The Two Sides of Gold Coins

Heads and Tails

Written by Adam English
Posted September 3, 2013

I'm back at my desk following the ceremonial end of summer, and I couldn't be happier.

Baltimore just saw a sticky, scorching week filled with immense traffic jams for a Grand Prix event that will inevitably lose the city millions, yet again...

Then there was the pair of visits to the vet and assisted living care for a beagle and basset hound mix that is now wearing a plastic cone over his head. Just getting him to maneuver the ungainly thing around his food bowl seemed like a series of botched space station docking procedures.

To even recount what led to that ordeal, you'd have to buy me a couple drinks. Let's just say this is one of those times when I'm so desperate to get away from it all, even heading into the office counts.

However, I'm willing to bet you aren't entirely ready to get back into the full swing of things after Labor Day weekend...

So today, I think I'll tell the tale of the two sides of coins.

Standard rules apply: Heads you win, tails you lose.

Heads

On the winning side of the coin, we have a Carson City, Nevada man described by his neighbors as an "anti-government" recluse.

Unfortunately, he was a bit too reclusive. This man had lived alone for about twenty years, since his mother had passed away, in a 1,200 square foot rancher. It took about a month for anyone to discover that he too had died.

That's when city officials and the world discovered what he'd been up to that whole time...

They were surprised, to say the least. This man had less than $200 in his bank account when he died, and his small home was in disrepair. But what he had inside the house — his garage, to be exact — revealed a whole other side...

The man's mother had a passion for antique gold coins, especially foreign coins, and was left a good amount of money when her husband, a vice president of a pie company, died. She would buy coins and meticulously write down the details of each purchase.

Her son took to the collection and continued after she passed away. Their records date back to 1964, when gold was still $35 per ounce.

By the time city officials discovered that he was dead and had looked through his house, they stumbled upon the result of decades of work...

They found so much, in fact, that they even had to dismantle the house and run a metal detector over the property to uncover all of it. But the bulk of the coin collection was found wrapped in tinfoil and neatly tucked away in old ammunition boxes. There was so much gold in the garage that a pristine 1968 Ford Mustang (a treasure in its own right!) barely fit.

Based on weight alone, the hoard of gold coins was valued at $7 million when it was recovered. Considering the deceased had coins dating back to the 1840s from Austria, England, Mexico, South Africa, and the United States, the collection was definitely worth more.

Even after the slide in gold prices, a set of fire sale auctions brought in $7.4 million with a vast majority of coins selling to dealers who would flip them.

The man and his mother had built a stunning coin collection, but the real winner here was his next of kin...

Investigators had to use a list of people who had attended his mother's funeral to track her down. In the end, a substitute teacher from San Rafael, California, ended up with an inheritance she never knew existed.

Tails

This story just goes to show that even experts can get burned when buying antiques...

On the losing side, we have an auctioneer company in New York.

Heritage Auctioneers & Galleries filed a lawsuit against a New York coin collector in Manhattan Supreme Court a couple months ago, claiming three rare coins it bought from the collector are counterfeit.

Court documents show that Heritage Auctioneers & Galleries claims they gave $31,000 to the dealer. Two of the coins were $5 gold "Indian heads" from 1909, stamped with an "O" — meaning they were minted at the New Orleans mint.

That would make them two very rare coins. Only 34,200 were minted, and many have been lost or were undoubtedly seized and melted down a couple decades later when the Federal government made owning gold money illegal.

Greg Rohan, Heritage president, called them "really, really good counterfeits. Our expert who got fooled in New York is a top expert. These fake were that good."

Just one of these 1909 $5 Indian Head gold coins from the New Orleans mint sold for $690,000 in June 2011.

Unfortunately, these two coins weren't from the New Orleans mint at all. Counterfeiters did a great job of changing a "D" on much more common coins from the Denver, Colorado mint to an "O."

The most likely culprits were Chinese counterfeiters, which is becoming all too common...

 

The MIT Center for International Studies estimates that counterfeits constitute between 15% and 20% of all products made in China — and account for roughly 8% of China's GDP. There's even a Chinese website called "ChinaTungsten Online" offering bulk orders of fake gold coins and bars that are filled with tungsten.

Global Piracy & Counterfeiting Consultants found one Chinese fake coin dealer who bragged about making 100,000 fake U.S. silver dollars per year.

Dozens of $20 gold coins turned up in the estate auction of the Carson City recluse turned out to be Chinese forgeries. At least the estate will reimburse the winning bidders for any fake coins that are found.

In a day and age where it is increasingly cheap and easy to use high-quality scanning techniques to mimic the appearance of a coin, it is increasingly becoming more and more difficult to discover what is valuable and what is worthless.

A Cautionary Tale

If there is one thing you should take away from these two stories about coins, it is this: You have to authenticate everything.

All kinds of collectibles are prone to counterfeits, forgeries, and fraud.

Upwards of 90% of sports memorabilia is fake and completely worthless, yet there are billions of dollars changing hands for it every year.

In the end, you might get lucky and inherit a $7.4 million collection of gold coins with immaculate purchase records... or you could stumble upon a $175,000 ultra-rare Superman comic book in a wall in Minnesota, like one undisclosed seller did a couple months ago...

But really, if you want to profit from rare collections, you're going to have to buy rare collectables.

And unless you are one of the best experts in the world, you're going to deal with fakes.

Even with decades of experience and incredible records, our recluse in Carson City was burned on dozens of coins, too.

Of course, there is a great way to invest in collectibles without taking on the same risk as an amateur buyer or anyone but the best numismatist...

There is a growing realization and demand for the best authentication services for all kinds of collectibles — including rare old coins, sports memorabilia, art, and music. This is a recipe for strong growth and profits in a field where few, if any, can fill demand — unless they have decades of training.

Interested in learning more about this opportunity? Check out the research our own Jimmy Mengel has been working on here.

Take care,

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Adam English

follow basic @AdamEnglishOC on Twitter

Adam's editorial talents and analysis drew the attention of senior editors at Outsider Club, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's page

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