Would it be a good time to trade bullion for rare coins?
bosco5041
Posts: 1,303 ✭
or would it be a good time to trade rare coins for bullion? I would like to hear some of your thoughts.
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I wish I had a LOT more bullion to buy rare coins with!
Bullion, on the other hand certainly can be an investment, it's liquid and trades generically with predictable spreads, of course, you can lose money either way. No one can predict what will happen to bullion prices, the dollar or stocks over the next few years (even though many delude themselves into thinking they know
but bullion doesn't demand you to be at the top of your game, if you're right about the direction. A much smaller percentage of the population actually makes money on truly collectible coins. But if it's about the hobby and enjoyment, investment may not apply. Do what makes you happy in the long run.
As far as timing the bullion market, a person will get a wide variety of opinions. Timing the coin market can be tricky as well, but those with a lot of expertise and access to coins, tend to consistently take money from those with less knowledge and less access.
1. Will gold go down?
2. Will coins go up?
3. Do I have the skills to pick out good investment coins?
Regarding question #3, that will vary by the individual. Only you can answer that. I assume the answer is "yes" since you assumed that doing this would be a good idea.
Regarding gold going up. Well...I did a study back when I was taking business courses where I plotted the value of gold vs. inflation. What it showed was a flat line. Over the long term, gold keeps up with inflation, and that is all. So from a long term perspective, it doesn't matter. If you sell your gold now, while gold is high, your dollars will have less purchasing power but you'll get more of them. Later, gold could be lower, but your dollars are stronger. Assuming that coins are priced the same way (a big and potentially bad assumption), it shouldn't matter.
Next, wil the coins go up? In general, I believe coins have traditionally beaten inflation. Not by much, as a group, but over the long term, they have outperformed. Will that continue? Wish I could say "yes", but the demographics do concern me a little bit. Not a lot of young folks at the coin shows and seems we lose a forum member here too often to stay happy. The markets response to this seems to be to get more picky over time. It reminds me of the Dr. Seuss story about Sneeches. The better Sneeches were the ones that had stars on their bellies. So guy shows up with a machine that allows the Sneeches without stars to have one put on their bellies. Soon all the Sneeches had them, so then some of them got two stars and that was the "in" thing to do. Sound familiar? Are slabs and beans really Sneech stars? To stay ahead in a shrinking market you have to adapt? I hope there is more to it than that, as I truly love coins.
So what do I personally think? At any point in history, it has generally been a good idea to sell Gold, which breaks even with inflation and trade it for coins, which outperform inflation. The exception might be a few moments in time where coins took off but Gold did not...which may have occurred when slabbing started and Wall Street wetted their feet. So I'm saying, "I think anytime would be a bad time to sell coins for gold and a good time to sell gold for coins". But when you consider how fast and how far gold has moved in a short time, and that coins didn't move too much, coins seem to be the relative bargain. If the idea is buy low, sell high, coins might be better. If I had gold left, other than "survival gold", I'd probably sell gold to buy coins. Even if coins are going to stagnate, it could be a while.
Steve
I look at it this way, you have to factor in transaction costs.
If you get the same value for the bullion, in the trade, as you would if you sold it, then you aren't out anything and that is fine.
If, however, you were to be allowed lesser value, then it isn't a good deal.
So, to me, any time I hear things like this, the first thing that comes to mind is "transaction cost" and once that is figured out, on both the buy/sell ends, then I think if it makes sense.
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Whoa! It all depends >>
Could you give me an example or two Tom?
<< <i>Awesome post. >>
Thanks. I wrote it, and then had to go back and majorly edit it, because the question he asked is: "Would you trade coins for gold?". I thought it read "Would you trade gold for coins?" because gold has moved so much relative to coins. Gold almost tripled in 5 years. Coins made a nice move, but not as much.
Some people track the ratio between the price of gold and the price of silver, and buy one and sell the other based on that ratio. I guess you could do that with coins too. It's really an elementary portfolio rebalancing. If you were going to do that, anyone looking at the last 5 years would automatically rebalance their portfolio by selling gold to buy coins. Even if you believed that it was smart to only precious metals, paying attention to the ratio of silver and gold to time buys and sells might benefit you....it would have helped lately when silver went sky high, and then dumped relative to gold.
