I don't think the election to use average cost basis is available unless you're selling mutual fund shares or other covered securities. I looked in publication 550 and 544 and, while they describe the general rule for cost basis transactions (specific identification or FIFO) and also discussed the special cost averaging election for mutual funds, there was no discussion of any special rules that might apply to determining tax basis in fungible collectibles acquired in multiple purchase transactions. Silence on the point implies strongly to me that the general basis rules Ira stated as alternative #1 apply. OP may want to look at these publications and draw his/her own conclusions.

The possibility of using average cost basis is derived from the treatment of GLD and SLV which are not subject to FIFO or specific identification determination of cost basis. Granted GLD and SLV are WHFITs (widely held fixed investment trusts), but ownership of GLD/SLV is deemed to be ownership of the underlying physical gold/silver asset. Definitely further research is required and the IRS Pubs do not provide definitive answers.

Ira