Around 2011 I had a really great investment idea. The price of gold had recently peaked at just over $1,900 an ounce in 2011 and, after a small decline, was carving sideways in choppy action. I wanted some exposure to gold, but I also wanted to hedge myself against the possibility of a future decline in prices.
What to do?
That's when I hit upon a plan. The premiums on pre-1933 U.S. gold coins had been declining for years beforehand. As the gold price rose, premiums on these coins (the amount you paid over the intrinsic value) seemed to inexorably compress. This led me to a tangible investment epiphany.
I could buy myself pre-1933 gold Indian Head quarter eagles (with a $2.50 face value) to get gold exposure while limiting my downside risk via numismatic value. At the time, each coin contained about $205 worth of gold (with spot trading at $1,700). But they only cost around $285 each for lightly circulated XF to AU specimens with good eye appeal.
The $80 difference between the price of the coins ($285) and the bullion value ($205) represented the premium - about 39% in this case. Although this might seem like a hefty price to pay for semi-numismatic gold coins, these scarce pieces had traditionally traded at much higher premiums to spot only a decade before. In fact, from the 1940s until the early 2000s, pre-1933 U.S. quarter eagle gold coins - even well circulated examples - rarely sold for anything less than 300% or 400% over their bullion value.
Alas, my story does not have a (completely) happy ending.
My original intention was to allocate somewhere between $1,000 and $2,000 to this strategy. This would have been enough to purchase anywhere from 3 to 7 gold Indian Head quarter eagles. But when I walked into my local Boston coin shop (J.J. Teaparty) to see what was available, I was terribly disappointed.
The only quarter eagles the dealer had looked like they had been run over by a pickup truck. They were ugly, heavily worn coins with plenty of dings, rim bumps and scratches. These were not the attractive, lightly circulated examples I had been hoping to buy. I asked the dealer why he didn't have any better coins. He replied that there was a shortage because the nicer specimens had all been shipped off to the grading agencies (PCGS and NGC) for certification - even the AU coins!
After this setback, I decided to put the idea on the backburner. Much to my chagrin, I never got around to seriously considering a mass purchase of pre-1933 U.S. gold quarter eagles again.
As you can probably guess, prices for these coins are much higher now. A nice AU Indian Head specimen will set you back around $450 in 2021 versus the $285 it cost in 2011. This is despite the fact that the gold price isn't much higher now than it was back then.
But my story does have a happy postscript.
During the summer of 2019, I was flabbergasted by the absolute collapse in premiums on pre-1933 U.S. gold coins. I saw common-date, MS-63 certified St. Gaudens and Liberty Head double-eagle $20 gold pieces routinely sell for 5% to 10% over melt value on eBay. After adding in the eBay Bucks bonus, this meant that you could have purchased these coins for under spot!
I resolved not to miss my chance to pick up a nice old U.S. gold coin in Mint State condition for a trivial sum over melt value. After perusing eBay for a couple weeks, I opted for an 1886 Liberty Head $5 half eagle gold coin from the San Francisco Mint (photo at the top of this article).
This coin was certified MS-63 by NGC, but I assessed that it was on the upper end of the MS-63 spectrum. I wouldn't go so far as to say it was an MS-64, but it was definitely a premium quality MS-63 at a minimum. Due to the depressed market for pre-1933 U.S. gold coins at the time, I could afford to pick and choose the very best example I could find.
In addition, the coin possessed a wonderfully deep-orange patina that is characteristic of surfaces that have lain undisturbed for a century or more. Toned gold coins are rather scarce today because well-intentioned, but misguided, collectors and dealers used to dip or clean toned specimens. This restored them to a bright, albeit sometimes unnaturally brassy-looking, yellow hue. However, knowledgeable collectors are gradually waking up to the subtle beauty of old, natural surfaces on gold coins.
In short, the coin I bought was a gem.
Better yet, my 1886-S half eagle only cost $535. After accounting for eBay Bucks and credit card rewards the premium over spot was a pittance for such a fine coin - only about 30%.
But these numismatic forays into U.S. gold really got me thinking. Just how rare are pre-1933 U.S. gold coins? And is there any good way to estimate the surviving population of pre-1933 U.S. gold?
Lightly Circulated Pre-1933 U.S. Gold Coins for Sale on eBay
Before we attempt to answer these questions, let's have a brief monetary history lesson.
Prior to the Great Depression of the 1930s, the United States was on the gold standard. Under this arrangement, dollars were exchangeable for gold at a fixed rate - $20.67 for every troy ounce of gold. But the financial dislocations created by the Great Depression put incredible strain on this convertibility scheme. As bank after bank collapsed, average people began withdrawing their money from the financial system fearing that their bank would be next.
