Bullion Market vs. The Coin Market

[Brotherman]

Hello all,

 

I'm another newbie (collecting for under a year) and I've been doing my homework - plus reading posts on this site for about a month now. There is a LOT of good information here! I think I've learned more here than from any one book - or two for that matter. The "What You Need To know" posts are my favorite.

 

Anyway, I have a question about precious metal prices and the coin market. Obviously (I think) when gold prices are up gold coin prices rise, and I am assuming that is true with silver prices and silver coins. My question is this: Which market do you think is more stable? I would argue that precious metals, particulaly gold and silver, are over inflated and that a downward adjustment is inevitable. On the other hand, the coin collecting market has seen a huge influx of new people in the hobby and, though some might fade after awhile, surly the overall numbers of people in the hobby will be higher than before the current bull market. More people collecting = higher prices for coins.

 

The reason I ask is because I have a modest bullion stash that has become more valuable with the rise in bullion prices. I would like to sell it off before the market cools - not to mention the extra cash would do wonders for my coin collection! If I make careful, educated purchases I am hoping that my coin collection would continue to hold most of it's value, even when the bullion market prices fall. I am interested in your thoughts and comments.

[Brotherman]

Hays

[EZ_E]

I believe that the coin market is more stable since there are an abundance of collectors who are true collectors at heart. Alot of the bullion market is hype. Notice that when bullion prices rise then many "investors" jump on board. So, more collectors are in it for the long haul. Bullion investors generally are seasonal.

[michael]

i totally agree with victor

 

now i do think that bullion especially so silver will go way higher

 

but i like the collection part

 

collecting something you love and understand and specialize in and also buy eye appeal..... extreme eye appeal and truly scarce opportunity and value numismatic coinage

 

then myself i think you will have fun and do well for yourself your collection and your money well spent

[Brotherman]

I’m glad to hear you all are in agreement! I probably would have sold off the bullion for more coins anyway - even if it wasn’t the financially “right” move. I would rather have a nicer coin collection than the bullion collection any day. Besides, what's the fun in collection a bunch of silver rounds?

[MunkyMan95]

When you say that wen gold rises, gold coin prices rise, that is not true for all gold coins. Sure the price of modern gold coin will rise, because they are not of much rarity, but your earlier gold may stay the same even if gold goes up hundreds of dollars.

[Regis44]

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Quote "The reason I ask is because I have a modest bullion stash that has become more valuable with the rise in bullion prices. I would like to sell it off before the market cools - not to mention the extra cash would do wonders for my coin collection! If I make careful, educated purchases I am hoping that my coin collection would continue to hold most of it's value, even when the bullion market prices fall."

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That was my feelings and I 'cashed-in' about half of my bullion (including lot of 50-64 silver coins). What I initially did wrong was to NOT have an aquisition plan. I've bought some very nice coins at good prices but now I have to re-group. I was only looking at upper quality and measuring value by individual coins. That left me with some beautiful coins "individually" but, not really a collection. I admire some of my much older and less valuable collections more than my new purchases.

 

When I "cash-in" the 2nd half of my bullion, I'll be working toward a nice collection e.g. full set of 3 cent nickels in lower MS.

 

Keep your bullion growing untill your plan is ready.

 

Regis

[jtryka]

When you say that wen gold rises, gold coin prices rise, that is not true for all gold coins. Sure the price of modern gold coin will rise, because they are not of much rarity, but your earlier gold may stay the same even if gold goes up hundreds of dollars.

 

I disagree. Even though some earlier coins are more scarce than modern bullion coins, they are still often valued based primarily on their gold content. Common date Saints are like this especially, often trading at a slight premium to melt. It all depends on the spread to gold, i.e. how closely tied to the gold price the coin price it. A 1915-S Saint in MS-63 is closer to the gold price than a 1925-S. When gold was trading at $260, these were selling for under $400, today you couldn't even come close to one of these for $400, but more likely $750, still roughly a $150 premium to gold. The 25-S on the other hand is much rarer, so when gold was $260, an AU 25-S might have gone for $2,000, but today that coin is over $4,000! There is much more to the market for classic gold coins than one might think at first, and all those factors such as demand, extant supply, new market entrants and the price of gold all play a role. It is wise not to try to overly simplify this condition.

[MunkyMan95]

So you're saying that EVERY SINGLE gold coin rises when the gold price rises? I still disagree.

[jtryka]

So you're saying that EVERY SINGLE gold coin rises when the gold price rises? I still disagree.

 

No, I am saying that it's much more complicated than that. They do all rise, but at different rates and times. The ones which trade closest to bullion will rise fairly closely to changes in gold. Others tend to rise in a stair-step fashion, particularly the ones which trade infrequently. Still others trade closer to bullion, but don't move as closely with bullion, like AU Type 2 Liberty double eagles. Further, the relationship to gold is directly proportional to the denomination, i.e. the lower the denomination, the lower the correlation, since gold dollars don't trade at melt, nor do quarter eagles, but when you get to eagles and double eagles, the relationship is stronger since there is a larger segment of bullion investors that buy double eagles instead of AGEs, but those buyers wouldn't generally buy 40 quarter eagles instead of 5 double eagles. My point is that it's incorrect to generalize in either direction when it comes to classic US gold.

[MunkyMan95]

You read my thoughts. I was thinking the exact same thing, but I just didn't know how to put that into words. Thanks!

[Brotherman]

Regis,

 

That’s good advice to have a plan of action when I cash in my silver and gold bullion. When I say modest bullion hold, I mean very modest – about $1500 worth at current prices. I was thinking of working on an EF or maybe even an AU Morgan date set. A full set with every mintmark is out of my range. I even toyed with the idea of doing the date set with nothing but toned coins but I fear the years 1893-95 would kill that idea. My monthly budget is around $100 -150 and I would like to finish it within a couple of years. In Extra Fine grade I could assemble a nice date set within a year for sure. An AU set might be a bit more challenging, but the challenge is more financial than availability of nice coins in this grade. I still think I could pull off the AU set within a couple of years…unless I keep hearing the siren call of those beautifully toned coins!

 

Hays