Is this the end ? Bullion tumbling....
thebeav
Posts: 3,783 ✭✭✭✭✭
Hello,
We've been enjoying a bull market in coins for some time now. As of this morning, silver is 6.11 and gold is 395.00. Gold peaked in the 420's a few months ago, silver at about 8.15 at the same time. This is an 80 cent non-stop slide for silver in the past week. Are we nearing the end to this market ? Just what is the relationship between bullion and coin prices?
Paul
We've been enjoying a bull market in coins for some time now. As of this morning, silver is 6.11 and gold is 395.00. Gold peaked in the 420's a few months ago, silver at about 8.15 at the same time. This is an 80 cent non-stop slide for silver in the past week. Are we nearing the end to this market ? Just what is the relationship between bullion and coin prices?
Paul
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WS
has retreated a lot in the last few weeks, it is still near it's pre-2004 all time high. If you believe
that oil will last for many more decades with geometrically increasing demand and that inflation
won't be a problem in this country then you should sell the metals.
In any case the coin market has not been fueled by profits on the metals this time as it was in
the late '70's. Even a sharp drop in the metals from these levels would have little impact on the
coin market.
Gold should be around $400/oz. U.S. maybe just a hair more right now but subject to day to day fluctuations as the world turns. Noted above in this thread that coin prices and gold bullion are somewhat connected but not necessarily in concert. Melt prices still seem to figure into fine and below gold coins but in the higher grades (MS) there doesn't seem to be much correlation with minor gold movements regardless of attempts to hype the play. I get that from being a student of the auctions. A $20 movement in gold (5%) does not signal the end or the revival regardless of which way it is. Ask the question..."Do I want to play $1000 for a chance at a $50 score?"...even the vegas crowd would just look at you with a blank stare. Scared money can move gold and happy money can move gold but the bottom line is that gold is security money for most people across the globe and unless you are moving many ounces a day, the day to day changes shouldn't affect on your life. Of note is that gold is seeing more pressure by asian markets, they have a particular demand for personal gold/security...it is just that now there is a new group of global players, namely an ever increasingly affluent Peoples Republic of China and about a billion people that are for the first time in many generations...having disposable income. Having called friday's average sales price close to the exact penny, from a week out in this forum, I suspect that I won't take too much flack on my opinion. But gold is an exceptional commodity. As a prediction, I would look for gold to continue to appreciate gently and with the world situation, it could fluctuate wildly (10%) but settle again to gentle appreciation. Of course, if the whole thing blows up...then gold could go ballistic but that is a hard play to call but not as unlikely as it would have been a few years ago but, if you're blowed up where's the play. I seriously doubt that gold will be taking a nose dive, I would be suprised if it showed any serious weakness, it is just not very likely. There are two approaches to buying gold...buy high and sell low so you can take the tax write off (not a good play) and buy low and sell high and make a profit (you need volume here). Gold is a very liquid asset and there are little players all over the world trying to squeeze a couple of buks out of it but that is risky business. Gold is a very good long term hold and is a good asset to have in your safe deposit box. When gold is high, sell...when gold is low buy but for coin people, collectors with gold numismatic material...just relax and put it in your safe deposit box or your album and smile.
Silver remains one of the most hyped commodities in the world...a poor man's gold and everyone can afford a few ounces to give them that feeling of having a liquid commodity for security. And besides, it looks cool. I agree with another in a previous forum discussion that silver is speculative. Silver does seem to affect coin prices, much more than gold. In fact the price of a $100 bag of circ silver changes a lot over the course of a few months but for one or two coins, particularly collectables like morgans or barbers or some of the beautiful silver numismatic material we have, silver isn't really part of the play. If you're talking about a $12 circ coin that is 1 oz of silver and silver jumps $3, then yes, there might be a play there if you have a couple of hundred coins you want to play but for a couple of dozen of coins...nah. If you're dealing $1000 or $100 bags of silver or wrapped bars then sure, you're a player. So, once again, just because silver finds it's place at $6 and a bit (been there for a number of years), the coin world is not coming to an end. Don't bite the hype, when it runs up to $8 it's too late to buy so if you want in, get some at about $6. Of course, if the big bomb goes off...that could change.
