Bullion versus Coins

October 24th, 2012 → 7:32 pm @ // No Comments

There are definite advantages to buying the right kind of precious metals

Disclaimer: this does not constitute, nor is the intent of the authors
to give tax advice. Please consult your accountant.

New precious metals investors may share a common misconception
of what bullion is. The term ‘bullion’ simply means a refined and
stamped weight of precious metal. Often what people think of as
bullion is what is routinely seen in the movies such as The Italian Job, or
Three Kings, or Ian Fleming’s classic James Bond movie Goldfinger,
namely big, heavy bricks of gold. In truth, bullion comes in many forms
and weights, including bricks, bars, wafers, ingots, and coins. Gold
bullion is then a recognized weight and fineness of gold that a person
can buy for the current price of gold, plus the small percentage costs
incurred in refining, fabricating, and shipping the bullion directly to
them.

Bricks like the ones in the movies make up most of the world’s gold
bullion, which is owned by governments and central banks. These are
the “London good delivery” gold bullion bricks of approximately 400
troy ounce size, refined and cast by the various private refiners
worldwide, and accepted for ‘delivery’ into London and other major
gold bullion markets.

The 400 troy ounce bricks are a cost-efficient way to buy physical
gold if one has a working use for the gold such as in electronics,
manufacturing, or the arts. However, if one doesn’t make use of the
gold, these heavy bricks can be costly to liquidate once removed from
storage.

Holders of these may encounter assay, refining, or just handling fees
in trying to liquidate that size of a gold bullion brick. It is much more
difficult and time-consuming to liquidate gold bullion in a single chunk
that is worth over $100,000, than it is to do so with the same amount of
gold bullion in more convenient and tradable sizes.

The small bars and ingots are often of exact weights and high purity
and may be available in 1 to 10 ounce sizes.
The most popular form for household investors is in gold bullion
coins such as the American Gold Eagle. Bullion is most commonly
sought after in coin form by household investors. Gold coins are a
practical and tradable form of gold bullion.

Alternatively, there are semi-numismatic coins that are not
considered bullion such as the favorite $20 Liberty Head gold coin,
which is still constitutional currency and far less likely to be confiscated
during a dollar collapse than is bullion.

These old gold coins, like the Liberty Head Gold coins have a story to
tell.

Beginning in the year 1849 and lasting until 1907, the American
mint created gold Liberty Head coins.

These coins were minted in several different denominations – two
and half dollars, five dollars, ten dollars, and twenty dollars. All of the
coins are made of 22k (90%) gold, with the twenty dollar editions
containing nearly a full ounce (.96750 oz) of the precious metal.
Since all Liberty Head coins were minted well before 1933, they are
considered to be non-reportable assets.

Buyers may not have to claim them as an asset or even fill out a
1099 for them, although they should always seek the advice of a tax
specialist. Best of all, they are of an early enough mintage that the
government cannot easily seize or confiscate them if a gold recall ever
occurred again.

Of all the available Liberty Head gold coins, the twenty dollar
denomination is the true prize for investors. Since these coins contain
nearly a full ounce (.96750 oz) of solid 22k (90%) gold, the gold coin
prices are tied to the overall gold value on the marketplace. If the price
of gold rises one hundred dollars, so does the value of these coins.
Lower denominations of the coins contain less gold, but their value is
still based largely on the overall price of gold on the market. Beyond
the “melt” value of the raw material, Liberty Head coins have the added
appeal of being collector’s items. A limited number of all the different
denominations exist, meaning that the demand for them is likely to
increase although the supply never will. Originally the highest
denomination minted was the Ten Dollar Gold Liberty. Due to the
overflow of gold that began pouring into Philadelphia from the 1848
discovery of gold in California, Congress authorized the United States
Mint to create a $20 gold coin on March 3, 1849. The $20 Liberty is
known as the most popular and recognizable coin of its day.

The $20 Liberty, also referred to as a $20 Coronet, remained in
production until 1907 when the United States Mint began releasing the
$20 Saint-Gaudens.

