When will rare coins outperform gold(bullion,saints, buffalos)?
TahoeDale
Posts: 1,785 ✭✭✭
It appears that today, with the gold boom at a serious high, the easiest way to put a portion of your discretionary money in hard assets is gold-- physical and gold stocks.
It doesn't take the years of experience and knowledge that the rare coin market requires. So thousands of regular citizens are ready to get on the wagon, creating a massive demand for all types of gold products.
This major interest will make even more demands on the suppliers, and gold shoud continue to rise higher, over the near term. But it will settle down eventually.
In the meantime, what can we anticipate will be the interest or not in rare coins? We have seen a 20% decline in many denominations, in all grades, some substantially more. And this includes rare hard to find examples, much less the widgets that have always trailed the better dates and condition rarity coins.
What will re-create the demand necessary for rare coins to outperform, over the long term, bullion products? Or should we all just turn in our rarities, and join the crowd?
Not me. The eye-appealing quality coins in most denominations are the best investment we can make. The only problem is the limited number of these gems available at any one time. ( versus the immediate availability of bullion products).
Actually, there is another obstacle. A MS 62 Saint or a PR Buffalo can be bought for less than $2000. There is a big premium over melt, but the price is right for the masses.
How many of the general public will pay $40,000 for a 1795 Flowing hair ED dollar in AU 58, or the most recent price for an 1801 draped bust half in MS 63? Few, or none. 99% of the general public buying gold have no understanding of the early denominations, grades, or rarity.
So, there will always be a smaller population of rare coin buyers. And for the experienced collector, with a long term hold, the rewards will certainly be greater. The generic gold rush will end, but the increase over time for rare coins will continue.
Just the opinion of a serious collector.
It doesn't take the years of experience and knowledge that the rare coin market requires. So thousands of regular citizens are ready to get on the wagon, creating a massive demand for all types of gold products.
This major interest will make even more demands on the suppliers, and gold shoud continue to rise higher, over the near term. But it will settle down eventually.
In the meantime, what can we anticipate will be the interest or not in rare coins? We have seen a 20% decline in many denominations, in all grades, some substantially more. And this includes rare hard to find examples, much less the widgets that have always trailed the better dates and condition rarity coins.
What will re-create the demand necessary for rare coins to outperform, over the long term, bullion products? Or should we all just turn in our rarities, and join the crowd?
Not me. The eye-appealing quality coins in most denominations are the best investment we can make. The only problem is the limited number of these gems available at any one time. ( versus the immediate availability of bullion products).
Actually, there is another obstacle. A MS 62 Saint or a PR Buffalo can be bought for less than $2000. There is a big premium over melt, but the price is right for the masses.
How many of the general public will pay $40,000 for a 1795 Flowing hair ED dollar in AU 58, or the most recent price for an 1801 draped bust half in MS 63? Few, or none. 99% of the general public buying gold have no understanding of the early denominations, grades, or rarity.
So, there will always be a smaller population of rare coin buyers. And for the experienced collector, with a long term hold, the rewards will certainly be greater. The generic gold rush will end, but the increase over time for rare coins will continue.
Just the opinion of a serious collector.
TahoeDale
0
Comments
Markets rarely go up every year, they need breathing time. Bullion will take a breather also.
Key ingredient is TIME.
Knowledge is the enemy of fear
Yes if the world becomes ho hum boring. --Jerry
That thought continually crosses my mind. So much so that in turns out that I have equal amounts dollar-wise in bullion and in collectable coins. That wasn't the plan as I've spent a lot more money on collectable coins then physical bullion! However, the recent run up in pm's has
altered my portfilio so to speak without my consent
I suppose I may take some profits in physical gold and use it to buy some more rare coins one day. However, today is not that day imo without going into the whole weak dollar scenario. There is room for both collectables and hard assets and everydog has their day.
As far as truly rare coins go, you play in a different league then most and may have a skewed opinion
One of your biggest fans, MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
As always, you bring up some interesting points.
