There’s a major new market developing before our eyes. Well, actually it’s not new at all, but the interest that it is receiving from the investment community is beginning to be significant. It really can’t be called a “new” market, because the products have been around for between 100-700 years. I’m referring to the European gold coin market. More specifically, I’m referring to the rare European gold coin market.

As most of you know, my company, International Collectors Associates, has been “out in front” of the fractional European gold coin market for over a decade. We have had the privilege of bringing over a million gold coins from over 12 countries to the market over the past number of years. The advantages of these beautiful uncirculated gold coins over U.S. bullion coins have been well documented in our literature. While European Central Banks were divesting themselves of their gold coin hoards, we eagerly and aggressively offered then to our investors. As gold climbed from $250 to $650 ounce, we made our investors very happy.

Being entrenched in the European market over the years has brought another amazing opportunity to our attention. Although we have been admittedly very resistant to investing in most U.S. rare coins (we have certainly had our reasons, which I will outline below), I am now completely convinced that tremendous value and opportunity lies in their European counterparts.

LET ME EXPLAIN.

As recently as 1970, an astute investor could have bought premium U.S. rare coins at remarkably low prices. The industry was still collector oriented. There was little to no investment interest in coins:

• 1. Obtaining sufficient information on the availability of coins was difficult at best. Communication was very limited.
• 2. Everything moved in slow motion. Price guides were published infrequently. Current information was rarely available.
• 3. Disposable income was not plentiful, but was beginning to increase.
• 4. There was no way for an inexperienced investor to correctly determine the grade (condition) of a coin. Since price and value are determined by condition, a prospective investor needed to be his own expert, or trust someone who obviously had a conflict of interest – the very dealer selling the coin.
• 5. Liquidity on a rare coin was very limited. Communication to prospective buyers was extremely difficult and very slow (if, in fact, one even knew how to contact buyers). It might take many months, if not years, to properly liquidate a rare coin for the appropriate value.
• 6. Prices were difficult to determine accurately – again because of ambiguous grading and lack of sufficient information.

Then came a revolution in the U.S. coin markets. Aided by the runaway inflation of the late ‘70’s, tangibles of all kinds enjoyed strong markets, but coins particularly so. Although precious metals were driving the price of gold coins up, there were many other factors that contributed to the soaring prices of U.S. coins. In fact, some prices literally increased 10 to 100 fold!

The greatest impact on the U.S. coin market was the entrance of investors. Seasoned investors understood the rarity, art, and potential price appreciation that the coin market represented. They also understood the satisfaction of owning something scarce, rare, or even unique. The U.S. coin market particularly rewarded those who bought rarity (low populations) and high grades (among the finest known).

But what factors enabled investors to enter a market that they once avoided because of so many pitfalls?

• 1. The advent of 3rd party grading. Without question, the premier grading services (PCGS and NGC) forever changed the coin market. Investors no longer had to rely on a biased coin dealer, they now had assurances that they didn’t have previously. Condition was no longer as ambiguous, and pricing, which was totally dependent upon grading, became far more objective than subjective.
• 2. Liquidity was greatly enhanced. Many rare coins are best sold through auctions, and the auction market is far more sophisticated than it used to be. Not only are there many more auctions than before (at least one every week), the technological improvements are staggering.
• 3. Information is now readily available. The internet has changed the world, making it possible to find out about any subject – including coins. There is also now a host of coin periodicals and price guides.

With so much going for the rare coin market, one might wonder why I have been reluctant to recommend truly rare coins before now. The answer is pretty simple. The bloom was already somewhat off the rose. It was important to be in the U.S. coin market early – by that, I mean by the mid 1970’s. Granted, prices might still appreciate, but not at the remarkable rates that they once did.

