Making Money on Generic pre-1933 gold

On an earlier thread I had mentioned that it is possible to make a profit on generic pre-1933 gold by utilising e-bay(or other auction houses). Although I have been doing this slowly over time and do not use it as a get rich quick scheme(impossible IMO), I just wanted to give a small example of the risk/ reward of doing this.

Ok.... I'm looking for a decent deal, and nice looking coin that I am not going to lose my shirt over, but could realistically make $20 - $200 on. My strategy is usually to find a coin that I think is an EF-AU without a doubt, but possibly a BU coin. My bidding strategy is simple: I start out with a wholesale bid equal to the XF greysheet price, and bid up to somewhere in between AU-58 and MS-60 greysheet depending on how I really think the coin will grade. This strategy has a risk involved, and I could lose money. However; that risk it limited to less than a hundred dollars, and I only bid on items I really have confidence in. So far I have done pretty good.

Here is an example on a recent coin I won on an ebay auction.

XF greysheet = 265 AU 58 greysheet = 300 MS 60 greysheet = 415
1913 $5 Indian Head $361/ won: seller claims coin is UNC. The picture looks good, the seller has a lot of positive feedback, and is upfront about any problems on other coins. Assuming the coin is real, but only XF or AU I lose about $100 bucks, and try to get my money back.
If the coin is UNC I can probably make at least $40 selling it at wholsale to someone in my local area.
If I send it off to be graded (which I probably will), and it comes back AU55 I am pretty much left with a break even coin which I will have to trade, or hold on to.
If the coin comes back MS 60 or MS 61 I know I can make $70 - $150 easily. If it happens to get a grade of MS 62 or higher obviously I have made out quite handsomely, and this has happened to me in the past. I will post the pics below, and let you all pick apart my insane methodology. Please let me know if you think I am destined to be a pennyless fool.

BTW this coin is actually little more on the risky side for me, but I thought this one could be worth it, and it possibly grade an MS 62. A chance like this I am willing to take to more than double my initial investment of $370.

 

Log in or Sign up to hide this ad.

I've done something similar in the past years, it's simply trying to find a true bargain using your expertise. It naturally requires a little risky buying and so in the end you might barely come out positive on average.

The effect would be the same, basically, if for all coins on ebay or your local auctions, or wherever, you put in bids at a little less than wholesale for the correct grade, but with less prior examination. Given enough low bids, you'll eventually win some and of those wins, some will turn out to be good buys and others will not. Whether you come out a couple of percentage points on top or not depends on how well you manage the risk.

I wouldn't call it "making money", it's not a stellar way to make money at all - but good for some interesting fun.

Call it maybe "trying to break even".

 

Be very, very careful on raw Indian $2.5s and $5s. Many are cleaned. Few of those will be obvious on e-bay quality photos.

It's never good to waste money with body-bagged submissions, but especially important when dealing with such low margins.

 

good advise

 

I used to think of the TPGs as a lottery... I gamble a few bucks hoping to get over on the deal. I had a VERY low batting average ! Those days are done.

Personally, I have a very difficult time getting above 62 on these Indians. Gorgeous coins, that's for sure. :thumb:

Good luck !

 

It seems a good idea in theory, but gold is like stocks as far as making money. When the economy is in the dumps, like it is now, the price of gold rises, as well as everything else from food to fuels. People have even less to spend on such things, except for a hardy few who always make the poor choice to buy things high. Then, when the economy improves, prices lower, and all those who bought high have the choice to either hold onto their inventory and hope the economy crashes again, or sell at a horrible loss. It's inticing to sell at a loss because when things improve economically, more and more people have the disposable income to spend on things like gold.

The only way you'll make it worth while is to buy when the price is low and sell when it's high. Unfortunatelly, when the price is low everyone and their brother is trying to buy it as well. Not many people will make money off of gold. Those that do are the ones that bought a long time ago and are just now selling.
Guy~

 

Definately a good word. Like I said I try to be extremely careful, and I view this purchase as a little more risky than most I make..., but only because the potential for a good reward is worth the cost of the mistake.

Look at the coin. Is it a gamble you would have made?

 

I know they seem expensive, but with gold to price ratios that are far lower than any other coins, the $20's are the only way to go with Pre-1933 US gold. I have found Heritage and other selling them for about 3-4% over spot at shows. They are pieces that will not TPG, because they are circulated, but they represent a better value if you are looking for classic coins, close to bullion.

 

Really hard to say from the photo. These are tough enough to grade in hand, much less any photo. Look for lustre breaks on the indian's cheek and various "high" points on the eagle, particularly the shoulder.

As always, nicks and bagginess in the field are critical and easy to evaluate. Very important on these; since they have no rims, the fields are unprotected. Pristine fields are scracer than other gold.

I had a nice Indian $5 come back 61 (NGC).

 

I've been able to do pretty good by treating all gold coins as bullion, regardless of what it is or its condition. On ebay, I simply bid the current bullion value of the gold content, less the shipping amount, then sit back and wait for notification that I either won or lost. I average winning about 1 out of 15 times. When I sell, I won't accept less than 10% over bullion. Everything sells eventually, some for a lot more than the bullion + 10%.