So for all the "The sky is falling!" crowd that jumps everytime gold or silver moves...hey, that is the nature of the commodities, they go up and they go down but after all that, they tend to appreciate gently and besides, they are pretty.
Have fun!
Mike
al h.
The current world yearly deficit between consumption and production of silver is over 100 million ounces. This isn't hype, and it has remained fairly constant even while the world production of silver increases every year. As long as this deficit continues, the price of silver MUST increase in the long term. Silver is one of the best investments in the world right now and will continue to be until production equals or exceeds consumption.
I know silver leaves a bad taste in a lot of people's mouths, myself included. A lot of people got stung in the early 1980's and the corporations that push silver investment aren't exactly the most ethical in the business. Just remember that the two richest men in the world are heavily invested in silver right now, and Warren Buffett in particular is well known for looking at the long term big picture.
time. Most of this connection which does exist is tenuous and has to do with the wealth
effect; people buy more when they see large paper profits on metals they own. In 1979
however, dealers and collectors were making large profits buying and sell metal and these
profits were often pumped back into numismatic coins creating a sort of false demand. When
profits on metals ended the market crashed soon after.
To an investor, gold is one of the hard assets that can be purchased as a hedge against inflation. It is also one of the assets bought for a diversified portfolio. Over the years(20 or more) a prudent investor will sell the parts of a portfolio that have risen in value, and add assets that are undervalued, in his opinion.
To a coin collector, especially those buying rare coins, gold is not an indicator of rising or falling coin prices, except for gold generics. There may be a slight relationship, as investors move into or out of hard assets, and the investor/collector who buys rare coins may also be buying gold products. But the rise in gold to $420/ounce and it's present price just under $400 will not, in my opinion affect the continuing rise in rare, key date coins.
The immense increase in rare coin prices in the last year is more nearly equated with the number of people who see the loss (or no real gain) in the equity markets, and a chance to hold an asset that WILL increase in value. I emphasize RARE coins, not just coins. Just look at the price increases for 1796 quarters, 1796 and 97 halves, all bust dollars over AU58, early gold, proof gold, and many others. It appears these type of coins are always on solid ground, and inspire the type of confidence that will attract collectors with serious money for years.
This topic, price of gold vs. rare coin pricing, will interest all of us over time. I stand to be corrected, probably in the next several minutes, and for sure, in the next 5 years.
The correlation between the coin and precious metals markets is shaky, but it is there. When the price of gold and silver moves, it does have an affect on gold and silver coins because the value of the underlying asset,the metal, has changed. The collectors value doesn't change, just the value of the metal the coin is made of.
Silver busting downward through 50 and 200 day averages is a substantial negative. However, perhaps the damage is done. It may be simply returning to the bottom of its ordinary price channel - which is in a general uptrend since the demolishing from $8 to $6. I would neither be quick to Buy nor quick to declare it dead. I'll gather my money and watch for it to refuse to decline further before buying. Gold seems to be near the bottom of in an ordinary uptrend channel. Nothing newsworthy unless you bought at $450.
Some great viewpoints here....Thank you for all of your inputs.....
Keets, as for the relationship between coins and metals......Many coin dealers also sell bullion, coins or bars. It seems to be a natural for them. As a result, these items are plentiful at shows. I attended major coin shows for many years in the 70's and 80's. There never was a doubt, when metals were strong, the coin show and coin prices were also strong. When weak, faces on the floor were long and prices suffered.
After all, coin prices are an attitude. A coin has a value because 2 people say that it does. When those 2 people (or 2 million) are upbeat, it reflects.....I think that this is the basis of the relationship.....