Designed by James B. Longacre, the obverse of the $20 Liberty gold
coin features a profile of Miss Liberty, sporting a crown which bears the
inscription LIBERTY. Thirteen stars representing the original thirteen
colonies and the date encircle her. The reverse features a bald eagle
behind a striped shield. The words UNITED STATES OF AMERICA arc
around the top of the coin. A total of three different types of $20
Liberties were minted during their time in circulation. Depending upon
the date and type, other pieces of information are listed on the reverse,
as listed below.

Type I: These coins do not feature the motto IN GOD WE TRUST and
the denomination is written as Twenty D. Assistant engraver Anthony
Pacquet created a second version of the reverse, but the redesigned
coins were discarded and melted down.

Type II: The IN GOD WE TRUST motto was added to the reverse in
1866, resulting in the Type II design. Rev. M.R. Watkinson of Ridleyville,
PA, spearheaded this change by asking Secretary of the Treasury Salmon
P. Chase to include the motto on the nation’s coins in 1861. Such
legislation eventually passed in 1865. Type II design change involved
altering the shape of the shield on the reverse from straight to curved in
the ornate rococo style of the day.

Type III: In 1877, the denomination was changed to read TWENTY
DOLLARS instead of TWENTY D. This is the only difference between
Type II and Type III $20 Liberty gold coins.

Another popular coin is the high-relief .96750 ounce gold piece
coined between 1907and1933 and known by the name of its designer,
the sculptor Augustus Saint-Gaudens, as the $20 Saint-Gaudens double
eagle.

The condition of a coin, its scarcity and collectability, and more are
not factors that come into play on the regular gold market. In short,
coins will be worth more than their weight in gold due to their
uniqueness. In some cases, certain coins can be worth two or three
times the value of raw gold in the marketplace. Many investors have
included several twenty dollar Liberty Head gold coins in their
investment portfolio as a way of diversification and have enjoyed great
returns on their investment as a result.

Many Americans are growing concerned over the United States
economy and are looking for a way to protect their finances and wealth.
Others want to find a simple, surefire, reliable, secure, and private
method of investing their funds. Gold is certainly the answer. Buying
gold coins minted prior to 1933 is the easiest, most affordable, most
private, and most reliable way to invest in gold. Liberty Head gold coins
are, in short, one of the best investments that can be made. Stocks and
paper money may become worthless, but gold is forever.

Ironically, it is the 1933 gold confiscation that has made Pre-1933
gold and silver such a valuable asset to own. Many Americans are
unaware of the fact that gold in the United States had been confiscated
on three different occasions during the course of history. Gold seizures
took place during the Revolutionary War as well as the Civil War, but,
the most recent case of gold confiscation happened in 1933 during the
tenure of American President Franklin D Roosevelt. A year later, in
1934, silver was also confiscated.

Franklin Delano Roosevelt issued a mandate through which all
American citizens were ordered to forfeit all gold in their possession.
The gold was turned over to the Federal Reserve and any citizen who
failed to obey the order was subject to punishment ranging from
substantial fine payment to imprisonment. The gold confiscation was
not applied to jewelry and was extended to bullion and gold bullion
coins only. The only exemption from seizure of coins made during that
time were of coins of numismatic interest and those with numismatic
value, which referred to coins with a minimum premium of 15% over
the spot market price of gold at that time. The right of citizens to once
again own gold was granted by the President on December 31, 1974.
Modern day American laws still grant the Federal Government the
power to impound gold and silver when necessary (Read the recent
National Defense Resources Preparedness executive order Obama
signed into law). According to the laws put down in the 2nd chapter of
title 12, of sub chapter IV, section 95A, the Feds can confiscate gold and
silver, but under certain circumstances as stated,

“DURING THE TIME OF WAR, THE PRESIDENT MAY THROUGH ANY AGENCY THAT
HE MAY DESIGNATE, LICENSE OR OTHERWISE–(A) INVESTIGATE, REGULATE, OR
PROHIBIT, ANY TRANSACTIONS IN FOREIGN EXCHANGE, TRANSFERS OF CREDIT OR
PAYMENTS BETWEEN, BY, THROUGH, OR TO ANY BANKING INSTITUTION, AND THE
IMPORTING, EXPORTING, HOARDING, MELTING, OR EARNING OF GOLD OR SILVER COIN
OR BULLION, CURRENCY OR SECURITIES”.

