures
contracts is very low. This is a result of the fact that the hedging or speculating
benefits of the contracts can be had largely without actually holding the contract
until expiry and delivering the good(s). For example, if you were long in a
futures contract, you could go short in the same type of contract to offset your
position. This serves to exit your position, much like selling a stock in the equity
markets would close a trade.

Please keep in mind that only very skilled investors should ever get
involved with futures and options. I have many good friends that have lost their
shirts pretending to know what they were doing. Here are a few pros and cons to
consider.
Pros:
+Potential for exponential gains. +Can speculate future prices at fraction
of cost of underlying asset.
Cons:
 -Highly risky.
-Physical gold often isn’t in the equation and paper gold contracts don’t
guarantee gold ownership.
Gold Forwards are another type of investment. Gold forward contracts
are similar to gold future contracts except that each contract is custom negotiated
specifically by the two parties in question, and it is done in the over-the-counter
market (OTC) (which is off the exchange markets). Gold warrants are another
form of options but are issued by private organizations and not necessarily
exchange traded. Options, futures and forwards are extremely risky and should
only be considered by advanced investors.
Digital Gold Currency, E-Gold is another type of precious metal
investment. This is a relatively new way of owning gold and is similar in
principle to Paypal. Gold is stored in an online account (and backed by gold) and
can be used as a form of payment or can be transferred to make payments. E-
gold also has the benefit of being redeemable into physical gold. Criticisms have
engulfed this type of online gold currency due to cases involving fraud, hacking
risks and little protection in case of anything going wrong. (Source:
Goldresource.net)
Another investing type, Gold Accumulation Plans (GAP) are a type of
saving plan which allows individuals access to incremental saving in the form of
gold. This allows individuals access to small sized gold investing without the
associated premiums. Each month a specific amount of money is deposited by
the investor, which in turn is used to buy gold in the account. Over time this
amount builds up and can be cashed out for physical coin/bar delivery, jewelry,
or even money if one wishes. Another advantage of gold accumulation plans is
the diversification benefits it offers that most traditional savings plans are left
without. (Source: Goldresource.net)
Gold Bullion Pensions are becoming more popular and widespread.
Citizens in the UK can invest in gold through Sipps (Self-Invested Personal
Pensions), and Americans can do the same through Gold IRA investment
opportunities (Individual Retirement Account). These types of gold pension
investments have the advantage of tax relief, but certain rules do apply, such as
the gold generally not being allowed to be in your possession. Therefore ETFs,
allocated accounts and e-gold would all qualify.
ETNs are another investment type. If you want more risk, try exchange-
traded notes, debt instruments that track an index. You give a bank money for an
allotted amount of time and, upon maturity, the bank pays you a return based on
the performance of what the ETN is based on, in this case the gold futures
market. Some of the more popular ones are UBS Bloomberg CMCI Gold ETN
(UBG), DB Gold Double Short ETN (DZZ), DB Gold Short ETN (DGZ) and
DB Gold Double Long ETN (DGP). ETNs are like playing the futures market
without buying contracts on the Comex. ETNs are flexible, and an investor can
trade them long or short, but there is no principal protection. You can lose all
your money.
Gold Accounts or buying gold “on account” means purchasing gold that
is held in a depository or similar facility. A gold account, also known as a
bullion account or metal account, is a way to own physical gold without having
to store it. We mentioned these earlier, as well as allocated and unallocated
accounts. Let’s review them again.

Allocated vs. Unallocated

There are two types of gold accounts. In an allocated account, each
investor owns a specified selection of gold bullion. The gold that you own is
kept separate from the gold owned by other investors. On the other hand, with an
unallocated account, you still own the same amount of gold, but it is not
differentiated from other investors’ gold held in similar accounts. For example,
you may own a 100 ounce gold bar on account, but you do not own a specific
gold bar if your gold is unallocated. This is the more common form of owning
gold on account. (Source: JM Bullion)
There are important differences between allocated and unallocated gold.
With unallocated gold, your gold may be considered a deposit, appearing on the
balance sheet of a bank or depository, and you are considered a creditor. With
allocated gold, you are the outright owner of a specific portion of physical gold.
It cannot be used as a bank’s reserve or given to another investor who wishes to
take physical possession of their gold. In the event of a financial crisis in which
the bank or depository has the potential for failure, allocated gold accounts are
safer than unallocated accounts because of this key difference.

Depository Storage
One of the advantages of owning gold on account is that you don’t need to
store it. Many investors rest easier knowing that their gold is safe in a bank or
depository vault, rather than in a safe hidden in their closet. On the other hand,
many other investors prefer to take physical possession, knowing that if an
emergency arose, they would have their gold in-hand rather than stored in an
account that may be many states away.

Liquidity
 Another major advantage of owning gold on account is that it is easy to
quickly buy and sell gold. Unlike when taking physical possession of your gold
bullion, most of the transaction is completed on paper, making it possible to buy
or sell anytime you desire, from anywhere in the world. This enables you to act
quickly when needed, such as when the spot price of gold is changing
dramatically.
Gold accounts also present an option for international diversification. A
single investor can have multiple gold accounts located around the world.
During times of crisis, such a strategy may ensure that at least a portion of the
investment remains intact.
With both allocated and unallocated gold accounts, it is usually possible to
actually take delivery of the gold you own on account. If you are interested in
opening a gold account and wish to take possession of your metal at some point
in the future, be sure that you understand whether the account allows transfer to
physical possession.
 What To Expect From Your
Investment
As you can see there are so many types of precious metal investment
opportunities in today’s marketplace. That being said, I want to repeat the fact
that what works for one person may not be suitable for another person. There is
no right or wrong investment. But knowing all the options and comparing them
to your situation certainly helps in this process of achieving the best possible
result.
Many people have exposure to the stock market and the investment types
that we spoke about, through their work plans, and they do not want to
independently go this route. Others do not have any money for this type of
investing (institutional and paper investing), and for some, they have no faith in
the stock market or any paper investments we mentioned. Just buying some gold
or silver bars or coins will satisfy their precious metal investment yearning.
Since exposure to precious metals and rare coins can take on so many
forms, it is challenging to know what the best strategy is. In order to gain a
handle on this subject, let’s pick at all of the options and compare them so you
can find a slot that seems to be best suited for your financial interests and
financial capabilities. Let’s face it, some types of precious metal investing and
rare coin investing involve sums of money that you might not have.
I want to start this discussion with pre-1933 gold coins. I clearly stated
that I did not believe that they were a good investment, and I want to drive this
point home by revisiting this topic and providing more food for thought. The
reason for this is very simple. Literally tens of thousands of people are investing
in these coins and are making very poor choices in so doing. Why?
Gold coins were minted by the U.S. Mint in many denominations from
1795 – 1932. These were and are to this day the only gold coins minted for
general circulation, readily available money. There come in many forms: Gold
Dollars, Gold Quarter Eagles, Three Dollar Gold Pieces, Gold Half Eagles, Gold
Eagles and Gold Double Eagles (see the Red Book for details). Over 100 million
of these gold coins were minted.
The coins commonly sold as pre-1933 gold investment coins are the
Double Eagles or $20 denomination gold coins. These are typically the coins
referred to as pre-1933 gold coins. Liberty Double Eagles pictured below were
minted from 1849 – 1907.

Saint Gaudens Double Eagles pictured below on the left side of the image
were minted from 1907 – 1933. Most of the 1933 coins were destroyed. On the
right side is the front and back of the current Gold Eagle made by the U.S. Mint
and sold only through authorized distributors, it is not part of the circulated
money supply as the pre-1933 gold coins were:
 A coin is only worth what someone is willing to pay for it. I, as a 50 year
veteran of coin collecting, do not consider pre-1933 gold U.S. minted coins rare.
Yes, some years are in great demand because few were minted, but there is a
major problem with respect to most of these coins. There appears to be a great
discrepancy between what some of these coins sell for and what the Red Book
says they are worth. The best way to illustrate this point is to look at selling
prices from APMEX, compare them to Red Book prices and then compare these
prices to sales on eBay . The following image captures a listing from the
APMEX web site for $20 Saint-Gaudens Gold Double Eagles, which were
minted from 1907 – 1933. Pay close attention to several things. First, look at the
sale price of $1536.47 and notice that this coin is graded as MS-63, which is a
high grade.

What is so interesting about this sales ad is that it says you will receive a
coin from the series, but it does not guarantee a particular date. It does, however,
guarantee the MS63 grade. The gold value at the time of this listing for this coin
is $1234. The coin is priced at $1536.47 plus shipping (more than $300 over the
gold value of the coin). The reasoning for the higher than gold price is
apparently due to the rare nature of the coin and the high grade, MS63. (This is
the logic used by APMEX to justify the price)
The Red Book, for a coin in this condition, regardless of the year 1907
-1933, states that the least expensive coin in the series is worth at least $2000,
according to 2013 prices. So you might reason, why is APMEX selling the coin
for almost $500 less than the Red Book says it is worth? Note: The buy back
price is almost $100 less than the selling price. Either the grading is off (we will
assume that this is not the case), they are giving you a great deal, or some other
issue is at play here.
So the magic question is, what is this coin really worth? Let’s answer this
question. First of all, the rule of thumb is never purchase a coin unless you know
the date and can see good pictures of the coin. Even though the coin may have a
high grade, in this case MS63, it would be nice to see close up pictures. Why?
Because if you try to sell it on eBay or to a coin auction company and then they
see the pictures but are dissatisfied due to the coins flaws then you are in trouble.
So buying a coin without seeing the actual coin you are buying is out of the
question.
This type of coin will always maintain some value because it has gold in
it, but as a numismatic or so called rare coin it has no extra value. The reason the
demand has been high for these coins is due to the rising price of gold and sales
pressure from companies toward buyers, which in many cases distorts the facts.
These coins are in great supply, despite the fact that many were melted down
when President Roosevelt issued act 1602. At least 75% of the pre-1933 gold
coins survived, and many were sent to Europe. Millions were sent before and
after WWII.
There were over 100 million pre-1933 gold coins minted (they date back
to 1849).
No one knows for sure, but there are probably millions of the more recent
coins still around, many are in Europe. Another point that is really important to
make: these coins were not circulated in pocket change. Because they were made
of gold and quite expensive back in the early 1900’s, people saved them in cans,
boxes, safes, etc…
This means that most of them are in really good condition. Coin collectors
pay high prices for coins graded up, like MS63, but not when there are so many
of them. Did you ever wonder why these coin dealers seem to have thousands of
them to sell? It is uniqueness that drives the price up along with the grade, but
these coins are not unique. There are too many of them around. If you can buy
these coins at or close to the price of gold at the time of purchase then you are
getting a good deal. To further prove my point, let’s look at the PCGS coin
index.
Before we look at the index chart, let me make a statement about the
grading company PCGS. We mentioned their name several times before. When
it comes to coin evaluation and coin information, PCGS is the Gold Standard in
the industry. They have certified close to 29 million coins to date and see more
coins’ prices and sales figures than anyone else. When they speak everyone
listens. They are the best.
Their rare gold coin index reflects the average value of thousands of coins
over time. The chart below clearly shows that in the past year value has dropped
and is heading straight down. The actual percent change is not much, but for an
investment class, this clearly is not a good sign. The heading on the chart is
“Mint State Rare Gold Coin Index”.

The three year chart displayed below is even more alarming. In fact, for
the past nine years the value of so called mint state (MS) rare gold coins has
been heading down.
 Remember the image showing the Double Eagle for sale on the APMEX
site for $1536. In a retail site like eBay these coins are selling for about the same
amount of money. Where’s the value here? Even after 59 bids, the final price
was equal to what APMEX is selling them for. Yet, the Red Book prices them at
$2000.
 To conclude, if you can purchase Gold Double Eagles or other pre-1933
gold coins, at or near spot, especially very high graded coins for a very small
markup over spot, you will come out ahead long term. But as you will learn,
there are much better ways to spend your hard earned money. These coins are
over pitched and over sold. They are not rare. A sales pitch that includes
reference to gold confiscation in 1933, and implies that if you buy these so
called “rare coins” they will never be taken because they have numismatic value,
is a complete exaggeration. When we look at coins that I do consider rare, a
whole new picture will be painted, and a new world will be discovered.
Let’s look at some other coins mentioned earlier. Namely platinum, gold
and silver coins recently made available through the U.S. Mint (since 1986).
Here are the coins commonly purchased:
 Typical prices paid for these coins, based upon current spot prices at the
time of this writing:
• 1oz American Eagle Silver Coin - $ 23 ($3 - $4 over spot)
• 1oz American Eagle Platinum Coin - $1522 ($95 over spot)

• American Eagle Gold Coins – 1/10 oz = $145 ($18 over spot)

1/4 oz = $355 ($37 over spot)
1/2 oz = $688 ($50 over spot)
1 oz = $1330 ($50 over spot)

• American Buffalo $50 Gold Coin - $1335 ($60 over spot)

• 5oz Silver America the Beautiful Series - $140 ($35 over spot)

As you can see the one ounce silver version sells at close to spot, while the
platinum and gold versions do not. In general all three types, silver-gold-
platinum coins, should only be thought of as precious metal investments. What
this means is simple, their value will always be determined by the spot price of
the metal they contain. Their value as a coin, or shall we say a numismatic or
collectible coin, is very minimal. (The 5oz silver may be a slight exception to the
rule because of the low mintage figure of 30,000.)
Buying high grade versions of these coins (such as proof coins, highly
graded slabbed coins and brilliant uncirculated coins) are more marketing hype
than a reflection of any future value. The reason for this is very simple. There
are hundreds of millions of these coins, so a high grade version is just one of
many millions of high grade versions already available.
What some dealers are doing and some grading services are doing is
slabbing or grading coins in an attempt to justify higher prices. Here are two
slabbed (graded) coins on eBay being sold by APMEX. The first coin is about
$18 over spot or almost twice the current price of silver, while the second is $85
over spot. An investment strategy that includes these types of coins is
questionable and may never pay off.

