What is happening to coin values

[TomD]

Whatever coins I have are an outgrowth of my decision in 2004 to start buying bullion gold and silver as an investment. Most of my money went into very prosaic stuff like Krugerrands, gold and silver Maples and Eagles, etc. As I began to notice the beauty of some of the offerings, my interest began to branch to more esoteric stuff but I've never become a numismatist. I have no clue what is happening in the world of coin values.

 

Virtually everyone in the civilized world is aware that markets of all descriptions have recently gone nuts. To those of us who invest in bullion the markets have been, shall we say, less that satisfactory. The theory with bullion is that it is safe haven in time of rapid inflation, monetary uncertainty, and very trying times in general, which I think would be a decent description of the past several months. It didn't happen that way with metals with spot prices rapidly plunging in concert with other commodities and in inverse correlation with the value of the US dollar index. There is one very strange aspect of spot prices, you can't actually buy any metal for what is defined as spot. A year back, I was aggravated with my local dealer because he wanted spot + $1.00 for bullion silver. That was too much for me because I could get it online for spot + $.30 to $.50 on average for 10 and 100 oz bars of silver or Engelhard rounds, etc. Now, if you can find anything at all to buy, you will pay premiums of $100/oz for gold and $5/oz for the most generic and least desirable forms of silver.

 

What is happening to the value of numismatics?

 

 

PS: I sold most of my bullion holdings last spring to buy a house on acreage in Florida.

[just carl]

I think your mixing up Numismatics with metal collecting or bullion hoarding. In the past I've seen metal prices go up, down, up, down, etc. Not long ago some people almost went bankrupt attempting to stock pile Silver, remember. Then the prices of Silver crashed. Sort of like it is doing now. In the past I've warned people that what goes up must come down, in metals that is. Of course not always true in rocketry.

I've been coin collecting for well over 60 years now. To me Numismatics is coin collecting, not accumulating a pile of metal. In all the years I've collected coins I've seen thier prices go up, up, up, up, up, etc. At really bad times the prices of coins may stablize somewhat, but not drop. Even now if you go to coin shows you'll see the prices of coins is still way, way up there. I'm a Red Book collector also and looking through my old editions from #1 to present, I don't see any drop in values of coins there.

For example when did you ever see the value of the 1909S VDB Lincoln Cent drop in value.

[TomD]

I think your mixing up Numismatics with metal collecting or bullion hoarding.

 

I understand quite clearly the difference. I know what is happening with bullion but I freely admit I haven't a clue about numismatic values. By your reply, I gather that numismatic values are doing quite well. Good luck because there are precious few asset classes doing at all well recently and that includes real estate, stocks, bonds, rare cars, paintings, you name it.

[gxseries]

Nothing more than supply versus demand.

 

Sure there can be a large amount of bullion but the cost to manufacture "bullion coins" far exceeds the original bullion value. When the prices of precious metals or rather, most metals were outrageously high a few months ago, some mints thought it is a nice time to hedge against future higher price. In theory that sounds good but now they are paying a high price for their contract and this gets passed down to customers.

[numismatic nut]

The coin market is normal.

[bahabully]

I've collected since i was a kid. Around 10 yrs ago i started out to complete a red set of lincoln cents (w.keys tpg'ed). When I got to the 1931s cent around 4 years ago, I looked at the prices (~$90-120),,, <no way>, i thought,,, i'll wait for the frenzy to slow down (coin prices had been soaring). Went on to the 55DD (~$800-1000),,, nah,, I'll wait. 09s-vdb, purchased for the insain sum of $1,200 in pgcs MS65.... had to have it and had a bit of extra annual bonus $$... figured I was a sucker for sure. All this was around 3-5 years ago.... when everything was bubbled and hyper-inflating. Take a look at the prices now in the red book,, or better yet, what these are realizing on ebay. Pick any key or semi-key date.....

 

Only investment (doubling as a nice hobby), that's done well yoy since I got in.

 

Love it !

