Learn how to protect your retirement savings.
An Introduction to Collecting Gold Coins
Are you considering starting a coin collection or adding coins to your existing collection?
Every coin can be “precious” for a number of reasons. Of course, some coins are actually valuable because of their gold content and rarity, but others may be precious in a coin collection because they are a work of art, are part of a themed series, or capture a piece of history,
Whether you’re collecting coins as a hobby or as an investment — or both — this guide provides tips and tricks to help you on your way.
Let’s first look at some terminology that will be useful when you’re researching and purchasing gold coins for your collection.
What are the basic parts of a gold coin?
Below are the terms used for the different parts of a coin:
The obverse side of a coin is the side that usually features a portrait or an image of a bust in addition to the mintage year. Canadian coins, for instance, bear effigies of the reigning Queen of England on the obverse side of the coin.
The reverse side features the coin’s face value.
The field is the flat surface that is the background of the coin’s design, the relief.
The relief is the coin design that is raised above the coin surface.
The legend consists of the lettering or inscription that identifies the face value, the country of issue. It may also include the designer’s initials.
The rim is the raised area along the diameter of both sides of the coin.
The edge, sometimes known as the “third side,” is often reeded but comes in other designs as well, including plain/smooth edge, lettered edge, and decorated edge.
The Gold American Eagle has a reeded edge.
The composition of the coin describes what it is made of. Another term is “fineness,” referring to the amount of gold the coin contains. For other gold products, we often use karats to describe the purity of the gold. Here’s how the two terms correlate:
- 24 karats = .999 fine or above = 99.9% gold
- 23 karats = .958 fine = 95.8% gold
- 22 karats = .917 fine = 91.7% gold
- 21 karats = .875 fine = 87.5% gold
For gold products in general, 24 karat (1.000 fine) gold is considered the most desirable, but since pure gold is very soft, it’s not suitable for coinage that is meant for circulation. Therefore, circulated coins consist of an alloy where gold is mixed with other metals to increase the durability of the coins. For example, the Gold American Eagle coins consist of 91.67% gold, 3% silver, and 5.33% copper.
What are the different types of collectible coins and finishes?
The finish of a coin refers to the appearance of the surface texture and the relief of the coin.
Circulated coins are meant to be used as currency in everyday transactions. The mint therefore produces coins for circulation without the extra steps involved in achieving other finishes.
Uncirculated coins are produced for collectors. The mint uses the same production process as for circulating coins but adds certain quality enhancements to achieve a brilliant finish.
Proof coins are the pinnacle of coin collecting due to their immaculate design and finish. They are minted for collectors and prized for the distinguished look and feel. Proof coins are characterized by their mirror-like background and frosted design elements. The mint manually feeds polished coin blanks into their presses, which use specially polished dies. To further highlight the details of the design, each coin is struck at least twice.
The gold American Eagle proof coin showcased the mirror-like background that proof coins are known for.
Reverse proof coins feature a brilliant or mirror-like design on a frosted background. Like proof coins, reverse proof coins are struck at least twice.
Specimen coins are characterized by their brilliant relief over a matte of lined background and are struck once or twice.
Error coins are coins that have flaws in their design or production process that set them apart from similar coins. Error coins often carry a hefty price tag because they are extremely rare.
Commemorative coins are typically issued as tribute to an important person or to mark a historic event.
Mints sometimes use enhanced finishes where they apply frosting or polishing to certain areas of the coins to highlight specific details.
How are gold coins graded and valued?
The price and value of a collectible gold coin are determined not only by its gold content and rarity but also by its condition. When you’re buying gold coins, be sure to check its “grade,” which is a visual evaluation of its wear. Coins are graded by companies that specialize in providing this assessment. In the US, the leading grading companies are PCGS and NGC. Coins with no or little wear receive higher gradings and, thus, higher prices; however, extremely rare coins that are low-grade can easily be much more valuable than more widely available high-grade coins.
Grading scales vary between countries, so keep that in mind if you’re purchasing coins internationally. Below are the general characteristics of coin grades used in the United States. Generally, coins are graded on a scale between 1 to 70, where 70 is a perfect coin that has the same condition as a coin struck now by a mint, and 1 is in a condition similar to a coin run over by a train. In addition to the gradings below, it’s customary to note any defects, including “bent” and “scratched.”
- Proof (PR or PF with a numerical designation typically between 40 and 70). This designation is used for proof/reverse proof coins.