I see the similar market value of an XF Type I $20 Lib, MS-62 Saint, and newly gold buffalo and think that the Type I $20 Lib is the best choice for me, of the three. On the other hand, I think that the coin buying public has a taste for new, shiny gold that can be purchased directly from the Mint. I have spoken to numerous fellow physicians that could not care less about a 1795 dollar or a seated half or whatever type coin, but have been buying modern gold from the Mint for several years and are happy to keep doing so.
As we use less and less physical change (pennies, nieckels, etc.) for personal transactions, I am concerned that in the future, there will be less and less interest in collecting it. While I still buy type coins and better date gold coins, I am spending a lot more money on old and new gold, where the ratio of price to spot is 4:1 or less. However, if I were collecting only for investment return, I would dump all of my early and type coins at the next opportunity. I think that the long term price appreciation for these items is cloudy at best, mostly because I do not see where the next generation of collectors is going to come in and take me out at a higher price.
That said, I still really enjoy my early type coins, Dahlonega and Charlotte gold coins, patterns, etc very much. I am just not betting my financial future on them.
I respectfully disagree in a very big way. You make the easy mistake of assuming that Moderns require no expertise. You should have been reading ericj's thread for the past 5 years and you would be in a position to have benefited from that expertise.
I knew it would happen.
Sorry if my post included, for your interpretation, Moderns, of the collectible variety. I recognize the degree of sophistication many collectors have achieved with this area.
My post meant to compare bullion related gold only.
RYK,
Good point on who will buy the rarer coins in the future--will there be serious collectors willing to pay big bucks for rare coins? I do not know what the future holds, but the lack of circulating coinage doesn't concern me. There are no more Juke boxes, and other old time artifacts being used by the public, but the collecting world still loves these amazing historical machines and appliances.
The present day number of coin collectors, in all grade and price levels, is a giant multiple of the numbers 20 years ago. I see no reason why this will decrease.
<< <i>JM,
Sorry if my post included, for your interpretation, Moderns, of the collectible variety. I recognize the degree of sophistication many collectors have achieved with this area.
My post meant to compare bullion related gold only.
RYK,
Good point on who will buy the rarer coins in the future--will there be serious collectors willing to pay big bucks for rare coins? I do not know what the future holds, but the lack of circulating coinage doesn't concern me. There are no more Juke boxes, and other old time artifacts being used by the public, but the collecting world still loves these amazing historical machines and appliances.
The present day number of coin collectors, in all grade and price levels, is a giant multiple of the numbers 20 years ago. I see no reason why this will decrease. >>
Dale, I fear that you are getting to get a sharp response from Jerry, because he is talking about bullion coins (at least I think so).
The jukebox market is vibrant because collectors can remember using them in the past. Heck, I'm 44 and even remember using them. Twenty five years from now, 50 years from now, will there still be interest? I do not know, but again, I would not "invest" in them, as a result. If I enjoyed having one, I might buy one, however. On second thought, my Ipod holds orders of magnitude more music and does other things. I'll pass on the jukebox.
Bullion can mean gold bars, foreign gold, lower grade classic gold, Gold Buffs, Modern Gold Commems and American Gold Eagles.
I don't know about MS-60 to MS-64 classic gold - that's a specialty unto itself (roadrunner can address that question since it is one of his many strengths), but I can state that from a financial standpoint, there have been several two-baggers, several home runs and even a few "grand slams" with the Gold Buffs, the American Gold Eagles and the Platinum American Eagles in just the past 3 years. It has truly been phenomenal beyond my expectations, to be honest.
So, to answer the first segment of your question, I would have to know when rare coins will start performing again (I assume that they are not on fire at the moment). I think that Cohodk has a pretty good take on that, "When there is widespread and sustainable economic prosperity."
Take your pick on when that will occur.
Cohodk also has a pretty good take on gold bullion in general, "Markets rarely go up every year, they need breathing time. Bullion will take a breather also."