 

As for bullion coins,, and as for buying bullion coins at over spot <here kitty kitty,, warm bowl of milk for ya kitty kitty>,, I'd pass on the warm bowl of advertised milk.....

I have around 500lbs of copper cents nicely bagged. They go for less than 50% of spot and are readily available everywhere. You'll have to hold these awhile however,, they are currently under the same type of governance as silver coins were when thier metal content value first began to significantly exceed thier face value. Thier collection is one of my favorit hobby's,,, and gets more fun every time the fed prints another Trillion.

[28Plain]

The theory with bullion is that it is safe haven in time of rapid inflation, monetary uncertainty, and very trying times in general, which I think would be a decent description of the past several months. It didn't happen that way with metals with spot prices rapidly plunging in concert with other commodities and in inverse correlation with the value of the US dollar index. There is one very strange aspect of spot prices, you can't actually buy any metal for what is defined as spot. A year back, I was aggravated with my local dealer because he wanted spot + $1.00 for bullion silver. That was too much for me because I could get it online for spot + $.30 to $.50 on average for 10 and 100 oz bars of silver or Engelhard rounds, etc. Now, if you can find anything at all to buy, you will pay premiums of $100/oz for gold and $5/oz for the most generic and least desirable forms of silver.

 

What is happening to the value of numismatics?

PS: I sold most of my bullion holdings last spring to buy a house on acreage in Florida.

 

What is causing the depressed spot prices of precious metals is that fund managers have been flooding the COMEX with precious metal derivatives, possibly because that's all any of them are holding that have any semblance of value left. Most gold bugs realize that COMEX activity is paper activity, not real sales culminating in the delivery of precious metals. This artificially induced drop in gold spot prices makes the nearly dead dollar look strong, which it isn't, by any means.

 

The scarcity of actual bullion products tells the tale: those who have bullion aren't selling and those who are selling don't have any bullion, only paper derivatives. I buy and sell gold and silver for a living and I can tell you that business has been stone dead at the street level for a few weeks. Nobody holding gold is willing to give it away at current spot prices. Right now, there's only a $60 or so difference in the prices of platinum and gold. It would be a great time to buy platinum bullion if you could find anyone drunk enough to sell theirs at the current price. ;-)

 

From what I've seen of numismatics prices lately, scarce coins in high grades have held up very well in market value while faddish modern coins have given up some ground. Low value coins have been selling sluggishly and junk silver coins are simply not available for sale at these artificially low silver prices.

 

At least when you sold your bullion, you put the money into land. That was probably a sound move.

[bahabully]

Good to see you still around 28. Q.- Can someone off the street buy precious metals directly from the folks digging it up.... could I call the mngr. of the S. African gold mining company and tell him I want to buy 50oz. at current spot, cut him a check or wire the money plus shipping ? If not,, who do these miner's sell to ? or do they simpley shut down operations when the spot price gets too low,,, or do they just stop selling and keep on digging ? Aren't these the folks that set the price anyway,,, they have it, so in order to get it, don't you have to pay thier price ?

[YeOldeCollector]

Aren't these the folks that set the price anyway,,, they have it, so in order to get it, don't you have to pay thier price ?

 

Well it's all supply and demand, but there is still a hell of a lot of gold that changes hands outside of the mining industry.

[gxseries]

bahabully, let's discuss something else, something more simpler such as agriculture and our food.

 

Can a customer buy food from a farmer? I suppose it's possible but farmers are usually in charge of producing extremely large volume of crops. To customize each customer's order and to organize the logistics is beyond what he's capable of and probably too complicated. A farmer would usually be more used to shipment his goods in a lot and receive a lump payment for what he produced. Similar things happen with the mining industry - it's just too complicated.

 

To answer the question of how the mining industry deal with the prices, this is usually what happens. For the ease of simplicity, we have just two grades of ore, one called high grade ore and low grade ore. Common sense will tell you that you would normally want to mine for high grade ore and produce as much as possible. But you get the leftovers called the low grade ores. Depending on the market price, there is a threshold of how economical it gets to recover the low grade ores. Low grade ores usually get stockpiled in hopes of that when metal prices raise, there is economic sense to recover them.

