The American Gold Eagle coin is one of the world’s most successful bullion issues, but are proof American Gold Eagles a good investment?
Since the inception of the U.S. Mint’s Gold Eagle program in 1986, over 25 million ounces of these bullion coins have been released to precious metal investors. However, there are important questions regarding these beautiful coins that surface repeatedly. Are modern gold bullion coins – even proof versions – truly collectible? Should you invest in Proof American Gold Eagles?
Proof coins are carefully struck collector’s versions of existing “business strike” coins. In the case of American Gold Eagle coins, the vast majority of pieces minted are intended for the bullion market. These bullion business strike coins are struck quickly in a highly automated fashion in order to satisfy the considerable quantities demanded by precious metal investors.
In contrast, proof American Gold Eagles receive special care. The actual minting process is very involved and occurs exclusively at the U.S. Mint’s specialized West Point facility located in the Hudson River Valley of New York state. Specially selected, hand-polished coin blanks are individually hand-fed into a press fitted with the best coin dies available. The coins are then struck a minimum of two times at low speed to ensure the best impression possible.
The resulting gold coins are then hand-inspected, one-at-a-time, by white-gloved mint employees. Any coins showing even the slightest imperfection are immediately rejected and condemned to be melted down. Proof coins that pass this rigorous inspection process are sealed in plastic capsules for preservation purposes before being mounted in a satin-lined, luxury presentation case that includes a certificate of authenticity.
Proof American Gold Eagles are a sight to behold. The exacting production steps adhered to by the U.S. Mint create a coin with a mirror-like field – the flat “background” area – and highly frosted devices – the raised design portion. This highly desirable effect, a mirrored field with contrasting frosted devices, is known by coin collectors as a cameo proof. Third-party grading services, like PCGS and NGC, will note the cameo effect on proof coins they certify with the designation CAM (for cameo) or DCAM (for deep cameo). While the highly desirable cameo effect is normal on proof coins today, it was rare before the invention of highly advanced minting technology in the late 1970s.
In addition to proof coins, the U.S. Mint’s West Point branch also strikes another variety of collector’s coin, called burnished American Gold Eagles. These burnished uncirculated coins are specially struck using many of the same exacting procedures as proof coins, including individual handling. However, the resulting burnished American Gold Eagles are not proof issues and do not have the mirror-like, cameo finish of proof coins. Instead, burnished American Gold Eagles look similar to matte proof coins, with both the fields and devices possessing a softly frosted appearance. For the purposes of this article, proof American Gold Eagles and burnished American Gold Eagles have very similar attributes and can be viewed interchangeably.
In spite of the incomparable beauty and technological triumph of proof American Gold Eagles, there are some people in the bullion industry who don’t like them. If you search the internet for information on these paragons of modern Americana, one of the first results you will see is an article titled “Hidden Dangers in Buying Proof American Gold and Silver Eagle Coins“.
This article contends that many bullion dealers selling proof American Gold Eagles mark up the coins excessively, leaving clients with overpriced collector’s coins that are actually worth only a modest premium above their spot values. There is an element of truth to this charge. Some unscrupulous gold dealers, especially fly-by-night companies that advertise aggressively on television or talk radio, do charge far too much for these coins. But, of course, all industries have their share of morally questionable business people who wish to take advantage of the ignorant. An informed coin investor buying proof American Gold Eagles from a reputable dealer will have nothing to fear.
Proof American Gold Eagles are aesthetic gems that echo the golden age of American coinage. The obverse design of the American Gold Eagle was borrowed from one of the most iconic U.S. coins ever produced – the Saint Gaudens double eagle gold coin. In the early 20th century, President Theodore Roosevelt strongly believed that a great nation deserved great coins. Therefore, he commissioned renowned sculpture Augustus Saint-Gaudens to create a circulating gold coin modeled on the Greek numismatic masterpieces of ancient times. The result, minted from 1907 to 1933, was the incomparably beautiful Saint Gaudens $20 gold coin. Its front displays the personification of Liberty boldly striding forward as the rays of the sun burst forth around her.
In addition to their rich history and meticulous striking process, both proof American Gold Eagles and burnished American Gold Eagles have mintages that are far lower than their bullion counterparts. With the exception of its first two years of production when mintages were higher, 1 troy ounce proof American Gold Eagles have averaged fewer than 40,000 specimens issued per annum from 1988 through 2016. After 1987, no year had a proof mintage greater than 100,000 pieces and over half of the series sports mintages of fewer than 40,000 examples. And the fractional 1/2, 1/4 and 1/10 troy ounce coins often have even lower mintages than the 1 troy ounce pieces.
These low mintage numbers for proof American Gold Eagles are in sharp contrast to the business strike, bullion version of the coin. The average mintage of bullion 1 troy ounce American Gold Eagles is over 600,000 pieces struck annually (from inception through 2016) with several individual years exceeding 1,000,000 coins. The proof versions, on the other hand, have dramatically lower mintages – often 1/10 or less of the bullion coins.
Burnished American Gold Eagles, like their proof cousins, also have shockingly low mintages. Mintages for 1 troy ounce burnished American Gold Eagles have averaged a scant 13,000 examples per annum through 2016. These modest mintage numbers are absolutely dwarfed when compared to those for circulating U.S. coins, which generally vary between millions and billions of examples. Simply put, burnished and proof American Gold Eagles are some of the rarest modern U.S. coins in existence.
Another little known advantage of proof American Gold Eagles is that they are the only type of proof gold coin eligible for ownership in a precious metal IRA account. While collectibles and antiques are specifically prohibited in U.S. retirement accounts, a carve-out was made for holding physical bullion bars and coins in a precious metal IRA. Luckily for the savvy tangible asset investor, the U.S. Congress overlooked the numismatic potential offered by gold bullion coins held in a precious metal IRA.
With premiums generally ranging from a modest 10% to 40% over spot for common date coins, burnished and proof American Gold Eagles have a lot of hidden investment potential. Despite possessing little numismatic potential, regular bullion American Gold Eagles have premiums that aren’t much lower, ranging from around 4% to 20%. Paying a slightly higher premium for the aesthetically desirable proof or burnished versions makes a lot of sense when you consider their inherent numismatic optionality.
Now there are situations where burnished or proof American Gold Eagles don’t make sense. If you are simply interested in buying the most gold bullion possible for your money and don’t have any interest in generating higher investment returns via numismatic potential, then you should pass on these coins. But, provided you pay a reasonable premium above their bullion value, burnished or proof American Gold Eagles represent a wonderfully low-risk, high-return investment. Not only that, but they are some of the only collector-oriented coins that can be legally purchased in a precious metal IRA.