Paul
<< <i>i'm still perplexed as to why the rare coin market has any tie into the market price of gold/silver. maybe someone could explain that to me. >>
Its not the bullion content of coins that ties the two. It's the "investor mentality". When investors see interest rates as low and inflation as high then they see an opportunity to borrow at 2% and invest at 6% (example figures only), they then buy hard assets such as gold, silver, art, real estate and collectable coins. If they see rates are rising and inflation is softening then they see this margin eroding or even going negative and they start to sell. Greenspans comments today gave indication that he still intends to raise rates, which is most likely the cause of the slide. many institutions bought these metals with money borrowed in the first quarter of 2004 that will be 1% more in the first quarter of 2005, thats a HUGE increase when you play in the billion dollar range.
Now if you believe that this coin market is fueled 90% by collectors then there may not be much affect but if the coin owners (collectors or investors) start to see little appreciation and the interest on thier equity line starts to rise you can expect that some will be looking to sell.
Coin market cycles have tended to correlate well with interest rates, conversely.
<< <i>Many coin dealers also sell bullion, coins or bars. It seems to be a natural for them. As a result, these items are plentiful at shows. I attended major coin shows for many years in the 70's and 80's. There never was a doubt, when metals were strong, the coin show and coin prices were also strong. When weak, faces on the floor were long and prices suffered. >>
That was then. Have you been to shows recently? Dealers are selling coins and not bullion. many could care less about the bullion prices because they don't deal in it like they used to. Its not as closely related as it was in the 70's and 80's.
Cameron Kiefer
No, I haven't been to shows in quite some time. I had no idea that bullion was not as popular there.
Thanks.....
Paul
I like my silver cheap. It makes the common date silver coins easier to afford in bulk.
roadrunner
The 100 ounce silver bullion bars were all gone by the end of the first day and usually at between 20 and 40 cents over spot. There were plenty of 10 ounce and 1 ounce rounds throughout the weekend, but I don't generally buy them because of the high mark up. I did pick up 200 single ounce rounds at 15 cents over spot at Saturday's closing.
Gold bullion bars and coins were abundant and I was able to snatch quite a few ounces, some as low as spot and even a couple of Rands for below spot.
Anyone who thinks the precious metals market bull run is over is missing a strong bet. We are only now moving into the second phase of this current bull run. I'm not going to make any predictions on numbers but I will say that I don't believe we will see the end of this run for another 2 to 3 years.
I have taken a lot of grief on this forum for my position on silver. So much so from a couple of particular individuals that I pretty much stopped posting. That and the cat fights and pissing contests were finally enough to make me say enough.
For those who called me a liar among other things when I mortgaged my nearly paid off house and put the entire amount into silver bullion, well, guess what? You know who you are and you were wrong! I paid off the house entirely and I still have a large store of silver left over. That's in spite of a nasty IRS battle due to a vindictive ex-wife that cost me over 90K with legal fees. Had I not re-mortgaged my house and converted it into silver when I did, I'd be in a world of hurt right now. Instead, I just have to put off early retirement by a year or two.
To those people who don't want to get involved in silver or gold bullion, that's fine. It's your choice. I have never understood the need for some of those same people to blast those who do believe it can be a great investment.
One more thing, anybody who don't see any connection between bullion prices and the coin market obviously hasn't been pricing MS60 to 63 early common St. Gaudens over the last few months. Just 18 months ago they could be purchased for a small mark over melt, try that now.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>Anyone who thinks the precious metals market bull run is over is missing a strong bet. We are only now moving into the second phase of this current bull run. I'm not going to make any predictions on numbers but I will say that I don't believe we will see the end of this run for another 2 to 3 years. >>
It's good to see you posting now.
The metals react primarily to inflation and the threat of inflation. It is interesting to note
that with inflation near historic lows that gold and silver are making strong moves. It
would appear that momentum alone will account for some significant inflation and more
investors moving into hard assets. With so little interest there should be a great deal of
room for growth. When the investment asdvisors start recommending this then you'll know
it's nearly time to get out. It's going to be a while though.
The truth is anything but that. Commodity prices from beans to cocoa, from steel to concrete, from OJ to oil, tell a far, far different tale.
roadrunner