 

A big misconception with many buyers with the metal producing mines is that if the metal prices price, it would automatically mean more production. NO. Instead, production CAN decrease, NOT increase, to allow recovery of the lower grade ores. Mining companies look for dealers that can buy their stocks in a huge lot and make them sign contracts. Gold are usually in hundred of ounces or copper at several short tonnes.

 

The price is then agreed between the two parties. Some companies might argue that prices are too low and hence if the buyer wants a better deal, they might suggest the buyer lock in a contract way over the spot price but guarantees the same price over a period of time regardless of whether the prices move up (unless something drastic happens)

[28Plain]

Good to see you still around 28. Q.- Can someone off the street buy precious metals directly from the folks digging it up.... could I call the mngr. of the S. African gold mining company and tell him I want to buy 50oz. at current spot, cut him a check or wire the money plus shipping ? If not,, who do these miner's sell to ? or do they simpley shut down operations when the spot price gets too low,,, or do they just stop selling and keep on digging ? Aren't these the folks that set the price anyway,,, they have it, so in order to get it, don't you have to pay thier price ?

 

Good to see you're still here, too.

 

As GX notes below your question, the mining corporations deal in contracts which rely upon credit settlements for delivery. There are as many procedures for scheduling production and delivery as there are contracts. Mining concerns are publicly traded corporations and are inaccessible to buyers like you and me, since we want simple, straightforward purchase agreements which end in delivery. The commodities exchanges of the world set the prices, not the miners. Mining corporations are also bound by agreements with the governments of the countries where their mining operations are located. Those agreements control outlet sales as well as operations prcedures and are subject to the political motivations of the governments where the mining is done.

 

If you want to buy the bullion products of South African mining companies, you have to deal with the retailers who can make delivery of the bullion coins and bars produced by the refiners and delivered to the mints of the governments with whom the miners have their contracts. A better way of getting bullion is to look up your local refiners of scrap gold and place your order for bullion. Your order may be settled with their own proprietary rounds and bars or with better known rounds such as Eagles, Pandas, Krugerrands, Maples, etc. with their own products selling for a slightly lower unit premium. Local to me is the Hoover and Strong refinery. There are probably refiners near you as well. Good luck buying. I'm sure you'll do well.

[gxseries]

Excellent explanation 28plain, I cannot have put it any better than you can.

 

In reality, it's actually the oil prices that has a strong impact on the overall mining operation cost, which gets passed down to the overall market and to customers. Now that oil prices are low, high metal prices are just silly. When oil price was at 50usd, gold price was at 400usd and mining operation cost was somewhere around 250usd/oz in average. Now don't start to diss about how much profit mining companies are making - mining companies usually have to foot out millions to start up the project as well as making promises to return dividends to investors as banks have a tendency to avoid mining companies for obvious reasons. It's a lot more complicated than what most people think.

[LostDutchman]

Well as for numismatics my opinion is that the turmoil in the stock market is bound to effect the coin markets. Common coins will be effected first... I noticed that the peace dollar prices have fallen in the new CDN. Junk silver dollars are selling for $7 or a little less sometimes. The common stuff... is falling off as is generic gold. Better date coins, early American coins, and high grade examples shouldn't be effected as much but still may suffer a loss in value. As money gets tighter there will be less and less buyers and less and less people driving the prices up. I have seen a slow down in the amount of coins I have been buying over just the last month.

[28Plain]

I have seen a slow down in the amount of coins I have been buying over just the last month.

 

I have too, Matt. Ordinarily, silver and gold buying for me would include a fair amount of coin, but not lately. Maybe people who would ordinarily think of selling me their grandpa's silver coins decline to do so because of current silver prices. All I've been buying lately has been scrap gold, and not much of that.

[just carl]

.