Steve
coins, which outperform inflation
>>
The big problem with WestySteve's post is that point. While a select few coins have outperformed inflation, most "investor" coins have underperformed. Whether they be 1973 Ike's for $200 at their bubble peak, or rolls of 1950-D nickels or common as dirt proof sets, all were some of the hottest investment coins back in their day. When they were still going up in price, there were compelling and seemingly logical arguments about why those investment coins were sure to go much higher.
In hindsight, key dates and early type, have done extremely well. Those are the stats cited by those that push coins as investments (This even though silver bullion has outperformed many of those better coins after factoring in typical buy/sell spreads or auction fees.). The big but to past performance is that most coin investors weren't buying those better coins or even junk silver. Many ended up buying the garbage investments being hawked by coin dealers that catered to the investment crowd.
It is unfortunate, but as a group, coin investors tend to have below average grading skills, below average access to coins, and below average coin market knowledge. With that trifecta the financial carnage that follows can be a wonder to behold. 80% losses are common with those still holding those hot investment coins from yester-year. Adjusted for inflation and opportunity costs, the losses are more like 90% to 95%. Again, someone below average in all three key skill areas is going to have a difficult time even getting to break even in numismatic coins. Again, if someone is above average in all three areas, they will tend to do well financially.
Buying PMs is all about limiting premiums when making transactions. Getting the most bang for your buck every time you make a purchase quickly adds up to a larger stack.
When a collector buys a numismatic coin there is a significant transaction cost incurred. Right off the bat you are fighting to over come that deficit, and when the time comes to sell you are again facing a significant transaction cost. These fees are huge obstacles to overcome when considering bullion vs. numismatics.
I take some comfort in knowing I can post an ad on CL for my junk silver and by the end of the day have cash in hand to cover the expense of a new water heater or whatever. Lots of cold showers ahead if you are looking to get a fair return on almost all numismatics quickly.
If however, you like PC'S better and they fullfill more closely your collecting and overall enjoyment desires then now is probably as good as time as any relative to the long run.
This thread inspired me to write another blog entry. I'll repost it here. I hope you find some of it useful, even if you may disagree with some of the assumptions:
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Portfolio Rebalancing...when you collect more than one thing...or Gold...or whatever
I was just on a coin collecting forum, and a fellow forum member posed the question of whether it makes sense to sell some of their collectible coins to buy gold, or even vice versa. I gave my answer (my "two cents") and I realized that the method needed to be repeated here. So here goes:
Suppose you believed that it was a good "investment" to buy gold and silver. Truth be told, when you factor in inflation, gold makes a poor investment because it only goes up in price when the dollar is weak, and the dollar is only weak when inflation is present, so the net result is that it just breaks even with inflation over the long term. But there can be short term run-ups (or crashes) in price that can significantly outpace inflation or underperform it. (Side note: Check out Exchange Traded Funds which trade like stocks, such as ticker symbol "DGP").
Back to our example. If you wanted to hold gold and silver, a good way to do it might be to buy an equal dollar value of each. For example, imagine you were to buy $1,000 worth of gold and $1,000 worth of silver. Then you monitor the price of both. At some point, you might see that the value of gold and silver fluctuated where you had $1,200 worth of gold and only $800 worth of silver. If that happened, you could "rebalance" your portfolio. This means you would bring the dollar value of each back to the original one to one (1:1) or 50%/50% ratio. So what you'd do is sell $200 of your gold and use that money to buy $200 worth of silver. Then you'd have $1,000 worth of each again. Now why in the heck would you do that? Because when Gold went up and silver went down, you'd be selling the gold at a relative high and buying silver at a relative low. Remember...the idea is to buy low and sell high right? Would it help? In some cases, yes. But remember that when you buy and sell gold and silver, you will incur transaction fees, right? Because of that, you might not want to balance very often.