- Uncirculated (UNC) or Mint State (MS60–MS70, which means “Mint State” coin at a grading of between 60 to 70). The coin shows no trace of wear, but minor nicks or marks may be present. The two terms are often used interchangeably. MS70 is considered a perfect coin.
- Almost Uncirculated (AU50, AU53, AU55, and AU58). The highest points of the coin may show small traces of wear Small trace of wear visible on the highest points, and at least half of the mint luster (the reflective qualities produced during the minting process) must still be present.
- Extremely Fine (XF40/EF40 and XF45/EF45). The coin has light wear on the highest points, and some mint luster is still present.
- Very Fine (VF20, VF25, VF30, and VF35). Most details are visible, and all major details are virtually complete.
- Fine (F12 and F15). All major details on the coin are visible and virtually complete. In this case,
- Very Good (VG8 and VG10). The designs and the date are clear but lack details, and the full rim must be visible.
- Good (G4 and G6). The coin shows significant wear, but legends, designs, and dates are still visible.
- About Good (AG3). You can read the date, but parts of the coin and legend are no longer visible.
- Fair (FR2). You can identify the type of coin, but the date might no longer be visible.
- Basal or Poor (PO1). In this condition, the piece of metal can be identified as a coin.
Now that you are familiar with the basics of coins, let’s look at some ideas you can use when building your gold coin collection.
How do you start a coin collection?
A wide variety of coins are available from mints across the world, so choosing your gold coins can seem overwhelming. Many collectors therefore specialize in one of four categories:
Country of origin
Collecting coins is a great way to learn about the culture and history of a country. The United States is an obvious choice, but other popular countries include Canada and Australia. Many collectors focus on coins from their own country, while others may aim to collect a coin from every country that has issued gold coins.
If you’re a history enthusiast, you may enjoy collecting coins tied to or related to a specific period in history. Perhaps you are interested in World War II and want to collect coins issued during that time period, or perhaps a particular year is of significance to you so you collect coins from that year.
Many coin collectors focus on coins that share a common theme. A popular theme is “animals,” and there are lots of great options from renowned mints like the Royal Canadian Mint (such as and Australia’s Perth Mint.
The Polar Bear and Cub gold coin from the Royal Canadian Mint is popular among coin collectors and is a popular choice for a beginner if you’re collecting animal-themed gold coins.
Mint mark collection
Some collectors focus on coins from a particular mint, such as the US Mint or the Perth Mint or even a particular mint in the US, like the now shut-down Carson City, NV, mint, which produced silver coins, while others consider the different mint marks of the various US Mint facilities significant. If you’re also collecting coins by year, you multiply the number of specimens needed for a complete collection since some otherwise similar US coins were minted at different mints.
Type or denomination
Other collectors collect coins with a specific value, such as quarters or $1 coins, allowing them to collect all the major coin designs with that denomination or coins from every year a specific coin has been issued.
How do you properly store your gold coin collection?
Gold is almost impossible to destroy. Part of its millenia-long appeal is that the precious metal can’t rust, tarnish, or decay.
However, gold coins can still be damaged during storage and handling, so it’s important to be cautious to avoid even small marks that can diminish their value.
If you’re just starting your gold coin collection, storing your coins at home is the easiest solution, but as your collection — and thus its value — grows, you can consider storing them in a safer place, such as a bank safety deposit box or a depository.
What to consider when collecting gold coins as an investment
Some gold coin collectors “just” collect as a hobby, while others build their coin collections as part of their investment strategy. Your goal affects what you need to consider when buying gold coins.
Coin collectors typically collect coins because they love the designs and enjoy the satisfaction of completing a set of coins for a particular coin type or an era. If that applies to you, then collect coins for their beauty and for the enjoyment of the hobby.
Many collectors also have the goal of making a profit someday, but to some the appreciation in the value of the coins is the goal. As investors, they collect gold coins knowing that gold coins will always be worth their weight of the metal or bullion value, and their increasing rarity means they will increase in value well beyond that bullion value.
The nature of your investment impacts what coins you can purchase, so when you’re considering buying gold coins as an investment, make sure you speak with an expert advisor to ensure that you purchase the right coins to meet your financial goals.
To learn more about the coins we offer at Gold Alliance — or if you have questions regarding the purchase of gold coins for investment purposes — just call 888-734-7453 and speak to one of our experts.