Here is the $64,000 Question: When will that breather occur? Cohodk believes it will be sooner, I believe that it will be later.
My belief is that the gold rush isn't over, although there will be a few lulls. God forbid that the currency doesn't crash completely. If gold continues strong as I anticipate, then the Modern Gold Bullion coins (AGEs, APEs, Gold Buffs, Modern Gold Commems) will benefit in multiple ways:
1) They already have a collector base
2) They benefit from the rise in spot gold
3) The economic crisis isn't over, and gold will continue to draw an increasingly bigger crowd as long as dollars are being printed in order to service the ballooning national debt.
4) New gold buyers are entering the market for all forms of gold, including Modern Gold Bullion coins. Some of these first time buyers will become familiar with the relationship between lower mintages and the collector premiums that inevitably are assigned to lower mintage issues. This will increase the demand for the scarcer issues and the premiums for them will remain healthy, even as the spot price increases.
If you consider Cohodk's remarks about the economy & gold market, and combine them with my assessment for the Modern Bullion coins - that is my answer to your question - not until the economy recovers, discretionary spending rebuilds itself, and the flight from the dollar stops. I expect that to be awhile, and I expect considerable bouts of volatility in the meantime. Regards, jmski
I knew it would happen.
1) Collectors know where Moderns come from, especially from the Mint. I, personally, feel like I'd have to study for years to gain enough expertise to collect Classics and know that I wouldn't be getting ripped off by inferior quality, tampering, or counterfeits.
2) Shiny new coins look great.
3) People like to combine collecting and investing, and Moderns are a much more understandable way to do that for most people.
Personally, I hope that Classics prices fall so that I can eventually get into them. For now, I'm sticking with Moderns, though.
I beleive that gold coins from any date will perform well with the bullion market and grow at a slightly larger % rate than bullion prices. Stocking up on mid grade Saints or Libs seems like a better idea to me than stocking up on inflated buffalo gold.
Personally I'm stocking up on Classic Head quarter and half eagles.
Although noone can no for sure and maybe the bullion market will tumble in 5 years for whatever reason and rare coins will sky rocket.
Who is John Galt?
WHO THE HECK CAN AFFORD TO BUY GOLD BULLION RIGHT NOW ANYWAY? Are some of you emptying your bank accounts or cashing in your tried and true collectibles? If you have a collection of hard to find coins with an approximate value of $5,000 to $10,000, would you trade them in for a VERY SMALL handful of gold slugs? I would not.
Of course you'll get those who quote articles, study the economic indicators and reflect on historical trends, but when I sit back and study the situation, I am afraid to buy gold at the current levels.
Check out some of my 1794 Large Cents on www.coingallery.org
<< <i>yes, I was just talking about bullion vs almost any high discretionary item that must be paid for in $US. I didn't mean to be sharp. --jerry >>
I was referring to other Jerry (jmski52).
<< <i>TahoeDale, I believe that rare coins will start to outperform gold when we get a true fiscal conservative in the White House. That may be a very long wait as it appears that most people in this country are going through life with their heads up their a$$e$. TomT. >>
Yes. 2010 elections will speak loudly. Status quo and I think gold will keep going.
Who is John Galt?
<< <i>
<< <i>yes, I was just talking about bullion vs almost any high discretionary item that must be paid for in $US. I didn't mean to be sharp. --jerry >>
I was referring to other Jerry (jmski52).
Oops. I'm easily confused sometimes. --Jerry
I knew who ya meant!
The price of gold might seem high to some, and it is at record highs in nominal terms. From my own point of view, it's not the nominal price that matters.
It's not even the price in terms of "1980 dollars" that matters. I simply think that the relative value of gold in relation to the dollar, and the stock market, and other assets in general - is what matters.
