Why is the "premium" on generic gold at 14 year lows?
cohodk
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Many generic pre-33 gold coins (even Uncs) can be purchased at very low premium to melt. Why is this? Why such low premium?
Excuses are tools of the ignorant
Knowledge is the enemy of fear
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For those of us who don't buy them, what is a low premium?
I'd guess the answer is lack of demand.
According to Laura Sperber:
"collectors and investors spend their money on better-date coins, which she believes will perform better over time than generics."
Apparently collectors agree with her.
As for stackers, IMO common saints have never been a good bullion play. Much better bang for the buck with modern gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
For example, $20 libs in 62 or Saints in 63 trade for about 6% over melt. Before 2009, the premium was about 25%....during the run into 2011 premiums went to as much as 50%....then around 15-20 from 2013 thru 2016. Right around and just after the peak in 2012 premiums were just a little higher than today. In other wirds, premiums were near these lows at the peak as obviously people didn't want to buy into a falling knife.
But why such low premiums now? If it's lack of demand, then will prices drop furthrr, or is this the apathy that makes bottoms?
Knowledge is the enemy of fear
I just got word today from an inside source, that One of the major players in generic 10's and 20's, said they market is super saturated in them, they are so many on the market looking for takers, its not even funny. was told the same about generic silver dollars, especially peace $. One major dealer has vaults full of them.
Maybe those high pressure telephone sellers that ripped off the old ladies with common gold helped drive premiums up. Many of them have been shut down.
Lack of demand is a good reason for premium decrease. Question we should be answering is why lack of demand?
Laura gave an excellent reason from the collecting perspective. From the stacking perspective it's most likely because stackers are shunning them for purer gold.
And the obvious answer is that they were just over priced.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Maybe buyers are just wising up. IMO it makes no sense to pay 6% over for less than an ounce when you can buy a full ounce as a Buffalo or AGE for 3-3.5% over. Based on mint sales, it looks like gold demand is down in general. Tax time? Maybe people have all they want. If Saints are your thing, it may be a buying opportunity.
I think silver is a better investment right now especially with the GSR near 70.
I think the old time stackers or old money prefer the classics. Personally, while I'm not old time, would prefer to buy UNC saints to AGEs. Maybe its just nostalgia.
I agree with derryb that's it's a lack of demand, but why? Coupled with the previous thread about having enough silver, I'm wondering if it's just apathy, which while is a good sign of a bottom, can also mean a long consolidation period before the next bull run.
Knowledge is the enemy of fear
Maybe it represents younger buyers that like the modern trash more than real coins
edited to add
Why? Because most people are occupied with the drama on other social networking sites and were lulled into thinking we could get it for less at Walmart.
When it comes to liquidity, IMO, modern bullion is preferable.... Certainly for those who are collectors, the older coins are attractive.... and now, with the market in general down, the premiums are down... If you cannot move the inventory, you are losing money. So, stack the new stuff, but collectors have an opportunity at this time... Cheers, RickO
The gold market is being led (or at least the perception is that it is being led) by Asia and India, and by electronic gold markets. Those regions and traders don't understand anything but pure gold. The introduction of .999 pure gold bullion coins, and now .9999 and even .99999 pure gold coins by the major mints of the world seems to confirm this. If demand, or the perception of demand, is that big buyers want only option A and B and have no interest in options C and D, then premiums will rise on A and B and fall on C and D.
--Severian the Lame
.999 coins are pretty stupid for most people. 1 oz. that is in a slab is fine but if they are loose they are going to get scratched pretty quick then some clown is going to want to beat you up on resale as if they no longer weigh an ounce somehow. I would buy the 1 oz buffalos in slabs , maybe the maples.
1 oz. .999 , .999 bars obviously but fractional .999 is completely stupid paying the .999 premium then slabbing 10 tenths to protect them is a giant waste of money. Even if you do have them in slabs expect dealers to spin you a yarn about how maples are not in demand or even if they are in a slab they could be counterfeit , because the dealers brothers cousins roommate saw a fake maple in a pcgs slab once.
