With all the talk of digital (altcoins) and Bitcoin, it is hard to even fathom the value or point of holding physical coins. They are still nevertheless being minted so it will be quite a while before the clunky things are done away with. Some coins, however, though not very publicized, still hold significant value – even as much as Bitcoins!
It reminds me of a time way back in 2006 while routinely wandering through the pages of a local magazine, I paused at an advertisement that caught my eye. An institution dubbed the South African Coin Corporation was offering R100 000 (the present-day equivalent of $8400) for a 5 Rand coin with the face of Nelson Mandela engraved on the back.
Unable to contain my excitement at the prospect of being a couple of hundred thousand Rands richer, I rang up the number supplied at the bottom of the ad to claim my bounty – I had five of the coins. Unfortunately, the coins were worth little more than their intended 5 Rand in value because they were ‘used’ – the consultant on the other line informed me.
The company required rare coins that had been untouched and uncirculated. The South African Mint in 2000/2001 minted and encapsulated a few of the 5 Rand Mandela coins and sold them to a few collectors – those were now valuable and had a high demand from overseas collectors.
The South African Coin Corporation was one of the many coin dealers in the country that dealt exclusively in graded, encapsulated rare South African Rand (ZAR) and uncommon South African coins.
For the past 18 years prior to my visit, the company traded in rare coins ranging from the Veld pond, the 1892 one penny to Krugerrands – all with dramatic and important historical backgrounds attached. “Roman emperors were printed on their coins and that’s how one could tell who ruled and through which period,” a senior broker and spokesman for the corporation explained. “The coins encompass historical periods in time from the Anglo-Boer war to Paul Kruger, and the gold mines – the stories are all in the coins.”
The coins are graded on an internationally guaranteed system by two recognized American firms namely NGC and PCGS. They work on a grading system ranging from categories such as ‘good’, ‘fine’ and ‘uncirculated’.
The grading system helps to determine authenticity and originality of the coins – eliminating counterfeits and circulated coins. A ‘proof 70’ coin is basically a flawless coin and is worth a small fortune. Lower and medium coins on average collect growth levels of 8% to 15%. Low-grade coins are basically coins that have been in circulation or ‘used’.
Therefore, a 5 Rand coin obtained from banks and shops (such as the ones I had at the time) are classified as heavily circulated and thus only worth their printed value.
The industry was briefly brought into the spotlight about a decade ago with the record sale of the single fine ‘proof 69’ Mandela 5 Rand coin for 100 000 Rands (worth $13, 300 at the time). A senior broker at the Coin Corporation carried out the record sale. “That specific coin was bought by an overseas investor,” he informed me.
The near flawless coin according to the company is earmarked to break the $100 000-mark in years to come when it becomes rarer. “And we are yet to see a ‘proof 70’ coin,” he added.
If that sounds impressive you will be further astounded to know that even lower grades of the coin such as the proof 66 5 Rand Mandela which cost 735 Rands ($62) in 2006 enjoyed growth of over an astonishing 900%. And like our digital friend Bitcoin, it shot up to 8500 Rands ($715) within a year in that year – spurred by speculation and the knowledge of its existence and intrinsic value.
Some of the lower grades (Proof ‘62s and ‘64s) are now currently worth about $200 – $300 today and can be bought off private investors via online marketplaces. Some banks like this German-based Bank called Netbank offers the option to invest directly in Krugerrands.
The US market has the largest rare coin markets in the world valued at billions and billions of dollars.
For those that are looking for something more secure and long term, there is only one trend with this type of investment – and it’s up but will take a long time – longer than holding shares/stock or the digital variation.
As with any trading instrument, the industry experts cautioned investors about the use of the coins as investment vehicles. They advised that the coins were subjected to various grading tests and one must ensure that they are getting the right price for the value of their coins. Potential investors in the coins needed to have them valued professionally – preferably with any of the accredited coin makers.
The market for rare coins is also highly subjected to supply and demand factors. There is always a shortage of rare coins with a steady demand from collectors – so naturally, prices are generally always going up albeit slowly. External factors can also affect the value – such as the economic or even political climate of the country of its origin.
So, just as we advised about researching Cryptocurrency for their intrinsic value, it is key to learn about the coins you plan to invest in – and furthermore, it is of greater value to have a collection of rare coins than just having one or two.
Many people, for instance, do not know that there are two types of Krugerrands because they look the same. One is mass produced – making it less rare and therefore less valuable.
The main impetus behind investing in rare coins besides the diversification of a portfolio includes the fact that they add to one’s personal assets and is free of capital gains tax. It, therefore, serves as collateral or surety for bigger investments. There are also perks such as the absence of hidden costs, administration costs and commission deductions – which are paramount ingredients of other forms of investments. Once you purchase the coin, it is yours for the keeping – we are still holding on to ours! 😊