Gold & Platinum Bullion vs Classic Coins

HJP

HI,

I have a client who is a firm believer that gold, platinum & silver bullion are way undervalued at todays spot prices and will at least double in price in the next 2 -3 years. He also has a collection of PCGS & NGC classic coins, including MS65 Morgan dollars, Proof Seated 50C, better date / grade silver Commems, a few $20 Libs & Saints, $10 & $5 Indians and some misc type material. All his coins are mid-range (i.e. $1K - $2K / coin, current Greysheet bid value).

He asked me what effect a doubling of bullion prices will have on the value of his classic coins. His assertion is that bullion will out perform his mid-range classic material and is considering having me sell all but his very favorite classic material & putting those funds into bullion between now & the end of the year.

What is your opinion about the relative performance of mid-range coins vs bullion, if the price of bullion doubles over the next 2 - 3 years?

Thanks for your input!
HJP

RedTiger

As a direct answer no one knows. If all bullion doubles in price, classic coins in MS65 worth $1000 over melt will go up, but not as much percentage-wise. Selling such coins to a dealer and having that dealer convert that money into bullion usually involves a significant hit on the bid/ask and dealer profit. Unless that person has a ton of money in those coins, personally, I would say leave them be, and put any new money into bullion.

A person can look at the recent performance of the coins in question when silver doubled from $7 to $14, or when gold went from $400 to $700. The coins probably went up some, but probably did not double. Also factor in the significant costs to sell typical collector coins for an average collector.

People asking for advice involving serious money, are usually are in way over their head, and 8 times out of 10 will make poor timing decisions. The less thinking, the less timing, the less complicated, often works out better for the average person.

HJP

Thanks for your input.

LincolnCentMan

What is your opinion about the relative performance of mid-range coins vs bullion, if the price of bullion doubles over the next 2 - 3 years?

The coins will most likely be stable over the next few years. If your client believes that metals are going to go up significantly, that's where he should probably be. If he believes metals will go down, the coins are probably the better possition.

-David

HJP

It seems likely that bullion will offer a better return than mid-range classic coins during a strong bull market in metals. But, there is a high degree of volatility and one must have the willingness (and financial ability, i.e. no margin borrowing) to ride out the market. Another key issue is deciding when to get out.