Its a variation of the sob story dealers give you when you try to sell them war nickles oh 60% of spot is the best I can do . because , you know , they are so hard to refine wink wink .
Part of the earlier demand for "bullion" saints and liberties was the belief that they would be exempt from a gold confiscation. Possible that this fear has been overcome.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It's all about aggregate (and tempero-spacial) supply and demand. The world itself is awash in all forms of gold and silver, it's no surprise that common, boring, and easy to find items are in less overall demand than more scarce, attractive, and "neat" items. As we've said in the related "enough" silver thread, many PM investors who are informed about "spreads" and "premiums" are satiated, and the "profit" is made in the arbitrage of getting Neat stuff for Common price and then selling it to the better-paying market of collectors, as well as large firms selling Stuff on TV to newbies, and buying Stuff from the public, generally and tragically referred to the Widows and Orphans market.
Oh, and LOL to war nickles [sic] yep, they're generally discounted and so are 40% halves, I notice no one shows either of those in the weekly Porn, funny how it's 18th century beer steins and 25 oz Engelhard bars now, isn't it? Neat!
Liberty: Parent of Science & Industry
Put them into a 2 x 2 and then into a flip and no scratcho. The lion's share of "damaged" bullion is caused by careless handling from dealers and non-dealers/stackers. The drawback to Maples is that they are subject to IRS reporting 1099-B if you buy or sell 25 or more at a time or engage in what could be construed as "related" transactions.
Whose paying 60% of spot for war nicks???
Real People actually pay more???? Please pm me asap on who does, thanks...
MS63 & MS64 Indians, both $2-1/2 and $5, are dirt cheap when one looks at their 10 year chart in the PCGS Price Guide. $2-1/2's have dropped from roughly $3k to less than $800 on some more common dates!
When gold hit 1000, then 1200 that put the charts going forward meaningless as they are hype marketing charts, those marketing runs may never happen again...
I also think the average person has no idea just how many millions of $20s were/are stashed in European bank vaults. Maybe a 6% premium is too high.
Many "better" date AGEs and Plats have also lost premium, even in higher graded slabs, so it seems likely that collectibles in general have lost premium. When I bought the only two Saints that I've ever owned, I recall that the premium on that type of bullion was quite high - I'm guessing 20% or more, which is why I started buying AGEs when they were introduced. The premiums were much lower on AGEs. I would speculate that the lower graded generic Saints are becoming more like bullion again, rather than collectibles. Competition for bullion business in addition to lower demand will drive premiums down.
As long as most people are happy with the stock market, we can also assume that some investment demand for metals is continually being siphoned off. Remember that the metals are not a very big capital market, so demand can shift in either direction without much effort until you reach a baseline level. We have been at a baseline level for a few years, imo. It's terrible if you expected to strike paydirt and retire in luxury quickly, not quite so bad if you are a stacker.
I knew it would happen.
Walmart pricing caused this. Everyone gets it for less.
Laura's answer is not even in the ball park.
Simply put:
A point that Legend also glossed over was what were the best performing coins in the rare coin market from 2001-2011 that were easily available, that anyone could buy?
MS63/64 $20 Libs and Saints. The common slabbed MS63 $20 Libs increased from $400-450 to approx $2100 during that run. 90% silver coin and plain old bullion would have been an even better value than most any rare coins, at far less risk. The inconvenient truth for rare coin dealers was the bullion collectors blew them away. You never saw that written about in their "market reviews."
While maybe it was true that "collectors" wanted better coins, it was the common gold coins, and generics that performed the best for a decade. If you held a rare 1878 MS65 $3 gold from 2006 to 2011 you would have only lost around 50% of the value....while a common MS63 $20 LIb went up 4X. The "rarer" coin is not always the better choice. Specifically, a large % of post-1880 better date $10/$20 gold coins got hammered and lost much or most of their premium as the price of gold rose from $435 to $1920....or being in the wrong place at the wrong time. Even with the price of gold peeling back some 40-45%, most of those same coins failed to recover much of those former premiums.
