By Patrick A. Heller – Liberty Coin Service
Commentary on Precious Metals Prepared for CoinWeek.com

Even though gold and silver prices are up significantly since the beginning of 2012, that doesn’t necessarily mean that this trend will continue. Buyers and sellers modify their decisions as prices change.

When you look at who is and who isn’t actively buying or selling gold and silver right now, that can give you significant clues as to where prices head in the near term.

Ever since the price of gold surpassed $1,000 for the first time in 2008, there has been significant liquidation and recycling of “scrap” gold such as jewelry and industrial products. In many instances, people who lost jobs or experienced other financial setbacks have sold assets to generate cash flow. Investment demand in the past three years has been so strong that prices continued to rise despite the increase in recycling supplies. From now into the future, however, the amount of scrap gold that could be liquidated will be smaller than it would have been because of all the gold already recycled.

The story is similar for silver. During the 1979-1980 precious metals boom, many companies acquired equipment to recycle metals. Even though prices later fell so low that it was no longer economical to acquire such equipment, it was still profitable to continue to use existing machines since the acquisition costs had already been paid. As a result, silver recycling continued at a steady pace even when prices were far lower during the past few decades.

Therefore, there is less silver available for recycling today and in the future than there would have been. Another factor to consider is that the use of silver in photography (including x-rays) has fallen sharply in the past decade or so. This is significant because a high percentage of silver used in photography is recycled. As the amount of silver used in photography has fallen, so has the amount of silver that could be recycled.

With higher prices, there would be a strong incentive for mining companies to expand production. However, it’s not quite that simple. From discovery of a mine site until full production used to take an average of about three years. With increasing environmental and other regulations, it now takes an average of about ten years to go into full scale operation.

Increasing regulations have also impacted the ability of existing mines to operate. In January, the government shut down operations at the Lucky Friday mine in Idaho, producer of about 0.5% of the world’s newly mined silver supply. Even though the mine had passed twice-a-year federal safety inspections, it was closed because of alleged problems with its state of the art mine shaft supports. The owner of the mine stated that it will take a full year to fix the alleged safety issues before the mine can resume operation.

Overall, silver mine output has been rising over the years even as global gold mine output mostly declined. Still, silver supply is just not increasing enough to match the rise in demand.

For decades, the central banks were net sellers of gold every year. That changed a couple of years ago to central banks now being net buyers of gold. The swing from being a net supplier to a net buyer has affected the supply/demand equation by about 40 million ounces a year. This is a huge impact when you consider that worldwide annual mine output may be only 70 million ounces.

Above ground inventories of physical gold and silver have dwindled over the past few decades, with supplies of both metals becoming tighter every year. Last year I received several reports of would-be buyers of multi-million dollar amounts of physical gold or silver who wanted to take immediate delivery but were unable to find sellers willing to accept their orders.

While the supply side of gold and silver is constrained, I think the largest impact on the prices of both will come from a surge in buying demand. Even though there has been an increase in demand for the two metals for industrial and investment purposes, the market has not yet experienced a sustained rush to buy physical gold and silver.

For instance, when gold and silver prices fell sharply in late 2008, there were significant delays in purchasing almost every form of bullion-priced physical gold and silver. At the most extreme, new orders for 1 ounce size silver rounds and ingots were taking three months for delivery after the buyers had paid for them. Today, in the US almost every bullion coin and bar is available for live or short term delivery. Premiums are close to as low as they have been over the past couple of years.

The recent weekly Commitment of Traders Report issued by the COMEX show that speculators have not jumped into the market. This means that the price increases have occurred without this source of demand.

China and India are the world’s two largest nations for consumption of gold and silver. What happens in those countries has a major impact on prices.

The Chinese government has been very aggressive at purchasing physical gold and silver for itself and also encouraging its citizens to accumulate precious metals. It is expanding the venues which would make it convenient for people to acquire gold and silver. There are regular stories of Chinese citizens who are unable to purchase physical precious metals because the stores are out of stock or have lines so long that it takes (literally) several hours to get service.

