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Rare Coins Lag Behind Gold
April 8, 2008
The real investment magic of rare coins stems from the fact that price increases from rare coins lag behind those of gold, which takes much of the guesswork out of investing in rare coins. Over the years, that lag has provided an early warning signal of impending bull markets and has produced periodic windfall profits for knowledgeable investors. Rare coins follow gold=s lead and, eventually, surpass gold. Bull markets in rare coins have always occurred during or after periods of rising gold prices, and reliable independent reports show that average annual returns on rare coins have historically been more than twice as great as the returns on gold bullion.
When gold soared to over $850 in 1980, rare coins went up more than twice as much, and continued to go up after the price of gold turned down.
In 1987, when gold started a rally that took it back over $500, rare coins lagged behind, but then rocketed past gold, with the market for investment-grade rare coins going up several hundred percent even as the price of gold fell from $500 to $360.
In 2002, gold started its ascent from an average annual price of $271 (in 2001) to where it stands today at over $900.00. Again, the price of rare coins followed in trace, rising steadily from 2003. However, it has only been in the past few months that rare coins have showed signs of taking off and, once again, exceeding gold=s progress.
A new index, which tracks the performance of Key-Date U.S. coins in the highest grades, shows that prices in that portion of the rare coin market increased by 31.9% in 2007. The Index, named the Classic U.S. Coin Rarities Key-Date Investment Index, is based on the retail values guide published monthly in Coin Values magazine.
The new Index contains a basket of 76 regular issue U.S. coins, with one coin, the key-date or rarest from each series, in the highest traded grade. Gold key-date coins were the top performers, with a 42.5% gain in 2007.
The powerful results for 2007 occurred despite the fact that the market for Key Dates and Rarities was actually down for the first half of the year. Since August, this index has provided us with an early indicator of a raging bull market!
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Copyright © 2010 Blanchard and Company, Inc.
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