Let’s look at the pros and cons of these coins with respect to their
investment potential. They are traded based on the market rate of their metal,
plus a small premium. Their actual metal market value is much higher than their
face value.
American Eagle Bullion coins are considered investment-grade bullion
coins, and are the only official investment-grade coins in the United States. As
such, these coins can be used to fund Individual Retirement Accounts (IRAs).
Major investment markets around the globe also accept them. Additionally, the
Internal Revenue Service (IRS) exempts the American Eagle Bullion coins from
IRS 1099 reporting, which provides the investors with an added level of privacy.
So these two benefits are a big plus.
Another plus is liquidity. One measure of a good investment is its
liquidity. American Eagle Bullion coins are easily bought and sold through any
Authorized Purchaser. Their distinct design and brilliant luster, along with their
U.S. Government backing and clear mark of fineness, makes them easily
identifiable and highly tradable.
One difference between investments, such as stocks and mutual funds, and
coin investments is the need for storage space. Once purchased, these silver
bullion coins are delivered to the buyer’s address. Depending upon the number
ordered, the buyer may need to secure a safety deposit box or other secure
storage facility. Buyers should be wary of sellers who, rather than delivering the
coins, offer to store them in a secure facility for the buyer.
American Eagle Bullion coins are priced slightly higher than standard
bullion rounds or bars. Therefore, it is necessary that buyers perform some
research and carefully consider which type of coin best suits their investment
goals before purchasing one or the other. Buyers should also keep in mind that
American Eagle Bullion coins are also sold in rolls of 20 or boxes of 500 rolls.
Bullion coins differ from collectible coins in a few ways. The resale value
of collectible coins is determined in large part by the numismatic value of the
particular coin as opposed to the actual value of the silver or gold content in the
coin. The value is dependent upon what someone is willing to pay for it, and
therefore, is subject to wide fluctuations. Bullion coins have a resale value based
on the actual precious metal content in the coin. The physical price of the metal,
plus a small premium, determines the value of a bullion coin. Therefore, they
should only be looked at in terms of their precious metal content but balance this
with their wide recognition, easy to sell trait, IRA and IRS advantages. For
someone having very small amounts of money to invest, these coins are worth
considering.
When it comes time to resell bullion coins, keep in mind that because
there are so many out there you may have a hard time getting your money back,
unless the price of the metal goes way up. What it boils down to is this: you are
investing in a form of a precious metal that can go up or down and may require
time before any real gains are made. But on the flip side, everyone knows what
these coins are, so in rough times they can sell quickly. And as stated, for many
investors it is the only way they can afford exposure to precious metals,
especially gold (a good way for some people to save).
Let’s spend a few minutes talking about gold and silver bars and rounds.
Buying them represents the best way to get the most bang for your buck. You
come closer to actual spot value this way. You can buy this asset type from
companies (such as the authorized distributors mentioned earlier), that will store
the product for you. Some charge for this, some don’t. The problem with large
amounts of gold and silver relate to safety and storage and the associated costs.
In times of need selling large amounts and large bars can be problematic.
We spoke about certified vs non certified product and the advantages of
certification. So many investors prefer the actual physical product to be in their
possession rather than take advantage of the many investment types that store the
gold for you, such as allocated and unallocated accounts and GAP or gold
accumulation plans. This may relate to mistrust or habit or lack of knowledge
when it comes to the many precious metal opportunities out there, so the purpose
of this book, is in part, to make you aware of these many options.
Remember we noted that many investors do not pay close attention to their
investments with respect to their return over time. They buy with blinders on. In
order to help you understand this topic better or see it from a different angle let’s
look at the return over time for stocks vs bonds vs gold.
Let me bring in two of the greatest investing experts in the world today so
we can see what they say about these three classes of investments. Dr. Jeremy
Siegal and John Bogle, the founder of Vanguard, have provided insight into ROI
for different asset classes, in this case the inflation adjusted returns of stocks,
bonds, and gold. Going back nearly two hundred years, they state:

“If you had invested $10,000, reinvested any dividends, interest, or other
gains, and left the money alone, how much wealth would have today in real,
inflation-adjusted terms based upon the asset class you selected? The stock
investor would have turned his $10,000 into $5.6 billion. The bond investor
would have turned his $10,000 into $8 million, and the gold investor would have
turned his $10,000 into $26,000. That is statistically significant.”
 A final word from John Bogle on gold investing as an asset class, and this
applies to silver as well:
“Why has gold generated such pathetic inflation-adjusted returns over the
long-run? Because gold has no intrinsic value. It isn’t a productive asset. When
you own a share of stock, you own a piece of a business that produces goods and
/ or services to consumers. A good business generates a profit. Every year that
passes, gold remains sitting in the vault, but the owner of a company such as
Proctor & Gamble or Golgate-Palmolive might have a giant pile of cash from the
profit generated over that same year by selling dish washing soap, laundry
detergent, and toothpaste.
From a financial standpoint, gold has one purpose: Rank speculation. It
can fluctuate wildly and generate huge opportunities for those who are paying
attention to gamble – and that is what it is. It can serve as a flight mechanism
during times of total catastrophic national collapse, such as a Jewish family
fleeing Germany during the second world war who wanted to be able to start
over with some capital in a new country. But in terms of productive growth, gold
is a dead asset that will eventually return to its baseline. It produces nothing. It
creates nothing. The inflation-adjusted returns of the past 200 years reflect this
reality.”
The intent is not to discourage you or suggest that gold and silver in any
form are not good investments, but to make you aware of what history
demonstrates so you can act accordingly.
Let’s look at some more pros and cons for precious metal investments
mentioned:
ETFs (There are many types of precious metal ETFs.)
Advantages:
For investors who seek exposure to the physical market, but have no
desire to possess the metal or pay direct insurance, assay, and storage costs,
ETFs offer an alternative. They have major exchange listings and trade like
equities. Investors can buy shares in a trust that owns the bullion. A very
convenient and hassle free way to get gold exposure.
Disadvantages:
Because the ETFs are created to reflect the price of the metal, the market
price can be as unpredictable as the price is on any given trading day. Some
funds may not have the amount of gold they claim and certain taxes and fees
may apply.
Key Points:
• Every time you buy or sell an ETF there may be a fee.
• An ETF that has global exposure may be influenced by the events in the
country or countries involved.
• If it consists of one or just a few products or companies it may fluctuate
widely in price.

Some more points to consider from the work of John Devcic, as found in
Investopedia: “The biggest factor in any ETF or stock or anything that is traded
publicly is liquidity. Liquidity means that when you buy something, there is
enough trading interest that you will be able to get out of it relatively quickly
without moving the price.
If an ETF is thinly traded, there can be problems getting out of the
investment, depending on the size of your position in relation to the average
trading volume. The biggest sign of an illiquid investment is large spreads
between the bid and ask. With so many new ETFs coming to market, you need
to make sure that the ETF is liquid. The best way to do this is to study the
spreads and the market movements over a week or month.
The rule here is to make sure that the ETF you are interested in does not
have large spreads between bid and ask prices.
In some cases, an ETF will distribute capital gains to shareholders. This is
not always desirable for ETF holders, as shareholders are responsible to pay the
capital gains tax. It is usually better that the fund retains the capital gains and
invests them, rather than distributing them and creating a tax liability for the
investor. Investors will usually want to re-invest those capital gains distributions
and, in order to do this, they will need to go back to their brokers to buy more
shares, which creates new fees.
Buying an ETF with a lump sum is simple. Say $10,000 is what you want
to invest in a particular ETF. You calculate how many shares you can buy and
what the cost of the commission will be and you get a certain number of shares
for your money.
However, there is also the tried-and-true small investor’s way of building
a position. This way is called dollar cost averaging. With this method, you take
the same $10,000 and invest it in monthly increments of, say, $1,000. This is
called dollar cost averaging because some months you will buy fewer shares
with that $1,000 because the price is higher. In other months, the share prices
will be lower and you will be able to buy more shares.
Of course, the big problem with this strategy is that ETFs are traded like
stocks; therefore, every time you want to purchase $1,000 worth of that
particular ETF, you have to pay your broker a commission to do so. As a result,
it can become more costly to build a position in an ETF with monthly
investments. For this reason, trading an ETF favors the lump sum approach. The
rule here is to try to invest a lump sum at one time to cut down on brokerage
fees.”
Gold ETF funds are said to be backed by gold, but the legitimacy of these
physical gold holdings has been a source of controversy among gold investors.
Regardless, for speculative or short term investors, it’s hard to beat the
convenience of ETFs which have gained huge popularity over the last several
years. The most famous among them, as mentioned before, is the U.S. based
ETF with the ticker “GLD” and also “IAU” (iShares COMEX Gold Trust).
There is a small administration/handling fee associated with these two
funds of around 0.4% per year and also commission fees might apply in some
countries of up to 0.4%. The tax implications might also vary depending on your
country compared to investing in physical bullion.

Large Gold Bars

Gold bullion bars are the preferred form of investing for financial
institutions, governments, and anyone with a lot of money. The reason is that the
amount of gold in gold bullion bars must be above 99.5% in purity to qualify as
investment grade and sizes are generally quite large (1 KG or 400 ounces are
common). Therefore, gold can be acquired with little to no premium over the
spot price.
Pros:
+Lowest price for acquiring physical gold
+Bars usually come from large and trustworthy mints and refineries Cons:
-Liquidating might be more difficult due to sheer value -Risky to carry
around or keep in the house
-Not convenient for using in small to mid-size transactions

Small Metal Bars

Advantages:
• Usually the least expensive
• Convertible into cash
• Internationally negotiable
• Price is widely quoted
Disadvantages:
• Must be stored securely
• Possible need for assay at time of sale • Yields no interest

Mining Stocks
Advantages:
• Offers capital appreciation opportunities • Dependent on the company’s
management and operating strength • May yield a dividend
Disadvantages:
• May require greater investment than small physical bullion purchases •
Requires knowledge of equity market

Mutual Funds
Advantages:
• Many mutual funds offer investment programs in precious metals •
Diversified holdings among dozens of companies – so if one company has
trouble you are not too heavily exposed to it Disadvantages:
• May require greater investment than small physical bullion purchases •
Requires knowledge of equity market
Bullion Coins
Advantages:
• Relatively inexpensive, some less than $25.00
• Small and easy to store
• Instant convertibility into cash
• Easy to transport
• Internationally negotiable
• Prices quoted widely
• Usable as money
• Easy to buy
Disadvantages:
• Must be stored securely
• Yields no interest
• Premium over bullion bar prices
• Many coin types exist which can lead to confusion • The buy sell spread
does not favor the retail investor

Certificates or Storage Accounts (General overview, more on next page)

Advantages:
• High liquidity but at competitive prices • No storage risk
• No sales tax
• Prices widely quoted
• Invest by dollar amount
Disadvantages:
• Several days’ delay in delivery
• Not in physical possession of owner

Accumulation Plans
Advantages:
• Invest as little as $100
• Discounted commission rates
• Highly liquid
• No sales tax
• Offers dollar cost averaging
• No storage fees
Disadvantages:
• Metal not in physical possession of owner although some firms will
deliver the metal if requested

Allocated Gold Account (Storage Account)

If you’d like to own physical gold (bars or coins) but would rather not deal
with headaches associated with storing the precious metal yourself, then you can
choose to invest in gold through allocated accounts. Theoretically this assures
that the bank in question would keep your portion of gold in their vault
somewhere attributable directly to you. You do have to pay extra for this, but
don’t expect to have a private storage box just for you as not all bullion banks or
financial institutions have such private vaults. However, hallmark, weight and
fineness are all recorded, and your gold stays in the vault and may not be used
by the banks for other purposes. You actually own this physical gold and the
banks job is to keep it safe.
Pros:
• No need to worry about gold delivery transportation or storage Cons:
• May require yearly handling/storage/insurance costs

Unallocated Gold Accounts (Storage account)

For investment in gold without the storage costs, unallocated gold
accounts are usually shown as a preferred choice and represent over 90% of
accounts at banks. This doesn’t mean that unallocated accounts are in fact better.
To the contrary, they invite a lot of risk which allocated accounts do not face. In
an unallocated account, the bank may do with your gold as they please, and the
bank in this case is in a position of debt to you. So if the bank faces problems,
they will likely sell the gold invested by its customers to meet its reserve
requirements. If something were to happen to the bank, unallocated gold
accounts are usually not covered by governments who only provide a guarantee
for its sovereign currency.
Unallocated accounts can come in many forms and sizes and are offered
through a variety of institutions through different names like gold pool accounts.
Both allocated and unallocated gold accounts involve gold certificates that you
hold that symbolizes your ownership position.
Pros:
• Cheap and easy way to invest in gold
Cons:
• The safety of ‘your gold’ is at the fate of the bank that holds it with no
mechanisms in place for protection (Source: Gold Resource)

Futures Contracts
Advantages:
• Speculative appeal
• Leverage reduces capital tie-up
• Liquidity
• Contracts widely quoted
• No storage risk
Disadvantages:
• Many trading limitations
• High risk factors
• Unlimited loss potential
• Requires market expertise

Options
Advantages:
• Speculative appeal
• Leverage reduces capital tie-up
• No storage risk
• Clearly defined risk
Disadvantages:
• Trading limitations
• Highest risk
• Less negotiable and less liquid
• Investor must be willing to sustain the loss of their entire investment in a
commodity option • High degree of knowledge required

The links provided earlier to the U.S. News and World Report web site
and other sites showed that ETF’s and Mutual Funds can display wide profit
variation; however, the top rated funds have been solid investments, but do
require expert advice before buying. Many of the asset classes we mentioned can
be examined through the U.S. News and World Report portal. Let me repeat:
Investing in any of them without expert advice is not wise.
 An unusual study covering a 30 year period compares some of the asset
types we looked at. It is one of the most significant studies of its kind, and needs
to be reviewed.