If we are in a deflationary mode (which some will say that we are), then gold is performing very well by bucking the trend that would normally cause gold to fall. This could be attributed to the large amount of liquidity in the system. But wait, they keep saying that credit is tight because the banks are sitting on the TARP money that was supposed to be used for lending. This seems to be telling me that gold is reacting to something else - something besides ample liquidity in the system (which there is none of).
The stock market rally *might* have been stimulated by the stimulus package, who knows? There is so much bogus money out there that the traditional methods of measuring money, and liquidity, and credit, and debt, and leverage, and stock valuations - are all out the window. Nobody has a handle on it, and if they do they sure aren't telling us.
If gold is reacting to anything, it is the loss of confidence in the system. Most people who aren't getting a free ride courtesy of the government already know this.
So what if the markets decline? My thought is that if the stock and bond markets take a tumble, so will the precious metals. That's what happened last year when liquidity became important and people sold everything to raise cash. I would expect the same exact reaction to another market decline.
The key question at that point is: what's safer, a paper asset or a precious metal?
Well - if both have declined and your portfolio is hurting, which is it?
I knew it would happen.
I knew that you knew, but I did not think that Jerry knew.
All I know is that I do not know what's going to happen, so I plan to be diversified in all sorts of assets. Over time, selling the winners and using the profits to boost holdings in what is out of favor seems to work. Only the hedge fund managers know the financial future (or at least they can make an extraordinary amount of money convincing wealthy people and institutions that they do)
Remember the 1980-2001 gold price. A loss of more than 50% over a 21 year period. Or should we forget that? Nah, it can't happen again, gold is magical.
There will be plenty of opportunities to buy gold under $1000, or much less.
Many good points by all in this thread.Let me put my two cents in.I cannot even concieve the thought of me being able to buy a 40k coin.But a buffalo proof at 1360.00 I was able to handle.In fact this is the most expensive coin I have bought.I may lose money I may gain money but it is the gem of my collection for now.So before anyone smirks at modern collectors please remember that not everyone can play on that field.
Moreover an issue that is bothering me lately is this......if I am able to buy a key or semi key in a series which I am motivated to do.....say a 1917 type one SLQ FH PCGS ms 65 for the going price I understand that if I try to sell it to a dealer I will be offered about half of what I paid for it.I may never get close to what I paid for it but for the love of the series I will buy it anyway.So unless you are in the big leagues collector wise you will almost never break even.For many of us the bullion game is the way to go.JMHO
<< <i>Many good points by all in this thread.Let me put my two cents in.I cannot even concieve the thought of me being able to buy a 40k coin.But a buffalo proof at 1360.00 I was able to handle.In fact this is the most expensive coin I have bought.I may lose money I may gain money but it is the gem of my collection for now.So before anyone smirks at modern collectors please remember that not everyone can play on that field.
Moreover an issue that is bothering me lately is this......if I am able to buy a key or semi key in a series which I am motivated to do.....say a 1917 type one SLQ FH PCGS ms 65 for the going price I understand that if I try to sell it to a dealer I will be offered about half of what I paid for it.I may never get close to what I paid for it but for the love of the series I will buy it anyway.So unless you are in the big leagues collector wise you will almost never break even.For many of us the bullion game is the way to go.JMHO >>
I think that you sort of hit the hammer on the head. Bullion is boring. There, I said it. If you have seen one gold buffalo, you pretty much have seen them all. Same for AGEs and ASEs (APEs give you a little variety from year to year but not within the issue). If you are interested in collecting coins for historical interest, old world charm, etc., bullion is not going to give you the warm fuzzies. What's more interesting, a Chain cent
On the other hand, it is reasonable to have some in your collection, if you are inclined or have significant concerns about the economy and believe that precious metals might provide some protection. Some folks are really concerned about those things and load up the truck in precious metals, and if it works for them, that's great, too.
Don't be too sure that you're invincible. When you describe gold buying as paranoia, it is an odd way of being in denial that the dollar is in free fall for any number of reasons.
