Understand The Gold Premium
When buying or selling gold bullion, you need to know the gold price and what the premium is above that. A gold coin with a face value of $50 does not necessarily cost $50 but one that had a $20 face value sold for over $18million. That, by any measure, is a big appreciation. This particular coin had two things going for it. It is a bullion coin and it is extremely rare. The 1933 “Double Eagle” coin was the last gold coin that the U.S Mint produced but it was never circulated thanks to President Franking D. Roosevelt. In 1933, Roosevelt ratified and signed an Executive order 6102 with the intention to stop people from hoarding gold. Many regard this as Roosevelt’s move towards confiscating gold from ordinary people. This order required private people, companies and association to turn in their gold for a paltry $20.67 an ounce. Basically, what the U.S fed was doing was stealing gold from the public because they couldn’t meet the rising demand for cold hard cash during the depression and the printing presses were able to cope with the demand.
To clarify, the word:” confiscation” might be has a different meaning or connotations. Government wasn’t just sending the “gold police” to take money from ordinary citizens. A lot of Americans just handed their gold, not everyone did however but held on their gold. Back then, the 1933 Double eagles were melted down by the government, only a few ended up in the hands of the public and is why they are rare and expensive. Anyone who was found with these coins, was considered to have stolen goods in their hands. According to the auction house, Sothebys, this one coin is considered to be the most expensive coin sold at auction.
According to CNN, this coin got its legitimacy in a legal battle between the owner and the US Treasury Department. People have complained a lot about the premiums of gold being high. At 1 ounce, the premium for this coin would be 942287.5355% premium at the melt value of $1,800 an ounce. This makes all the premiums paid for gold coins in the U.S a little bit more acceptable.
Understanding premiums on gold coins
When you buy or sell gold bullion there is what is known as the spread which moves inline with the gold price. The spread is the difference between the buy and the sell. Why is that? Shouldn’t the price of the gold bullion coin be the same as the gold price of say $1,800? There are various reasons why different gold bullion coins with the same amount of gold are priced differently for you to buy. The price of gold eagles, Maple Leaf gold coins, Australian Kangaroo or Krugerrand will differ because of the “coin premium”. Factors that affect this premium include the manufacturing cost, the distribution and any other costs that a refinery of gold sellers. These will of course be different for every gold coin produced.
This gold price increase in the premiums not only applies to gold coins but it is an increase applied virtually to every industry. And, whilst supply and demand largely determine what goods should be sold for in their markets. The supply and demand of gold and other goods is affected by supply and demand in various markets. A high demand for a certain coin can drive the premiums up compared to similar coins under different circumstances.
These are the factors you should consider when buying gold bullion as when it comes time to sell gold bullion back to the dealer, you will get back the initial premium you received.