Coin and Bullion Investing Insights
For the past several weeks, I have been getting an increasing volume of email asking for more information about investing in coins and bullion. This spate of inquiries is probably related to the current slide the U.S. economy is undergoing, since these types of emails ran about 5 queries per week until a couple of months ago. Current volume is averaging 3 or 4 per day now, and this increase tells me something very interesting. As the economy enters what is surely one of the many cyclical recessions from which it has always recovered in the past, people who have lost faith in the stock market, bonds, and other more traditional forms of investing are looking for either diversification or a safe haven. Bullion has filled this role well in past economic cycles, but what about rare coins? Are rare coins a good investment right now?
Although past performance is not a reliable indicator of future growth potential (or so the investment advertising disclaimers are always warning us,) the fact is that the rare coin market has proven to be a solid hedge against inflation (and then some) for at least the past 70 years or so, especially if you buy high-grade rare coins and key coins. Bullion, too, has done well, although it has been a lot more volatile and risky, especially for the short term investor. But what should I tell the people who are writing in increasing numbers asking the simple questions such as, "Are rare coins a good investment right now?" and "Is bullion a good investment right now?"
I plan to research and write a great deal more about these questions in the next few weeks, but for now I offer my gut feeling about both types of investment, and then direct the reader to some interesting analytical articles by others who are experts in the field of numismatic investments. My answer for the rare coins is that I'd recommend staying away from key Lincoln Cents right now, because market prices have been driven up in advance of the release of the four new penny designs in 2009. Although prices will likely go even higher before the penny frenzy is over, buying Lincoln Cents, and to a lesser extent the other U.S. Small and Large Cent types, for the collector who plans to hold onto this material for at least 3 years or more, I feel you've missed the boat for now and prices will ultimately settle at or below the frenzy prices we will very soon begin seeing. For other rare coin types, the same solid advice that I always give still stands. Buy the highest grades you can afford, preferably key coins housed in PCGS or NGC holders, and don't expect to make any kind of profit on them by holding them for less than perhaps 5 to 7 years' time unless you really do your homework and know exactly what you're doing. Like all forms of investing, you should approach it as a business decision and do your due diligence before buying. However, if you collect coins because you actually enjoy the coins themselves, then buy whatever your heart calls out to you to buy (as long as your pocketbook agrees) and the rest will take care of itself.
As for my answer to those asking bullion-related advice questions, I can only say that there are some very strange manipulations happening on the bullion market right now. It is a treacherous place in the short term, but I think it's probably an excellent place to put U.S. Dollars that you can leave for the long term. Analyst Patrick Heller recently made the interesting claim that the U.S. Treasury and/or the International Monetary Fund (IMF) might be sneaking 400-ounce gold bullion bars onto the international bullion market in an effort to hold down prices. He writes that if this news were to get out, it "will actually have the opposite effect because it would represent an admission that the U.S. dollar deserves to be worth much less than it is today." His recent NumisMaster.com article on the current bullion market situation is fascinating reading for anyone interested in this topic. Another interesting take on the issue of bullion investing was written by hobbyist Bill Green, where he makes the case against putting too much of your money into gold bullion in his Numismatic News opinion piece titled "Diversify: Excellent Strategy, Bad Tactic."
What is your opinion about coin investing and/or bullion investing? Do you agree with my views, or do you think I'm nuts? Can you tell us about a good columnist or other easy-to-follow analysts? Share your thoughts in the comments section below, because like most of us, I'm very interested to hear and learn more about this important topic.
Comments
There are several people talking about the manipulation of the price of gold and silver by central banks and others. A leader among them is Jason Hommel. His website is http://silverstockreport.com/ and his free newsletter (which I would encourage everyone to sign up for who is interested in this subject) has been on the cutting edge of this manipulation story.
Jason Hommel has proved time and time again that physical metal is not available at the “market” price (other than in 1000 ounce bars with a waiting list of several weeks) and is in fact many dollars higher at the WHOLESALE level for silver rounds and small bars.
This is unheard of in past history where the average difference might be as high as 10-15% but NEVER as high as the 40-60% (for silver) it currently is. Should there be a major default at the Comex (Crimex as we call it) the price of gold and silver will really explode.
To see what other bullion buyers and sellers are thinking go to the Bullion Direct forum here http://forum.bulliondirect.com/ While I believe coin collecting is a great hobby I feel everyone should also have some bullion with their collection. The American Silver Eagles as well as some of the other collectible rounds to include those of foreign mints are often very beautiful to look at as well. Sincerely, John Leckrone
Just want to say thanks for your About.Com.articles I find them very interesting an informative.I started collecting coins about 5 years ago and you’ve help me alot. Thanks again. About bulion if i could I would invest in it. I just completed my Silver Eagle collection and I not only injoy the coins but it is also an investment for me ,I also bought the silver proof quarter state collection. I’m now working on Morgan silver dollars . thanks for you insight. G Shultz
I think that coin investing is still a very good way to hold onto your financial future. I don’t think bullion buying is a good idea right now with the market so unstable, unless you are buying collectable bullion coins.
