
Background photo by Apollo2005.
From enduring decreased sales in June to battling worldwide counterfeiting operations, American bullion coins have taken a beating in 2018. However, from a collecting standpoint, bullion coins are coming into the limelight. While a civil war in the hobby rages regarding coin design preferences, which typically revolves around a general fatigue for so-called “politically correct” new Mint issues, bullion coins avoid the worst of the hobby’s design-related drama. This is, in part, due to bullion coins’ high intrinsic value from their dense gold or silver content. Despite a recent dip in sales, coins like American gold and silver Eagles continue to be some of the most highly coveted American-made coins on the planet, which is perhaps why they are so often targeted by counterfeiters.

The 2018 Pictured Rocks National Lakeshore quarter (left) and the 2018 American Silver Eagle (right).
What separates a bullion coin from, say, an America the Beautiful quarter? Quite simply, it’s intrinsic value. While the typical America the Beautiful quarter is composed of 8.33% nickel and balance copper, the average American Silver Eagle is composed of one troy ounce of 99.9% silver. This puts new issues like America the Beautiful quarters at a disadvantage, since their value is almost exclusively determined by extrinsic values that others place on them (the beauty of the design, Proof or other special formats, hype around release dates, how strong sales are, the location featured in the design, etc.). Extrinsic factors tend to matter less to bullion coins since the emphasis is traditionally directed toward their high precious-metal content.

The mirror for the James Webb Space Telescope is coated in gold to reflect infrared light. Hover to zoom.
Gold does have quite a bit of intrinsic value, since it is almost universally considered an attractive metal, does not corrode, is extremely conductive, and is easily melted for coinage. Silver too has myriad intrinsic uses, from medical instruments to water filtration, but at the end of the day, what matters most is what people think has intrinsic value, and nickel and balance copper will never match up to gold and silver in this way.

The obverse of the Morgan silver dollar (90% silver and 10% copper). This particular coin was minted in 1879 at the San Francisco Mint (“S” mint mark) and is graded MS-67+.
To more seasoned collectors in the hobby, coin design is a rather significant factor in determining value. They often cite such gorgeous classics as the Mercury dime, Liberty Walking half dollar, Morgan dollar, or Saint-Gaudens double eagle as the apex of American coinage. These beautiful classic coins form a collection that is integral to the identity of more experienced collectors, showcasing good taste and sophistication. However, to young and upcoming collectors, I believe that they are more interested in the quality of metal used in coinage over design quality since many of them are too young to remember the greats and take the view that the metal will always be valuable and marketable, while design preferences are fickle. I draw this conclusion from an article entitled “Young Collectors: Who Are They and Where Are They Buying Art?” While the article focuses on young art collectors, it is important to note that coin collecting is not so different from art collecting (though numismatics is undoubtedly more of a science). One paragraph, in particular, caught my eye:
Banks are also well aware of the trend. Numerous hold wealth management seminars and even mock auctions for children of Ultra High Net Worth Individuals (UHNWI). According to a U.S. Trust survey, HNWIs under 50 years old are more likely to view art as an investment, while those over 50 years old treat art as part of their image and lifestyle. Therefore, younger art collectors are observed to be more willing to buy and sell their pieces of art, while the older generations have the tendency to keep them.
The trend for younger collectors to place an emphasis on buying and selling art over image and lifestyle makes all the difference. I think that we can extrapolate these findings about young art collectors to young coin collectors as well:

Source: U.S. Trust
Enter bullion coins, which may become the preferred choice of a new generation of coin collectors, who place the value of the metal that made the coin over the design of the coin. These young collectors are less likely to keep their coins in a prized collection and will prefer instead to re-sell them on the basis of their market value. Pure gold, silver, and platinum coins will always have value to investors because even if the coin design is undesirable, the coin can simply be melted down and re-sold for its precious-metal content. It’s still too early to say whether or not bullion will come out on top eventually, but if current designs for other coins continue to drag down sales at the Mint, then there may come a time when bullion will become the Mint’s bread and butter when the next generation assumes the mantle.
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So “In reality, gold and silver have no more intrinsic value than nickel or balance copper…”
Well, no. In reality gold and silver are much rarer than nickel or copper and so ARE intrinsically more valuable. In addition silver has more conductivity than copper, but, because of rarity over copper, is too expensive for overall use.
A lot of people I know are broke and cannot afford gold and silver coins. This could be why sales are down.