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When evaluating investments in gold coins, bars, and other types of physical goals, the topic of melt value often comes up. It is not the only way to measure the value of a precious metal investment, but it is an essential metric that any precious metals investor should understand.
This guide to gold melt value introduces the topic and defines important terms so that new investors can use their knowledge of bullion and gold coin melt value to improve their precious metal investment decisions.
Gold melt value is just one of many qualities that influences the value of an investment in precious metals. Anyone considering investing in gold or other precious metals should keep in mind that investments in precious metals, like almost all investments, can potentially lose value. Investors who have questions about precious metals investment should consult a financial advisor, such as the experts at the Oxford Gold Group, before deciding to invest.
What Is Melt Value?
The melt value is the value of the metal if one were to melt the metal down. It is distinct from the market value of gold because other factors can affect the value of a piece of gold. The melt value of coins does not include their value as collectibles or qualities such as the condition of the coin, its provenance, or the rarity of the coin. It does not also reflect the value of the artistry of rings, jewelry, and other pieces of wrought gold. Melting down these pieces would necessarily destroy these aspects of the piece and negate that value.
Determining the Melt Value of Gold
It is not necessary to melt down gold to determine and discuss the melt value. You can calculate the melt value of gold by multiplying the weight of the coin by the percentage of gold contained within it and the current value of gold per ounce. For example, a one-ounce coin that is 20% gold would contain one-fifth of an ounce of gold if melted down. Gold was valued at about $1,800 per ounce in 2021, so this coin’s melt value would be about $360.
Gold Weight
Gold is typically sold by the troy ounce, which is 31.1 grams, almost 10% heavier than a standard ounce. Gold coins and bars issued by governments typically have the gold weight indicated on their surfaces.
Gold Purity
The value of a “gold” coin depends on the purity of the gold. A gold bar that is over 99% pure is essentially worth the spot price per ounce. Gold coin melt value is often less than that of gold bars since they often contain a mixture of metals such as 90% gold and 10% silver or some other metal. Do not overlook the purity of gold coins when evaluating their potential as investments.
The Live Gold Price
The value of gold at the present moment in precious metal markets is called the live gold or spot price. It changes continuously while markets are open. This means that any gold you own will rise and fall throughout the day. If you are buying gold as a long-term investment, daily changes to the spot price will not matter as much as the long-term changes over the years.
If there is a change in the economic situation, such as stock market volatility, rising inflation, or international economic sanctions, investors might put their assets in gold to protect them, which can cause a spike in gold prices. If you believe this spike to be temporary, it might be a good time to sell some of your gold and switch to another asset until the gold spot price returns to a lower value.
Using the Melt Value of Gold and Other Precious Metals to Evaluate Investments
The melt value of gold is a floor on the value to which any gold collectible can fall, even if it loses any of its collectible value due to damage or volatility in the collectible value. Naturally, the melt value of gold is not constant and rises and falls with the price of gold per ounce.
Coin and bullion dealers may base the price they offer on the melt value, or they might offer additional value for items with clear collectible value. This may depend on whether the dealer is primarily selling collectible coins or providing precious metals for investment.
Melt Value Versus Numismatic Value and Face Value
Coins with identical melt values, such as coins of the same type from different years and minting locations, might have very different values to collectibles. The numismatic value can be increased by many factors that affect the coin’s rarity. This includes:
Coins With a Very Limited Production Run
Some coins only exist in small numbers because the mint only produced a small number of them. Uncirculated coins are often rare because few coins remain in pristine condition. Over the years, most coins lose their value when they are in circulation.
Coins With Production Errors During Minting
Coins stamped on the wrong metal, in the wrong thickness, or with errors on a feature of the coin are rare because only a small number of coins were produced in that year. Mint errors are distinct from damage that occurs after the coin leaves the mint, as the latter decreases the coin’s value.
Coins With Historical Significance
Some coins, such as early coins minted by the United States, are sought after because they reflect an important time in the nation’s history. The increased demand for certain coins can increase their market numismatic value beyond what one might expect from the rarity of the coin.
If a coin’s value is significantly higher than its melt value, it might be advisable to preserve the coin to protect its value. However, you may need a qualified appraiser to determine the numismatic value of a coin. For these reasons, investment in collectible coins requires more effort and time than investing in gold bullion based on melt value.
The melt value of coins is also different from the face value of coins. A coin’s melt value can exceed its face value, particularly it is an older coin containing a high percentage of silver or gold or a bullion coin with a nominal face value well below its melt value. For example, a one-ounce gold coin with a face value of $50 would have a melt value in 2022 that is much higher. The rare million-dollar coins minted by Australia and Canada have melt values several times their face values.
The Melt Value of Coins in Circulation
Other coins, particularly modern coins intended for circulation, have melt values below their face value because they consist of metals with lower values, such as copper and nickel. Coins that do not have gold, silver, or other precious metals are not typically used as investments, except for people who collect loose change in cans and jars. They are essentially cash but inconvenient to store and sell.
Due to the difficulty of determining the numismatic value of coins, many investors simply buy coins or bars of mostly pure silver or gold based on the melt value. This makes it more straightforward for investors to value their investments for tax purposes and evaluate investment performance.
Using Melt Value When Buying and Selling Gold
If you do not know the numismatic values of coins, you can be sure that you are not overpaying for gold or other precious metals by purchasing them at a price at or near the melt value of the coins. If you are lucky and some have a higher numismatic value, you might profit from the sale. If you pay the numismatic value for coins, you might lose value as the coin suffers wear.
Most investments in gold IRA funds are in gold that is valued based on its melt value. Many countries make decorative silver and gold coins that serve as investment vehicles. Investment companies and bullion dealers typically make a variety of products available so that investors can customize their portfolios.
Investing in Gold with The Oxford Gold Group
The Oxford Gold Group specializes in precious metals investments, including coins and bullion. We make detailed information about the physical gold that we sell, including the composition and weight of the gold, making it easy to determine the melt value. We take care of the paperwork and government reporting requirements that go along with transporting gold so that you don’t have to deal with that responsibility. We store your gold in a modern, secure facility and make it available for inspection.
Now that you have had the chance to learn more about the gold melt value of coins and its role in investing, we hope you are intrigued by the prospect of investing in gold and other precious metals. Find out more about investment opportunities with The Oxford Gold Group. You can reach us by calling 833-600-GOLD, or you can download our investment guide from our website.
