The vast majority of numismatic or collector coins are worth substantially more than their melt value. In virtually all cases, their bullion content has little or no bearing on their value. However, from time to time, certain numismatic coins have traded close to their underlying melt value. This phenomenon doesn’t happen often, but when it does, it creates an intriguing investment opportunity. Low premium numismatic coins offer two ways to win: an increase in the spot price or an increase in the numismatic value.

Unlike most bullion products, numismatic coins have a finite supply. Whereas the United States Mint continues to produce one ounce gold eagles year after year, they will never again make another $20 double eagle. Even more recent modern mint products, like $10 gold commemoratives, may never be released ever again. In the event of a demand surge for gold eagles, the US Mint can usually increase production and satisfy the market’s needs. If a sudden demand arose for $20 double eagles or $10 commemoratives, there is no mint to fill in the supply gap. A demand surge for numismatic coins often creates a spike in premium (i.e. the difference between market value and melt value).

Demand—and thus premiums—are cyclical for numismatic coins. This category was particularly popular in late 2009, when many large marketers were actively “pushing” vintage U.S. gold coins to their customers. At the time common $20 double eagles in average Uncirculated condition were trading for 60-80% over melt. Since then these vintage gold coins have fallen out of favor and the premiums have dropped significantly. Today those exact same coins can be had for less than 20% over melt; this represents some of the lowest premiums in the past decade. In fact, some $20 gold pieces were worth more in 2009 when gold was $900 than they are today when gold is $1200.

At today’s historically low premiums, vintage U.S. gold is an interesting option for investors. If gold were to rise dramatically, so too would the value of the vintage gold coins. However, if the coins appreciated in numismatic value, they might still rise in value even against a flat or mildly weaker spot price. A big increase in collector demand could push these coins higher even without a bounce in the melt value.

Obviously there is no guarantee that either of those events would happen, but the main point is that low-premium numismatic coins offer two ways to win. Not only would an increase in spot prices benefit their value, but so would an increase in numismatic interest. With multiple levels of demand, both from the investor and collector markets, low-premium numismatic coins provide an additional hedge that few other bullion products can offer.