This study compares the return for gold bullion vs the stock market vs
three month T-Bills vs rare coins (all grades) vs rare coins MS 65 vs rare coins
MS63-MS65 for 30 years from 1979 – 2008.
(Please do not confuse rare coins with pre-1933 gold coins, which as I
stated before are not rare. In the pages to follow we will define rare coins and
look at coin collecting in depth.) What is so surprising about this study are the
results, showing that a wide variety of rare coins on average, out perform all the
other asset classes listed. The study happened to end during the economic
collapse of 2008 when the market crashed, yet even after 2008 rare coins went
up and the market went down.
Notice the performance of the stock market, which is more than twice that
of gold and T-Bills, yet less than that of MS65 rare coins. Don’t worry, we will
explore rare coins and grading (MS65) in great detail. For now I wanted to point
out how significant rare coin returns are in terms of their investment potential.
This chart was compiled by Raymond E. Lombra, Ph.D., a Professor of
Economics and Dean for Research, Graduate Studies and College Advancement
at Penn State University. He has authored, co-authored and contributed to
numerous economic and financial books, publications and periodicals. Professor
Lombra is a consultant to the House Banking Committee of the U.S. Congress,
the Federal Reserve System, the Congressional Budget Office, the Joint
Economic Committee, Prudential Bache, Morgan-Stanley Dean Witter, the
International Monetary Fund and the U.S. Treasury. His many honors and
awards include election to Who’s Who in Economics.
I’d like to spend a few minutes and speak about certain purchases that
people make from TV ads. These ads take on many forms, from coin ads, to
precious metals, to buying your gold and silver from you. I’m sure you have
seen them. Do not purchase any coins or any metal from a TV ad or magazine
ad.
An example is the TV shopping show Dealers and Mints. Most of the
Uncirculated Morgan Dollars I’ve seen on TV shopping shows like this sell for
$300 each, but can be purchased from a normal coin dealer or on eBay for $40.
Another TV seller is the National Collector’s Mint. The U.S. Mint has
issued warnings about this company’s misleading advertisements in the past,
particularly its Freedom Tower Coins. National Collector’s Mint ads imply that
Freedom Tower and other coins have meaningful amounts of precious metal in
them when they do not.
Other examples include: the Franklin Mint and the Bradford Exchange.
They are aggressive marketers who do sometimes sell genuine bullion coins, but
their coins usually do not have any after-market value among coin collectors and
investors.
Another bad investment are “sets” of coins. This is another popular TV
shopping show product; plus they’re often found in magazines and swap meets.
“Spurious sets,” are sets that are put together out of lower grade and/or common
coins according to some kind of theme. The coins are usually placed in fancy
plastic holders, with nice quality packaging. You then pay $38.99 for a set of
five coins that are worth $2.99 just because they were all minted during World
War II or the Vietnam War, or because they’re from around the world and
commemorate movie stars or some sort of cartoon character. Such coins are
usually genuine and will probably appreciate in value, but they probably won’t
be worth what you paid for them anytime during the next five generations!
These are a favorite of dealers like Littleton.
Other TV ads from so called “metal dealers” offer to buy your silver or
gold for 1 % over cost, implying that you are getting a good deal. Let me ask
you a question. If they are paying one million dollars for prime time TV ads on
popular stations like FOX, can you imagine what their costs are? Don’t buy
from TV shows and magazine ads!
 Gold vs Silver – Who Wins This
Fight?
A question that is often asked concerns silver vs gold: which investment
over time, makes the most sense? Because there are so many types of gold and
silver and you have seen them reviewed earlier, it is hard to pick a winner. They
all have pros and cons. But let’s take a look at some of the differences, and how
these relate to which asset has the most bang for the buck over time, particularly
in the years ahead.
A concept that is often overlooked is the relatively low price of silver in
relation to gold. Silver should be priced much higher than it is. The price
relationship of these two metals is of great interest. Let’s look at what happens
when silver goes up 10% and gold goes up 10%. For silver to go up this much,
the price has to only climb a few dollars, say $20 to $22 per spot ounce. Gold on
the other hand, has to move up well over $100 for it to increase 10%. For
example, $1280 per ounce to $1408 per ounce, or an increase of $128. Let’s look
at this concept in terms of large dollar amounts.
Let’s say you buy one million dollars worth of gold and one million
dollars worth of silver, and silver goes up 10%, yielding $100,000 profit. Gold
on the other hand goes up $40 per ounce when silver just went up $2 or 10% per
ounce, but the actual percentage change is less than 4% per ounce for gold, so
the one million dollar investment went up much less than the silver one.
Let’s look at this from another angle: you buy 60 ounces of silver for
$1220, and you buy one ounce of gold for $1220. Since the silver ounce price
moves in greater proportion than gold, a $2 increase per ounce means a 10%
gain or $122 profit. Gold, let’s say, moves up $60 per ounce at the same time,
but this equals about a 5 % gain, which is typically how the prices for these two
metals move. So buying the same dollar amount of silver as gold, suggests that
your chance of a greater return is with silver. A small move in silver yields a
much higher percent gain.
I will prove this to you. Here is an actual example. Look at this chart.
Notice how the gold price per ounce went from $1247.25 to $1317.5 in the three
week period, a climb of $70 or 5.5%. While silver went from $18.81 per ounce
to $21.04, a climb of only $2, but equal to 11%, or twice the increase of gold. If
you monitor these changes you can pick trends and know when to buy.
 Another point to consider relates to the gold-silver ratio over time. Gold
and silver follow the same path, one goes up, the other goes up, and they also
follow each other going down. The historic silver/gold price ratio is 15 or 16:1,
but in recent years, silver is relatively cheaper. Today the ratio is 66:1 which
means that silver is currently undervalued, and cheaper than historic norms, and
thus it is a better investment than gold if you want to “buy low and sell high“.
Based upon a “normal” ratio, silver should be priced at least $90 per
ounce. The supply and demand fundamentals for silver are extraordinary. There
has been an ongoing supply/demand deficit in silver for 12 years. More silver is
consumed by industry than is produced by mining and recycling combined.
Some say this deficit reaches back 60 years, and has consumed virtually all the
known silver mined since the beginning of the world. The annual deficit has
recently ranged from 100 million to 200 million ounces per year.
Just look at the 2013 figures from the Silver Institute:
 Total supply = 978 million ounces
Demand = 1081 million ounces
Net deficit = -113 million ounces (That’s negative 113 million ounces)
Remember most silver mined has actually been used, while most gold ever
mined still remains above ground and intact. There is also less silver in the
ground than gold. The actual chart that shows these figures is displayed below:

Another point to consider and this is according to the First Majestic Silver
Corporation:
“In the gold market, there has been a large increase in paper futures
contracts which are used to suppress the price. In silver, the relative amount of
paper contracts is much larger. In other words, there are more paper shorts who
will be caught in an impossible situation when the price of silver really begins to
rise due to the fundamental supply demand gap. They will be forced to buy
silver or go bankrupt. Either action will cause a dramatic rise in the silver price.
If they default on the silver contracts, that will signal to the world the severe
shortage of silver, and signal a great investment opportunity.”

We must also consider geo-political events, particularly what has

happened in China and India recently and how this affects the price of gold. On
June 26, 2014 it was reported in QZ.COM that:
China’s National Audit Office reported today it has discovered 94.4
billion yuan ($15.2 billion) in fraudulent loans backed by gold stocks that don’t
exist. Unnamed banks were using “fictional” cross-border currency-swap loans
backed by gold to take advantage of interest-rate differences inside and outside
China, the report says. The report marks the “first official confirmation of what
many people have suspected for a long time - that gold is widely used in Chinese
commodity financing deals,” Liu Xu, an analyst at Capital Futures in Beijing,
told Bloomberg.
China’s grab for all the gold it can mine and can get its hands on is cause
for concern, because of a lack of transparency. In theory, they could corner the
gold market and impose a pricing structure by the leverage they have. This is not
something that would happen any time soon, but they are feverishly looking for
gold deposits in their vast country.
Remember, the Arab world fixes the price of oil according to their needs
because they have so much of it. Events in India are even more troubling. India
is one of the world’s leading gold consumers along with China. India’s thirst for
gold has many components:
• Religious associations – temples and religious groups hoard gold
• Social prestige – gold is a sign of status
• Savings venue – Indians prefer to save gold rather than money
• Marriage traditions – families start saving for gold when their children
are infants (Gold that the bride brings to the wedding symbolizes status
and is a sign of good luck)
• Inheritance – gold is the preferred type of wealth transfer
An amazing 12.5% of India’s imports (2012-2013) are in the form of gold.
This desire for gold has actually weighed down the economy to the point where
the government has taken action. It has curbed gold imports by as much as 41%
and may impose measures as are needed over time. Will this result in downward
price pressure on the world gold market?
Uncertainties in China and India do one thing, help make gold investing
an unpredictable action. With most of the gold consumption in the form of
jewelry and investments rather than actual industrial need for the precious metal,
you end up having doubt as to how good an investment it is over time. Silver
usage on the other hand is mostly of an industrial nature. An important point to
remember, and this is often overlooked, when gold goes up silver follows and
the reverse is true, so if you need an indicator to point you in the direction of a
buy, look at gold, as it heads up silver will follow – time to buy. Silver will out
perform gold over time, mainly because it is under priced.
 Coin Collecting – What Every
Investor Must Know
We are going to explore coins and coin collecting in depth. There are
many reasons for this, but the principle one is to help you develop a strong
knowledge of your own investments so you can make sensible decisions. As
stated before, certain rare coins return a higher rate of return than any other
investment class over time. Certain coins, like pre-1933 gold coins, do not make
good investments. U.S. Mint bullion coins are often purchased at prices that
make it hard for the investor to recoup anything, especially over short time
periods.
Remember the chart we looked at for a 30 year time period showing how
the stock market returned about 11% and rare coins in high grade about 13%? I
want to update these figures using more current data. The long term appreciation
for high quality rare coins have achieved returns exceeding those of the major
equity indices. Looking back over the past 40 years, rare coins have had a
compounded (IRR) rate of return greater than 11%, while the DJIA and S&P500
indices have grown at rates less than 7%. Interestingly, rare coins increased
slightly in value between 2006 and 2010, while the equity markets went down.
We must balance this information with events of the last few years which have
seen the DJIA and S&P500 have extraordinary growth, more than the
7% just mentioned. But the facts over time are clear. Rare coins do very well.
An interesting chart reflecting a long term study shows how well rare
coins do over the years. The study compares rare coins to many other asset
classes. Silvano DeGenova is one of the world’s greatest coin authorities, and his
rare coin tracking data is based on real sales. Note how his UNC (uncirculated)
returns for 35 years rank above all other investment classes on the following
chart:
 The fourth line from the bottom (DiGenova UNC) shows a return of 9.5%.
Compare this to silver, gold, oil and the others. Notice the ranking of from 1 to
14 on the right hand column. The top two rankings are for coins. Again, keep in
mind the years for the study, which ended in 2005. The world is different now.
The stock market is very robust but coin returns still rank high. You can see why
coin information is so critical. Let’s start at the beginning and we will work our
way up.

What is coin collecting?

Anyone who saves one or more coins for any reason is coin collecting.
Some collect coins as a hobby while others for immediate or long term financial
gain. Some individuals collect to teach their children about math, coins and
money. Some people collect because they want to invest now, but plan on
passing the collection down to their heirs. Some save a specific coin type or date
because it holds sentimental value (gold, silver, error, foreign, ancient,
commemorate or proof coins for example). Some collect every major coin made.
The list goes on.
Don’t let the coin field box you in mentally. There isn’t a single person
that knows it all and every collector has a different degree of knowledge. In
other words, do not let the vast amount of information overwhelm you, everyone
started at ground zero, we are here on this earth to help each other.
Let’s define the term “rare coin”. After all we have used this term so
much. What is a rare coin? Is a rare coin one that has considerable value attached
to it? The word “rare” means uncommon, distinctive, extreme of its kind. So, a
definition of “rare coin” can be a coin that is uncommon in some way and may
or may not have value. In other words, some coins are very rare and very
uncommon, yet do not have much value. Some are very valuable. I will show
you why this is.
Coin collectors, on the other hand, typically think in terms of dollar value,
when using the term “rare coin”. For example, I have seen very uncommon
coins, maybe only a few in existence, have no value and therefore coin collectors
would not consider them rare. The problem with the term “rare coin” is that
there is no standard definition, for example, is a coin that is worth $1000 a rare
coin or not? If you are interested in buying rare coins, what should you buy?
Don’t worry it will all become clear to you.
Coins that continually go up in value over time and are hard to find and or
buy because they are scarce and when found can only be purchased for much
more than their face value, is probably a good definition for “rare coins”. As far
as investing and this book is concerned, this is the definition we will use.
Remember a coin is only worth what somebody is willing to pay for it. I have
seen a one of a kind coin worth an estimated $100,000 and other coins that have
had over 50,000 of them minted, and they sell for $50,000 in very good
condition. I am going to show you what coins are considered “rare” and why.
 Coin Collecting – Getting Started
(Tools)
It’s a known fact that coin collectors have more knowledge of precious
metals. The reason for this is simple. Many coins are made of silver and gold
and collectors usually have handled them. This gives them an edge. They are
familiar with fake coins and fake gold and fake silver and they know the value of
silver and gold coins. If you want to sharpen your precious metal skills you will
need to understand more about coins, especially bullion coins. Knowledge is the
key. When you look at paper investments, like ETFs and mutual funds you can
compare their return to coin returns, especially rare coins. If you know what a
rare coin is and how to determine a coins value you will be in a much better
position to make investment decisions based upon fact rather than habit or
market trends or suggestions from aggressive sales people.
This is a very good time in the book to take a close look at tools you will
need to be successful at coin collecting and precious metal evaluation. I am
going to show you exactly what these tools are, why they are needed, what they
cost, and how to get them.

