by Jack Lee
A lady asked me today, when’s the best time to sell gold? She said, “Since gold is at a record high price should I sell, keep it for safety or should I just let my kids have it as inheritance?” This is a good question and one that a lot of folks are thinking about now.
The first thing to be considered is she said she doesn’t need the money, so time is on her side no need to sell out today. Gold has been doing very well and my best guess is that gold will easily reach $1500 an ounce within the next 5-8 months. That would be a reasonable goal or strike price. So the first thing to do is set a reasonable strike price…in our case reasonable is estimated at $1500 an ounce.
This may be a very good time to sell gold you no longer want because gold has risen almost 70 percent in the past two years. As our economy struggles, gold always gets stronger. Gold is an indicator of economic nervousness, but as the economy gets better there is an inverse relationship to the price of gold. You have to ask yourself do you see the economy getting better (even if only by a small amount) or do you see it continuing down? Being a good guesser of economic direction will help establish the best timing. My guess is 5-8 months out and then gold should be getting close to a top, IF all things continue as they are…if not, well, there’s a whole new ballgame!
Next, the best way not to get a bad deal when selling your gold is to know as much as possible before you approach someone about buying your gold. We’ll discuss that a bit later.
As for inheritance, I like this idea best if you can avoid probate and thus the death tax. Passing your wealth down is always a great thing to do, but this is a very personal choice. I can’t advise on this part, but I can on valuing the collection and timing the sale. Of course I don’t have a crystal ball, but we can read the market charts and look at the gold charts and we can all be aware of current events in relationship to our economy – I feel very certain that based on this current market, gold doesn’t have a whole lot farther to run. But, what is left in the run could still make a lot of people some decent cash. /Where’s the top? Who knows? Maybe, it could go up to $1600-$2000 an ounce. Maybe higher, if something derails the economy again. But in all probability I see gold topping sooner than later. Time frame 5-8 months.
Whenever it gets near that time when one wants to sell we have to consider something else besides the raw gold (melt) value. I’m talking about the collector value. This value could increase its overall worth many times over… if she is lucky enough to hold the right year coins in good shape!
In order to make an informed decision she should get at least two appraisals to have a good idea of the collections value. Gold bullion is easy to calculate based on today’s market price, but gold coins can be complicated to value.
Two gold coins of the same year and same denomination could be valued quite a bit differently by collectors. This value is set according to its grade. So what is a grade? A “grade” is a commonly accepted label used by numismatists to indicate the appearance of a coin. In other words, if one collector tells another that he has a 50 Charlotte half eagles in uncalculated condition then both collectors should be on the same page.
In the 1940’s a numerical grading scale was invented by Dr. William Sheldon. This scale, which ranged from 1 to 70, was originally devised to ascertain values of 1793-1814 Large Cents by ascribing a basal value to each variety and multiplying this value by the grade in order to determine a price. The Sheldon grading scale is now used by most numismatists.
In order to do justice to the art of grading I would have to write about 5-6 pages on the subject, but for now, let’s just do the short form.
Surface Preservation: Overall condition, noting any marks or dings. If a coin has a ding on the reverse side it is generally not penalized as much if it were on the face.
Indian Head quarter eagles saw a lot of service so it’s harder to find nice examples that do not have the marks, scratches and scuffmarks associated with circulation and/or poor handling and that makes a coin in fine to very good condition rather valuable.
United States gold coins are less circulated so there’s a high expectation they will be in good condition and therefore surface preservation is very important in determining grade.
Luster: Does it still retain much of its original appearance? When analyzing the surface of a coin in regards to grade, there are two things to look for: the amount of the original surface (or “skin”) that is intact and the amount (and location) of marks. Premiums are paid for pieces with mirror-like surfaces that are most likely found in proof coins.
in 19th century United States gold coins they tend to have a frosty texture. This texture can be found on issues from all mints but it is most closely associated with Philadelphia and San Francisco.
Coloration: Color is the most subjective factor in determining grade. For example a gold coin that shows deep green-gold color may be attractive to one viewer and unattractive to another. In my opinion, attractive original coloration greatly enhances the appearance of a coin. Gold is a relatively inert metal and not subject to as much variance in coloration as silver or copper. However, a wide range of colors may be present on gold coins.