Remember the 1980-2001 gold price. A loss of more than 50% over a 21 year period. Or should we forget that? Nah, it can't happen again, gold is magical.
Did you buy gold at $850 in 1980 and hold until 2001? If so, you are the only one.
RYK, did you know that I found die markers on some of my 2006-W 1/4 oz AGEs? I know, not really that interesting..........And.........the Modern Bullion is so much better-made than a Chain Cent............
(but I'd rather have a Chain Cent!)
I knew it would happen.
Gold has a world price entirely unaffected by accounting games between the Treasury and the Fed. - Jim Rickards
One probably sells for at least 40 times or maybe 2000 times melt, while the other is 1.2 times melt.
People seem to be saying the lower downside is the better bet for now, until the $40,000 coin goes much lower.
If I had to guess when the rare coin prices stabilize maybe it could start when unemployment stops rising, and that may not be for many more months.
The miners "all in" cost for gold is not $300-$450/oz. That's a typical number given for the operational cost to actually mine the gold. It does not include a whole basket of risks that occur outside the narrow operations window (political, environmental, currency fluctuations and hedges, derivatives risks, funding explorations via share dilutions are just but a few). Having a foreign nation take over your mine, stage a strike, pull your permit, etc. will drive that $450/oz up very quickly. As easy as it looks to profit at gold at $1000+ a number of leading miners failed to do so in the past quarter. Big boys like Agnico Eagle, Kinross, Barrick, had terrible quarterly reports and lost big. And in the 2nd quarter a top company like Yamana lost $ millions due to derivatives and currency losses even though production numbers were excellent. Only a couple of the top miners had glowing 3rd Qtr earnings reports while most were muddled or poor. When one factors the all-in price of mining that ounce of gold you will find the real cost to be more in the range of $600-$900+ per oz. depending on the operation. The miners are still not having an easy time of making money. And this in the face of ever decreasing existing mine lives. Mining cost have tripled over the past decade while actually processing less total gold. It's getting much harder to find the same amount of gold as they dig deeper, make riskier acquistions to stay at the top of the list and mine in places that only Billy Goats would traverse.
It's interesting to hear some say that the premiums for 64-65 saints are too high. Yet at 2-2.5X melt value they sell for a third of the premium of a BU 1958 wheatie. What does a 1928 BU merc, buff, SLQ, Lincoln, or other major 1920's coin sell for vs. intrinsic value? One could say that the $10-$100 we spend for a 1928 BU non-gold coin is extremely high. Even the 64-65 Morgans sell for higher premiums of 3X to 8.5X melt. I've never heard anyone say that buying circ wheat cents was expensive or risky yet they carry a higher premium than circ $20's.
roadrunner
You are right on--My opinion is skewed, and has been for some time. As I said, all the attention today is on gold, and thousands are attracted to buying bullion related assets.
And many will do fine.
But, since I have enjoyed immense profits from buying and holding rarities, and love the history and hunt that accompanies the venture, I will remain in the minority, and happily so.
If I misled any in thinking I believe that rare coins will outperform gold, for the near term, I apologize. As the title of the thread indicates, my question was when the rarities will do better than bullion.
Sometimes, this return takes a short time and sometimes it takes a
much longer period of time. As an example the S&P 500 is at an all time
high as related to earnings. The same thing relates to coins. Series may lag
Gold may surge , but in the final analysis, all returns to the mean.
Camelot
<< <i>MJ,
You are right on--My opinion is skewed, and has been for some time. As I said, all the attention today is on gold, and thousands are attracted to buying bullion related assets.
And many will do fine.
But, since I have enjoyed immense profits from buying and holding rarities, and love the history and hunt that accompanies the venture, I will remain in the minority, and happily so.
If I misled any in thinking I believe that rare coins will outperform gold, for the near term, I apologize. As the title of the thread indicates, my question was when the rarities will do better than bullion. >>
Dale
You were crystal clear. You my "Friend" are a gentleman and I always look forward to what you have to say. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>With mining costs at $450 an ounce, only a sucker would buy gold at $1140. The higher gold goes, the more paranoid the gold bugs get. Buy now, before the sky falls!