The tools mentioned were:

• Nitrile gloves
• Two coin books (So far only one book was mentioned) • A jewelry loupe
• A gram scale and a larger scale
• A magnet
• A digital microscope
• A non-glazed ceramic tile or dish
• A gold-silver testing kit
 Nitrile gloves are used to handle coins because they are very dirty. They
can also be used to handle nitric acid for gold testing. If you look at a lot of coins
in one sitting, they come in handy. You will be amazed at how dirty they get
from coins.
The above ad from Amazon shows latex free gloves. I also recommend
that you get powder free gloves. They come in different sizes, so order
accordingly. Always order 100, you will be glad you did. They come in black
and blue colors. I like the Dynarex brand. Sometimes Walmart carries them.
Two books that I recommen are: The Red Book – A Guide Book of United
States Coins 2015 by R.S. Yeoman and Strike It Rich With Pocket Change:
Error Coins Bring Big Money by Ken Potter. The error book is an added bonus
to have, but not needed in the beginning. The next two images show them on the
Amazon web site.
The spiral bound Red Book works best.
A jewelry loupe is needed to examine coins close up and to check gold
and silver for purity or maker markings. I buy them on Amazon and prefer those
that have a LED light. The loupe shown above works well.

A gram scale is indispensable for weighing coins, jewelry, gold and silver.
These small scales are limited to 8 ounces. Certain coins need to be weighed to
determine metal content, authenticity and error types. Make sure the scale you
buy weighs in the 100th of a gram as this one does from Amazon. I use this one,
and it has worked for many years. Shop around on Amazon, prices and products
change all the time.
Here’s a real life example of why these small scales are so important.
Notice the weight difference, 11.20 grams vs 11.45 grams.

If we did not have the Red Book handy or the internet and had these 2
Kennedy Half Dollars and we were looking at them and noticed their
appearance was somewhat different, the gram scale confirms that one
weighs more than the other The 1973 Kennedy on the left has no silver in it
– but the 1967 one on the right weighs a little more because it is 40% silver
(Can you see the silvery appearance?)
 This scale above is used for weighing any form of heavy gold or silver and
for shipping. It is very accurate and weighs in grams, pounds, ounces and
kilograms. I have used it for years and love it. The weight stays on for a few
seconds after you lift the item off the scale so you can see it better. I bought this
one on Amazon. The company was great to work with. It cannot be used for
weighing very light objects.
 A powerful magnet is used to detect fake coins, gold, silver and jewelry.
This one on Amazon has a handle and is affordable. Remember, even though an
item may not stick to the magnet, it can still be fake gold or fake silver or a fake
coin.

Can you guess how I took this beautiful picture of an 1885 Morgan Silver
Dollar? A digital microscope allows you to take great close ups of coins and
jewelry. This picture shows its capability. Good quality pictures help when
trying to sell an item and when trying to identify an item. Also, the
magnification allows you to see the object close up.

I use this one and it was purchased on Amazon. It plugs into your USB
port so make sure it is compatible with your computer ports (USB 2.0 vs 3.0). It
comes with software that is amazing. It even takes video. For best results when
trying to take pictures of objects that are reflective, move the object to the side
slightly so the lights from the microscope are not shinning on the object directly.
A non-glazed ceramic tile can be purchased at any hardware supply store
like Lowes or Home Depot for only a few dollars. It is used as a rubbing stone.
You rub the gold item on it, and test the mark or look at the mark color. The gold
and silver kit was illustrated before. Here is the link again:
http://cgi.ebay.com/ws/eBayISAPI.dll?
ViewI tem&item=310825248614&ssPageName=ADME:X:RTQ:US:1123
 Coin Collecting – Clubs and
Terminology
Most cities and towns have a coin club. There are a number of reasons to
join one, especially if you are new to coins and have children. Here are web sites
that have many of the coin clubs around the country listed, along with other
useful links: http://collectingclubs.com/
http://www.coinlink.com/directory/ clubs.html

Joining a local coin club is easy and very rewarding. They usually have a
low yearly fee, mine is $16. They hold regular meetings, usually once a month
and the benefits are enormous: • They always make educational presentations –
great learning resource.
• They are a great way to educate your children. Very few children
participate and the members will try to help them – like helping the next
generation.
• The members have hundreds of years of coin experience and can help
you identify your coins.
• They routinely have auctions where you can buy coins and stamps well
below market value.
• Members that you get to know will often have extra coins that they will
sell to you at low prices so you can complete your collection.
• Members will buy coins from you.
• Members will have tons of resources – names of reliable dealers e.g. I
routinely buy things at my coin club auctions and resell them on eBay.

Some terminology was listed in an earlier chapter. Let’s cover some new
terms and provide a link to a complete coin dictionary. This link is also a coin
forum that is well worth joining, it is free:
http://www.coincommunity.com/dictionary/
Mintmark: A small letter(s) designating where the coin was produced.
C = Charlotte, NC (gold coins only; 1838-1861)
CC = Carson City, NV (1870-1893)
D = Dahlonega, GA (gold coins only; 1838-1861)
 D = Denver, CO (1906 to date)
O = New Orleans, LA (1838-1909)
P or No Mintmark = Philadelphia, PA (1793 to date)
S = San Francisco, CA (1854 to date)
W = West Point, NY (1984 to date)

BU: Brilliant Uncirculated refers to the coins condition or grade – it is a coin

that is in its original condition or mint state and has original mint luster.
Bullion/Bullion Coin: A coin (American Eagle) or other object (bars, ingots,
etc…) consisting primarily of a precious metal, e.g. silver, gold, platinum.
Business Strike: A coin minted for general circulation.
Certified: A coin that has been authenticated and graded by one of the major
grading services, like: PCGS or NGS.
Circulated: Coins with obvious signs of wear due to being “circulated” in
regular commerce.
Clad: Coins made from more than one layer of metal, e.g. quarters since 1965
have a pure copper core, with the outer layers copper-nickel (.750 copper, .250
nickel). Grade or Grading: A term used to define the coins condition.

Key/Key Date: Refers to the scarcest coins in a series and carries a higher price,
e.g. 1909-S VDB Lincoln Cent which is the rarest coin in the Lincoln Penny
series.
Luster: The brilliance or shine of a coin and is considered to be one of the main
factors in the coins value and grade.
Mint Set: An official set containing one uncirculated coin for each
denomination made that year.
MS/Mint State: A term to describe a coin in the condition as it left the mint,
uncirculated coins or BU.
NGC: Numismatic Guaranty Corporation is one of the major grading
companies.
Numismatics: The study, art or collection of coins, medals, tokens and similar
objects.
Numismatist: A person who is knowledgeable in the collecting of coins,
medals, token and similar objects.
Patina: A term used to describe the lighter shades of toning on a coin.
PCGS: Professional Coin Grading Service is one of the major grading
companies.
Proof: A specially produced coin made from highly polished planchets and dies
and often struck more than once to accent the design. Proof coins receive the
highest quality strike possible and can be distinguished by their sharpness of
detail and brilliant, mirror-like surface and sometimes cameo effect.
Proof Set: A complete set of proof coins for each denomination made that year
and specially packaged.
Relief: The part of a coin’s design that is raised above the surface.
Reverse: The back of the coin or tails.
Rim: The raised outer edge of the coin, that helps protect the design from wear.
Slab: A nickname referring to coins that have been graded by a third party
service and placed in a plastic holder.
Strike: The act of impressing the image on to the planchet. The quality of the
strike is an important part of the grading process.
Toning: Coloring on the surface of a coin caused by a chemical reaction, such as
sulfur from older cardboard books, flips or envelopes. Rainbow-colored toning
and original toning is often a desirable characteristic to many collectors.
Type Set: A collection of one coin for each denomination and/or a particular
design.
Ask Price: The selling price a dealer offers.
Bid Price: The price a dealer pays for bullion or coins.
Bullion: Precious metals like platinum, gold or silver in the form of bars or other
storage shapes. Bullion coins are made of these metals, too.
Collector Coin, Historic Coin, or Numismatic Coin: A coin whose value is
based on rarity, demand, condition, and mintage; in fact, it may be worth more
than its bullion value.
Melt Value: The basic intrinsic bullion value of a coin if it were melted and
sold.
Premium: The amount by which the market value of a gold coin or bar exceeds
the actual value of its gold content. The seller can recover part of the premium at
resale.
Spot Price: The current price in the physical market for immediate delivery;
sometimes called the cash price.
Spread: The difference between the buying price and the selling price.
Troy Ounce: The unit of weight for precious metals. One troy ounce equals 480
grains, 1.09711 ounces, or 31.103 grams.
One of the best ways to learn about coins is by joining a forum. We
mentioned one earlier, here are some more:
CoinTalk Forums: These forums are perfect for beginning coin collectors
and expert coin collectors. I really love the community here.
Coin Network: This site is more than just a coin collecting forum. It is a
social network for coin collectors. The Coin Network has a forum section, a blog
post section, and a section to create groups.
Susan Headley’s Coin Forum: Susan Headley is one of the best coin
bloggers. She writes the Susan’s Coins Blog at About.com. If you have not read
Susan’s blog articles, head on over there right now. She is an excellent writer
and very passionate about coins. In addition to being a great writer, Susan has a
great coin collecting forum.
Collector’s Universe Forums: Collector’s Universe does not just cater to
coin collectors. However, this forum does have an active coin collector
community.
Another great forum: www.Coinpeople.com
 How To Start Collecting
The best way to learn about coins, even if you have no intention of
actually collecting, but want to increase your understanding so your investment
strategies can be more fruitful, is to get your hands on some and build a small
collection. One way to do this is to pick a coin denomination that is easy to work
with, costs little, and can be found easily so you are able to complete a set.
Several possibilities come to mind: Lincoln Pennies, Jefferson Nickels and
Ancient Coins. Ancient coins are harder to find than pennies and nickels, but are
so fascinating that you should consider collecting them. I will show you how.
Of the three listed I suggest Jefferson Nickels. It is very easy to complete a
set and this will give you confidence and a sense of accomplishment. You will
learn a lot about coins in the process. The Jefferson Nickel came into existence
in 1938 to replace the Buffalo Nickel. The most valuable coins are only worth $3
- $15 in good condition, so completing a set is easy and it may require some
investing, but not much. Many of the coins can be found in change. Let’s look at
the type of nickels you may come across:

1938 – 2003 Design (Jefferson front, Monticello back)

2004 - 2005 Design (Westward Journey Series)

 2006 – Present (Monticello on reverse again)

The Red Book lists all the dates in the series including some error coins,
which are hard to find, and can be expensive, but should be mentioned. We will
look at the errors later. A good way to get started is to buy a coin folder that
holds the nickels you will be looking for. Several companies make folders:
Whitman and H E Harris make folders. Whitman is the cheapest and best for
getting started.
The Whitman Folder below can be purchased online for as little as $2 used
and $3-4 new from Amazon and most major retailers. Three folders are needed
for the entire Jefferson Nickel Series.
 The Warman folder below can be purchased for $4.99 online. It is
designed for children and is loaded with educational facts. Amazon has it.

You will notice when you examine the Red Book that there are dates listed
that will not be in the coin folders. These are coins that have errors on them, and
some coins (not errors) are only minted in special sets and not released into
circulation. They show up in change upon occasion, but are not listed in the coin
folders. Don’t worry about these error and special set dates. Stay focused on the
coins listed in the folders. How then does one find the coins to put into the
folder?
Besides looking through pocket change, the best way to get your hands on
large numbers of nickels is to order a box from the bank. Some banks charge you
to do this, some don’t. If you have a good working relationship with your bank
they will not charge you. Chase, Compass and Citibank are pretty good about
this. Each branch is different, so shop around. How then does one order a box of
nickels?
Tell your bank to order a box of nickels (not new coins) and they will call
you when it comes in, usually three days. You only pay for it when it comes in.
A box of nickels holds 50 rolls, $2 each, for a total of $100 and weighs 22
pounds (heavy). This weight is a dead weight so be careful handling them. They
are much heavier than you think.
You have two options when opening these rolls. One is to reuse the roll
wrappers by prying one end open carefully with a small flat screw driver. Or, ask
your bank for plastic deposit bags. You can dump all the coins into them and
mark it with the amount and your bank account number for redeposit (some
banks charge for these – they cost the bank about 75 cents each). My bank gives
them to me for free.