So why would I now be willing to recommend rare European gold coins as investments? Again, the answer is pretty simple. I believe they are currently poised to repeat the pattern of the U.S. rare coin market when prices literally took off. There are some very compelling reasons that I believe this:

• 1. Many European coins are now being graded by third party graders. NGC and PCGS are both very active in the foreign coin markets, removing the mystery of grading and condition for potential investors. There is also now a respected 3rd party grading company in England which will only help to stimulate coin investing abroad.
• 2. There is real liquidity. Not only are more and more people becoming interested in this market, more and more auctions and coin shows are featuring foreign coins.
• 3. The strength of the Euro and the vast increase in disposable income in Europe is creating many wealthy would-be coin investors.
• 4. Foreign gold coins prices are ridiculously undervalued compared to their U.S. rare coin counterparts. In most cases, their values are about 10-20¢ on the dollar compared to equivalent U.S. coins.
• 5. Europeans understand investing in art and rarity (old master paintings approaching $100 million) – they simply needed the information and assurances that the coin market now offers them.
• 6. Timing – the timing is right. The most profitable percentage move in U.S. coins came in being invested early. I believe we only have several years to position ourselves before this collector market becomes an investor market.
• 7. There are extraordinary values available. High grade, low population, even proof gold coins can still be purchased for what seems like pennies on the dollar. Their U.S. equivalents have long since been snapped up and their prices driven through the roof.
• 8. Most European gold coins are actually much older and more historically significant than U.S. coins. The U.S. is a very young country compared to European nations – and so are its coins. Many European gold coins are older than U.S. gold coins by centuries, not merely by years. Their age and history make them imminently collectible.
• 9. Those who are already investing in our Legacy Collection Coins have a head start on their portfolio. The major difference to our past offerings is the individual nature of each of these coins.

At this time in the market for semi-numismatic coins, we feel it is imperative that you be more knowledgeable as to what a collectable coin is. Because we guarantee to buy back these coins at the same grade, we, as a dealer, consider several factors that our coins must have in order to guarantee our own liquidity. Liquidity is to collectible coins what location is to real estate.

Therefore, we use these criteria, to help us determine what types of coins will be desirable and easily liquidated. In considering any type of collectible coin, you should do the same.

I. Was the coin minted prior to 1934? – After 1934, the U.S. and the rest of the world, discontinued to mint coins as legal tender. Any coins minted after 1934, were minted for bullion reserve purposes, and are not considered legal tender coins.

II. Is the coin uncirculated, and how can you tell? Consider this question… Would you expect an uncirculated, 100 year old coin, to be dull with tiny scratches or bright and shiny? If you answered dull, you are right. In it’s original condition, an old coin tends to be dull or hazy, and may have a few tiny scratches. If the coin is bright and shiny, and you see no scratches, typically this indicates that someone has buffed or cleaned the coin. A shiny coin attracts customers looking for the wrong thing. Eye appeal is important, but a true uncirculated coin, should be purchased in it’s original condition – not an altered one.

III. In the future, will a dealer pay you a premium for the coin? Almost all old coins carry collectible premiums, however, there are several coins currently being promoted as collectibles. It doesn’t always mean a dealer at some future time will be willing to pay a collectible premium for the coin. If you follow these guidelines, they will protect you from buying an illegitimate coin. You should carefully consider all of these points. You should not disregard a single one when choosing a coin.

IV. Has the coin ever been re-struck ? In some instances, coins were reproduced by a country reusing an old design cast to make the coin. For instance, the Swiss and French 20 francs were reproduced in the mid 1940’s using old die casts, bearing an older date. Anyone wondering what happened to the gold stolen by the Nazi’s may want to consider this. Austrian Ducats, bearing the date 1915, are currently being reproduced, are offered as old coins, and are selling for a premium. This creates a problem for the coin as a collectible, because at this point, no one knows the true population of the coins made with that date, nor how to tell the old from the new. To better understand this problem, imagine Chevrolet reproducing 10 million more exact replicas of the 57 Chevy. Then try to imagine convincing someone they were really built in 1957, once the news got out.

