U.S. Mint’s Gold and Silver Coins Turn to Lead for Some Retirement Investors The government sells gold-coin proofs at a 25% markup over per-ounce gold prices; ‘it’s sort of like buying a car and driving it off the parking lot’
U.S. gold proof coins from the U.S. Mint facility in West Point, N.Y.
By
Michael Rothfeld
Nov. 26, 2017 1:18 p.m. ET
166 COMMENTS
WE HAVE A STRONG SELL ON ANY GOLD OR SILVER YOU HAVE IN YOUR IRA FUND. WE ENCOURAGE YOU TO CALL AND ASK FOR PHYSICAL DELIVERY ... AT WHICH TIME WE CAN PURCHASE YOUR COINS. PLEASE CALL FOR MORE INFO 1-800-953-3027
The U.S. Mint makes a pretty penny selling gold and silver coins. But there are two sides to the deal, which some investors are calling highway robbery.
After years of making pennies and nickels that cost more to produce than they are worth, the Treasury Department is making a mint off a line of pricey American Eagle coins in what is known as proof condition—sheathed in plastic and never touched by human hands. Last year, sales totaled $112 million.
Gold proof coinThe government currently is selling the gold-coin proofs at a 25% markup over per-ounce gold prices, a premium that can run as high as $360 per coin. The silver coins carry a more than 200% premium over market silver prices.
That might be well worth it for coin collectors and hoarders—or for stashing in a post-apocalypse bunker along with the guns and freeze-dried macaroni. But some unhappy investors have deposited them into retirement accounts, where the shiny gold and silver coins have performed like lead sinkers.
Paul Rumage, a 64-year-old retired software engineer from Michigan, said he was looking for a haven from stocks for his individual retirement account in 2013. A private dealer persuaded him to buy 45 four-coin sets of American Eagle gold proofs, and 979 ounces of silver Eagle proofs, records show.
The 1,135-coin treasure of gold and silver cost him $308,000, which included a 6% commission for the broker. Less than a month later, his IRA statement valued the coins at $212,000.
“I knew something was wrong,” Mr. Rumage said.
After filing a lawsuit against the dealer and broker, he sold the coins back at a loss. He since has given up on gold and instead bought land in Arkansas.
U.S. silver proof coins from the U.S. Mint facility in West Point, N.Y. The government’s proof sales amount to a heads-I-win-tails-you-lose deal, according to George Cooper of USAGold, a Denver investment firm. He said he won’t sell the proof coins without reciting an extensive disclaimer.
Marvin E. Johnson, 61, of Kanawha, Iowa, said American Bullion Inc. sold him 930 American Eagle silver proof coins for his retirement account. He paid the equivalent of nearly 2 1/2 times the market price of silver. Then he sued when he saw his investment drop like a rock.
“He bought them at a premium where I don’t think he’d ever make a profit,” said Thomas Reavely, Mr. Johnson’s lawyer and coin collector.
Mr. Johnson and American Bullion later settled the coin dispute confidentially. Orkan Ozkan, American Bullion’s chief executive, said it wasn’t the company’s fault. Mr. Johnson, he said, paid the going rate: “We buy it high, mark it up and sell it high.”
Then he pointed a finger at the government. “Maybe you should ask that question of the Mint: Why are you charging so much for these coins?” he said.
The U.S. Mint does operate a bit like a coin dealer. Salespeople answer phones. An online store, with a pop-up chat window, adorns the website. Customers can sign up to have annual proof sets charged to their credit cards.
Mint profits on gold Eagle proofs hit nearly 18% last year. Net profits on the Silver Eagle proofs were even better, reaching about 41% last year.
The Mint transfers its profits to the Treasury’s General Fund. “We are not in it to make money,” said Kristie McNally, the Mint’s chief financial officer.
Mint officials said they pitch proof coinage as collector’s items, not investments. But Congress kept the door open to putting the coins into retirement account investments a few years after banning other collectible items in 1981.
‘Proof gold’ on display at the U.S. Mint facility in West Point, N.Y. G Before the ban, said Ken Swab, former counsel for a House subcommittee on consumer affairs and coinage, investors could keep Persian rugs in their living rooms and IRA accounts.
“It was perfect,” he said. “You could walk on your tax deduction every day.”
Lawmakers allowed American Eagle proofs as an exception to the rule, making them a favorite for coin dealers pitching a “Gold IRA” to retirees.
Balint Mezei, a self-employed contractor, said he bought about $50,000 worth of U.S. proof coins around 2006 for his retirement account after being convinced by a coin dealer they would be safer from the government’s hands than regular bullion.
Mr. Mezei said his account statement after the purchase valued the coins at $35,000. “I just wanted to diversify,” he said, calling the dealer’s 30% markup unfair. Gold prices rose, so he sold the coins last year for more than he paid, though he would have made more had he invested in regular gold bullion.
Most buyers are better off not expecting any profits from U.S. proof coinage, experts say. Some collectors say they get joy simply by possessing the coins.
The American Eagle proof, a double-struck coin, has been described as the most beautiful coin ever made. Plus, “you get a certificate” and “a little leather box,” said Rick Boss of Ohio, a proof-coin collector and retired AT&T engineer. “You’re getting a piece of history.”
Nonetheless, Jeffrey Christian, a precious-metals investment adviser, said he steers his clients away: “It’s sort of like buying a car and driving it off the parking lot. It will have an immediate depreciation.”