It is important to know about the metal composition of nickels because at

times they are worth a lot more than 5 cents. A standard nickel is 25% nickel and
75% copper. “War Nickels” (mid-1942 to 1945) are 56% copper, 35% silver,
and 9% manganese. Silver nickels contain 0.05626 troy ounces of silver.
When the price of copper and or nickel rises the actual value of a nickel is
more than 5 cents. When this happens people hoard them for resale. All wartime
nickels are worth more than 5 cents because of their silver content. The web site
coinflation shows them to be worth $1.14 each (June 2014).
http://www.coinflation.com/silver_coin_values.html
 Any coins found with “S” mint marks should be saved and all silver coins
should be saved (the coin folder has spaces for certain coins, no spaces for newer
“S” coins or error coins).
Wartime silver nickels have a mint mark above the dome, see the letter
“P” below. It could be a “D” for Denver or an “S” for San Francisco or a “P” for
Philadelphia, the cities that minted the coins.

In order to properly identify your Jefferson Nickels that you find it is

important to know where the mint marks or letters indicating where the coins
were made are located. It can be confusing.
Located from 1938 to 1964 to the right of Monticello, except for “wartime
nickels” which have a large mint mark above Monticello shown above (no mint
marks used from 1965 to 1967).

From 1968 to 2004, slightly clockwise from the last digit of the date.
In 2005, under “Liberty”.

Since 2006, under the date. Philadelphia Mint specimens before 1980 lack a mint
mark, except for wartime nickels, which have a P for Philadelphia, if struck
there.

When you go through the coin rolls start by looking at the dates and mint
marks. As you find coins to fill the slots in the coin folder make sure you have
your gloves on. Coins are very dirty. If you find a duplicate coin for a coin
already placed in the folder, replace the old one with the new one, if the new one
is in better condition, and keep doing this for all the coins. Yes it is a lot of work,
but worth the effort.
Any coins that seem different in some way should be saved, and as stated
before, all silver and newer “S” coins should be saved as they have some value.
Check the Red Book for coin values and coinflation for silver and copper-nickel
values. When a nickel is worth more than a nickel you should save them.
As you fill the slots you will notice that the empty spaces typically hold
the harder to find coins. As you can see in the image below the 1938 D and 1938
S slots are empty. They were minted in low quantities compared to the other
coins and therefore are more difficult to find. At some point you might consider
purchasing some of these missing coins in order to complete your set. Ebay is a
good place to buy coins. We will look at this subject in a future chapter.
The 1938D and 1938S are missing. Notice the low mintage figures of 4.1 and
5.4 million.
 Error Coins Can Be Very Valuable
When you start searching for Jefferson Nickels you will immediately
notice that the Red Book lists error coins along with the coins you will search for
to fill your coin folder. The coin folder has no slots for error coins. Because they
have value, I suggest looking for them while searching through rolls of nickels
and other coins.
The Red Book mentions eight nickel error types, but if you look at Ken
Potters book Strike It Rick With Pocket Change he lists thirty error types worth
looking for. He states that there are many more, but they are minor in nature. So
where does one begin? What does an error coin look like and which ones are
worth looking for without spending hours looking at each coin? There is no easy
answer, but a good starting point is to look for the eight mentioned in the Red
Book and one mentioned on the PCGS web site, the speared bison, for a total of
nine.
Let’s look at the nine error coins in some detail so you can easily spot
them. The Red Book suggests a value for them. The speared bison, not
mentioned in the Red Book, is worth $60+. Get out your magnifying loupe – you
will need it.
The first error to look for is the 1939 Double Monticello:

You can clearly see the doubling of the letters: O – V – N – S. It is worth $75 or
more – value depends upon coin condition.

The 1942D: D/D Horizontal D. The mint mark shows up twice – one over the
other. The top “D” is vertical and the bottom “D” is horizontal. It is worth from
$75 on up.

1943P: 3 over 2. This one is hard to spot - a faint 2 is present under the 3. It is
worth $50 on up.
1943P: Double Eye. There is some doubling on the date and letters and the eye –
hard coin to spot. It is worth $25 on up.

1945P: DDR (Double Die Reverse). You should notice doubling on letters. It is
worth $20 and up.
1949D: D over S. It is hard to see this one. It is worth $150 on up.

1954S: S over D. It is worth $26 on up.

1955D: D over S. It is worth $36 on up.

2005D: Speared Bison. It is worth $60 on up.

 The easiest way to remember these errors is to make a list of them and
keep it handy when looking at the nickels.

• 1939 Double Monticello

• 1942D: D over horizontal D
• 1943D: Double Obverse eye and letters doubled
• 1943: 3 over 2
• 1945D: Double Reverse
• 1949D: D over S
• 1954S: S over D
• 1955D: D over S
• 2005D: Speared Bison

Please keep in mind the fact that error coins can occur at any time on any
coin. We looked at nine errors common to the Jefferson Nickel. However, there
are some errors that occur when the coin is minted that affect the appearance of
the coin, and therefore, can be found at any time on any coin. In other words, the
same error may exist on many denominations, pennies, nickels, dimes, etc...
These errors are very noticeable. You can easily see them without any
type of magnification. Let’s take a few minutes and look at some of them on
Jefferson Nickels.
Any coin can suffer from these mishaps. The value of these error coins ranges
from a few dollars to thousands, depending upon the coin and the error.
This web site gives some values for these errors, also check eBay:
http://coinsite.com/us-error-coin-values/

A rotated reverse or die rotation results in a reverse not being vertical with
 the front or obverse of the coin - when you flip a coin over the back should
be in the same vertical position as the front

The more the coin is rotated the greater the value – just flip each coin over
to check for this

A clip error occurs when a new blank coin is punched from a piece of
metal that already had a hole in it from previous use.

Off center stikes – coin blank was not placed in collar properly.

Double strikes – coin imprinted more than once.

 Lamination error – top layer coming off or not placed on coin properly.

Jefferson Nickel coin blank. Incomplete coin or coin missed its mark, the
blank metal onto which a coin is pressed had the rim raised (now called a
planchet), but the final imprinting of the coin was never done.

Broadstrike: When a perfectly centered planchet is struck out-of-collar, it

expands evenly in all directions. This error can be called a “centered
broadstrike”. However, since the majority of broadstrikes are centered, hobbyists
usually refer to it simply as a broadstrike. If the planchet is not well-centered,
but the design remains complete on both faces, the error is called an “uncentered
broadstrike”.

Dies and Cuds: Extra metal – many variations of this error type. It occurs
when the die breaks and extra metal is placed on the coin.

One of the best web sites ever developed on error coins is listed below:
http://www.error-ref.com/index-of-entries.html

This site lists every possible error by name and provides detailed pictures.
It is designed for the advanced collector, but worth taking a look at and having
as a reference.
Once you look at this site you realize that the error topic in and of itself
can become a life time pursuit.
 How To Grade Coins
When you start collecting nickels you will notice some are worn out and
some look new. As you can imagine, the condition of a coin affects its value. So,
to determine value we need a point of reference. The Red Book tells us general
values for each coin type based upon a condition that it describes for each coin
series.
This image below from the Red Book shows the grades or conditions in
relation to the Jefferson Nickel, making this information very valuable for the
beginner. It provides a reference point to help determine the condition of the
nickels you find.

There is a standard that has been developed to help us decide what the
condition or grade is. On a 70-point grading scale coins are assigned a numeric
value. It is called the Sheldon Scale. The Sheldon Scale ranges from a grade of
Poor (P-1) to Perfect Mint State (MS-70.) Grades are usually assigned at key
points on this scale, with the most commonly used points being: (information
from about.com)
(P-1) Poor - Barely identifiable; must have date and mintmark, otherwise pretty
thrashed.
(FR-2) Fair - Worn almost smooth but lacking the damage Poor coins have.
(G-4) Good - Heavily worn such that inscriptions merge into the rims in places;
details are mostly gone.
(VG-8) Very Good - Very worn, but all major design elements are clear, if faint.
Little if any central detail.
(F-12) Fine - Very worn, but wear is even and overall design elements stand out
boldly. Almost fully-separated rims.
(VF-20) Very Fine - Moderately worn, with some finer details remaining. All
letters of LIBERTY, (if present,) should be readable. Full, clean rims.
(EF-40) Extremely Fine - Lightly worn; all devices are clear, major devices
bold.
(AU-50) About Uncirculated - Slight traces of wear on high points; may have
contact marks and little eye appeal.
(AU-58) Very Choice About Uncirculated - - Slightest hints of wear marks, no
major contact marks, almost full luster, and positive eye appeal.
(MS-60) Mint State Basal - Strictly uncirculated but that’s all; ugly coin with
no luster, obvious contact marks, etc.
(MS-63) Mint State Acceptable - Uncirculated, but with contact marks and
nicks, slightly impaired luster, overall basically appealing appearance. Strike is
average to weak.
(MS-65) Mint State Choice - Uncirculated with strong luster, very few contact
marks, excellent eye appeal. Strike is above average.
(MS-68) Mint State Premium Quality - Uncirculated with perfect luster, no
visible contact marks to the naked eye, exceptional eye appeal. Strike is sharp
and attractive.
(MS-69) Mint State All-But-Perfect - Uncirculated with perfect luster, sharp,
attractive strike, and very exceptional eye appeal. A perfect coin except for
microscopic flaws (under 8x magnification) in planchet, strike, or contact marks.
(MS-70) Mint State Perfect - The perfect coin. There are no microscopic flaws
visible to 8x, the strike is sharp, perfectly-centered, and on a flawless planchet.
Bright, full, original luster and outstanding eye appeal.

A simplified version may be more helpful:

Prefix Numerical Grade Description

MS 60–70 Mint State (Uncirculated)
 MS 60–70 Mint State (Uncirculated)
AU 50, 53, 55, 58 About Uncirculated
XF 40, 45 Extremely Fine
VF 20, 25, 30, 35 Very Fine
F 12, 15 Fine
VG 8, 10 Very Good
G 4, 6 Good
AG 3 About Good
FA 2 Fair
PR 1 Poor

Valuable coins, worth $100 or more are often sent to grading companies
for certification. Certified coins sell for much more money than the same coin
that is not certified, and it lets the seller and buyer know that the coin is not a
fake. Buying certified coins assures us that we are getting what we pay for.
However, there are certified fakes out there, but not many.
Let’s look at some nickels and try to determine their grade or condition.
The Red Book description for a VG-8 Very Good coin shows the 2nd
pillar from the right nearly gone, as is the case for the coin below. The other
three pillars are visible but worn, so this coin is Very Good or perhaps one grade
higher, Fine.

The Red Book states a coin that is AU-50, about uncirculated has traces of light
wear on only high points of the design. Half of the mint luster is present. Notice
the mint luster.
 How To Handle Coins
It is important to know how to handle coins. Coins are dirty, so wearing
gloves helps. Handling valuable coins and special coins should be spoken about.
Some coins can be damaged just by breathing on them, and some can be
damaged by touching them. This results in lowering their value. Valuable coins
should never be cleaned by you, only by professionals.
Proof coins, for example, if for some reason need to be taken out of their
plastic covers, can be damaged by breathing on them and touching them. Years
ago coin holders were not properly made and coins became damaged when
stored in them. This problem has been corrected today. The chemical in the
holder (usually a card board holder) reacted with the coin, producing a
discoloring of the coin or a toning of the coin. Toned coins can have value. The
reason I mention this subject is due to the fact that you may come across a very
valuable coin and you should only handle it with cotton gloves to maintain its
value, no cleaning. Please note: a valuable coin after improper cleaning can be
reduced in worth by 90%.
Common coins can be cleaned with soap and water, but no abrasive
material or cleanser should be used. Use your fingers to soak the coin in soap
and water, do one coin at a time. Rub the coin with your fingers, then rinse the
soap and water off with distilled water then place the coin on a towel to dry
(don’t use your nails).
Because you may come across a toned or sometimes called rainbow toned
coin it is important to examine this subject in some detail. Coins react to
chemicals around them, either by touch or by exposure through the air. Believe it
or not some toned or rainbow toned coins actually are more valuable than plain
coins. It depends on the coin and how they look. Never buy a toned coin unless it
is certified. Many dishonest sellers bake coins in the oven and produce fake
tones.
It is very important that you understand toning. If you clean a toned coin
you can take a coin worth maybe $30 - $50 and turn it back into just a quarter,
assuming it is a 25 cent piece you just cleaned. Recently PCGS, the coin grading
company, tweeted this picture of a Silver Eagle featuring spectacular concentric
rainbow toning.
Certified by PCGS – a red coin like this can sell for hundreds and sometimes
thousands of dollars.

Another cleaning method:

Soak the coin in vinegar. If unsightly tarnish, dirt or rust deposits, or other
contaminants remain on the coin after a thorough rinse, soak the coin for
anywhere from a few seconds to a few minutes. For gold coins, soaking in very
hot soapy water works the best. For old pennies, soak the coin in vinegar for at
least 24 hours. Silver, copper, and nickel-clad coins can be soaked in distilled
water or, to remove tough stains, white vinegar. A 6-minute soak in lemon juice
may also be used on silver coins. This will not only protect the coin but it will
help give the coin a finish at the end of the cleaning. Always rinse with distilled
water and let dry on a clean towel after any cleaning method.
 Fake Coins
Unfortunately it seems that money is more important than ethics, and
many places on earth produce vast numbers of fake coins. For example, Lebanon
produces fake pre-1933 gold coins. In fact, it has gotten so bad that they even
fake certification. They copy the PCGS plastic holder, fake the grading and
claim the coin is real when it is not. Fortunately most certified coins are not fake.
Almost every U.S. Mint gold coin has been faked. Many are made in the
Middle East. What is so scary about this fake shown below is that it is made of
gold and has the same weight as the real coin on the right. Let’s look at the
reason it is fake.