Compounding the problem was the fact that there was no insurance for bank deposits; the FDIC did not exist at this point in time. As a result, the wise move was to remove your funds from any questionable bank rather than risk losing your hard-earned money when it failed.
The financial crisis came to a head in January-February 1933 when two Michigan banks - the First National Bank of Detroit and the Guardian National Bank of Commerce - effectively became insolvent. The Governor of Michigan was forced to declare a bank holiday in order to avoid a general banking collapse. This action frightened people in neighboring states who believed their governors may be forced to follow suit.
The crisis quickly spiraled out of control.
One day after his inauguration on March 4, 1933, newly elected president Franklin Delano Roosevelt declared a national bank holiday. One month later on April 5, 1933, FDR issued his infamous Executive Order #6102 which suspended domestic gold convertibility of the dollar. In addition, citizens were required by law to surrender their gold coins, bullion and gold certificates to the government.
Consequently, huge quantities of pre-1933 gold coins flooded into the U.S. Treasury. Exactly how much was confiscated is unknowable, but it is estimated that nearly 500 metric tons of gold were seized from U.S. citizens. The vast majority of this amount would have been in the form of old U.S. gold coins - perhaps as much as $321 million face value.
The Treasury melted these coins into gigantic .900 fine gold bars (the same purity as the coins they came from), which were subsequently stacked in either Fort Knox or in the subterranean vaults underneath the New York Federal Reserve. These melted coins have been lost to us forever.
An intriguing follow-up to this story occurred in 2013 when Germany decided it was going to repatriate approximately 674 metric tons of gold bullion that was being held by foreign central banks on its behalf - most notably at the Banque de France and the Federal Reserve. Curiously, it was announced that this repatriation was scheduled to take an astonishing 7 years to complete.
No one knows for certain why it would take Germany so long to get its foreign-held gold back, but there was speculation that the U.S. was unable to easily complete the delivery in .999 fine gold bars because all they had on hand was old .900 fine coin melt bars. These old bars had never been refined up to industry standard .999 fine gold because it was seen as unnecessary in the 1930s. If the Treasury/Federal Reserve was now forced to refine old coin melt gold bars en masse, it would explain at least some of the delays that Germany's monetary repatriation effort suffered.
The entire situation implies that massive quantities of gold held in the United State's reserves were derived from melted pre-1933 gold coins, meaning that surviving coins must be at least somewhat scarce.
PCGS & NGC Certified U.S. Classic Head Gold Coins for Sale on eBay
It is also an indisputable fact that old U.S. gold coins (along with old foreign gold coins) have been melted by private parties for their bullion value during every significant historical spike in the gold price since the abandonment of the Bretton Woods monetary system in 1971. This includes the run-ups in the mid 1970s, 1979-1980, 2011 and 2020. Some of the rarer pre-1933 U.S. gold coins that sport substantial numismatic premiums (like the $1, $2.50 and $3 gold pieces) have largely escaped this fate. But the more common date half eagle ($5), eagle ($10) and double eagle ($20) gold coins have undoubtedly been melted in quantity in modern times.
We can also attempt to garner clues about the rarity of pre-1933 U.S. gold coins by checking out population reports from the popular third-party grading services. According to NGC and PCGS, they have certified just under 6 million pre-1933 U.S. gold coins (excluding scarce pre-1839 gold, proofs and the ridiculously rare $4 Stella) with an aggregate face value of $86 million.
Although this seems substantial, we have to keep a couple caveats in mind. First, the numbers include crack-outs and resubmissions, which are significant. This means the values given are definitely overstated, although no one knows by how much.
Second, U.S. Mint records claim that it struck almost 345 million coins over that period with a gross face value of nearly $4.5 billion. The amount of pre-1933 U.S. gold coins certified by NGC and PCGS together represent less than 2% of the original mintages regardless of whether you are comparing number of coins or face value.
There are undoubtedly many old U.S. gold coins that have not been submitted for certification to the major grading services. But even if we assume that only 1 in 5 coins has been submitted, it still means that the surviving population (across both certified and uncertified coins) is, on average, less than 10% of the original mintages. In all probability, the true extant population is probably closer to 5% - or even less - with that number dwindling little by little every year as ever more common-date coins inevitably find their way into the melting pot.
Although we ultimately can't say with any certainty exactly how rare pre-1933 U.S. gold coins are, we can reach a few general conclusions.
First, I feel confident that the Indian Head/St. Gaudens series struck during the 1910s, 1920s and early 1930s have the highest survival rates of any pre-1933 gold. These coins would have circulated for the least amount of time - generally no more than 25 years - before gold was demonetized during the Great Depression. And while many of these coins were undoubtedly melted by the Treasury, most of those that survived would have been in relatively high grades.