 

Can a customer buy food from a farmer? I suppose it's possible but farmers are usually in charge of producing extremely large volume of crops. To customize each customer's order and to organize the logistics is beyond what he's capable of and probably too complicated. A farmer would usually be more used to shipment his goods in a lot and receive a lump payment for what he produced. Similar things happen with the mining industry - it's just too complicated.

 

Utterly rediculous statement. Can a customer buy food from a farmer. Not only possible but constantly being done in massive amounts every day. There are farmers markets all over the place. At flea markets farmers take trucks full of items to be sold. Many, many farmers have signs in front of their places saying things like poultry, vegtables, fruits available. In farming areas many farmers have road side stands selling just about everything. I've been buying eggs direct from farmers for many years and usually enough for all my neighbors. Many farmers sell bulk milk to people as well. Many older milking cows are taken to a butcher and the meat is distributed between the farmer and the butcher. Those farmers sell or trade excess to other people.

Just where have you been?????????

There is no comparison between farming and mining.

[gxseries]

Just carl, I'm sure you are living in an area where you are close to farming areas and hence this is possible for you. For most customers living in cities, this is not an option. The only difference between agriculture and mining is that there are laws about how trading must be done. Agriculture is not strictly regulated whereas mining is. The major cost in both situation are the transportation, middle man and royalties or rather taxes. Land lease as well is another major cost but we'll leave that to another story.

[Dave]

Where I live, there are wheat farms and mining nearby. I've not seen any roadside stands for wheat, nor have I seen any roadside stands for ore. It would be kinda' fun if there were roadside coin/bullion stands, though.

 

A quick check with a co-worker confirms that he has seen a roadside stand where a local farmer sells some produce from a small ranch, but I've never seen it. Our farmer's markets here are really not that great, though, and I have never bought anything from them. But I digress...

 

I think we're all pretty happy that the numismatic market is doing well. While I've heard that there is some speculation that the 'common coins' will become more common as people turn them in for spendable cash, which would cause their prices to fall, the general view I've heard and read is that the overall market will be pretty decent throughout this econimic hardship.

 

So I have this question: What do you think it would take to cause the numismatic market to fall?

 

I've never heard of the market during the great depression or how a serious war like WWI or WWII affected the numismatic market. I would imagine that, given the relatively recent "Price Craziness" that's been going on in certain collection areas, prices might plummet if there were a serious enough crunch to stave off collectors from buying at inflated prices.

[LostDutchman]

To put the slowdown in perspective...

 

5 weeks ago I bought 62 ounces of pure gold in one week...

 

this week I have bought 3 tenth ounce eagles

 

poof its all gone...

 

 

yikes

[bahabully]

1 - Ag and mining was probably a bad comparison.. As stated, there are tons of farmers markets, and just about any farmer in business anywhere (or commerical fisherman in that regard) would generally be happy as a clam to sell you thier goods at a major discount to market/retail price.. Motivated people who distain meats/eggs/milk/fish/etc. dripping with hormones/preservatives, gassed, or radiated have generated a healthy demand in this space. Big corporate farms generally do not play here... I guess if there were more small mines left in the country we'd realize a more direct model for aquisition of bullion....

2 - Demand drying up will affect coin prices... I'm not sure I can say that I've seen that in any of my occasional bidding on the 'bay. Prices are still up there, although I cannot imagine they will continue to climb at thier past rate any longer,, or climb much at all in the current environment.

3 - Supply - my impression from the folks who play in this space in this chain is that demand is still there, but supply is down...? Economic depression would probably free up alot of bullion, and then prices would most likely drop?

 

... i think the derivative discussion offered by 28 was an excellent read !