There is moderate softness on both sides but primarily at the digits and
letters, which can appear almost cartoonish. There are also a number of raised
lines, often seen on fakes, by the denticles, especially on the reverse. A few
particularly noticeable raised lines can be seen above the D in UNITED. These
are almost never seen on genuine specimens. The denticles are the many little
squares around the coin next to the rim. Notice the metal above the D, the extra
metal next to the denticle. (Looks like streaks)
 Chinese made fake silver dollars “Morgan”. The easiest way to spot a fake
coin is just by looking at it. Most fakes look perfect, no ware, plastic like, hot off
the press.

Photos from Jinghua Shei.

 Most fake coins will not weigh true. The Red Book tells you the weight of
every coin so you can use this as a guide. Many fake coins have incorrect
information on them, check the date and mint mark of the coin, and look it up in
the Red Book. If the coin in question has a mint mark in the wrong place, the
wrong type of mint mark or a date that is not listed in the Red Book, be careful,
it may be a fake.
Fake Morgan Silver Dollars and fake older large cent pennies are
becoming more common due to the large scale production runs from China and
other places. The acid test is fine for silver coins if you can hold them before
purchasing. But buying coins online can present challenges, since you cannot
test them. I will list some steps to help protect yourself. Keep in mind the fact
that pictures of coins online from bad dealers may not show the actual coin being
sold. Here are some web sites that you can look at to help determine the
authenticity of a coin, but this information is usually useful after you buy, not
before.

http://coinauctionshelp.com/Counterfeit_Silver_Dollars_Fake_Trade_Dollars_Fak
e_Morgan_Dollar.html#.U8PvkEDb4z4

http://www.silver-coins.org/counterfeit_dollars.html

http://meridiancoin.com/contemporary-fake-silver-dollar-guide/
 http://www.ngccoin.com/news/viewarticle.aspx?
IDArticle=3526&counterfeit-morgan-dolla r-fake

If you Google fake coins, fake Morgans, fake silver you will discover
more valuable information. You will never end up with a fake coin if you:

• Buy only from a reputable dealer – red flag are private auctions.
• Buy only slabbed or certified coins (PCGS or NGC).

If you are going to spend over $50 on a coin make sure it is certified.
Never buy from a dealer that sells slabbed and unslabbed coins – this is a red
flag. I see so many dealers online who have a few certified coins and a bunch of
coins that have not been graded. I think they do this to convince you they are
reputable. Be very careful.

• Many fake coins look like plastic – they look too perfect to be real.
• Many eBay dealers sell fake coins – just look at the pictures.

Another big red flag are dealers who sell coins every week and have large
numbers of great coins for sale. It is impossible to have this many good coins
unless they inherited them or got their hands on a giant batch of coins from an
estate. Even then, I would be very cautious. Probably buying fakes from China.

• Any coin that is worth way more than the asking price is usually fake.

Never buy a coin that you cannot see clearly and in great detail – even a
high grade coin may not look so good after you buy it. (I have seen coins on
eBay selling for a fraction of their true value – just by looking at them you can
tell they are fake).
Another type of fake occurs when an actual coin is altered (the coin is not
fake but has been manipulated in some way). A very good article that talks about
fake (changed) coins that were sold on eBay is shown below:

http://www.ebay.com/gds/Coin-Fake-Detection-1909-S-VDB-Lincoln-
Cent-/10000000015293333/g.html

Let’s look at an altered coin:

The highly sought after 1922 penny can be made by removing the “D”
from under the date so it appears to be a 1922 coin.
 When buying online from sites like eBay (this does not apply to well
known coin auction sites mentioned earlier), it is advisable to make one small
purchase from the dealer, and when you get the coin, pay to have it certified.
This way you know they are selling genuine merchandise. It is better to pay $30
before shelling out hundreds only to find out you have fakes. You can email me
at any time to look at coins in question. This topic will be addressed again in the
chapter called: Buying Coins.
 Children and Pennies
Penny collecting is another great way to start learning about coins, and it
is a great way to introduce children to this fantastic hobby. What is so sad, is that
coin collecting does not appeal to the younger generation because technology
offers more pizzazz. Just go to a coin club meeting in any town. There are no
young people in attendance. But the good news is if you introduce your children
or a friend’s or relative’s child to penny collecting they will love it. The
approach you take is what matters.
The best way for kids to get started is with the Warman’s Lincoln Cents
For Kids Folder. Amazon has it. We mentioned this before.

It is an easy book to fill because it starts in 1979, and it is loaded with fun
facts. When working with children they must wear gloves, and very young
children should not work with coins because they are a choking hazard. I like to
order a box of pennies. It is only $25 and contains 2500 coins (caution – it
weighs 14 pounds and is dead weight). Lincoln pennies were minted from 1909
– today (see the Red Book).
 There is so much you can do with pennies. You can turn the hunt into a
game for your kids. They can practice their math skills by calculating the age of
pennies they find. See who can find the oldest coin. They will find foreign coins,
dimes, shiny new pennies and copper pennies that are worth 2 cents each – see
coinflation.com for current rates. You can even find Indian Head pennies, but it
takes patience.
Copper pennies were minted from 1909 – 1982 (some 1982 pennies are
not copper so you have to weigh them to be sure). A copper penny weighs 3.11
grams. A zinc penny (1982 – present) weighs 2.5 grams. Copper is worth about
2 cents per penny so when children find copper pennies they are doubling their
money immediately. This gets them excited. You will find many copper pennies
in a box of 2500 coins. This 1974 copper penny shown below weighs 3.08
grams. We know this because of its date.

This zinc penny (2000D) above, only weighs 2.49 grams. Some pennies
weigh a little more or less than others, depending upon how worn out they are.
In 1943 the U.S. Mint made pennies out of steel instead of copper. Known
as steel war penny or steelie, it had the same design as the copper penny. Due to
wartime needs of copper for use in ammunition and other military equipment
during World War II, the U.S. Mint researched various ways to limit dependence
and meet conservation goals on copper usage. After trying out several substitutes
(ranging from other metals to plastics) to replace the then-standard bronze alloy
(95 % copper and five % tin and zinc), the one-cent coin was minted in zinc-
coated steel. This alloy caused the new coins to be magnetic and 13% lighter.
They were struck at all three mints: Philadelphia, Denver, and San Francisco. As
with the bronze cents, coins from the latter two sites have respectively “D” and
“S” mint marks below the date.
Steel pennies are easy to find and fun to collect. In really good condition
(mint) they can easily bring $20 or more. You will find them when looking at
penny rolls. Many, however, were destroyed by the government after the war.
Notice the gray steel color of the 1943 steel penny on the right compared to the
copper penny on the left.

Once children get hooked on coins they will develop a lifelong passion for
a hobby that can actually help pay for their education. The Red Book shows the
value of pennies, and it shows some error coins as well. My Penny Treasure
ebook sold on Amazon lists penny coin errors.
A complete Lincoln Penny set in a very high grade can be worth well over
$100,000.
 The world’s most expensive penny, a Lincoln cent struck in the wrong
metal at the Denver Mint in 1943, sold for a world’s record price of $1,700,000
in September 2010:

The Lincoln Penny Series has great appeal to any age group, and it is one
of the most sought after coin series in the world of Numismatics. The Whitman
Coin Folders can also serve as a starting point for children or for anyone that
wants to learn about coins. The next image shows the Whitman Folder Series.
Also consider the Harris Folders as well, also made by Whitman. Most large
department stores carry these folders. Amazon, as well as other online stores,
have them for less money. A good price is $2.99.

Penny error coins are well worthy of your time and study, and the Red
Book lists some of them. Many are quite valuable, and the major ones can be
found when looking through your pennies. Some examples are shown below.
 Coin Roll Hunting
We briefly mentioned coin rolls with respect to Lincoln Head Pennies and
Jefferson Nickels. However, it is important to cover this topic again. I will divide
this chapter into two parts, coin roll hunting and buying coin rolls. I could cover
the latter, buying coin rolls, in one word: DON’T, but you will then wonder why.
Coin roll hunting refers to the act of opening up coin rolls and looking at
the enclosed coins to find a particular coin(s). It could be for the purpose of
finding copper pennies, buffalo nickels, silver coins and much more. There is so
much mentioned about the topic, especially on YouTube. Most of what you read
or see is inaccurate and misleading.
The YouTube videos often mention the frustrations associated with
looking at rolled coins. They can’t find any silver or they look for certain dates
and have little or no success. The problem is very simple. They do not know
what they are doing. The only way to be successful at finding silver is by
looking through half dollar rolls for 90% and 40% silver coins. And at the same
time you should look for half dollar error coins so you have the added bonus of
errors along side silver. When you look at half dollars, you will find a lot of
1964 Kennedy Halves because people do not realize that they are 90% silver,
and many of them are dirty and hard to spot. Looking for silver with dime and
quarter rolls is a waste of time. Looking for quarter errors is not a waste of time.
For detailed information on this subject please check out my course: “Learn
How Power Sellers Make Millions On eBay” found on www.Udemy.com.
The other topic of interest is buying coin rolls online, especially on eBay.
In one word, don’t. Almost all the rolls on eBay are fake. They have been
manipulated by the seller to appear in such a way that the buyer is tempted to
buy or bid because of the end coins that have some value. How is this done?
It is very simple. Just buy a coin crimping machine and some old looking
wrappers and put a few Indian Head Pennies at each end and you are in business.
Here’s a machine on Amazon that could make big money if you were unethical.
 Buying unsearched rolls:

A great article from eBay illustrates my point:

At any given time, eBay has a few hundred auctions for unsearched rolls.
The new fad on eBay is bank wrapped rolls showing a key or semi-key date on
the end, and the old fad is pointing to their (the seller’s) feedback on how many
key dates that have been found in the rolls they are selling. Most coins found in
bank wrapped rolls are common and well circulated coins. Shot gun wrapped
rolls can be opened, searched, then recrimped as if it came from a bank. The
same rolls can be searched and a key date put on the end, then recrimped as
unsearched.
For example, let’s say I have a shot gun roll of Lincoln Wheat Cents, and
all are common dates. So, I buy a 1909-S key date for $125, (this is the actual
book value of the coin in good condition), and I replace the end coin with the
1909-S Lincoln. Also, I know that a 1909-S with the VDB on the back is worth
$900, and I also know that you can’t see if the 1909-S on the end of the
recrimped roll has a VDB or not. Now I start my auction on eBay with a
statement “Unsearched shotgun roll with a 1909-S showing”, and a question “Is
this a 1909-S VDB?”.
I sit back and watch my $125 investment sell for over $255.00 because
some buyers wanted to risk the chance to discover a 1909-S VDB. So, they pay
$130 more than the roll is worth, and my paypal account grows over a hundred
dollars more. Now I’m thinking, “What if I did this with 10 rolls? I could make
well over a thousand dollars in a week!” To top it all off, other eBay sellers see
my success and copy my act. Now, it’s a huge problem. Don’t get into “lottery”
wars like this with other bidders. It’s never worth it!
 Let’s look at one of these tempting eBay rolls: Unbelievable, a roll of
pennies with an Indian Head at one end probably worth $2 is selling for $42, and
the bidding hasn’t ended yet.

Look at the seller’s feedback, yet people are still bidding:

 Rare Coins
The subject of rare coins is of vital interest. We mentioned the term
several times before and provided a definition:
Coins that continually go up in value over time and are hard to find and or
buy because they are scarce, and when found can only be purchased for much
more than their face value, is probably a good definition for “rare coins”.
So logic tells us that coins, like most pre-1933 U.S. Mint gold coins, the
Double Eagles e.g., are not rare, because they are not scarce. I can prove this to
you, and it bears repeating, especially when you consider that thousands
continue to buy these coins at prices beyond what they will ever be worth.
 So to claim that Double Eagles in mint states are rare is a completely
misleading statement. Advertising pre-1933 Gold Double Eagles as rare coins
and using the rare coin index as a point of reference indicating the ROI of
around 11% over time is a complete misinterpretation of the facts. Please note:
reliable coin dealers and bullion dealers are going with the flow, trying to make
a buck. But I think they are somewhat confused about what is rare and what is
not rare.
The rare coin index as a term, has many meanings. Its interpretation is a
result of what each coin dealer or coin information company or investment
journal implies it to be:
For example, the Wall Street Journal refers to it this way:
“For the past several years, Coin World has provided a “Classic U.S.
Rarities Key-Date Investment Index” for use in the Wall Street Journal’s
investment scoreboard.
The scoreboard tracks investment groups in the categories of stocks,
bonds, mutual funds, bank instruments (bank certificates of deposit and money
market accounts), money market funds, precious metals and residential real
estate. Coins are listed in the category, “rare coins, top investment grade, in the
year-end survey.” (Steve Roach)

Here is the index they refer to: (rare coins listed on bottom at 10.30%).

In addition to the Wall Street Journal, there are many world class coin
companies, like PCGS that have their own coin index. PCGS has the PCGS3000.
Let’s look at it in some detail:
 The figures in their charts represent an average sale of 3000 rare coins
over a period of time. It is based upon prices they monitor and have first hand
knowledge of. As you can see in this 44 year chart, rare coin sale prices have
increased dramatically. The coins on the lists can be found here:
http://www.pcgs.com/prices/PCGS3000.aspx
Let’s address the question again, what are rare coins? To begin with, there
is no way to invest in the rare coin index because the coins listed are so rare and
hard to find that you cannot get your hands on them easily or invest in them as if
they are sitting somewhere like a stock or fund. You as a collector, can learn
what types of coins are rare, and if money permits, begin buying them in the
hopes that they will appreciate about 11% over time, which is what their track
record indicates.
 Another example of a rare coin.