Corrections & Amplifications
Gold and silver proof coins sold by the U.S. Mint aren’t colored with a special dye. An earlier version of this article incorrectly stated a special dye was used. (Nov. 27, 2017)
Write to Michael Rothfeld at [email protected] article from wall street journal
U.S. gold proof coins from the U.S. Mint facility in West Point, N.Y.
By
Michael Rothfeld
Nov. 26, 2017 1:18 p.m. ET
166 COMMENTS
WE HAVE A STRONG SELL ON ANY GOLD OR SILVER YOU HAVE IN YOUR IRA FUND. WE ENCOURAGE YOU TO CALL AND ASK FOR PHYSICAL DELIVERY ... AT WHICH TIME WE CAN PURCHASE YOUR COINS. PLEASE CALL FOR MORE INFO 1-800-953-3027
The U.S. Mint makes a pretty penny selling gold and silver coins. But there are two sides to the deal, which some investors are calling highway robbery.
After years of making pennies and nickels that cost more to produce than they are worth, the Treasury Department is making a mint off a line of pricey American Eagle coins in what is known as proof condition—sheathed in plastic and never touched by human hands. Last year, sales totaled $112 million.
Gold proof coinThe government currently is selling the gold-coin proofs at a 25% markup over per-ounce gold prices, a premium that can run as high as $360 per coin. The silver coins carry a more than 200% premium over market silver prices.
That might be well worth it for coin collectors and hoarders—or for stashing in a post-apocalypse bunker along with the guns and freeze-dried macaroni. But some unhappy investors have deposited them into retirement accounts, where the shiny gold and silver coins have performed like lead sinkers.
Paul Rumage, a 64-year-old retired software engineer from Michigan, said he was looking for a haven from stocks for his individual retirement account in 2013. A private dealer persuaded him to buy 45 four-coin sets of American Eagle gold proofs, and 979 ounces of silver Eagle proofs, records show.
The 1,135-coin treasure of gold and silver cost him $308,000, which included a 6% commission for the broker. Less than a month later, his IRA statement valued the coins at $212,000.
“I knew something was wrong,” Mr. Rumage said.
After filing a lawsuit against the dealer and broker, he sold the coins back at a loss. He since has given up on gold and instead bought land in Arkansas.
U.S. silver proof coins from the U.S. Mint facility in West Point, N.Y. The government’s proof sales amount to a heads-I-win-tails-you-lose deal, according to George Cooper of USAGold, a Denver investment firm. He said he won’t sell the proof coins without reciting an extensive disclaimer.
Marvin E. Johnson, 61, of Kanawha, Iowa, said American Bullion Inc. sold him 930 American Eagle silver proof coins for his retirement account. He paid the equivalent of nearly 2 1/2 times the market price of silver. Then he sued when he saw his investment drop like a rock.
“He bought them at a premium where I don’t think he’d ever make a profit,” said Thomas Reavely, Mr. Johnson’s lawyer and coin collector.
Mr. Johnson and American Bullion later settled the coin dispute confidentially. Orkan Ozkan, American Bullion’s chief executive, said it wasn’t the company’s fault. Mr. Johnson, he said, paid the going rate: “We buy it high, mark it up and sell it high.”
Then he pointed a finger at the government. “Maybe you should ask that question of the Mint: Why are you charging so much for these coins?” he said.
The U.S. Mint does operate a bit like a coin dealer. Salespeople answer phones. An online store, with a pop-up chat window, adorns the website. Customers can sign up to have annual proof sets charged to their credit cards.
Mint profits on gold Eagle proofs hit nearly 18% last year. Net profits on the Silver Eagle proofs were even better, reaching about 41% last year.
The Mint transfers its profits to the Treasury’s General Fund. “We are not in it to make money,” said Kristie McNally, the Mint’s chief financial officer.
Mint officials said they pitch proof coinage as collector’s items, not investments. But Congress kept the door open to putting the coins into retirement account investments a few years after banning other collectible items in 1981.
‘Proof gold’ on display at the U.S. Mint facility in West Point, N.Y. G Before the ban, said Ken Swab, former counsel for a House subcommittee on consumer affairs and coinage, investors could keep Persian rugs in their living rooms and IRA accounts.
“It was perfect,” he said. “You could walk on your tax deduction every day.”
Lawmakers allowed American Eagle proofs as an exception to the rule, making them a favorite for coin dealers pitching a “Gold IRA” to retirees.
Balint Mezei, a self-employed contractor, said he bought about $50,000 worth of U.S. proof coins around 2006 for his retirement account after being convinced by a coin dealer they would be safer from the government’s hands than regular bullion.
Mr. Mezei said his account statement after the purchase valued the coins at $35,000. “I just wanted to diversify,” he said, calling the dealer’s 30% markup unfair. Gold prices rose, so he sold the coins last year for more than he paid, though he would have made more had he invested in regular gold bullion.
Most buyers are better off not expecting any profits from U.S. proof coinage, experts say. Some collectors say they get joy simply by possessing the coins.
The American Eagle proof, a double-struck coin, has been described as the most beautiful coin ever made. Plus, “you get a certificate” and “a little leather box,” said Rick Boss of Ohio, a proof-coin collector and retired AT&T engineer. “You’re getting a piece of history.”
Nonetheless, Jeffrey Christian, a precious-metals investment adviser, said he steers his clients away: “It’s sort of like buying a car and driving it off the parking lot. It will have an immediate depreciation.”
Corrections & Amplifications
Gold and silver proof coins sold by the U.S. Mint aren’t colored with a special dye. An earlier version of this article incorrectly stated a special dye was used. (Nov. 27, 2017)
Write to Michael Rothfeld at [email protected] article from wall street journal
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