 

I agree. I've also noticed over the years that $20 low mint state coins, say MS61, slabbed by NGC or PCGS seem to sell about $125 over the bullion content in the long run. When you can get one for less money, it's a buy.

 

OTOH, the other coins, the $1, $2.50 $5.00 and $10.00 should be purchased as collectibles only, the premiums on those coins greatly exceeds the value of the gold in them, and for them to return your initial investment, gold is going to have to appreciate considerably, especially the $1, $2.50 and $10's. The $3.00 is never an investment of any sort, even the ex jewellery pieces sell for quite a bit over melt.

 

I'll be sure to post new pictures when this coin comes in, along with the 1890 proof IHC cent I bought for $91.00.

 

If your strategy is to use gold bullion as an investment vehicle it is pointless to buy anything with a substantial premiuim over spot price. This is definately not my motive in anyway shape or form.

The same premium over spot that these coins sell for can actually be a good way hedge to against gold going down because people pay that premium. The closer to spot that you purchase them for the bigger the benefit to you. Conversley, when gold rises the premiuims on these coins rise too, and usually at a greater percentage than gold.

In today's environment I think you can benefit from the latter more than the former. Inflation is out of control, and the US Dollar is in a downward spiral. The gold and silver investment bandwagon has not yet been borded. Just my opinion.

 

Well I'm not sure I fully understand your example but . . .

OK, you paid $361 plus shipping. Apparently from later comments you are in at a total of $370. You say if it is an XF or an AU you are into it way too high and you will apparently try to send it back for a refund. This will cost you return shipping so youwill show a loss of $18.

Assuming you can find someone willing to buy it raw as an Unc at graysheet. Considering the risk if it didn't come back as Unc and the dealers expense of having to get it slabbed you may find getting that kind of an offer difficult. Even if they do feel it is Unc, with the expense of having it slabbed they may only offer $380 to $390. You make $10 to $20.

This I'm not sure I follow. If you send it in for grading you are now into it around the $390 level, and the AU quote is $300. (for a 58 not a 55) Sounds like a $90 loss not a break even.

Once again I don't follow. If it comes back a 60 you're into it at $390 and sheet is at $415. How does this translate into a $70 - $150 profit?

Could be, I don't know what 62 sheet is so I don't know how well you will do. And as the saying goes, "Sometimes even a blind pig finds an acorn."

Then we have to consider what happens if it happens to come back bodybagged for cleaning or a problem (that either you missed, or they imagined). You are into it at $390 and it's now maybe worth XF money. You have a $105 loss.

And if it just happens to come back "questionable authenticity" you're into it at $390 and it is worth bullion, currently about $230 for a loss of $160.

So as I see it unless you happen to luck into a 62 or better you are looking at a potential upside of $15 -$25 versus a potential downside of $18 - $160 dollars. And you are going to have to win 6 to 9 times for every loss (other than immediate returns which only require a two to one win ratio) to come out significantly ahead.

And if the picture you posted is what you are working from I would really be concerned. I can't see how you can tell anything or come to any conclusions from that picture. If I was bidding based on it I would not go higher than XF money. Too much downside risk.

 

This is excellent advice, a very solid strategy to follow in my opinion.

 

Speculating, especially on the online fleaMarket, for gold coins hoping some are truly going to be MS is a very risky and likely losing proposition. To date I have bought a grand total of one, very small, gold coin on eBay. Gold coins are best bought either from reputable dealers, or site in hand and not based on some picture on the online fleaMarket.

 

First of all the greysheet price for MS60 is 415 wholesale for raw

The whole reason I listed the greysheet price was to represent the fact that I purchased the coin below "dealer" prices.

These prices represent what prices dealers will buy/sell to each other.... These prices do not really represent the full value coins can bring in the market. In MS60 I should be able to fetch 475-500. Look at the DLRC auction archive.

The point is if it is AU55-58 I pretty much end up with a value comparable to what I paid as long as I have it slabbed. I submit my coins in groups with other people, so it does not cost me $20.

If it is UNC, or better then I do stand to make what I have previously stated whether I slab it or not. If it is a crap coin I try to get my money back. If it is AU I will probably have it graded, and either sell or hold.

Like I said I know there are risks, but IMO the downside was less than the upside. I always hear people dogging ebay as a source to find coins, and I often wonder if they are really trying to scare others away. I usually do quite well, and often find great values on ebay. FYI, I can get much more for my money on ebay at the same quality than I can at my local coin store. The reason is my local dealer charges top dollar for every coin he has. Anything slabbed is priced at list.

After reading most of the feedback on this thread I think some people are driven by fear when it comes to ebay, and unwilling to take any risk. I have gotten burned 2 times, and got my money back both times, but I have had far more success stories than 2.

BTW did you call me a blind pig? What a jerk!

I will post better pictures when the coin comes in, and bow to your arrogance if I am wrong, but if I am right you have to take the blind pig statement back... haha

 

Come on, this is beginning to go south quickly. Let us have an intelligent and meaningful conversation without insults - such are unbecoming of this group.

 

THE BLIND PIG says.....

I'm sure he didn't really mean any harm with the blind pig comment, as I didn't mean any harm either.

I do enjoy the meaningful conversation however, and appreciate everyone's advice!