The 1909S VDB Lincoln Penny is a key date in the series and one in this
condition is rare. Based upon what you have learned, you should not consider a
coin like this that has not been certified by one of the major coin grading
companies. Why didn’t the seller spend $30 - $40 for certification? I can tell by
looking at the coin, based upon an earlier link in the course, that it is real, but I
would not take a chance with that much money on the line. The selling price of
$910, is far less than the $1500 plus it would have generated had it been graded!
Let’s refine the definition of rare coins now that we have looked at some
more coins that I consider rare:
Coins that continually and (dramatically) go up in value over time and are
hard to find or buy because they are scarce, and when found can only be
purchased for much more than their face value, and have been certified by a
major grading company, and most likely are selling for a bare minimum of $300
(most rare coins sell for much more than that), and coins that typically are very
old (more than 50 years). Error coins are usually not considered to be rare coins
but there are some exceptions.
Major investors in rare coins, such as foreign billionaires, typically buy
coins worth millions of dollars knowing that their investment will climb faster
than any other asset class. You, however, can enter the rare coin arena with
purchases in the $300 -$1000 range (the low end of the rare coin marketplace),
and by running ads and hoping to locate a coin that way.
 Let’s go into the PCGS rare coin index and look at some rare coins so you
can get a better feel for ones that the experts consider “rare”. I will examine
coins on the low dollar end of the index. The next image captures some most
people are familiar with, the Lincoln Head Penny:

You can see from this chart and from these prices that you can enter the
rare coin market with small investments like the ones illustrated here. ($385 -
$1050 - $1500)
 Special Coins
Each year the U.S. Mint makes a limited number of special coins that it
sells directly to the public. Examples include: Proof Sets, Mint Sets and
Commemoratives. They are usually sold for a premium price because of their
unique qualities, and you can sign up to have them sent to you on a regular basis,
like an auto ship program. Many who invest in them do so with the expectation
of future financial gain, and some just love collecting them.
Proof Sets: Proof refers to the way a coin is made and not a coin’s
condition. Proof coins are usually sold in sets each year and sold in a protective
casing to maintain their beautiful appearance. They are sonically sealed in their
case and inspected for quality by U.S. Mint employees wearing gloves (they are
not air tight). I have found numerous proof coins in change, apparently someone
opened the set to cash in the coins not knowing their value while in the holder.
Proofs are commonly known to have mirror like surfaces, but other surface types
have been made: Frosted and Matte Proofs are examples.
 This beautiful 1979S Proof Set has a penny, nickel, dime, quarter, half
dollar and dollar coin in it. What is interesting about this set, and this point
illustrates how these sets, which are commonly collected for investment
purposes, are mistakenly valued, is its current value of $6. But it cost $9, 35
years ago. Had you invested $9 at 1% simple interest for 35 years you would
have $12.75 today.
Each year proof sets are minted, and over the years the sets have contained
different coin types. The Red Book has a complete list of them. Because of their
beauty, they are considered collectible, but the notion that they will increase in
value of time is subject to debate. Some do, but most don’t. Let’s examine this
issue in some detail. It has been my experience that owners of proof sets have a
misguided sense of their value.
Many proof sets do not increase in value over time. In fact they decrease.
Some do appreciate, but at such a slow rate, that they should not be thought of as
an investment, just a collectible. The PCGS proof index for the last 10 years
bears this out: it shows a minor price increase over a long period of time. There
are better ways to invest your money.
 Mint Sets: Just like proof sets, mint sets are packaged in containers but
not sealed like proof sets are. They contain uncirculated, not proof, coins. Most
of them are worth less than their original price.
Commemorative coins are authorized by Congress to celebrate and honor
historic events, individuals, and places. The coins are legal tender; however, they
are not minted for general circulation. Commemorative coins are produced by
the United States Mint in limited quantity and are only available for a limited
time before minting ceases. Money raised by the sale of these coins helps worthy
causes , museums, e.g.. Examples of some commemorative coins recently sold
by the U.S. mint:
 Most coins of this type have little future value unless mintage was very
small or some other anomaly takes place. In the modern era, the two most
valuable coins are the 1997 Jackie Robinson $5 Gold Coin and the 2000 $10
Library of Congress bi-metallic gold and platinum coin. The Jackie Robinson
coin, commemorating Major League Baseball’s first black player, achieved just
six percent of its authorized minting. The 5,174 pieces that were issued are now
worth an estimated $3,500 to $6,000. Just 7,261 of the Library of Congress coins
were minted, now fetching about $3,750 to $5,200.
This 50th anniversary coin to celebrate the 1964 Civil Rights Act may not
have future value because of the large quantity being minted, but for those of us
who were alive then it has special meaning.
 The U.S. Mint also makes medals that can be purchased. Some examples:

Commemorative coins and some of the other coins mentioned are a great
place to start if you are new to the hobby of coin collecting. Each type has a
unique design. Participating allows collectors to invest in precious metals (not all
of these coins are made of precious metals) that double as legal tender.
Purchasing these coins as soon as they are released may turn out to be a valuable
investment as time reveals the coin’s eventual worth. However, most over time
do not appreciate much.
 Ancient Coins
“Ancient Coins” is a topic that may be of interest to the first time collector
and also to the experienced coin enthusiast who may not know much about this
subject. The world of ancient coins is now open to everyone because of the
internet. Simply go onto eBay, for example, and you can find hundreds of these
coins for sale. What is an ancient coin?
An ancient coin is a coin minted many years before modern civilization
began, usually associated with ancient Greece and Rome and believed to be first
minted at least 1000 years before the birth of Christ, possibly in China.
Examples of ancient coins include: Chinese coins, Roman coins, Greek coins,
Islamic coins, Byzantine coins and Egyptian coins. For a brief but interesting
history of very ancient coins, the first coins minted, please read this:
http://www.ancient.eu.com/coinage/
The subject of ancient coins is very complex and very controversial. It
seems that one can never be sure that the coin they buy is real or fake. According
to the FBI, 50% of the coinage, especially those sold online, are fake. Even the
best dealers have been accused of selling fake coins and overcharging. Do not be
dismayed though. If you proceed with caution and follow basic rules you will be
okay.
We spoke about buying coins before and buying from reputable dealers.
This concept applies to ancient coins as well. Ancient coins are fascinating and a
fun way to start collecting coins and a great add on to an existing collection.
Literally millions of these coins exist and are buried in the ground. There were
no banks in ancient times so they were buried. I have assembled a great deal of
information for you, mainly in the form of links to web sites that are packed with
facts on this subject, but we will cover the basics.
 As you can imagine you do not go to the bank and order ancient coins or
contact your favorite coin dealer and order them. They are discovered in a few
parts of the world by digging and detecting, mainly in Europe and the Middle
East, and then show up for sale on the internet, usually for auction.
As you can see from the history of just one gold coin shown above, this
type of collectible can be more compelling and has so much more history than
say a typical U.S. Mint coin, whose design may actually be based upon ancient
Greek coinage. Imagine touching a coin from the time of Alexander the Great,
Socrates, Plato, Aristotle, Hippocrates, Caesar and Jesus! In fact it is believed
that many ancient coins depict a very accurate rendering of Christ.

Believed to be the earliest (700 A.D.) numismatic portrait of Christ

 Actual pictures of gold, silver and bronze coins made to depict all the
Roman Emperors. Every time a Roman Emperor came into power a new coin
was made.
Despite their history and beauty, ancient coins can actually be less
expensive than modern coinage. A wide range of prices, from very low (less
than $1) to high exists, as it does with modern coins. I am often asked what is
the most expensive ancient coin? A rare collection of ancient Greek coins, called
the Prospero Collection, fetched a record price of $25 million at an auction in
New York. Included in the collection is a coin which has been regarded as a rare
artistic masterpiece by experts. It features the head of a satyr, a character widely
used in Greek mythology, and was sold for $3.25 million, thereby breaking all
previous world records for an ancient Greek coin.
As with any new endeavor it can be challenging to get started. First and
foremost: read-read-read. Get involved with every forum and link I mention, and
saturate yourself with information. If you start small and proceed slowly you
will help protect yourself.

Ancient coins were made using simple tools:

The basic tools were an oven for heating blanks or “flans,” tongs for
handling hot flans, a table or bench on which an anvil was mounted,
and a pair of dies struck with a heavy hammer to impress the design
into the flan
 into the flan

This ancient Roman coin shows how coins were made

Ancient coins were made from various metals and abbreviations are used
to identify them. Sometimes it is hard to tell from photographs, but there is a
series of abbreviations that let you know what metal you’re dealing with – AE is
Bronze; AR is Silver; AV is Gold, and there is fourth category called Billion
which means either that the coin has a low silver content or that it was washed in
silver. Saying a coin is washed in silver is a little like saying it is silver plated.
What are uncleaned coins? Ancient coins are found in the ground so they
become encrusted with dirt and can erode, so they are referred to as uncleaned or
crusty. The most common variety of uncleaned coins comes from the Balkans,
also referred to as Dacia. They can come from Austria, England, Spain and the
Middle East. Coins from Spain are the most desirable, because the dry climate
has kept them very well preserved.
Both Spanish and Middle Eastern uncleaned coins often possess a patina
highly valued by collectors that has a sandy color and texture. Austrian coins are
generally very interesting as well. British coins can be the most challenging of
uncleaned coins because of the soil conditions in England. The patinas tend to be
more fragile because of the acidic nature of the soil, and are not recommended
for newcomers to uncleaned coins. But they also yield some of the rarest coins
that you will not generally find in the Balkan lots.
Holy land uncleaned coins will surprise you with the variety of different
coins you can find in one lot. They could contain: Greek, Roman, Provincial,
Jewish, Islamic, and Byzantine coins. It was a center for trade and many
different cultures sprang from this area. Holy land uncleaned coin lots will
contain a rich variety of coins! This is a nice way to start if you haven’t found
something you want to focus on; it’s like the appetizer platter at a chain
restaurant - a little bit of everything.
Greek and Byzantine coins are harder to come by, and usually more
expensive than Roman coins. Greek coins, from before and during the early
Roman Empire, tend to be twice as thick as regular uncleaned coins, and the
legends on them are hard to decipher because the text is in Greek and not Latin.
Latin is pretty easy to figure out once you get the hang of it, but Greek remains
elusive because it uses a different alphabet. They are also harder to clean than
Roman coins because their surfaces are often fragile and powdery.

Buying a small lot of uncleaned coins is not a bad way to get your feet
wet, for under $20. If you start out with a minimum purchase and learn how to
clean ancient coins, and then try to identify them you are off to a good start.
Finding a reputable source for uncleaned coins is very challenging. Many good
dealers seem to come and go. Lists I have of recommended dealers seem to out
date themselves very quickly.
Uncleaned coins can be purchased from many sources. They can be found
on eBay, Amazon, vcoins.com and just by searching Google for “uncleaned
coins” or “Roman Coins” or “uncleaned Roman Coins” or “Crusty Coins” or
“Crusty Romans”.
 The next pages provide a list of online resources that you can examine and
investigate. It is very extensive, and will require some time. Please keep in mind
that many of the sources they list as reputable sellers of ancient coins,
particularly uncleaned coins, are outdated. They no longer exist.

Great article on cleaning ancient coins:

http://www.ebay.com/gds/Minimalist-Approach-to-Cleaning-Restoring-
Uncleaned-AncientCoins-/10000000178368748/g.html?
_trksid=p2047675.m2468

Great article on cleaning ancient coins: this person also sells them:
http://www.romancoins.net/cleaning.htm

Another article on cleaning coins:

http://www.forumancientcoins.com/numiswiki/view.asp?
key=complete%20guide %20to%20uncleaned%20coins

Good article on fake coins. Also has some good resources listed:
http://www.mindspring.com/~kroh/Empirecoins/fakes.html

This eBay article provides tips for buying ancient coins on eBay:
http://www.ebay.com/gds/10-Tips-for-Buying-Uncleaned-Ancient-Coins-
/10000000008769720/g.html

This eBay article helps you identify fakes before buying:

http://www.ebay.com/gds/How-to-avoid-buying-fake-ancient-coins-
oneBay-/10000000001336206/g.html

List of genuine eBay sellers, many are no longer active on eBay!

http://www.ebay.com/gds/GENUINE-SELLERS-LIST-OF-
ANCIENTCOINS-ARTEFACTS-/10000000003542741/g.html

Great resources:
http://esty.ancients.info/numis/sitelinks.html (Best link – Best resource)
http://tjbuggey.ancients.info/dealers.html

Another great resource:

http://rg.ancients.info/guide/ancients.html
 A link to a great coin forum that has discussions on ancient coins:
http://www.coincommunity.com/forum/topic.asp?TOPIC_ID=138699
I suggest you join this forum and get involved – it is free.

Let’s make an actual purchase (which I will do on eBay) and proceed with
the cleaning. But before we do, in case you are not too familiar with eBay, I
want to show you how to find an eBay seller by their ID name. Many of the links
I just provided list eBay sellers who they recommend by their eBay name, e.g.
“ancientcaesar”.

Let’s find this eBay seller.

 My order of ancient coins came in from eBay. This photo came from the
eBay listing and shows some detail but not much. I paid a little over $1 per coin.
These two pictures show the front and back of the coins (10 coins total).
The eBayer who sells these coins is: stephengriffin6631 (eBay Name)
He and some others who have good products are: shopday2012 and
tina0116g11.
When the coins arrived it was very difficult to discern any features
because of the crust that accumulated over the years.