Another consensus position is that for any given date and mintmark, circulated examples will be more common than uncirculated specimens. This is just common sense. Most coins that sat in bank vaults and didn't circulate were confiscated by the government in 1933 and melted down. Only those coins that left the banking system and found their way into private hands (and thus circulated, even if only a little) had a chance at surviving the great melt.
This doesn't mean that all uncirculated pre-1933 U.S. gold coins are rare, just that they are almost always rarer than their circulated counterparts.
It is also obvious that $3, $1 and $2.50 (quarter eagle) gold pieces are the rarest denominations (ranked in order of greatest rarity to least rarity). Mintages for the aforementioned odd-ball denominations were very low to begin with and NGC/PCGS population reports verify that relatively few of these coins have survived compared to the much more common $5, $10 and $20 gold pieces.
PCGS & NGC Certified Pre-Civil War U.S. Gold Coins for Sale on eBay
Now that we've addressed the rarity question insofar as it is possible to do so, we can move onto investment recommendations.
There are a few standout areas for anyone hoping to invest in pre-1933 U.S. gold coins. The first is pre-Civil War issues - anything struck before 1866. Mintages during the antebellum era were far smaller, on average, than anything that came afterwards. Survival rates were also abysmal, meaning that very, very few of these coins are still with us today.
And within the pre-Civil War category I'm particularly fond of early U.S. gold, which was struck before 1840. Only three denominations were minted during this period of American history: $2.5, $5 and $10 gold pieces. This hallowed era of American numismatic history included famous series such as the Draped Bust (1795 to 1807), Capped Bust (1807 to 1834) and Classic Head (1834 to 1839) designs.
Prices for early American gold coins can be prohibitively expensive for the aspiring collector, but problem-free coins sporting the 1830s Classic Head design are still readily available with a price tag of less than $2,000. Liberty Head coins from the 1840s and 1850s can also be found for less than $1,000 on occasion.
My next recommendation is to pursue scarce branch mint issues. These are coins that were struck at provincial mints: Dahlonega, Charlotte, New Orleans and Carson City.
The Dahlonega mint (located in Georgia) was founded to process gold extracted in the Georgia Gold Rush of the 1830s. It operated from 1838 to 1861. Charlotte, North Carolina was another Southern branch mint that solely minted gold coins between 1838 and 1859.
The New Orleans mint, positioned at the mouth of the Mississippi River, struck coins in many different denominations from 1838 to 1861, when production was interrupted by the Civil War. The mint resumed operations in 1879, with the final coin rolling off its presses in 1909.
The last branch mint I like is Carson City, Nevada. This mint was created to process silver and gold that had been mined in Nevada's immensely rich Comstock Lode. Many collectors like Carson City mint-marked coins because of their close association with the Old West. The Carson City mint operated intermittently from 1870 until 1893.
Prices for coins struck at these desirable branch mints will be high, with many specimens selling for thousands of dollars. While mintages were never high at any of these mints, the later New Orleans issues struck between 1879 and 1909 are by far the most common (and therefore affordable).
Another recommendation for those wanting to invest in pre-1933 U.S. gold coins is what are known as "conditional rarities". A conditional rarity is a coin that, while not particularly low mintage or rare in lower grades, is still rather scarce in higher grades.
PCGS & NGC Certified Rare Branch Mint U.S. Gold Coins for Sale on eBay
An example of this is the beautiful NGC certified MS-63 1886-S half eagle mentioned earlier in this article that I bought for my personal collection. Almost 3.3 million specimens were struck - a very healthy mintage by late 19th century standards. And yet PCGS and NGC together have certified less than 3,800 coins in MS-63 or better condition. Yes, there are undoubtedly a few high-grade Mint State pieces that haven't been certified yet, but probably not very many. In short, the coin is scarce in higher grades, even if it isn't in lower grades.
There are many, many different date/mintmark combinations of pre-1933 U.S. gold coins that qualify as conditional rarities. And asking prices often aren't more than a few hundred dollars above melt value, although some hunting may be required to find the right coin at the right price. These attributes give conditional rarities the perfect blend of reasonable cost and high numismatic potential that both coin collectors and investors naturally gravitate toward.
My final play in the space is probably the most humble. Buy any lightly-circulated, problem free pre-1933 U.S. gold coins (common-date coins are fine) you can find selling for less than 30% over melt. Just avoid coins that have been harshly cleaned, holed, bent, badly scratched, or otherwise abused.
Even a circulated gold piece in XF or AU condition will still look impressive in the hand and retain all the history of a much more expensive example. And because you will have paid so little premium, there is very little possibility of significant loss unless the price of gold collapses - an event I see as incredibly unlikely.
As an old investment saying goes, "Once you've taken care of the downside risk, all that's left is upside potential." And pre-1933 U.S. gold coins are brimming with that investment potential.
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