[gxseries]

Again, you are not understanding my point. What varies in the two of them is the logistics and market condition. The other fundamental cost factors are almost similar. I never mentioned that every single bit of both business are exactly identical. In agriculture where most of the goods end up in customer's plate in one way or the other, metals on the other hand varies quite differently. There is a reason why there are strict regulations of how business is conducted. It is a lot easier to steal one ounce of gold than one ounce of any random crop. It is a lot easier to steal a kilo of gold bar than one kilo of food. One of the biggest pain with stocking precious metal is the amount needed to spend on security. Investors / traders aren't keen on wasting money on extra security thus created paper version.

 

If I remember right, only about 10% of gold goes to investors / public, about 3% with platinum with the rest going straight to industrial, jewelery, government stockpile etc. With crops, I'm sure a bigger percentage goes straight to the public. Unlike what most people think with the metal market, it's the industry sector that has a bigger impact although it is customers that do have an influence with the demand. High metal prices do encourage recycling, which changes the equation of supply versus demand. Common sense: at low metal prices, who would be interested to sell? Mines on the other hand are usually designed to run for several years to recover the startup costs and make enough profit and usually have their lowest break-even cost factored in. If interested, I have a basic excel form to illustrate this - just pm me.

 

The biggest concern with the mining industry is the safety factor and environment impact. There is way too much drama regarding about pollution effects in the mining sector although there are similar regulations about fertilizer usage in the agriculture sector as it can impact the water around the surrounding. There are a few mines open to the public, some examples are the Arkansas diamond mine and other gold panning sites. Here are some examples: http://www.recminer.com/recreational_mining_sites.htm

 

Put in short, metal prices were hijacked by the oil prices. Oil prices impact the cost of transporting equipments, products etc which affected the cost of everything else including electricity which in turn raises the overall cost of the product to the customer. Companies can't just keep the prices low for the customers the whole time. When investors kept dreaming about how oil prices would hit 200usd/barrel, they clearly never understood the impact that if oil is to hit that high, it's not only the transportation cost that is to go up - prices of everything including food goes up dramatically as well. The only problem that they didn't factor in is: the global population's salary didn't go up fast enough. Everyone lost, only greedy investors won the game.

[just carl]

Just carl, I'm sure you are living in an area where you are close to farming areas and hence this is possible for you. For most customers living in cities, this is not an option. The only difference between agriculture and mining is that there are laws about how trading must be done. Agriculture is not strictly regulated whereas mining is. The major cost in both situation are the transportation, middle man and royalties or rather taxes. Land lease as well is another major cost but we'll leave that to another story.

Living in a area close to farming???? Try Chicago, Illinois. Not a real lot of farms here you know. Yes it is an option. I have a car and just drive to farming areas all over the place and buy whatever I want. Also, the downtown area is full of farmers markets every Thurseday. At flea markets all over the area farmers bring stuff in for sale. You just have to get out more.

[just carl]

I think we're all pretty happy that the numismatic market is doing well. While I've heard that there is some speculation that the 'common coins' will become more common as people turn them in for spendable cash, which would cause their prices to fall, the general view I've heard and read is that the overall market will be pretty decent throughout this econimic hardship.

 

So I have this question: What do you think it would take to cause the numismatic market to fall?

 

I've never heard of the market during the great depression or how a serious war like WWI or WWII affected the numismatic market. I would imagine that, given the relatively recent "Price Craziness" that's been going on in certain collection areas, prices might plummet if there were a serious enough crunch to stave off collectors from buying at inflated prices.

I've been collecting coins for well over 60 years. I go to coin shows 2 to 4 times a month. As long as I can remember I've never seen coin prices go down. During really bad times they may level off but never down. Now with so many people melting coins for thier metal value the prices of coins is actually increasing due to this. I also collect the Red Book and have every edition since the firest in 1947, which actually came out in 1946. There are NO droppings of prices there either. Even now at coin shows there is no dropping of coin prices due to a poor economy and there are many, many, many customers at the coin shows buying.

[bobh]

I've been collecting coins for well over 60 years. I go to coin shows 2 to 4 times a month. As long as I can remember I've never seen coin prices go down. During really bad times they may level off but never down.

But as they say, "what goes up must come down" ... or is it not?

