As more and more investors enter the physical precious metal market, many find themselves wondering what direction their investments should take. At the same time more investors move into the market, there seem to be an increasing number of pitfalls for them to avoid.

What type of bullion should you buy? Are pre 1964 silver coins worth investing in? What about purchasing bags of “scrap metal”? Should you invest in rare coins? What should you consider about commemoratives coins and replica coins (reproduction coins)? Each strategy has its advantages and disadvantages, depending on what your short and long term goals may be.

Here we will specifically address the issue of coin replicas. We will look at what they are, how to spot them, what you need to know about them and why it may be wise to just avoid them altogether.

What are replica coins?

Coin replicas are coins that are minted to look like an original. Although the National Coin Hobby Act states that imitation coins must contain the word “copy”, coins are being produced in China without concern for the regulations. Even where the word copy is used, some coins may claim to have value they may not actually have.

Some replica coins are produced so well, you have to look very closely to distinguish it is in fact, a replica. Replicas need to be distinctively different from the original however, to not be considered counterfeit.

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So how do you spot replica coins?

Genuine United States coins will always feature the denomination of the coin like “Half-Dollar” or “Dollar”. Replicas however will generally replace those words with some sort of product description like “.999 fine silver” or “giant proof”. This in and of itself does not make it a bad investment; it’s just letting you know it is not legal tender.

When you see coins advertised in newspapers, magazines or online, look for trigger words like “tribute coins”, “adaptation”, “reproduction”, or some other clever description like “magnification”. When you see these words, you have spotted an ad for replica coins.

To avoid counterfeiting issues, most replica coins are produced larger than the genuine version, but they also may also be produced smaller. These “miniature” versions are still replica coins.

What makes replicas even more difficult to spot is the fact that unless the original designer copyrights the design, any coin may be copied. Thankfully, the U.S. Mint recognizes the confusion and provides resources to help investors, including a side-by-side comparison chart of common reproductions.

Important facts you should know about replica coins.

This may get your attention: any business can produce U.S. coin replicas. They just need to follow the rules against counterfeiting and those in the National Coin Hobby Act.

Many consumers believe that when they see a coin advertised that looks like an American coin, it must have been minted with some backing or endorsement of the U.S. Government. That is simply not true. Only coins minted by the U.S. Mint itself are legal tender.

Should you avoid replica coins?

Replica coins are a dicey minefield that novices investing in physical precious metals are better served avoiding. It takes a person experienced in these replica gold coins or replica silver coins to determine any true value.

The U.S. Mint itself will not comment on the present or future value of replicas as collectibles, and in fact, defers those considering investing in them seek out the services of a trusted coin dealer. To us, that seems like very good advice.

It is better for a novice to buy gold and silver bullion or invest in numismatic coins. Bullion and numismatic coins will always at least maintain the value of their precious metal content. This will always provide a safety net of value, and for novices in particular, that safety net can be very valuable.