Another example. You don't have to maintain a 1:1 or "50/50" ratio. Suppose you decided you wanted a portfolio of 60% Gold and 40% Silver. You could buy $100 worth every month for 10 months. If gold and silver didn't move much, after 10 months, you'd have about $600 worth of gold and $400 worth of silver. Now suppose they started to shift in value. They might shift because Silver is not just a precious metal, but also an industrial metal with rising and falling demand. (yes, gold is an industrial metal too...but to a lesser degree). Anyway, Silver stagnates, but Gold rises. Soon, you have $900 worth of gold and $400 worth of Silver. At that point, you would go through the Math to figure out how much gold to sell. Since you have a combined $1300, you should have $780 worth of gold and the rest in silver. So you sell off $120 in gold and buy more silver.
What else can you balance? You could balance a portfolio of Gold and Cash in a 70% Gold/30% Cash ratio. If Gold climbs too high, you sell gold. If gold drops, you buy more with your cash to rebalance. Neat, huh?
Finally, let's discuss collectibles. It is possible to balance a portfolio of collectibles. Some ideas: You could balance your coin collection's value vs. a portfolio in gold. You could balance your coin collection's value against cash. You could balance your coin collection's value against your comicbook collection's value. You could even balance three things....like maintain the value of your coin collection, your comicbook collection, and gold in a 40%/40%/20% ratio.
One last thing to realize. This rebalancing is more effective when the items in it are fluctuating up and down...rather than certain types of collectibles that will only keep moving up in fits and starts. But this can also create a situation where you are selling winners to buy losers. Imagine if Bill Gates decided back in the early 1980's to balance a portfolio of MicroSoft Stock and Cash in a 50%/50% ratio? If he did that, he'd still be rich, but not nearly as much. Balancing a portfolio of anything can cut your gains because you're not fully invested in a winner, but it can also help set a bottom floor on losses because you don't hold through a peak. For example, if you were balancing a portfolio of Silver and Cash back when Silver hit $50 an ounce, you would have sold some of your silver near that peak. But on the other hand, you wouldn't have owned as much silver either because you were keeping money in cash. Portfolio balancing creates some tough decisions!
I dunno probably a stupid question..
When I buy a coin I have a hard time patring with it.
Many members on this forum that now it cannot fit in my signature. Please ask for entire list.
"Rare coin" is too generic...
He who knows he has enough is rich.
If you're trying to make money by investing in precious metals, I'll need to consult my crystal ball on what you should do.
Bob
Whoever is careless with the truth in small matters cannot be trusted with important matters.
Rec78 has already addressed this issue but I'm asking too.
Ron
``https://ebay.us/m/KxolR5
<< <i>So are we investors or collectors?
I dunno probably a stupid question..
When I buy a coin I have a hard time patring with it.
We're definitely collectors. I just put forward the information that I do because we all have to decide at some point whether we want to increase our spending on coins, decrease our spending, or (God Forbid) sell. Because of what Gold is selling for, I think now might be a good time to sell Gold and collect more coins.
If Gold goes back to $400 an ounce, then start collecting gold coins.
Steve
My reasoning is simple.....PM's will gain on rare coins in value.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
I agree whith what Steve and the others have said about diversification being very important.
And, if there's more at stake here than just investments, then by all means sell some bullion, not all at once if you have that luxury.
"dollar cost averaging" your sales will be less likely to sting you later if PM's soar again and you'll be less likely to suffer with big swings in PM prices.
And there's something to be said for having beautiful collector coins, the enjoyment has got to count for something!
Geez... There have been times during the latest financial meltdown when I've been tempted to DUMP a significant percentage of my stock/mutual fund portfolio and purchase nice rare coins with the proceeds! At least then, i'd have something 'REAL' and pretty to hold
and enjoy... Something beyond the very transient nature of paper and corporate earnings and IOU's. I didn't sell it all though, tempting as it was..... and IS.
Happy, humble, honored and proud recipient of the “You Suck” award 10/22/2014
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<< <i>So are we investors or collectors?
I dunno probably a stupid question..