Confiscating the gold and silver bars within a country creates an
instant “bull” market as the global demand for the metal remains high
while the supply available for trade is made even lower. The 1933 gold
confiscation caused the price of gold to go up by 75% within the space
of a few weeks.

Pre 1933 gold and silver “graded” coins have several advantages
over modern bullion coins, the first of which is in the area of privacy.
The graded pre-1933 gold and silver coins are the last of the few
investments that can be acquired privately and kept confidential.
Certified U.S. gold coins have been graded and guaranteed by the
Numismatic Guaranty Corporation (or NGC) and Professional Coin
Grading Service (or PCGS).

These numismatic gold and silver coins are completely private and
investing in them can be done without letting even a single person know
anything about the transaction. Paper investments made through
banks and brokerages require them to make a full disclosure of your
investment to governmental agencies. In many cases, this information
is sold to marketers. However, this sort of intrusion into your private
transactions is completely absent if you invest in pre 1933 coins. They
do not even require 1099B form to be filed when you buy or sell your
holdings.

Disclaimer: this does not constitute, nor is the intent of the authors
to give tax advice. Please consult your accountant.

A second and highly significant advantage of numismatics and seminumismatics
is their historically good investment performance.
According to the CU 3000 Index numismatic coin performance
standards, a $1,000 investment of generic gold coins bought in 1970
was given a current value of $22,500. A coin portfolio of mint state gold
worth $1,000 during that same time period was found to now be worth
$57,977. Compared to the Dow where the $1,000 worth of investment
made in 1970 grew up to $13,500, the difference is huge. The U.S. has
experienced fifteen recessions since 1919, but regardless of how the
economy fared, the value of numismatic rare coins has consistently
performed well. During the horrific stock crash of 1987, for example,
the CU 3000 Rare Coin index went up 660%.

Confiscation concerns: The executive order passed by President
Franklin Roosevelt on April 5, 1933 stated that it was illegal to own
bullion gold bars or coins. The exact terms of the order stated that
under the order of the President, all citizens were required to surrender
all gold bullion coins, bars and certificates to the Federal Reserve Bank
by the 1st of May, 1933. The hoarding of gold bullion, certificates, and
coins was forbidden. The exceptions were those gold coins which had
some special value as rare or unusual coins. Anyone violating the terms
of the mandate was fined an amount of $10,000- an unbelievably huge
sum in those times- or they were imprisoned for ten years, or made to
suffer both. Even any officer, director or agent found to be a participant
in another’s act of violation was not spared and also punished.

If history is at all useful as a guide, and it is, then gold and silver will
most likely be confiscated once again in order to back a collapsed dollar.
Nothing is for certain, but it is certainly logical. Will the government
confiscate pre-1933 metal? Perhaps, but at least the easier and more
likely preliminary confiscation of bullion would be a warning to take
action. There are, however, many reasons why pre-1933 coins are apt
to again be exempt from confiscation

A case for PRIVATE gold & Silver pre-1933 coins: Will gold & silver
bullion be confiscated?

“An interesting piece of information that you might not
know is that the old U.S. gold coins minted prior to 1934
are still, according to the US Constitution, the only legal
tender in our country. That is why there is such a strong
argument about those coins being exempt from a future
confiscation.”
–Kal Gronvall, Gold & Silver Exchange president

Under the U.S. legislative laws, bullion can be confiscated upon
orders from the President. Coins of rare and numismatic value,
however, do not fall under the category of bullion and are considered
collectibles. In comparison to the bullion market, Pre-1933 Gold is a
small market. It is the needle in the hay-stack, where bullion bars and
coins are the hay-stack that can be taken with an executive order. In
the world of collectible or “numismatic” coins, each coin class, year,
mint, and grade would have to be evaluated by the Government in
order to set a buyback price. The man-power and resources to do this
are great, and for this reason alone, the cost would outweigh the
benefits. Bullion, which makes up roughly 95% of the grab-able gold, is
easy to value and therefore cost-effective to seize. Considering that the
pre-1933 market is a small fraction of the size of the bullion market, it is
unlikely that government would waste the time and resources to go
after this niche market.

Pre-1933 Gold coins are presently the safe haven of safe havens, the
buying and selling of which is private, and requires no 1099 reporting,
and in addition, they are unlikely to be confiscated. This makes private
pre-33 gold coins a better investment option than bullion.