There have been periods when common saints have outperformed bullion. One such instance occurred from the $681 gold bottom in Oct 2008 to the next peak in Nov 2009 at $1226. I do know that common MS64 Saints were fetching approx $2000-$2100 at that time and MS65's around $2500-$2600. The MS64's were selling for 80% of MS65 price, probably their highest premium factor of the past several decades. Even the 1 oz gold AGE's in boxes were going for $2400-$2500.
Agreed plenty of geniuses carefully selecting certain dates grades slabs etc were blown away by stackers that bought sacks of circulated 90% silver held it for a few years and sold at the right time. It's not glamorous enough for some people .
Precious metals hibernate long periods, and wake up and roar once every 30 years or so for a couple of years.
Meanwhile, in addition to historically more reliable capital gains and historically lower volatility and long times being dead money, stocks pay quarterly dividends year after year, and real estate landlords collect monthly rent checks.
Gee whiz, I'm pushing 50 and sure hope I live long enough to see a new high in gold and silver before I see the grim reaper.
Liberty: Parent of Science & Industry
How bout just high enough to sell your stash at a profit, unless you're into a lot of it at the old high.
I believe a LOT of new material is coming from overseas.
I know my morning emails have pretty large quantities on offer.
Why aren't the Europeans buying it? Do they have confidence in the Euro?
Knowledge is the enemy of fear
What are they offering? Saints?
Martin Armstrong presents his argument on why to stack $20 gold in lieu of modern bullion coins
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Your like 10-20 + years late to his party...
had a guy come by last thur with 46 $20 libs, just run of mill. Called to see a major player we do business with's buying price, couldnt do it, no money left. they told me they had over 7k 20's in stock at that moment with few buyers.
They also told me they had over 40k generic silver dollars as well in stock with few buyers
What do you mean by generic silver dollars? Like the circulated $20 a piece by the sackful kind? Or slabbed common date type stuff that sell one at a time to collector types?
Raw 21 Morgan's common date raw Morgan's also...
N raw peace commons...
That's a lot of working capital tied up in inventory. Wow.
Well, they just need to drop the price and watch them fly out of inventory!
Liberty: Parent of Science & Industry
I was thinking the same thing as Baley
If the premium has collapsed on classic, seems like that's where I'd like to buy.
Of course, I'd still rather own generic classic anyway.
Would that be price manipulation?
Knowledge is the enemy of fear
Premiums are the direct result of demand. Demand has shifted to "more gold for the dollar" offered by modern gold bullion.
While premiums may have come down on the $20 coins (.9675 oz. gold content), they are still higher than the premium for modern bullion (1 full oz. gold content) when comparing dollars per gold oz. For the stacker, common date $20 gold is still a more expensive alternative than modern gold bullion coins.
Maybe most buyers who were buying common date $20 gold for their gold content have learned that AGEs and gold buffalos give them more bang for their buck. I did - replaced all my common date saints with AGEs years ago and ended up with more gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
More like financial hara kiri.
SHEESH! When APMEX has a sale end at of the month, I've never heard it referred to as price manipulation.
Apmex is still selling it for more than spot. Suppose they sold it for spot minus 79c?
Knowledge is the enemy of fear
Well, you do what you need to do to move inventory. If 79 cents under is more than your cost, I'd have no issue with that. I suppose if you're doing it to undercut a few competitors, it could be construed as being manipulation, but I can't see them manipulating the market as a whole. Then again if their actions don't affect the spot price, they aren't manipulating anything.
If they sold it for spot minus 79c, what would be the true value of silver? Spot -79c, spot, or spot +79c?
Knowledge is the enemy of fear
As far as gold I'd always go with the old stuff over modern. Theres no upside with modern. Its souless drab dime a dozen pick your adjective. Always get pre 1933 and you can have the opportunity to be a salesman at some later date and sell into some sort of demand or fall back on spot if that doesn't materialize . A modern AGE is just a lump , no one example means anything more than another. No history behind it , no date means anything to anyone no one will demand 2014's over 2010's who cares . Fungible is fine at melt but for a premium over spot ? Nope.
Silver dollars hold premium better than ASE's too , I don't see that going away either.