By Doug Winter – RareGoldCoins.com

Beginning with this article, I’m going to focus, from time to time, on issues that I regard as “forgotten rarities.” These are coins that are truly rare but which, for a variety of reasons, do not get the fanfare that they deserve. I plan on featuring a selected gold rarity once every month or so. The first issue that I want to discuss is the 1863 eagle.

I’m going to try to avoid “condition rarity” issues in this series. In other words, I’m featuring coins that are rare in the most absolute sense of the word. And I think the 1863 eagle has this concept of rarity absolutely nailed.

There were only 1,218 eagles produced at the Philadelphia mint in 1863. For all denominations other than the double eagle, mintages were extremely low this year, which makes sense given the economic conditions of the Civil War (at the beginning of the year it was still not readily concluded that the Union forces would prevail). The low mintage of this issue, combined with a generally low survival rate for gold coins of this era, meant that the 1863 eagle was a rarity from the time it was struck.

I regard the 1863 as the third rarest business strike issue in this entire series, trailing only the 1875 and the 1864-S. I believe that there are around 30-35 known in all grades. As of March 2010, the combined total of coins graded at PCGS and NGC was 37 but this figure is clearly inflated by resubmissions; NGC, as an example, has eight coins alone in AU58.

The surviving examples of this issue tend to be in the VF-EF grade range. Eagles of this era were clearly used in commerce and those that were not later melted tend to show numerous abrasions and signs of rough handling. I can’t recall having seen more than three to five 1863 eagles that had original color and reasonably clean surfaces. Many have been cleaned or processed and properly graded AU examples are very rare.

Since 2000, there have been only six auction records for 1863 eagles that have not been damaged, harshly cleaned or ungradable by PCGS and NGC. The most recent record of note was Heritage 1/05: 30496, graded AU58 by NGC, that realized $28,750. This coin was not choice for the grade, in my opinion, yet it was still a bargain given its rarity and comparatively high degree of preservation.

By Doug Winter – RareGoldCoins.com

In the past few years, I’ve noticed an interesting trend in relation to the pricing of rare date gold coins. I refer to this as “value compression.” Let me explain what I mean.

When I mention this term I am referring to a small price premium between grades. The classic value-compressed issues have long been the Iowa and Roanoke commemorative half dollars. According to the most recent CDN Greysheet , the difference in value between an MS60 and MS65 Iowa half dollar is a whopping $12 (!) while a Roanoke shows a value increase of just $70 between MS60 and MS65.

This phenomenon has begun creeping into the United States gold market as well. Areas which appear susceptible to value compression include common date St. Gaudens double eagles, gold dollars, lower grade Carson City double eagles and early gold in the EF45 to AU55 grade range.

Why do values compress in certain series? The most basic explanation has to do with current grading standards and appearance; a secondary reason is based on the actual design and size of a coin.

As an example, an 1851-C gold dollar is a $1,250-1,350 in EF45 in today’s market. In AU53 it is worth in the area of $1,500-1,600. Why is there such a small difference for what should be a pretty hefty increase in grade? This is mainly due to the way that these coins are now graded. There is no longer much aesthetic difference between an EF45 and an AU53 gold dollar and the market recognizes this by compressing the price spread between these two grades. In the case of the 1851-C dollar, the value is even more compressed between an AU50 and an AU53 or an AU53 and AU55. Simply put, if a collector can see no discernible difference between two grades, then why pay a premium.

In no series is this compression more evident than with common date St. Gaudens double eagles. If you take a random sample of freshly graded MS62 coins and freshly graded MS64’s, there is probably going to be little difference. In fact, the 62’s might even be nicer than the 64’s. This inconsistency of grade is why an MS62 is currently worth $1,450 and an MS64 is worth just $1,600. Back in the days when there was an appreciable difference between the two grades, there was an appreciable price difference. (more…)

This week a “bullion related” news item crossed my desk which gave me pause.

A company called Gold Solutions Marketing Inc. (www.TheGoldBullionCard.com),  recently issued a press release announcing their new Gold Backed “credit card”, which will be available soon online. The card, which will be branded by either MasterCard or Visa, is supposed to function like a regular credit card, but will be backed by gold bullion coins you have to deposit into an account. If you don’t currently have any gold, the press release states that you will be able to purchase a quantity of gold. ” below market prices”, at the time of your account opening.

Jeff Silver, VP of Gold Solutions Marketing, Inc. was quoted to say, “Those who ‘believe in gold’ can see  the new (Credit Card reforms of Feb 2010) law reshaping attitudes and conventions about credit cards that will help make this breakthrough collateralized credit card concept a reality in the very near future.  They know that gold, which is a hard asset, can provide a higher level of liquidity and usefulness, while positively impacting the financial picture for millions of Americans” .

Now to be fair, I have to state up front that I am not a big fan of the credit card industry or the big mega banks in particular, and how Congress has allowed, and still allows them to engauge in what many consider to be predatory business practices is a whole different story. But something just didn’t make sense to me in this press release.

First, this is a collateralized credit card, where of the line of credit is backed by an asset you already own.  According to Jeff Silver, the ” credit card [will be] based on 75 percent of the value of gold coins on deposit……, which should give the issuing bank a much more secure feeling about extending credit.”  You Think ?

Now my mother drowned all of her stupid children, but it seems to me that if I have $20,000 in gold bullion coins, in my possession, why on earth would I ship them off to a depository in exchange for a “credit card” with a $15,000 credit limit? (more…)