That opinion is by no means unanimous and there are those who
present several arguments to support their disagreement. The sites and
blogs which disregard the facts that support the pre-33 coin freedom
from confiscation issue are often biased in favor of their own bullion
products, and therefore have their own marketing agenda. Usually, a
bullion-only dealer that persists in spreading the rumor that pre-1933
gold coins can be confiscated at any time has an easily understood
ulterior motive. Pre-1933 gold coins are the biggest competitors for
bullion dealers thus causing bullion dealers to lose out on business.
That is a major reason why bullion dealers try to convince buyers that
pre-33 coins can be confiscated just as easily as bullion coins or bars.

In the event that any site or person is found to be proclaiming that
pre-1933 coins can easily be confiscated, their reasons must be carefully
examined. It may be that they are curably ignorant or have been misled
by a third party, but it also may be that they are deliberately feeding
their customers wrong information. Upon examination of their financial
motives, it will soon be clear whether they have another agenda.
The debate about numismatic collectibles in general is not nearly as
vigorous as the particular debate about pre-1933 United States coins.
Quite a controversy has arisen which points to deeper issues about legal
money because pre 1933 coins were minted by the U.S. Treasury in
accordance with constitutional law and thus are considered to this very
day as the only constitutional currency. The Federal Reserve Notes in
circulation as U.S. Dollars are creations of the Fed and hence are unconstitutional.
The coins which are used for common everyday transaction are of
course legal tender. Dimes, quarters, dollar coins and half dollars are
commonly accepted units of currency. But there is another interesting
bit of information related to legal tender money. Any gold coin, minted
by the U.S. Treasury before 1933, can also be considered as legal
money, which is the actual reason why pre-1933 coins cannot be
confiscated. The government can confiscate gold, but they cannot seize
public money.

In 1933 when President Franklin Delano Roosevelt ordered citizens
to turn in gold and silver bullion, he gave them printed money in return,
but even after paper money had become the more accepted mode of
payment, these pre-1933 coins have their same monetary value. Their
status as constitutionally minted legal tender has not changed. In the
United States, they are still considered as valid money even though they
are not used at face value in commerce and trade.

When investing in precious metals, most people immediately think
of gold as their best option. But silver has been used as currency for
just as long, and minted coins made of silver can be traced back
thousands of years. It is certainly a bit more affordable than gold can
be, but can provide the same stability and investment returns that its
more famous precious metal cousin does. In the final analysis, when at
long last it is evaluated fairly, investment in silver will completely eclipse
investment in any other asset including gold as the inevitable result of
The Silver Bomb.

In America, one of the single most important silver coins ever
minted is the Morgan Silver Dollar. Coming into circulation in 1878, this
coin has become more popular than almost any other coin on the
market. Commemorative edition coins and even the famous twenty
dollar gold piece are still not as popular as the Morgan Silver.

Made from ninety percent silver, all of the original Morgan Silver
Dollars were issued prior to 1933, allowing them to be considered a
non-declarable asset. In addition to not having to file a 1099 or any
other form of report with the government, the infamous 1933 act
ordering confiscation of gold and silver did not apply to these coins. In
short, no matter what happens to the U.S. economy, investors will be
able to take solace in the knowledge that this investment will remain in
their hands and remain valuable. The Morgan Dollar is one of the most
collected silver coins in our history. Created to absorb the massive
quantity of silver minted from the Comstock Lode the Morgan Dollar
was designed by George T. Morgan in 1878.

The head of Lady Liberty takes up most of the obverse of this silver
coin. She is encircled by the date of issue, thirteen stars, and the words,
E PLURIBUS UNUM. This phrase, which translates to “Out of Many,
One”, was first chosen for official United States use in 1776.

The reverse features a bald eagle with wings spread perched upon a
branch and arrows. The eagle is partially surrounded by a wreath.
Above his head sits the motto In God We Trust. Around the rim are the
words UNITED STATES OF AMERICA separated by a star on either side
from ONE DOLLAR.

Morgan, who studied under the direction of instructors from the
Royal Mint in London, placed an “M” on both sides of the coin to lay his
claim to the design.