Demand in India is very sensitive to price. When prices fall, demand soars. When prices rise, demand tapers off until there is a sense that the market has established a base from which prices will resume climbing. Right now, buyers in India are mostly sitting on the sidelines since the price of gold broke above $1,700. So, prices rose in the second half of January without extra demand from this nation.

In Europe and the Middle East, there is strong demand for physical gold and, to a lesser extent, silver as safe havens from deteriorating currency values. Demand was especially strong in North America in March and April 2011, but is now lackluster.

Although there have been some investment funds taking positions in gold or silver, this activity has been on a minor scale.

Perhaps the most significant indicator that the rush to buy gold and silver has not started in earnest is the relatively minor importance that the two metals have in world finances. There were times in the first half of the 20^th century where the value of gold and silver mining shares and all the circulating gold and silver coins made up more than 20% of global wealth. Today that proportion of worldwide wealth is about 0.5%.

By the way, perhaps a significant indicator of where prices are headed in the near future is a decision by Endeavor Silver to inventory part of its newly mined silver output rather than sell it at current prices. I have heard that other mining companies are discussing this option, where they might only sell enough metal to fund continuing operations. It is highly unusual for mines to choose to defer cash flow in anticipation of much higher prices in the coming months.

The real rush to buy gold and silver will not be underway until there is strong demand from China and India, elsewhere in the Far East, the Middle East, Europe, and across North America. You will also see central banks and investment funds purchasing greater quantities of physical gold and perhaps silver. When fabricators and wholesalers are unable to meet demand for physical metal, prices could skyrocket. We are a long way from this position today. But it is coming and will be here surprisingly soon.

Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles). His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.

News and Analysis on scarce coins, markets, and the collecting community #93

A Weekly CoinWeek Column by Greg Reynolds

It has been a while since I have written about Liberty Seated Half Dollars. Indeed, I have not done so since August 2011, when I discussed several Liberty Seated halves that had then just been auctioned, as members of the Dick Osburn Collection. The topic here is Liberty Seated Half Dollars that were offered in the FUN Convention auction, during the Platinum Night session on Jan. 4, 2012. I have already covered many other coins that were auctioned in this same event, including bust halves last week and earlier the Eliasberg-Atwater-Jung Chain Cent that realized $1.38 million. (Clickable links are in blue.)

Liberty Seated Half Dollars are scarce and attractive coins, which are undervalued from a logical perspective. While the uncirculated and Proof coins that I discuss here are too expensive for most collectors to obtain, Liberty Seated Half Dollars are not very costly in circulated grades, and may be good values in comparison to bust halves or Walking Liberty Half Dollars. Also, 63 grade halves tend to be much less expensive than the even higher grade coins that I discuss herein.

Besides, I wish to repeat my belief that, for collectors to understand the classic coins that they own or see, there is a need to learn about coins that are not affordable. Art enthusiasts often determine that it is beneficial to learn about paintings that they cannot afford.

It is not practical to cover all of the Liberty Seated Half Dollars in this auction session. I am focusing upon ‘No Motto’ Liberty Seated Half Dollars. The motto, ‘In God We Trust,’ was added to half dollars in 1866. Liberty Seated Half Dollars were minted from 1839 to 1891.

The so called ‘No Motto’ type was minted from 1839 to 1866, and this auction featured an impressive assortment of these. Moreover, this auction contained two gem quality, 1853 ‘Arrows & Rays’ Half Dollars, a business strike and a certified Proof. These are representatives of an important one-year type.

I. 1842 ‘Small Date – Large Letters’

The run of Liberty Seated Half Dollars in this Platinum Night session began with an 1842 half that is PCGS graded MS-64. It is of the “Small Date, Large Letters” variety.

There was another 1842 ‘Small Date – Large Letters’ half sold by Heritage in a different session of this same auction extravaganza. Surprisingly, it was also PCGS graded MS-64 and it realized the exact same price, $8050! I did not see the second one.

