Coins? Investment or just for collection?

[Anonymous]

My stepdad tends to give my son gold and silver coins from the US Mint as gifts. We are appreciative of all gifts, so I'm not complaining about the coins. But I don't have any experience with them. Should I think of them as an investment like a savings bond to be sold one day in the future if my son decides or are they merely collectors' items?

I appreciate hearing your thoughts. Thanks!

[Anonymous]

To truly be able to answer your question, we need to know more. What kind of coins they are, what year, are they proof coins, are they graded, etc...? The mint sells a bunch of different ones. I hope that my answer below does not muddy the waters but if you have any questions, please post them and I will check back in order to answer any questions that I can.

Gold and silver coins have value when compared to the dollar. In general, silver and especially gold coins are a hedge against inflation. So, if the federal reserve prints a bunch of money or if the politicians give us huge deficits with reckless spending, the value of the dollar will decline and your son's coins will be worth more.

Additionally, the dollar has no intrinsic value because there is a theoretically unlimited supply of dollars. All the government has to do is print them from a printing press or create them electronically. However, it is not so easy to just create more gold or silver because there is a limited supply of these metals. So, gold and silver will always be worth something.

Lately, meaning since about 2002, the value of the dollar has been in relative decline. The purchasing power of the dollar has fallen greatly. However, gold and silver have risen quite dramatically. So, some of the coins that your son got a few years ago have probably increased in value.

My personal recommendation is to hold the coins that your son has, buy more gold and silver and wait. When the government gets its spending under control and when the federal reserve no longer sets interest rates at very low levels, then that would be the time to consider selling the gold and silver.

[Anonymous]

They are nice gifts.

However, in general terms gold and silver are not particularly good investments. Neither provides you with dividends or interest and the down side is that you have to pay to store it in a safe place.

Similar to your step dad we want to give our grandchildren meaningful gifts that will appreciate over time rather than the most recent fad toys which inevitably end up in the trash heap. So for birthdays and holidays we faithfully contribute to 529 plans in which we've created for each of them. Grandparent created 529s are especially nice because when kids apply for student aid in college this money is not counted into the equation. Also, because the contributions are made after taxes have been paid there will be no capital gains taxes to be paid when they withdraw the money sometime in their late teens. Our goal is to accumulate enough money to pay for their first year of college.

Having said all that, your step father is to be commended for giving gifts that will appreciate in value and not end up on a scrap heap of broken and forgotten toys.

[Anonymous]

Thanks for the insight. I will look up their value.