Note the relative size of the coins, and how encrusted they are. I took this
picture as soon as they arrived. I was ready to start cleaning with my distilled
water, plastic container and lid.
After a few weeks of distilled water soaking and tooth brushing, some details
begin to emerge on this coin: notice the ear and the profile and the hair style – is
it braids?
 Buying Coins
Buying coins from reputable dealers, like those mentioned with respect to
the U.S. Mint authorized dealer program, helps prevent fraud. Many of the
dealers we listed sell bullion coins and bullion gold and silver. They also
advertise their buy back price; so buying from them helps insure that you can
quickly sell back to them, and at the price they advertise at the time you want to
sell. These dealers typically do not sell rare coins (other than pre-1933 gold
coins, which as you now know are not rare). They do not sell collectible coins
either, such as the coins we want for our coin collection.
Years ago buying coins was a very simple process: either you went to your
local coin shop or you bought from a coin magazine or journal. Now you still
have a few coin shops, and there are some coin magazines, but most buyers look
for sources online. Many come to mind: eBay, Amazon, small coin dealer web
sites, major coin auction sites, craigslist, local online classified sites, forums that
sell coins and smaller coin auction sites. There are also some newer sites like
Ubid, Ebid, Onlineauction and Delcampe. Most of the coins on these newer sites
are either junk or fake.
While eBay has become the de facto standard for coin purchases, I do
want to talk about other options. My experience with smaller coin auction sites
suggests that you can often find good deals on them, but you do not have the
forms of protection that eBay gives buyers such as buyer protection, easy pay
system using PayPal, the ability to check feedback and search history of the
seller, a good quality photo system so you can see the coin detail, a wide
selection, easy and effective search methods and more.
However, with this in mind, you can often find a coin you really want and
need for your collection on these smaller sites and sometimes on local classified.
Some sites to consider: www.vcoins.com. This site has some nice coins
and dealers have to abide by a code of ethics. U.S., Ancient and Foreign coins
are listed. You can sign up for their free newsletter.
Amazon has beefed up its coin listings with its new coin collectibles
section: http://www.amazon.com/Collectible-Coins/b?
ie=UTF8&node=9003130011
You can see that it refers to it as BETA. It has a search tab and many
category selections.
 There are two coin auction companies/coin dealers that also need to be
mentioned. These are the two most important coin companies in the world with
respect to auctioning valuable coins. They also sell coins, typically expensive
coins.

www.ha.com Heritage Auctions is the world’s largest coin dealer and coin
auction house and probably one of the best. You can buy single coins and some
at modest prices. This is a good place to find rare coins, and it is one of the best
bets for selling your valuable coins.

http://www.stacksbowers.com/ Stacks Bowers is another large and well

respected coin dealer-auction house. You can buy coins on this site.

http://www.coincommunity .com/ Coin community is a great forum and

source for finding coins.

Your local coin club is also a great way to buy good quality coins from
people you can trust. I have seen some good ads on Craigslist for coins, so keep
that in mind.
It is important to spend a few minutes talking about a concept that you
must come to understand. The term “Key Dates” is a term that is often used to
describe the key or best coins in a series.
A “Key Date” is a coin or coins from a set of coins or series of coins, such
as the Lincoln Head Penny series, starting in 1909 that is considered very hard to
get and much more expensive than the other coins in the set. There are no pre-
defined definitions for each set. Just look at the Red Book and look at a series
and you will very quickly see the “Key Dates”. The coins with the big prices are
usually the “Key Dates”.
When you start collecting you will soon notice that your coin folder fills
up with the easy to find coins, but the key dates remain elusive. Many collectors
can only fill in the Key Dates by buying them or trading for them. I mention this
subject because of a technique that I have used and recommend to you. I call it
“buying down”.
I am not suggesting that you buy all your coins, but this technique should
be part of your thought process in case you want to try it. It works like this:
I cannot tell you how many times I have seen The Lincoln Penny series,
for example, selling on eBay in very good condition but missing the key dates. I
consider the key dates for the Lincoln Series to be: 1909S, 1909S VDB, 1914D,
1922, 1931S. Sets like these (missing the key dates) in very good condition often
sell for well under $200. Old pennies can be hard to find in change so if you
want to jump start your collection, consider this approach. Buy the coins and
then try to slowly find (buy) the key dates.
The downside to this is that you cannot see the coins close up (sometimes
sellers have good pictures of each coin, but usually not). I trust sellers who sell
sets like these.
Sets like these show up on eBay quite often.
Let’s look at eBay again and mention some basic rules that will help
protect you when purchasing:
• Coins priced over $50 should be slabbed or graded.
• Never buy coins unless you see very clear pictures of the front and back.
• Only buy from a seller that has a very good track record – read their
feedback carefully.
• Look for bargains by searching for auctions that end at odd hours – such
as in late night hours or on days when people are not online much – week
days during the mornings, for example.
• Only buy from sellers that communicate well with you. I always write to
my sellers and ask questions about the coins: How long have you had
them? Where did you get them?
 them? Where did you get them?
I do this not so much because I need these questions answered, but
because I can tell by their answers if I want to do business with them – do they
answer quickly and provide detailed information. I have seen eBay sellers who
answer you in riddles – they try to be vague and often make no sense – they are
hiding something.
If you find a coin that you want to purchase, I suggest you save it or put it
in your watch list and only bid at the last minute. I never place a bid until the
very end. If I am not available when the auction ends, I use a sniping tool to
place the bid for me, and I decide how much I am willing to pay. The tool places
the bid for you at the last minute, and bids up according to your limit. This way
you spend the least amount of money possible and no more than your limit.
What is a fair price to pay for a coin? Look it up in the Red Book and use their
price as a guide. Don’t worry if you do not win a bid. The same coin will show
up again.

There are a few good auction tools out there:

https://www.ezs niper.com/index.php3 Ezsniper works well and you get

three free auction bids and pay 1% after that for any auction that you win.

There are free sniping tools as well that have good reviews:
https://www.jbidwa tcher.com/
http://www.gixen.com/index.php

Another tool that can help analyze a seller’s feedback for you is:
www.auctionshadow.com
 Selling Coins
We spoke about selling in an earlier chapter. It is an important topic.
Selling has two parts to it. You can sell when you are in a hurry and need cash
fast; therefore, price is not a key issue. Then there is selling for the best price. In
this case you can hold out, you are not in a hurry. Local coin and gold shops and
even pawn shops typically pay 50 - 70 cents on the dollar for precious metals,
including coins with gold or silver in them. Jewelry stores do the same. Many
shops claim they pay spot price, but if they do, they cannot make profit unless
the price of the metal goes up. Be careful of this claim.
You can advertise on Craigslist and other local online sites, but this is
dangerous if you have high priced items to sell. Coin web sites can be used to
sell your products, but they seldom have the audience and safety features that
eBay has. Your local coin club is another possibility, but this method takes time.
For best results, and as I stated before, eBay, and the dealer you buy from,
(assuming they are reputable and authorized) are your best bet for getting the
best price. Quality dealers will publish their buy back price. Ebay is a great way
to sell, and you can always get spot price.
With respect to silver coins, like junk silver (90% and 40%) and
numismatic coins, eBay is the way to go. Silver bars and rounds and gold bars
and rounds can also be sold on eBay or to your dealer. It doesn’t hurt to shop
around and see what several authorized dealers will pay for your items. Oddball
products, like foreign bullion coins and non-certified gold and silver may be
problematic as far as dealers are concerned, so eBay may be your only option.
Ebay has such a large audience and so many coin enthusiasts that bidding
can drive the price of your product up. Remember that the dealer you purchased
from and eBay will cost you around 13% to sell your item. That means you will
lose 13% when you sell back to the dealer and on eBay, assuming the price of
silver and or gold has not changed.
Here are some key points to keep in mind with respect to eBay and selling
in general:
• If you are selling coins that have precious metal in them, always sell
when the price of that metal is on the upswing.
• Coins in great condition often sell for more money than coins in average
condition, and if they have precious metal in them can sometimes get
prices even higher than their metal content because of their high grade.
• With this in mind have better coins graded or slabbed – it will result in
 • With this in mind have better coins graded or slabbed – it will result in
better auction results. (This only applies to coins that have real numismatic
value and are worth over $100)
• Start and end your eBay listings on Sunday night around 6PM Pacific
Time, more people are on eBay at that time.
• Free shipping attracts more bids and more potential buyers.
• A low starting price, such as 99 cents, attracts more bids in a big way.
• Auction listings work better than “buy it now” does – buy it now cost
money and gets poorer search engine results.
• If you are worried about the price going high enough for your coin(s)
you can include a reserve, but you pay for this and eBayers do not like
reserves.
• Most coin auctions bid up to a good price, so you seldom have to worry
about using a reserve price.
• Providing a very clear, beautiful picture makes all the difference in the
world – use the USB digital microscope mentioned in the course – it is
phenomenal.
• Answer communications quickly and thoroughly.
• Use very brief but very good descriptions.
• The description should never mention any rules or do’s or don’ts – this is
a big turn off.
• If there is a story associated with the coin(s) tell it – this makes the
listing more personal, and eBayers like this.
• Ship very quickly and package your coin(s) properly – make sure they do
not make any noise or move around – protect them with cardboard.
• Always include a copy of the order with the item (if possible), and hand
write a note with a happy face – thank them.

The secret to success on eBay is getting traffic to your listing. If the coin
you are selling is one of 100 similar coins, it can be quite challenging to get
buyers to your ad. This applies mostly to rare coins, rather than silver or gold
coins, which will always attract buyers. There are many dynamics associated
with getting traffic, but one in particular is more important than the others and
needs to be mentioned: The Title.
The 80 character title is what eBay uses as a way to draw buyers to your
listing. As you can imagine, a well written title gets the best results. I want to
draw your attention to a great free tool that can help you write an effective title.
It is called Title Builder: www.title-builder.com
This is the main page from the web site:
 Just click on “Get Your Item Title” and you will see this:

I entered the words “Indian Head Penny” and then pressed the enter key.

As you can see, Title Builder comes back with this rather long suggested
title based upon the strongest words used in eBay when someone is looking for
an Indian Head Penny. The words: Indian, head, penny and cent have the biggest
bars, and therefore, carry the most weight.
 So if you take the title created and boil it down to 80 characters, you end
up with a strong traffic magnet.
Indian head cent penny s one choice coin liberty au u diamonds free
unc shipping 1908 high grade 1905 roll
This is what I come up with: (I took out Au and Unc and U)
Indian Head Cent Penny Choice Coin Liberty Diamonds Free
Shipping High Grade
(Note: If the 4 diamonds still show on the coin this implies great
condition)
 What’s nice about eBay is that if the item does not sell you can relist it. In
an emergency you can cancel your listing before the listing ends if you have to.
If you have an extremely valuable coin please contact the two auction houses
mentioned earlier – Heritage and Stack’s Bowers and get their opinion on the
coin(s) before attempting to sell. My course on eBay called: “Learn How Power
Sellers Make Million On eBay” will provide more detailed information and is
available on the web site: www.udemy.com.
Here is a list of the top 11 coin auction results of all time:
 Investment Strategy – Conclusion
Precious metal investing is a complex subject. There are so many options
available. With precious metal ownership you know that you can always cash in.
The money is always there in time of need. For some, particularly those living
on a very tight budget, buying a coin or two each month, such as a 1oz Silver
Eagle is not a bad idea. Coin collecting is another way to start saving. As you
learn and acquire coins your financial base will build. Rare coins provide a great
rate of return, some argue that it is the highest rate of return for all asset classes,
and are a good buffer against market volatility.
Running ads and looking for precious metals and coins pays off over time.
Keep running your ads and you will be rewarded. Handing out business cards,
placing fliers and speaking to groups, such as seniors will produce good results.
About 15% of the senior population has some form of precious metal and coins
and seldom know what to do with it. They usually end up selling for a fraction of
their worth.
Others are challenged by the high end of the financial spectrum -
involving millions of dollars and how to invest it. Should you buy physical gold
or silver? Should you invest part of your portfolio in precious metals (just to
provide a mental buffer), and if so, how, and how much? Getting sound financial
advice from an established investment house is worth the effort and is necessary.
If you need help ask friends who they invest with. There are many well
established financial institutions that have good reputations and good financial
advisers on staff.
Having a broad based stock portfolio with some, maybe 5%, precious
metal exposure makes sense and if nothing else provides some piece of mind.
The top performing precious metal ETFs and mutual funds support this
reasoning. The stock market over the years has yielded the best results and solid
companies that have delivered year in and year out provide more piece of mind
than precious metal investments do.
Buying gold and silver as a hedge against inflation and future calamity is
not sound and is not supported by the facts. Only in very extreme circumstances
(as was the case in World War II), has this thinking paid off.
Please keep in mind the fact that reputable precious metal dealers, like
those authorized by the U.S. Mint, such as APMEX, will continue to sell pre-
1933 gold coins for inflated prices. This does not mean that they are unethical or
in any way untrustworthy or even dishonest. On the contrary, these are the
dealers you should be buying from, but don’t buy pre-1933 coins unless the price
is close to spot value. The marketplace has distorted the worth of these coins.
 In 1912 a Persian philosopher traveled to the United States. In one of his
presentations he stated: “Money is like a pile of sand in the desert. One minute it
is yours, and the next minute the wind comes and blows it away”
If you have more than you need, remember those in need. Blessings to
all.

Why did this 1794 Silver Dollar sell for $10.5 million and break all coin
records?

(Answer at book’s end!)

It is rare (unique – only one of a kind) and in great condition, but it sold for
$10.5 million because that is what someone was willing to pay for it!