The largest and heaviest silver coin since the Civil War, the Morgan
silver dollar contains a hefty 0.77344 ounces of pure silver. It was
minted continuously from 1878 to 1904 when the government
exhausted its supply of silver bullion. Congress would pass the Pittman
Act in 1918, recalling over 270 million silver dollars for melting and the
Morgan dollar would be minted one last year in 1921 before being
replaced by the Peace Silver Dollar.

There are a number of factors that determine the worth of Morgan
Silver Dollars. The current market price of silver directly affects the
value of Morgan Silver Dollars, since they are made almost entirely of
the precious metal. As the price of silver rises, so will the value of these
coins. Conversely, the basic price of silver is not affected by many of the
factors that can drive up the price of Morgan Silver Dollars. These are
collector’s items, after all, and their value can increase due to a coin’s
condition or the current demand in the collector’s market for it. Add to
that the fact that these coins are in a limited supply, and the Morgan
Silver Dollar values are historically much greater than the basic price of
silver.

Millions of these coins were minted to help absorb the massive
amounts of silver found in the Comstock Lode in the late 1800s, but in
1918, over 270 million silver dollars were melted down to help provide
relief to Great Britain during the First World War. Obviously, this
increased the scarcity of the Morgan Silver Dollar and added to its value.
Over the years, there have been numerous newer issues of the Morgan
Silver Dollar for sale. From basic mint runs in the Sixties to the
occasional commemorative edition, none are nearly as valuable or
sought after as the original, early Morgan Silver Dollars.

Gold will certainly never lose its appeal, but neither will silver. For
many, the affordability of silver makes it a more attractive investment
option. There is certainly no denying that anyone can benefit from
investing in these precious metals. Far and away the easiest and most
reliable method of purchasing silver is to buy reliably graded Morgan
Silver Dollars. Their value will continue to swell throughout the coming
economic crisis, helping whoever owns them to rest a bit easier at night.
The Morgan Silver Dollar is a great way to position one’s portfolio to
take advantage of the soon manifestation of The Silver Bomb.

One of the rarest coins is the much sought-after 1921-22 Silver
Peace Dollar. These were the only years that this coin was minted in
high relief. The Peace Dollars were minted between 1921 and 1929 to
commemorate the signing of the peace treaty between the U.S. and
Germany at the end of World War One, which was known at the time
simply as the World War. It was believed that no other war could be
worse than this one had been, and this was to have been “The War to
End All Wars.

Interestingly this silver coin was created without a new
Congressional Act instead it was minted under the provisions of the
Pittman Act which had called in and melted down most of the Morgan
Dollars. The medalist Anthony De Francisci designed the Peace Silver
Dollar using his wife Teresa as a model for the personified head of
Liberty. Above her head appears the word LIBERTY and beneath sits the
date of issue. The motto IN GOD WE TRUST appears around her neck
separated between the words WE and TRUST.

The reverse of the coin features a perched eagle on a mountain crag
looking off into rays of sunlight. Across the eagle is the dollar
denomination. The Mint Mark appears underneath the word ONE. At
the top of the coin along the rim lay the words UNITED STATES OF
AMERICA above the Latin phrase E PLURIBUS UNUM.
All Peace Silver Dollars were struck in high relief in 1921, their first
year of production. The design was slightly modified in 1922 and
normal relief coins were struck later that year. Peace Dollars were
struck continuously until the effects of the Great Depression were felt in
1929. The U.S. Mint began producing the Peace Dollar again in 1934,
but coins dated 1935 would be the last to see circulation.

Coins of this type from all nations are just as rare. If all the seminumismatic
coins of not just the U.S. but of the world were to be
distributed throughout USA, only about one in twenty five people would
end up owning such a coin. From that perspective alone, it puts these
coins in the “exceptional” and “rare” categories and therefore not
subject to confiscation. Arguments to the contrary are grossly
inaccurate. The dealers that spread fear to the contrary have obviously
taken a lot of liberty with the truth in order to endorse their own bullion
products.

Buy gold and silver, especially silver. Buy it now. Consider the
privacy, security and risk-abating exemption to confiscation of pre-1933
collectible gold and silver coins, especially silver. Buy as much as you
can, for there will never come an event like the coming global return to
metal as money in combination with the inescapable re-evaluation of all
assets against the new value of precious metals, particularly the new
value of silver. Then and only then will you be ready for The Silver
Bomb.


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