The majority of United States gold coins have been cleaned or dipped at one time. As a result, they no longer display original coloration. As collectors become more aware, they are often attracted to coins with pleasing natural color. In many series, it is almost impossible to find original pieces. In the near future, it is likely that totally original pieces will be accorded a strong premium over “typical” examples.
Color is not as important a factor in determining the grade of a gold coin as it is on a silver or copper coin.
Eye Appeal: This is pretty much a self-explanatory term. However, a coin that has good eye appeal may be very strong in one area (excellent luster, for example) and good in another (nice but not great color). If a coin is negative in one area (very heavy marks, for example) but acceptable in all others, it is still likely to be noted as having below-average eye appeal.
Grading coins is an art, but it also requires some skill. This is why I suggest any serious collection get at least two estimates of value. One mistake could mean a lot of money.
Here are the commonly used terms for grade:
- Mint State (Unc) – Absolutely no trace of wear
- AU coins come in AU-50, AU-55 and AU-58. As a novice, you probably won’t be able to tell the difference between AU and Unc coins. One of the weird things about coins is that an ugly uncalculated coin often sells for more than a beautiful coin with barely perceptible wear.
- Extremely Fine (XF or EF) – Very light wear on only the highest points.
- XF coins come in XF-40 and XF-45. With an XF coin, you can usually see the wear without messing around too much, but it is a very small amount of wear. There is often some of the mint luster left on the coin. Most of the devices on the coin are clearly defined. For each type of coin, there are different things to look for in determining if a coin meets this demanding grade.
- Very Fine (VF) – Light to medium wear. All major features are sharp.
- VF coins come in VF-20, VF-25, VF-30 and occasionally VF-35. The key word here is major. Minor features such as some of the finer hair detail, feathers, etc. will be worn.
- Fine (F) – Moderate to heavy even wear. Entire design clear and bold.
- Fine is labeled F-12 in the Sheldon scale. Your average 1965 quarter from circulation is Fine. A lot of the details are gone, but you can still see a good deal of the design.
- Very Good (VG) – Well worn. Design clear, but flat and lacking details.
- Very Good is VG-8 on the Sheldon scale. The entire design is weak, but a few details are visible.
- Good (G) – Heavily worn. Design and legend visible but faint in spots.
- Almost Good (AG) – Outlined design. Parts of date and legend worn smooth, its almost used up..
- Fair (Fair) – You can identify the coin as to its type.
- Basal State (Basal) – You can identify the lump of metal as being a coin.
Okay, now lets re-focus on our original seller and lets say she gets two appraisals, one comes in at $65,450 and the other comes in $63,300. This is in the ballpark, like I said grading is part skill and part art and therefore you’ll likely not get much closer than these estimates on a large collection. But, at least she has a reasonably good idea of her coin collection’s value, somewhere between $63-$65k.
Now should she sell it all when she hits her strike price? My advise is, because we are at record high’s in gold and silver, maybe she should think about selling at least half and then keep the other half for a rainy day fund or inheritance. Gold is always good security in uncertain times and we sure are in that right now or like I said, she can keep it for inheritance and have that feeling of security if it all hits the fan. Remember, the more these coins age, the more valuable they become…so once again time is on her side, unlike bullion.
If it were all bullion I would be temped to sell around 75% of it when it hits $1500 an ounce and see if it runs much more before reconsidering selling the rest. If that happens and gold goes up to $2050, so what? You’ve made your profit – and be happy you did. Catching the top or the bottom of anything is darn hard to do.
Gold hitting $2000 is a long way off and many things could happen between now and then, which is why I said $1500 is an acceptable price for now. Gold is trading at record highs and any investor should know that when anything is a record high it rarely stays there. Our economy is on the mend, it may be slow, but it’s on its way and as our economic woes fade, so will the price of gold. I would not be one bit disappointed to take the money and run when you get a good price and I consider $1500 for gold and $27 an ounce for silver reasonably close to the top, close enough that it warrants taking profits. And a lot of people will be thinking the same way, so this will add to the price decline whenever it begins. First rule of investing is realize that what goes up will eventually come down…even gold.