When I buy a coin I have a hard time patring with it.
We're definitely collectors. I just put forward the information that I do because we all have to decide at some point whether we want to increase our spending on coins, decrease our spending, or (God Forbid) sell. Because of what Gold is selling for, I think now might be a good time to sell Gold and collect more coins.
If Gold goes back to $400 an ounce, then start collecting gold coins.
Steve >>
I really chuckle when a statement similar to if Gold goes back to $400 an ounce is made. I understand how Gold/Silver have risen and fallen over the last 40 years but I am sorry the times have changed and it's never falling back to those levels.
Successful card BST transactions with cbcnow, brogurt, gstarling, Bravesfan 007, and rajah 424.
Keep as much gold as you're comfortable with, spend the rest on "rare" coins.
Or combine them and buy rare gold.
Both are a gamble in my opinion, but anything that is looked at as an investment usually is. (if that's how you're viewing coins in general).
<< <i>How does the op rate in terms of grading skill, access to coins, coin market knowledge? If a person is above average in those areas, numismatic coins can be financially rewarding. If a person is average or below average in those areas, break even, or a loss is the expected result. The joys of the numismatic hobby aside, a person below average in those three skill areas, will tend to do better financially sticking to straight bullion and limiting exposure to numismatic coins.
As far as timing the bullion market, a person will get a wide variety of opinions. Timing the coin market can be tricky as well, but those with a lot of expertise and access to coins, tend to consistently take money from those with less knowledge and less access. >>
The above pretty much sums up what you need to know about this topic. Most people on this forum do not have the access to coins to make this work for them. Ie., my grading skill in what I collect is good, and what I don't know about the coin market I can find out from a dealer friend I trust who knows this sort of thing. But I don't have first shot to new coins coming on the market.
Then factor in the transaction costs of buying / selling numismatic coins. Very few collectors can make money given these odds.
"Seu cabra da peste,
"Sou Mangueira......."
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<< <i>
<< <i>So are we investors or collectors?
I dunno probably a stupid question..
When I buy a coin I have a hard time patring with it.
We're definitely collectors. I just put forward the information that I do because we all have to decide at some point whether we want to increase our spending on coins, decrease our spending, or (God Forbid) sell. Because of what Gold is selling for, I think now might be a good time to sell Gold and collect more coins.
If Gold goes back to $400 an ounce, then start collecting gold coins.
Steve >>
I really chuckle when a statement similar to if Gold goes back to $400 an ounce is made. I understand how Gold/Silver have risen and fallen over the last 40 years but I am sorry the times have changed and it's never falling back to those levels. >>
This time it's different, eh?
I really chuckle when people use words like "never" when trying to predict the future.
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<< <i>
<< <i>
<< <i>So are we investors or collectors?
I dunno probably a stupid question..
When I buy a coin I have a hard time patring with it.
We're definitely collectors. I just put forward the information that I do because we all have to decide at some point whether we want to increase our spending on coins, decrease our spending, or (God Forbid) sell. Because of what Gold is selling for, I think now might be a good time to sell Gold and collect more coins.
If Gold goes back to $400 an ounce, then start collecting gold coins.
Steve >>
I really chuckle when a statement similar to if Gold goes back to $400 an ounce is made. I understand how Gold/Silver have risen and fallen over the last 40 years but I am sorry the times have changed and it's never falling back to those levels. >>
This time it's different, eh?
I really chuckle when people use words like "never" when trying to predict the future. >>
We can bet on it and see who is chuckling last.
Successful card BST transactions with cbcnow, brogurt, gstarling, Bravesfan 007, and rajah 424.
<< <i>
<< <i>
<< <i>
<< <i>
<< <i>So are we investors or collectors?
I dunno probably a stupid question..
When I buy a coin I have a hard time patring with it.
We're definitely collectors. I just put forward the information that I do because we all have to decide at some point whether we want to increase our spending on coins, decrease our spending, or (God Forbid) sell. Because of what Gold is selling for, I think now might be a good time to sell Gold and collect more coins.
If Gold goes back to $400 an ounce, then start collecting gold coins.
