Rare coins versus precious metals
Zsmartie
Posts: 135 ✭✭✭
If you were wanting to invest in something beside the roller coaster stock market, which would you consider a better investment - rare coins or precious metals? I own both and prefer the coins. However, when in need of quick funds, precious metals are easier to sell. But I get little enjoyment in looking at a stack of ASEs.
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Invest? Neither.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
I like stacks of graded ASE, AGE. Have some graded numismatic coins too. Plus graded currency. Being in the biz have diversified roster. Frankly I think US numismatic coins (with their sticker game) seem really expensive vs world. Sometime in the future feel all that will blow away with the wind anyway when a self grading AI holder comes out. Be aware too a coins surfaces (raw or slabbed) are a point in time. Reaction with the atmosphere can change its (be detrimental) marketability as time goes on. A mentor experienced dealer friend told me decades ago - churn your inventory you win, sit on it you lose.
Go with bullion first then maybe try some numismatic area you have studied. I don’t think there is any right answer. Nobody really knows the future of the RC market. I have always found date sets of an issue expensive and boring at some point.
Rare coins are a hobby. PM’s are inflation insurance. Both are nice to have, but not great investments.
In my years (76 now) I have invested in a variety of areas - agricultural land, performance horses, precious metals, stock market, CDs, and graded coins. They all IMO have their ups and downs. I have had the most enjoyment in horses and coins. Financially the land (I live in Montana) had by far the best payoff. I no longer own land, horses (wife does), or any stocks. My latest hobby is the mint state Franklin half dollars. I was born in 1948 the first year of the Franklin and the last year was when I was in high school. So those coins, although not rare nor overly valuable especially the ones I look for, mean something to me.
The only precious metals I like to have an abundance of is small brass cylinders topped with a piece of conical lead.
"When they can't find anything wrong with you, they create it!"
Agree. But coins are especially problematic:
There are some threads about collecting key date coins you might want to check out. I remember reading something David Hall wrote a long time ago too about the same thing.
Technically, "investments" are things that give you a return on investment while you own them. Blue chip shares pay dividends, investment properties give you rental income, money in the bank gives you interest, that sort of thing.
Buying something you don't actually need, in the hope that, by the time you wish to sell it the price will have gone up, is technically "speculating" rather than "investing". And "speculating" is just a fancy, respectable-sounding word for gambling. Go ahead and speculate in rare coins and/or bullion, if that's what you'd like to do with your spare money. Just be aware that speculation is generally less predictable and reliable than traditional "investments".
Now, there is one observation I would make about the difference between the rare coin market and the bullion market. You might think that they should more or less move in sync with each other. That seems to make logical sense, since rare coins are (usually) made of precious metals to start with. But humans aren't renowned for their collective logic. I've noticed that these two markets actually tend to move in opposite directions.
Here's why. A piece of bullion has just one component to it's value: the bullion value.
A rare coin, on the other hand, has three components: the face value, the bullion premium, and the collector premium. It's that collector premium that's the most volatile, since it depends entirely on "market sentiment", all squishy emotions rather than the hard data that accountants and speculators prefer. The face value is constant (and largely irrelevant for most rare coins), the bullion premium goes up and down depending on the bullion market.
Suppose bullion prices are bullish - going up and up, day after day. Coin collectors and dealers are generally a conservative bunch and are reluctant to pay those bullish prices, so the total value of collector coins does not rise at that same rate as the bullion price. What's happening? The bullion premium is going up, but the collector premium is actually going down. If the bullion price keeps going up, the collector premium drops all the way to zero and the coins are likely to wind up hitting the melting pot and turned into more profitable bullion.
Nobody wants to own things that are going down in price, when there's a readily available alternative; so speculators sell up their rare coins and switch to bullion, which of course increases the supply of rare coins and feeds back into even lower prices. So when bullion is bullish, rare coins are bearish, and vice versa.
So, back to the OP's question: which to buy, bullion or rare coins? The answer depends on what you think the bullion price is going to do. Skyrocket? Then buy bullion. Fall, or stay much the same? Then buy rare coins.
Roman emperor Marcus Aurelius, "Meditations"
Apparently I have been awarded one DPOTD.
The only time I consider the word investment, as far as any collectible is concerned, is where you collect what gives you enjoyment. That is your investment. The sheer joy of completing/owning your collectibles.
bah humbug. sure gold eagles are investments! Not all investments pay you income. Does your house pay you rent, does TSLA pay a dividend? Did MSFT or AAPL pay divis during their headiest growth years?
Ungraded stack of gold eagles for the win. Avoid the hoity-toity graded and rare coins. I can get 10 quotes on a AGE in 5 minutes, online and LCS. If I want a quote on my reverse proof MS69 gold eagle, I get lowballs and "bring it in for an eval, then a lowball offer". Or sell on Fleabay and get robbed by the empty box scam or just 13% Ebay fees.
A stack of AGEs is liquid, can be held locally, and an investment that the Govt can not frig with so easily as your 401K.
How are you at timing?
That's the key to making money investing in either coins or PMs but few seems to be able to do it well. Same is true for stocks. If you only knew when to get in and out, you could make a fortune. But that's the hard part, isn't it?
Rarely are prices so lopsided that it seems like you can't lose. But such a situation occurred about 20-25 years ago with PMs. Silver had dropped to $3-$4/oz and gold was below $300 after trading at highs of $50 and $850 around 1980. PMs were dead and nobody wanted to invest in them after a long downward trend. But they had become so cheap, there was general agreement that they only had one way to go-up. But, when? It took a couple of years but I sold out (too early) at $8/oz. I was pretty close to calling the bottom (as was EVERYONE else), sold at a profit several years later but could have made more if timed fully right. I got lucky and getting the buy end right was enough to make some money.
But it all comes down to timing. Occasionally, when the market is so lopsided, there is opportunity but right now I'd be neutral on PMs. So, again, I'd ask "How are you on timing?" How about luck gambling? You are going to need one or another to be successful.
When you park your money into other forms of money and you can handle a bumpy ride sitting on money (bumpy for the investor type and marketeers) , and all of it is still money , who's looking for returns ?
Editing ( usually for punctuation, grammar or spelling ).
In these uncertain times prefer a balanced offense. Numismatic coins for good retail strong margin / then bullion material play the PM side of the ball. Followed by currency with the good solid / breakaway margins it brings.
Not just somebody sitting back as investor. Out working my angle wherever can find it.
Rare coins have the potential to go up far more in price than precious metals, although the current high price of gold leaves one wondering what could happen. You can come down a lot more when the price is $2,000 an ounce instead of $400.
On the other side, you can lose a lot more on rare coins, and you have to know what you are doing when you buy them. You can buy the "right" date, mint mark and denomination, but buy the wrong coin because it has been overgraded, repaired or simply goes bad bad because it's been treated with a chemical and not properly rinsed. People think that slabs and stackers protect you from that. They might not.