Look what's beating stocks

Not everyone is bullish on bullion. Traditionally, gold has been a horrible investment, says Pedro Santa-Clara, a professor of finance at the University of California at Los Angeles Anderson School of Management. That's because it's expensive and doesn't do well when everything else is doing well. That could provide the basis for an argument in favor of investing in gold as a hedge against other investments.

"But when compared with investing in stocks and bonds over the last 30 years, gold has had dismal performance. And it's not really an economic asset," Dr. Santa-Clara adds. "When buying shares, you can hope for the prices of those shares to go up. You can't really hope for appreciating gold prices."

Santa-Clara also notes that central banks have been trying to get rid of gold because it has proven to be a poor long-term investment.

Regardless, gold is beautiful. At least, that's how the US Mint is describing its upcoming 24-karat gold collector proof coins. The investment coins are due out in 2006, with a potential global market estimated at $2.4 billion. Prices have yet to be set and are based on the London Bullion Market Association's going estimate for gold.

The US Mint currently produces a 22-karat gold bullion American Eagle series. The coins have face values of $5, $10, $25, and $50, but usually sell for several hundreds of dollars. In April, the $50 coin was selling for about $450.

There is no question that bullion is good business for the federal government, says Jay Johnson, a former Wisconsin congressman who served as director of the US Mint during the Clinton administration. Under his watch from May 2000 to August 2001, the US Mint generated about $2.6 billion, all of which went to the Treasury's coffer.

"When the US Mint profits, hopefully it keeps taxes down for everyone else. I just don't think the Senate and Congress see the US Mint as a priority for making money," says Mr. Johnson, noting that it costs about 22.5 cents to make a golden dollar, and 12 cents to make a quarter. "That's a pretty nice profit margin for the Mint."

Investors who have enough money to buy and sell a substantial amount of coins also have the potential to profit nicely. Silvano DiGenova, chief executive officer of Superior Galleries in Beverly Hills, Calif., doesn't believe anyone should make a true investment in coins with less than $10,000. The reason: Coins that are worth the investment can cost several thousand dollars apiece.

For example, a gold coin from the early 19th century can run about $6,000. But Mr. DiGenova expects the coin to nearly double in value in three to five years.

"People also have to remember that coins aren't as liquid as stocks and bonds. And some clients put half their net worth into coins," says DiGenova, who started collecting pennies more than three decades ago.

Sherman's favorite coin is a penny from 1793. Though its condition is crude at best, Sherman says he can make out an interlocking chain on the back of the coin. "And each link in the chain stands for the colonies that linked together to make up this country."

Estimates of such a coin's value range from hundreds of dollars to several thousand depending on its level of preservation.

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