Buying gold? Don't be a sucker!

This is a gold, Ultra High Relief American Eagle. Don't get led down a primrose path by goldsellers' marketing gimmicks!

Whether gold or silver is a good investment in these uncertain times is a question I'll leave for another post. This post is just a caution that caveat emptor is alive and well in the gold market as much as anywhere else.

One example: sellers representing gold or silver US Mint coins as "First Strike®" (note trademark!) and for which they charge a steep premium over the other coins of the same series. For example, Goldline sells "First Strike®" American Gold Eagles for $2,094.95, a premium of $1,140 more than gold's closing spot price of $955 on Feb. 25. Is this a deal? Is it for Goldline! You can buy today an Ultra High Relief Gold Eagle directly from the US Mint for $1,339. What's the difference between the two coins?

A "First Strike®" coin is an utterly ordinary, standard-strike coin that has been through a marketing mill to jack the price up. Gold Eagles have been made by the US Mint in the hundreds of thousands every year since 1986. The UHR Eagle is a special-production, special-process coin authorized to be struck only in 2009. The gold content in both is the same, one troy ounce. So why is the ordinary "First Strike®" Eagle $756 more than the special-issue UHR Eagle?

Good question, because "First Strike®" means pretty much nothing. "First Strike®" is not a US Mint term. It the proprietary term and invention of Professional Coin Grading Service (PCGS), a private coin-grading company that is widely used and respected among coin collectors and buyers. The term would seem to indicate that coins so labeled are those struck first during a coin's production term. Many buyers presume that those coins' impressions are therefore of higher quality. But that is not even what PCGS claims about the designation.

Beginning in 2005, PCGS began designating coins packaged and delivered by the U.S. Mint in the 30 day period following the initial sales date of a new product as First Strike®. For instance, new American Silver Eagles typically go on sale each January 1st, thus any coin packaged or delivered and submitted to PCGS for certification between January 1 and January 31 qualifies for the First Strike® designation.

According to the United States Mint, the Mint has not designated any coins as "first strike," nor does the Mint track the order in which coins are manufactured during their production. The United States Mint states that they exercise strict quality controls to assure that coins of high caliber are produced from each die set throughout its useful life. The Mint states that their manufacturing facilities use a die set as long as the quality of resulting coins meets United States Mint standards, and then replace the dies, continually changing sets throughout the production process. Coins which meet the criteria of PCGS First Strike® will be designated as a First Strike® regardless of when those coins were minted.

Translation: First Strike® coins are ordinary coins with a marketing label attached. Fact is, at least half the bullion coins to be released by the Mint in a given year are struck the previous year, and simply stored until the release date. Since the Mint does not keep track of the production order of individual coins, the First Strike® label has nothing to do with when in the run the coin was struck. As well, the Mint swaps dies out when necessary, so there's no reason in any event to presume that early coins are of higher quality than later.

eBay, of course, is a one-stop shop for coin buyers. I don't collect coins myself, but know some folks who do. They say that you can get a good coin at a good price on eBay - if you're careful, shop dispassionately and are prepared to walk away from every auction you bid on.

Research is key before buying precious metals. Sellers use gimmicks for them just as sellers do for anything else. Know what different terms actually mean and don't just accept a seller's definition. Go to another source. It's critical to research prices before buying.