What are Proof Gold Coins & Why do investors buy them?
Here at ATS Bullion we don't just sell standard bullion gold coins, but we also sell proof coins and proof sets. But what exactly are proof coins and what makes them different to normal coins, I hear you ask. Well this article will briefly cover the difference between proof and bullion coins and why investors tend to buy them. We hope this guide acts a useful starting point in your journey to understanding coins and collectibles but in the event you have any questions why not call us on 020 72 40 40 40 or email us at: [email protected].
What are Proof Coins?
Traditionally the proof finish on a coin is the highest striking standard by the Minter. The dies used to produce the proof finish are carefully looked after and hand crafted to create the sharpest, most defined strike on gold and silver coins. The actual strike and creation of a proof coin is done by careful striking at lower thresholds. The speeds are adjusted and the pressure lowered, to get the marking and sharpness absolutely exact. This means that the proof dies that are used during the minting, produce less coins than their bullion counterparts and the process of making a proof coin is far more labour intensive. The proof finish therefore is the pinnacle of coin minting and helps to display the mastery of the strike. Proof coins tend to be limited mintage and usually come with a box and certificate (depending on coin and mint). Proof coins often command a higher premium to purchase and are popular with coin collectors.
Proof Coins vs Bullion Coins
What are the main differences between proof coins and bullion and how can you tell the difference between proof coins and bullion coins?
|Proof Coins||Bullion Coins|
|+ Typically come with box & certificates||+ No box or certificate|
|+ The strike or finish is a higher grade||+ Lower grade strike or finish|
|+ Lower mintages||+ Higher mintages|
|+ More expensive to purchase||+ More cost-effective to buy than proof|
|+ Finish usually has a mirrored background (the table) with a frosted foreground (the relief)||+ One finish on the coin - usually a mirrored finish on the background and the foreground|
To help you to spot a proof - here is a proof sovereign opposite a bullion sovereign so that you can see the particular striking differences:
So are Proof Coins worth buying?
This is where things a get little less clear-cut. In truth it can be subjective and trends can play a factor with proof coins that the bullion coins are unencumbered by. Whilst proof coins are beautifully crafted - they may not always be the best for investors. Here are a few things to bear in mind when deciding to purchase a proof coin.
Firstly, you may pay a significant premium for a proof coin, way above and beyond the intrinsic value of the gold. For example, this year's proof coin could well set you back over Â£400. Whilst this year's standard bullion sovereign would only cost you around Â£250. The premium you have paid for proof sovereign is a whopping 80% over the gold price whilst the bullion sovereign premium is about 6-7% premium over the gold price (prices correct at time of writing, February 2017). Remember, when you come to dispose of the asset - the price you will receive will always track the gold price and so a dealer may only pay you just over the spot price for the proof coin, meaning that you would need the gold price to go up nearly 80% for you to recoup your money. Whereas a bullion coin, having the lower premium, doesn't need the price to rise much for you to break even.
The above example is of course an extreme scenario - most proof coins that dealers are selling are pre-owned and therefore will have a lower premium. This means it isn't always going to be an 80% premium above the gold price on a particular proof coin but more likely a 15-20% premium depending on the dealer and what the coin is.
Secondly, another factor to consider and one that is much harder to predict, are buyer trends. Collector's trends can have a significant impact to what a proof coin or coinset is worth. For example, the 1989 proof gold sovereign with a box and certificate bought in 1989 would have set you back approximately Â£175 (calculated using the LBMA historic gold price and the current premium for a brand new proof sovereign). The same 1989 proof sovereign coin purchased in today's market, would cost you well over Â£1,200 - that's at least five times the spot value of the gold. Likewise there are other proof sovereigns that are worth two to three times their gold value. The problem is - why does this happen and which coins are going to be worth more in the future. Not an easy question to answer.
So are proof Coins worth buying? Certainly the beauty of proof coins will always attract collectors, just as vintage cars, watches and art will always attract investors and speculators, but always know what you are buying and why. Here are our tips on purchasing proof coins:
Tip One - Buy from a reputable dealer such as a BNTA (British Numismatic Trade Association) dealer. You can have a look at the full BNTA list here.
Tip Two - Make sure the coin comes with box and certificate where applicable
Tip Three - Ask the dealer what premium they are charging you. Never be shy to ask, the dealer isn't going to mind telling you!
Tip Four - Find out what the dealer would currently buy back the proof coin if you were selling it
Tip Five - Check the condition of the coin making sure there are no significant blemishes or fingerprints on the proof coin. It is always worth checking the condition and asking for the dealer's opinion on the condition.