 

During the explosion in silver prices which, IIRC, occurred in the late '70s or early '80s, there WAS a big drop in silver coin prices (e.g., Morgan dollars). But I have only collected coins seriously since 2004, so I'm not sure when the exact dates were. But some people bought coins at a very high price and lost a lot of $$$ when the resulting drop/correction in silver prices happened.

 

Now with so many people melting coins for thier metal value the prices of coins is actually increasing due to this. I also collect the Red Book and have every edition since the firest in 1947, which actually came out in 1946. There are NO droppings of prices there either.

Of course, it is all relative ... I have the Yeoman "Blue Books" (like the red books, but from the dealer perspective) from 1966 and 1971. If I compare those prices with today's prices, well of course everything has gone up! But a lot happened in between those dates...

 

Even now at coin shows there is no dropping of coin prices due to a poor economy and there are many, many, many customers at the coin shows buying.

Now THAT is good to know!

[gxseries]

We are mixing two different terms here, one is bullion and the other is strictly coins. Of course, coins that have precious metals in them do get affected by the voliatle metal prices but as far as I know, most dealers would price their coins as bullion value + some premium. Or some dealers wouldn't care about the daily spot price and whack in whatever they feel they are happy to sell at.

 

I must disagree that all coin prices will keep rising. I would be very puzzled if coin prices didn't rise dramatically over the Hunt Brothers scam (around 1970s to 1980 like Bob said) and didn't fall after that. Similarly, wasn't there a time in the 90s when the market was flooded with too many overgraded coins and prices fell sharply? I wasn't around at that time so I cannot confirm it - I remember reading it off somewhere. There can be another possibility (very low) that some stashed rare coins are found, which can be a hoard, i.e. forgotten hoard, sea salvaged, archaeological find and such. Well known example: 1933 double eagle. The person who paid a high price thinking that it's unique must be very ticked off over the new discovery of other coins.

 

Sometimes it's even possible to find coins or mintsets that are resold in the general market cheaper than the original mint price as it can be unpopular and such. Some Perth mint products as far as I know can be priced oddly from what I see from time to time.

[28Plain]

We are mixing two different terms here, one is bullion and the other is strictly coins. Of course, coins that have precious metals in them do get affected by the voliatle metal prices but as far as I know, most dealers would price their coins as bullion value + some premium. Or some dealers wouldn't care about the daily spot price and whack in whatever they feel they are happy to sell at.

 

I must disagree that all coin prices will keep rising. I would be very puzzled if coin prices didn't rise dramatically over the Hunt Brothers scam (around 1970s to 1980 like Bob said) and didn't fall after that. Similarly, wasn't there a time in the 90s when the market was flooded with too many overgraded coins and prices fell sharply? I wasn't around at that time so I cannot confirm it - I remember reading it off somewhere. There can be another possibility (very low) that some stashed rare coins are found, which can be a hoard, i.e. forgotten hoard, sea salvaged, archaeological find and such. Well known example: 1933 double eagle. The person who paid a high price thinking that it's unique must be very ticked off over the new discovery of other coins.

 

Sometimes it's even possible to find coins or mintsets that are resold in the general market cheaper than the original mint price as it can be unpopular and such. Some Perth mint products as far as I know can be priced oddly from what I see from time to time.

 

 

Good observations. One thing I noticed is that a rise in bullion value can wipe out the coin premium on precious metal coins, especially gold coins. The thing I'm watching in the bullion market is the way central banks seem determined to keep gold and silver in their assigned status of commodities, even though those two metals have been regarded as money (and the only true money at that) throughout history. Central banks will not survive a return to gold and silver money since they are committed to the fraud of fiat money creation and legal tender laws.

 

Gold and silver are money. Trying to keep up the fiction that they are commodities like wheat, pork bellies and FCOJ is a futile attempt to divert the attention of people from the fact that central bank created fiat money and arbitrary credit issuance is a fraud that is about at the end of its tenure. Real money will reassert itself sooner or later.