Are Shipwreck Coins a Good Investment?

February 06, 2019

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Not every coin is created equal. Some coins and years see negligible mintages, e.g. only 24 barber dimes were produced in 1894 by the US San Francisco Mint. Most, these days, are produced by the tens of millions. While what makes a coin get on the list of what are the most expensive coins in the world can be complicated, we are here to answer a simple question.

Are Shipwreck Coins a Good Investment? Why or Why Not?

To start with, let's talk briefly about karat. Karat is a reasonably precise measurement used to determine which coins are purer than others. The term represents purity in a piece of gold, and the measurements for older coins usually come in 18, 22, or 24k.  If you see a 24-karat coin, then you are looking at 99.9% pure gold, the most valuable form of gold there is. 22k gold, on the other hand, is 91.67% pure; while 18k measures in at 75% purity.

Why is karat important? When talking about gold coins, for example, it separates gold bullion coins (the same 99.9%+ that gold bars are made of) from most other coins.

Note that gold "coins" are produced by state Mints and must carry a face value, e.g. USD 100.00. Most modern coins, with some exceptions such as the US Gold Eagle and the South African Gold Krugerrand, are made of 99.9% + fine gold (24k).

Are Shipwreck Coins a Good Investment Because of Their Gold Value?

Generally, no. Most shipwreck coins are going to carry a variable premium over the spot price of gold. If you are looking to invest in gold proper, you are best to find the cheapest gold above-spot. In other words, pay what the gold is worth and no more than a slight premium over that manufacturing the bar and shipping and handling.

Moreover, shipwreck coins come in a variety of metals, depending on their original purpose. In fact, the biggest and most obvious determinant of value is how many of them exist.

Knowing that gold does not always equal value, the most valuable shipwrecked coin happens to be a gold Brasher Doubloon. Specifically, with the goldsmith's initials "EB" (Ephraim Brasher) minted on the eagle's wing. In December of 2011, Blanchard & Co. sold one for USD 7.4 million.

…Are Shipwreck Coins a Good Investment if you Can't Tell Them Apart?

 

What we are really pointing out above is that if you have a hard time discerning between valuable and non-valuable coins, you need to be very careful. You can mitigate this issue by working with a reputable dealer. You should also reference third-party (arms-length) information and people.

In doing so, you can make sure you are both getting a fair (or better) price, and you are avoiding fake coins. That brings us to a big issue: fraud in numismatics. You can find an assortment of good and not-so-good replica coins on websites as easy to access as Chinese AliExpress. Go ahead and look at eBay and you will find a plethora of fakes being spun as ‘Spanish Pirate coins’.

Now, does that mean a lot of high-quality sunken treasure doesn't exist? To the contrary. One surprising point for many people is that you can buy shipwreck coins relatively easily. As you do your research, you will come across many such coins selling in the low $100s. Think about it.

Most sunken treasure was common coin, and is rarely very rare. Moreover, the presence of a "Shipwreck Effect" is visible, it is not necessarily a sign of higher values to come. Unlike gold, silver coins tend to degrade much more quickly in saltwater and this may significantly outweigh any Shipwreck Effect designation benefits.

Answering when are shipwreck coins a good investment means thinking about all of this. It also means considering that most of the coins you will see date from the late 1500s to the early 1900s. So if you are still interested in sunken treasure and love the glamour and backstory as much as we do, here are a few other things to keep in mind.

Bubbles & Market Risk.

The discovery of sunken ship tends to spark market frenzies. Collectors get excited about owning a piece of forgotten history and spend much more than the long-term value of the coin. It is always a good idea to exercise patience with rare coins. Inflation is also a real danger with shipwreck coins.

Are people going to assign them a greater or lesser premium, 10 years from now? Moreover, economically, it is rare that demand outweighs supply sufficiently to push coins meaningfully above their melt value. As noted, when tons of the coins are dumped on the market, collectors quickly fill up.

Quality Can Really Suffer.

Long-term exposure to water is really not that great for most things.  While gold holds up better, silver can take a big ht over time. Despite oxidizing, the movement and saltwater can really tarnish it, no pun intended.

Always remember to check the grade of the coin before buying. This can be complex because with a sufficiently Shipwreck Effect'd coin it can be hard to determine what the coin was before it was sunk.

Investment Bullion is .999+.

As we already talked about, the most important factor in measuring many coins’ worth is gold content levels. In most cases, the gold found in shipwrecks does not measure up on the purity test with the kind bullion gold coins available today.

This means you are paying more for less. Be especially careful not to confuse fancy packaging or jewellery for high quality coins, despite them coming from a famous explorer’s galleon. The popularity of a ship rarely has much to do with long-term coin values.

Our Verdict, Are Shipwreck Coins a Good Investment? … Rarely.

There are so many exciting coins out there in the world. Many of these can be good investments, especially if you can buy them well-below market value. If you manage to find shipwreck coin yourself (underwater or at a garage sale), you will have done well.

Buying a shipwreck coin at retail, however, is probably not a good investment. There really are better ways to bring measurable value to your portfolio.

Still, shipwreck coins are sunken treasure, and buying them for yourself or as gifts can be a lot of fun. While a base in financial value will always be there - even if you can't get them cheap - their aesthetic and historic value adds a lot significant luster.

So to sum up, if the history, sunken expeditions, and wars are of interest, you will get a lot out of shipwreck coins. On the other hand, if you are asking are shipwreck coins a good investment in a financial sense, then you should probably look at alternative investment opportunities.



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