Remember the 1980-2001 gold price. A loss of more than 50% over a 21 year period. Or should we forget that? Nah, it can't happen again, gold is magical.
There will be plenty of opportunities to buy gold under $1000, or much less. >>
All gold bashers pick that magic 21 year period of the highest high and the lowest low.Too funny. I could do that with stocks, oil or coffee. What if you bought in 2001 and held til today? Numbers will dance to the tune of the one holding the pen.
Don't kid yourself. They are plenty of smart people buying gold at these prices. I don't consider John Paulson argueably the worlds greatest trader a sucker, or China nor India.
This was posted on the pm forum by an esteemed forum member:
Have a customer who has been buying two or three common $20's every other week for a few months now. Says he is worried about where the dollar is going.
Came in today with a two page list from our inventory that totaled about $90,000. I asked did you want to pick a few from that list? He said he would take them all! Mostly $20's and $10's, plus a bunch of $5's and a few $2-1/2's.
Had already sold two coins off the list earlier in the day, but he wrote a check for the rest and will pick them up after the check clears.
Wowser!
and from the same member
Well, Bob has a big head since he sold some other guy $4,000,000 worth of bullion yesterday, and it is the second time the guy has bought that much.
The funny thing is, this time the guy got roughly 3,360 ounces for his $4 mill, while last Spring he got approx. 4,360 ounces for the same amount of money!!!!!
LOL!
So, these guys and countries were smart enough to have the money to buy gold at these prices so just maybe they feel they know something.
A lot of the gold bashers I personally know are Ivy League educated and quite frankly are elitests and remind me of CNBC anchors and reporters. They have never owned an ounce of gold and will bash it at all costs. My son is one of them.
Gold will have it's set backs but it will trade much higher in the foreseeable future in my opinion. I wouldn't get too cute trying to time it.
JMHO. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>When there is widespread and sustainable economic prosperity.
Markets rarely go up every year, they need breathing time. Bullion will take a breather also.
Key ingredient is TIME. >>
Amen
Ahh yes. But do we also remember the magical 25 year period from 1929 to 1954 when the Dow finally regained its 1929 high. That did not account for the loss to inflation however. Or how about the 1966 to 1982 period when stocks were cyclically flat but lost 70% of their value when compared to gold. Over this past decade stocks have lost 83% of their value when compared to gold. Real Estate has lost over 70%. Before judging that 21 year down period for commodities one needs to understands all the machinations at work to help ensure that a 25 year credit rally in stocks and bonds occured while commodities in general stayed down. No one seems to mention that oil fell harder than gold during those "lost" 21 years...though came back 12X in just a decade. Oil, the lifeblood of our industrialized society is probably magical until a replacement can be found.
The real question you should be asking is what follows a 20-25 year down period in commodities? Commodities were probably the cheapest they had ever been when priced in real terms. Gold's not magical, it's just a mirror of confidence in the currency/govt. Bullion took a 21 month breather after a 7 year run into it's March 2008 high. It may be a while before another such breather is needed.
roadrunner
As far as those gold miners having the Life of Riley finding cheap gold at $450/oz: New Gold just had their Mexican mining operation shutdown by the Mexican govt. and pro-environmentalists. They re-evaluated their 2006 economic impact statement and said that today they do have a big impact on the surrounding populous. So the permit was pulled and the mine ceases digging until something changes, such as paying some ransom money to someone. Expect stuff like this to happen with more frequency in the future as each nation probably wants to keep as much of their natural resources at home even if it means just keeping it in the ground. Overtime it will all revert back to the govt. Mining PM's, it's not what it used to be. In New Gold's case Mexico was one of their 3 major mining locations. Their stock fell 20% today on the final ruling.
roadrunner