Bullion Advice

HearingDr

Hey everyone --

I have been generally a lurker for the past 6 years and occassional poster and have done some transactions on BST. Anyway, the point of my post. I generally like to stack AU/AG that will have some downside protection. For example, a few years back I loaded up when bing had the rebates (8/20/30%). -- I was a seller of silver and the 40's and only recently have started to nibble on the buy end again. Point being I usually try to get desirable stuff as close to melt as possible (as im sure everyone here does) .

I recently started to consider the 4 coin gold proof issue from US Mint. It is a pretty hefty premium for my taste, but long term what is the consensus about that product and how its premium holds up. Not necessarily talking about selling to a dealer, but collector to collector. I dont mind paying for quality if you know what i mean. Also, if anyone can clarify, when issues have lower mintages, what are we generally talking, if there is a cap at 20,000 sets. Thanks for your input.

Eric

derryb

hefty premium on the AGE proofs but could possibly be new lows on proof sales. I think they'll sell them all given the dry spell on mint gold issues and currently lower spot. These proofs are best used as money generators to put back into stackable (cheaper) bullion. Question you have to ask yourself is will they generate. I think so, not much down side.

You gotta go with your gut not someone else's. This way you can blame (or thank) no one but yourself.

OPA

From my experience, unless you have a PCGS 70 coin, they will go for a few % above spot. Of course there are exceptions, but you will also be paying a premium when purchased. If you believe, that the price of gold will go up, then my suggestion would be to purchase the bullion version.

derryb

<< <i>Without box and papers IRA value is negated, so they will trade a little over the eagle premium. >>


an IRA account holder cannot submit bullion directly into the account. It has to come from a third party seller and go directly to the account custodian. The third party has to be one that is willing to participate in submitting the purchase to the custodian on behalf of the account holder. These "participating" third party dealers will of course exert demand on the proofs as they get ready to act on behalf of IRA account holders.

derryb

the possible black swan with any mint gold or silver issues for the rest of the year is them declaring any early end to sales if a planchett or metal shortage hits them. It's happened before and it provided a great reward to early buyers.

HearingDr

and will the price of gold go up is the million dollar question! haha

I may have a little different mindset than a lot of the posters on the boards, though I certainly welcome the varied insights. I like AG/AU as part of a diversified portfolio, and I do 'collect coins' -- have since childhood (my dad started me on that). So there is something to be said for having an 'investment or insurance' however you like to view it that you can hold in your hands etc. The coin collector in me likes saints but the practical side of my thinks I dont mind a larger premium if there is potential for greater reward, a reasonable potential that is. Thanks for the input so far.

E

jmski52

The way I look at the "collector bullion" category is that there exists a continuum of price vs. scarcity premium. Let me explain.

A popular, low-mintage collector bullion coin will gain a nice premium, sometimes very soon after the mintage is deemed to be "low" for the series. In order to play this game, you have to pay an obscene up-front premium to the Mint when you buy it. That's the risk - because if the coin isn't low mintage, you will see that premium evaporate. If the gold market goes down, you might lose in two ways - if the price goes down and if the premium evaporates as well.

The flip side of that situation is when you buy a collector bullion coin for the Mint's high price, and then it becomes acknowledged as the key or "a rarity" because of the low mintage. If it's part of a popular series and you happen to catch the key during a downturn in the economy or a downturn in the gold market when nobody is really buying - then you will be happy that you bought. If the gold market starts picking up steam, it will also help quite a bit. In that situation, you could win in two ways.

Sometimes, a loss in the premium will offset a move in the metals markets, or vice versa so you can be wrong in one direction and not get hurt too much (as long as you're right in the other direction. In that case, you are successfully hedged.)

Keep in mind that even the scarce or key "collector bullion" coins fluctuate over time. They make impressive run-ups once they are seen as keys, and then the prices tend to taper off and slowly decline for a time. Later on, the prices start climbing back up as the series continues and the relative rarity and pricing become more well-established. If the coin happens to be "the key" or "the king", it just never backs off much - which is a good thing if you happened to buy it.

It's a very fun game if you pay close enough attention to ferret out the winners.

On the other hand, there's alot to be said for straight bullion as well. Regular gold & silver bullion coins & bars have fewer variables than collector bullion and don't depend on playing with numismatic scarcity premiums - but global supply & demand still does play a significant role in the profitability of regular bullion. Fewer variables simply means less work and less volatility. Sometimes, low maintenance is a good thing.

I like a 50:50 split between regular bullion and collector bullion, because I pay pretty close attention to collector bullion mintages, and I've been able to do fairly well in that area. At the same time, my regular bullion continues to do its own thing.

Your preference for "buying as close to spot" is how most of us start. At some point, you start to consider other factors such as liquidity, and authenticity, and marketability. These other variables are important, but their importance tends to change over time as well, depending on what else is going on in the broader market at the moment. When people start finding tungsten bars, the premium on authentication becomes more important. When the market becomes hot, premiums don't matter as much to buyers or sellers so the premiums are accepted in the normal course of business. When the market is cold and people are trying to liquidate, the premiums go away.

In your case, you are considering a high premium set, in a hot market - a set which might become a scarcity if various conditions are met. You are willing to risk the premium for a shot at a higher return. There aren't any guarantees. That's exactly what the market is all about. My feeling is that the gold market is going to be healthy for a few years or more. That supports the premium. The potential for scarcity is unknown at this time. I share your pain. Good luck!

HearingDr

thanks for the info Jmski. I see what you are saying, and that is the debate that I am having with myself! I actually tend to buy authenticated stuff. I think I have a decent eye, but I am not going to gamble that my eye is that much better than a scammers ...

I generally buy Govt issued from legit sources or pcgs/ngc slabs. I have been kicking around the idea of common date pcgs 65 saints and that market seems to be pretty stagnant (correct me if i am wrong). I was better off buying the AU saints/liberties that i bought at 1150 gold, than I would have been with the greater investment in 65 saints at that time. So it seems like I am having the same debate with myself but it is the proof set instead of the 65 saints...

thanks
E

derryb

Keep in mind that common date saints in higher grades are, well. . . quite common. If you're looking for a play that is dependent on spot prices, stick with the much lower premium bullion eagles.

If you'r gonna buy the proofs, consider buying them directly from the mint and submitting them for grading yourself. It's not difficult and you will get your 70's cheaper. the 69's, at a minimum, generally return at least the dollars you have tied up in them.

ricko

Much of my gold was purchased when even with the mint premium, they would now be viewed as a steal..... Yep, I am happy about that. My point is, that long term is the view you should have with bullion... Cheers, RickO

ShinyThingsInPM

Great summary jmski52 !

I would just add one comment. When buying collector bullion it is like buying an option - for small amount of premium under the right conditions you can rip a substantial reward. It gives you extra protection if PM markets go down since "collector" premium is less correlated with the PM prices