Steve >>
I really chuckle when a statement similar to if Gold goes back to $400 an ounce is made. I understand how Gold/Silver have risen and fallen over the last 40 years but I am sorry the times have changed and it's never falling back to those levels. >>
This time it's different, eh?
I really chuckle when people use words like "never" when trying to predict the future. >>
We can bet on it and see who is chuckling last. >>
Take a look at this:
See how it was pretty much in the $400 range for years on end. Then took off in the last 5 or 6 years? You don't think there is any possibility that this is a bubble. That fiscal restraint and debt paydown can't bring the price back to it's pre 2005 trend line?
Did I miss something when I wasn't looking? Where's this fiscal restraint and debt paydown of which you speak?
It's not about gold. It's about the dollar.
I knew it would happen.
<< <i>That fiscal restraint and debt paydown can't bring the price back to it's pre 2005 trend line?
Did I miss something when I wasn't looking? Where's this fiscal restraint and debt paydown of which you speak?
It's not about gold. It's about the dollar. >>
Agreed on all accounts. The idea of fiscal restraint at this point in time is humorous. But I can see it happening in our future. Like if we had a business friendly environment that lead to more hiring that lead to more taxes being paid, etc.
Interestingly, when you go on Kitco.com, they will outline the portion of the rise in gold that is attributed to a weakened dollar and the component that is not. I saw a lot of the "not" for days and days on end. Bubblicious.
Wanna see something else? This Exchange Traded Fund (ETF) which tracks gold is below it's 200 day moving average for the first time in almost 3 years. Note how it is always above the moving average when it is on an upswing. Its pattern is broken. Might not mean much, but it's interesting.
trend
I may soon be pulling a David Hall and buying a house on the coast.......in which case a bunch of coins may be sold overtime....
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I'm really not a pessimist. I try to listen to the "Don't worry, be happy" song very day. I'm just thinking that some 90% junk silver looks good as a portion of assets. Trying to sell an 1895 proof dollar or other expensive numismatic item when things are really bad doesn't appeal to me. I too am a collector and have my $2-5k coins that i hope to sneak into heaven somehow. I don't care about some things since they are a passion not an investment. However, i still say that in today's environment i will not be selling my bullion to buy numismatics, stocks, bonds, or any other paper asset. I am looking for a small piece of farm land. Things never go up forever nor do they go down forever. I just think that it might get a little worse before it gets better. The sun will rise tomorrow....and the next day.
Empty Nest Collection
<< <i>That fiscal restraint and debt paydown can't bring the price back to it's pre 2005 trend line?
Did I miss something when I wasn't looking? Where's this fiscal restraint and debt paydown of which you speak?
It's not about gold. It's about the dollar. >>
I agree.
I have to laugh when these people think about "$400 gold", they're thinking "stable dollar, unstable gold". I hate to tell you, but it's the other way around.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>That fiscal restraint and debt paydown can't bring the price back to it's pre 2005 trend line? >>
Ha ha ha, thanks for the belly laugh
Most of us here are using the US dollar as a benchmark to value gold. It isnt that simple.
Spend some time watching Au in terms of Euros/USD/JPYand you see that Au has an intrinsic value that wants to break free from the restraints of governments, but is still handcuffed to the ignorance of 99% of the world's governed people.
Having said that, I still love Dahlonega gold
There are a lot of interesting parallels with the recent past increased popularity of the Gold ETF funds (and how 'easy' it makes it for the public to 'own gold' vs the price of gold) when compared to the (at the time) New Easy Public Ownership of Stock craze of the late 1920s and the New Easy Online Public Daytrading of Stocks in the late 1990s.
Aaaaaaaaaaaaaaaaaaaaaand we all know how those ended when the music stopped. At the time, though, it sure seemed like "this time it's different"
and then there's 1979
Don't get me wrong, I love gold and have an amount of it. But I wouldn't be surprised to see it go back down to under $1000 an ounce within a few years from now.
It can take a generation for an asset class bubble to dissipate and a new one to form.
Liberty: Parent of Science & Industry