(MONEY Magazine) – Rare gold coins, always a hot item in the $1-billion-a-year coin collecting market, are looking even more lustrous as investors scramble to give their portfolios a few troy ounces of inflation protection. The rationale -- as conveyed by some dealers -- is that collectible coins, whose price is based on bullion value plus a numismatic premium, may provide a cushion not only against inflation but also against ricocheting gold prices. If bullion is down, so the argument goes, the numismatic market could hang steady or even climb, helping the coin retain value. But does this argument stand up? To find out, Money researched the price history of one particularly cherished U.S. coin -- the $20 gold piece minted from 1907 through 1933 that features a woman in flowing robes designed by Augustus Saint-Gaudens, the leading American sculptor of the late 19th century. The Saint-Gaudens, also known as a Double Eagle because its face value is twice that of the traditional $10 U.S. gold Eagle, has long attracted favorable reviews -- including a recent one from Richard C. Young in his International Gold Report (7811 Montrose Rd., Potomac, Md. 20854; $149 a year). Rather than the higher-priced specimens, like the rare 1909 Saint- Gaudens minted in Denver that might cost $22,500 in pristine condition, Young touted more common varieties like the Philadelphia 1926; that coin, uncirculated but with a few nicks and scratches, would cost $605 -- about 29% over the value of its 0.9675 ounce of bullion. ''Investors who love old coins get an enormous pleasure from their beauty,'' says Young, ''even if they cost more than the American Eagle, the Canadian Maple Leaf and the South African Krugerrand.'' These bullion coins trade at only 3% or so over their gold value. The pleasure, alas, is purely aesthetic. The recent price pattern of the Saint-Gaudens (see the chart) shows its worth often tracks that of gold so closely that its supposed value as a hedge is illusory. The only exception, says Bob Wilhite, an editor at Numismatic News (700 E. State St., Iola, Wis. 54990; $24.95 a year), is that there is sometimes a brief delay between when gold starts to fall and when the coin price follows. ''You may have a few weeks to a few months during which you can still sell the coin without a loss,'' he says. To do so, though, you would need to monitor both gold and coin prices minutely. The only sustained period during which the Saint-Gaudens defied a falling gold price was from 1983 to 1985, when its value was artificially inflated by boiler-room telemarketers hawking it and other gold coins to unwary consumers. The price shot up to more than double the bullion value in 1984 but sagged back to roughly its current level only two years later after authorities shut down the boiler rooms, and the Treasury issued the American Eagle. Even during the fluke price upsurge, it would have been hard to make money on the Saint-Gaudens because of the stiff dealer markup common to all collectible coins. A Saint-Gaudens bought for $692 in early 1983, when the run-up was starting, would have fetched only $615 if sold back to the dealer the same day -- an instant 11% loss. And since the resale price has never been above $692 for more than three months running since then -- for only 10 months in total -- the buyer had relatively few times to sell without a loss. ''Numismatic coins are not a very liquid investment,'' explains Carl Carlson of Stack's, a New York City dealer. ''You may have to hold them for seven years just to break even -- and for another three years to make a profit.'' Experts like Bob Wilhite add that coin collecting can be tricky for the novice. ''Unless you have learned to tell different grades of coins apart,'' he says, ''you may unwittingly pay too much for too little.''

CHART: TEXT NOT AVAILABLE CREDIT: Source: Numismatic News CAPTION: How one prized coin fared against gold The purchase price (blue line) and resale price (red line) of the Saint- Gaudens $20 have paralleled the price of an ounce of gold (green line) in recent years, except from 1983 to 1985 when the coin's value was hyped by hard-selling telemarketers (all prices are quarterly averages). But profits were hard to come by because of the hefty dealer markup (the spread between the blue and red lines). A 1927 minting gleams below. DESCRIPTION: See above.