Buying coins for numismatic reasons plays a very small part in the economy. I feel that a rare St. Gaudins coin will always be a good investment even if the Dollar goes away. Once these collectable coins become collectable, they no longer have monetary value actually. Would you use a 1932 twenty Dollar gold piece to buy some groceries with? I think not. In the first place most clerks wouldn’t know what it was. They would probably think it was a new Presidential Dollar Coin. Once I buy a coin to put in my collection, like the Statehood Quarters, they nolonger are quarters in my mind, they are a collected coin of numismatic value, not 25 cents. We still collect coins from countrys that no longer honor their old form of currency but the coins still have a certain value to them, and the longer time carries on, and the fewer of them ther are, the more valuable they become. Hang in there folks, I think we are safe in our hobbies as long as we don’t betray it ourselves and give it all up to a new form of Govt. currency. And if some of you do, it only makes mine worth more.
Right now, China holds 2 1/2 trillion United States dollars! What China does with those holdings, in my opinion, will determine the destiny of our beloved greenback.
The fact that “leaders from 43 Asian and European nations met in Beijing last weekend to discuss the global financial crisis” (quote from Patrick Heller) without inviting the USA is very troubling. Our “friends” in China and Europe would like to see an international unit of currency instead of the dollar. Of course, that international unit of currency would be backed by gold! Read between the lines, folks. China is carrying a big stick right now and it doesn’t want to see a WEAK dollar cut into the value of their immense holdings. China does not want to assist in propping up the U. S. dollar any longer, they want to replace it!
My recommendation is this: physical posession of gold bullion is a smart insurance policy against that eventuality!
One of the most interesting (and frustrating) things about trying to invest in gold or silver bullion right now is the enormous premiums that need to be paid above the “market prices.”
Even traditionally low premium methods of acquiring bullion such as 100 ounce silver bars have premiums of up to 50%.
I know a lot of people are trying to buy bullion, but its tough to step up to the plate when you have to pay such large premiums.
If you do a follow up, I’d like to know your opinion on the best way to acquire bullion without paying exorbitant premiums.
I just wanted to comment on silver in particular, Several months ago before the spot price of silver tanked you were able to pick up silver eagles and maples for anywhere betrween 2-3 dollars an ounce over spot. Lately now that silver has huvered around 9 dollars an ounce good luck finding anyone selling for less than 7-8 dollars over spot. Purchasing silver at this time might be a bit risky in my opinion because of the tremedous premium over spot value. I personaly like to purchase collectable silver coins, that as another person commented about,really aren’t affected by the spot value , but by there collectability. There are some good deals to be had on collectable silver right now because of the unstable market
Good Day!
Everyone thus far has made a good point, but what’s really happening is still a mystery & will remain that way for a while. Even though the premium for buying silver is high, the overall cost is still pretty low in contrast to what it was just a few short months ago when it made it close to $25 dollars. So do you sit & wait til the cost goes up, but the premiums fall or do you buy now & sell later when everything stabilizes? Buying is buying. Buy low, sell high, right? This applies to coins as well. Some dealers won’t go below a certain amount because they bought those coins for more, however some have come down to their approximate costs & good deals can be found. The fact of the matter is to purchase what you can now (when low) and ride out the chaos.
Coins & bullion are long term investments. Granted sometimes you can roll them over for a quick buck, but it will usually serve you better to wait. As with any investment speculation there’s always risk attached and much like gambling you shouldn’t buy or wager any more than you can afford to lose.
For you bigger players, look at Platinum. It’s within $100 dollars of gold. Just last week it was within $50 dollars of gold per oz. So what will the AE’s be selling for this year if prices stay down or will they make them at all? Last years Platinum AE’s sold for nearly $2000 bucks! I would think, for those of you who can afford it, that Platinum would be a sweet deal right now, if you can find anyone willing to sell some.
Don’t panic, is the key here. Buy what you can while prices are down & wait it out or simply sit on what you have for a while. Either way, time is the deciding factor.
Thanks for listening…
Cash is king right now, IMO.
Rare coins, precious metals and stocks are unpredictable today. The market manipulations are so extensive and dramatic right now that only the most savvy need apply. Big institutional players are dumping, buying, rearranging, and taking both quick profits and long term acquisitions.
The more the market jerks around the more some like it because this is where the most profit can take place by placing the right bet. Essentially it’s a bettors market, including precious metals.
So essentially no investment right now is safe, excepting FDIC guaranteed CD’s and money market deposit accounts. (Not mutual funds.)
No comment on the long term key date rare coin market. In a 1829 type of market crash it would take over a decade to recover coin values, as a comparison.
If it’s a hobby and you can afford it, who cares? If it’s an investment for necessary gain, or as a hedge, then beware.
BB
This is dangerous territory now, for the unititated. I agree mostly that as a hobbiest, go with what appeals to your likes, versus what you think precious metal is going to do over the long term. Alot of countrys have been dumping gold. And yet it remains high, unlike other precious metals that have fallen drasticly, because they are tied to production. Like platinum silver, and palladium. I agree about china. We owe them, they want what’s do them. That puts us all at risk. That was why i asked the question for the mint, if there is any truth in the rumor, that the confiscation laws are in effect, just haven’t been implimented yet. Seems all presidents have had the power since 1933, if they feel for the security of our nation. That stoping gold trading would keep our system from going bankrupt. Untill the public knows more, and the feds fess up. I think bullion investing could be very risky. I personally haven’t stoped buying mint products, i haven’t bought any precious metal from them lately. Cept for some silver proof coins. I may by the saint when it debutes in Jan. 09. After that, it’s back to the fence, till i can make some sense out of all this.
coiny