V. Is the coin protected from confiscation? A precedence was set by our country when Franklin D. Roosevelt instituted Executive Orders recalling gold bullion in exchange for paper currency. This effectively pulled real money out of the hands of the public, and put a currency that could be easily reproduced into circulation. The only gold people were allowed to own was in jewelry and collectible coins. In our country, if martial law is declared, and executive orders are enforced, they will also institute exchange controls. At that moment, our borders will be closed to prevent any wealth from leaving the country, any foreign paper currency you own will be called in and made illegal, and any bullion you have in your possession will also be called in and made illegal.

Collectible coins are far less likely to be confiscated, because of the government’s inability to determine collectible value. Even if this were to change, and governments go after collectibles at some point, you will have bought more time, with collectibles, to be legal for as long as possible. When Stalin and Hitler confiscated gold, they did not confiscate collectible coins. But eventually, they declared certain segments of their populations to be spiritually or politically incorrect, and seized everything from those people. A sobering thought for Christians and politically incorrect traditionalists in America .

VI. Is the coin non-dealer reportable and privateHaving dealt with this issue earlier, we would like to reiterate two concerns. First, for dealers to take advantage of any exceptions, real or imagined, to 1099 Dealer Reporting requirements, they risk an IRS audit of their client’s transactions to verify compliance. We are not willing to use the exceptions for that reason. We would rather “chew our arm off” than to fill out 1099 forms.

However, we will report the liquidation of even a single gold coin to avoid an IRS fishing expedition. A wise man once observed, “Do you know what happens if you let a camel stick his nose under your tent flap? Pretty soon, you have a camel in your tent.” Second, protecting your privacy today insures your legal ownership from confiscation in the future.

VII. Does the coin have a low mintage? It is not necessary for a coin to be “rare” strictly by population, but for a coin to have collector appeal, it must have some scarcity or rarity. Although the majority of old U.S. coins have significant populations, what makes them rare is the condition they survived in. However, if a coin has a low mintage population, this too, can play a significant role in its rarity value.

VIII. Is the coin under-valued or over-valued? In other words, does the coin have genuine upside potential, or is it over-priced at this time. This could be important in determining if a coin is currently over promoted by dealers.

For instance, during the Y2K scare, many dealers promoted cheap double eagles as a barter coin that was protected from confiscation. These circulated coins were only $80 to $100 above their gold value and seemed like a good buy compared with uncirculated double eagles. After Y2K, many discovered these coins were only worth their melt value.

In 1998, ICA began recommending old, uncirculated, European coins with sizes and premiums similar to modern fractional bullion coins. This helped our clients avoid big losses with the barter portion of their portfolio.

IX. Is the coin over-graded? All too often coin dealers are unwilling to take responsibility for the accuracy of the grading of a coin. Therefore, they typically will only guarantee the coin according to the current grading service standards. This actually poses a problem, especially if the standards change in the coin grading services. In the face of strong market demand, coin grading standards can loosen up in order to supply more coins into the market.

So, what happens to the standards when the opposite takes place, and suddenly there is no demand, or even a market sell-of? Here at ICA , we guarantee to buy back your coin at the same grade we sold it to you. This insures that no matter what the current standards are at the time, we know that the coins we sell you now will stand up to any standard being used in the future.

X. Is the dealer reputable and well capitalized? There are over 5000 coin dealers currently in existence in the United States . Of those there are only a hand full of reputable, established dealers in this industry having the knowledge to truly give their clients the best service. ICA has a 28 year history of buying and selling precious metals. ICA is one of the largest dealers in the country. This insures our ability to provide a two-way market, and give you the proper perspective.

All too often most people are not given enough of the right information to make a good decision. ICA believes that the integrity, information, and coins we provide to our clients has been, and will continue to be, at the highest standard by which the rest of the industry will be measured against. Like Grandpa McCoy was fond of saying “ It ain’t bragging when you done done it”

Our highly trained and experienced advisors strive to help you in customizing solid strategies of wealth preservation for your financial and retirement assets. Not only do we offer sound financial advice, but we also strive to keep our clients well informed in any economic environment.