Why Does the Gold American Eagle Always Cost More Than Other Coins?
If you’ve ever shopped around a bit when wanting to buy 1oz gold coins, you’ve undoubtedly done some comparing between coins like the Canadian Maple Leaf, the Australian Kangaroo, or the South African Krugerrand. But in looking at the American Eagle, have you ever wondered why the premiums over the spot price are more than any other, making it far-and-away the most expensive 1oz gold coin to buy?
It’s not unusual for us at BFI Bullion to get these kinds of questions about price differences, and to get them from non-US persons regarding the American Eagle's high price tag. But what prompted me to write this article was the fact that I got this question from more than a few Americans in the past couple of months. They came to us wanting to buy Eagles, but then saw the price differences.
So, what is “so special” about the American Eagle that makes it the highest priced among all other coins?
Before I answer this, let me clarify: When I mention the “American Eagle”, or “Eagle”, from here on out, I’ll be referring to the 1oz gold American Eagle coin. I want to make this clear, as it is the one of two American Eagle coins (1oz gold and 1oz silver) that we offer here at BFI Bullion. Gold American Eagles also come in one-half, one-quarter, and one-tenth of an ounce sizes.
While I have some of my own practical reasons for why I believe the Eagle is always more expensive, and I’ll get to those later, we could probably safely assume that off the top, they are more expensive because they are in higher demand. So perhaps the question might be why are they in such high demand?
Looking for somewhere to start, I simply Google’d it. Here were the reasons I found from numerous different websites:
“The quality is guaranteed by the United States Government.”
“The US Mint is amongst the most storied coin manufacturers.”
“Due to their secure nature, high quality, and American orientation.”
“22-karat gold, with small amounts of alloy, making the coin harder and more resistant to scratching and marring, retaining a high resale value.”
"By law, the American Gold Eagle coins can only be made with gold mined within the United States.”
All compelling reasons for sure, but nothing that personally jumped out at me as to why the Eagle should be more expensive. I mean, the Royal Canadian Mint has a rich history of minting coins too. And did you know that apparently, in the 1980’s, the Krugerrand accounted for nearly 90% of the gold coin market?
In practically thinking about it, first, the American market of investors is enormous, and having spent the first 30 years of my life in the US, I can tell you first hand that there is a deep-rooted patriotism for all things “American”, making it perhaps obvious that we would gravitate to the Eagle. The US gold coin market is one of the largest in the world. It also shouldn’t surprise you that when looking at any precious metals dealer’s website in the US, the first coin you’ll see is the Eagle.
What few non-US persons might realize is that the American Eagle is approved – and heavily advertised – in the US for being able to be included in an IRA (individual retirement account). While the Australian Kangaroo, the Canadian Maple Leaf, and the Austrian Philharmonic are as well, in any list that is done in alphabetical order, the “American Eagle” will always show up at the top.
While the Eagle’s popularity has made it one of the most counterfeited bullion coins in the world, according to a survey in 2018 by the ACTF (Anti-Counterfeiting Task Force), the good news for investors is that even if they pay a higher (or the highest) premium when purchasing, they’ll also get more for the coins over spot when selling them again. That can certainly be an advantage, although it isn’t a guarantee, as how much you get back in premium will depend on the usual supply and demand for gold and for the Eagle at that time.
Is the greater expense worth it to buy the Eagle? Personally, while I certainly like them, I tend to purchase the coins with the best premiums at the time I’m purchasing. I’m not thinking about the resale value, as my plans are to hold my metals for years, not weeks or months. As many of our clients know, I always like getting the “most bang for my buck”, as Americans like to say.
At the time I was finishing up this article, gold spot was sitting at around $1904/oz. I had a quick look online at a few dealers in the US offering the Eagles – 20 x 1oz gold Eagles - and for the dealers that even showed their prices, I saw prices as high as $2,155/oz. I was quite surprised as at the very same time, we could offer them all-inclusive of our providers’ premium and our standard brokerage fee for a purchase this size, for $2,031/oz. To compare, the absolute lowest priced gold coin we could offer at this moment was the 1oz Australian Kangaroo, for an all-inclusive $2,003/oz!
To be clear: I’m not poo-pooing the Eagle at all. I do have a couple of them myself. But for my long-term holdings, I’m quite happy with the Kangaroos, Maples. Britannias, and even Noah’s Arks. But then again, that’s just me: always after the most bang for my buck!
This article was published by BFI Bullion Inc. in their recent newsletter "Digger Quarterly". To check out the full report feel free to download it below.