As high grade representatives of this issue trade so infrequently, it is hard to interpret this dual $8050 result. It could be that the PCGS price guide value of $17,500 is incorrect and should be lowered.

There was also a ‘Proof’ 1842 ‘Small Date – Large Letters’ half in this auction session. All known Proof 1842 half dollars are of the ‘Small Date – Large Letters’ variety.

This one is PCGS certified ‘Proof-64.’ The Heritage cataloguer suggests that seven are known. I am not thrilled about this particular coin. The $43,125 result is strong, a full retail price.

The Proof 1845 half in this sale is PCGS certified ‘Proof-64 Cameo.’ It sold for $57,500, another strong price.

II. Background: Small Dates and Larger Dates

The ‘Small Date’ term refers to the size of the numerals on the obverse (front of the coin). The ‘Large Letters’ term refers to the size of the letters on the reverse (back of the coin). Liberty Seated Half Dollars minted from 1839 to 1841 feature letters that are smaller than the letters on halves that were minted after 1842.

There are 1842 dated halves with both reverses. The ‘Small Letters’ reverse is sometimes called the ‘Reverse of 1839,’ and the ‘Large Letters’ reverse likewise is sometimes called the ‘Reverse of 1842.’

There are three major varieties of 1842 halves: Small Date – Small Letters, Small Date – Large Letters, and Medium Date – Large Letters. The ‘Small Date – Small Letters’ coins are much rarer than the other two varieties, though the ‘Small Date – Large Letters’ is worth a considerable premium over the ‘Medium Date’ 1842 halves.

In the history of coin collecting, obverse varieties tend to be much more significant than reverse varieties, especially those varieties that relate to numerals. A readily apparent obverse variety that is characterized by differences in one or more numerals, such as notably smaller numerals, is more likely, than other varieties, to have the status of a distinct ‘date.’

Randy Wiley and Bill Bugert have analyzed varieties of Liberty Seated Half Dollars and incorporated their findings into a book, which was published in 1993. This Wiley-Bugert (WB) book is available online at the DLRC website. They measured the height of the numerals on Liberty Seated Half Dollars.

In relation to coins, the term ‘date’ has more than one meaning. In the context of Small Date, Medium Date and Large Date designations, the date refers to the physical numerals of the respective year that appears on each coin.

According to Wiley and Bugert, Liberty Seated Halves of 1839 to 1841, plus some 1842s, have a ‘Small Date,’ which measures from 0.056 to 0.064 inch in height. As I already noted, other 1842s have a ‘Medium Date.’ The numerals in ‘Medium Dates’ vary from 0.076 to 0.086 inch. All half dollars of the following years are said by Wiley and Bugert to each have a ‘Medium Date’: 1843-45, 1859-74, 1876-85, and 1888-91.

In contrast, a ‘Large Date,’ which is sometimes termed a ‘Tall Date,’ measures from 0.086 to 0.096 inch in height. Wiley and Bugert report that Liberty Seated Half Dollars dating from 1847 to 1857, and also those of 1875, each have a ‘Large Date.’ It is curious that the 1875 is the lone year from a different era to have a ‘Large Date.’ Halves of 1858, 1886 and 1887 are said to each have an ‘Extremely Large Date,’ which is approximately 0.1 inch in height, give or take 0.02 inch.

The 1842 ‘Medium Date’ coins are often wrongly cited as having a ‘Large Date.’ Among Liberty Seated Half Dollars, 1846 seems to be the only year for which both ‘Medium Date’ and ‘Large Date’ coins are known. ‘Large Date’ and ‘Tall Date’ 1846 halves are the same coins.

III. 1846 Halves

The 1846 ‘Large Date’ (also known as “Tall Date”) is rarer in ‘mint state’ grades than the 1846 ‘Medium Date’ issue. Indeed, the 1846 ‘Large Date’ is probably rare in all grades.

The 1846 ‘Large Date’ in this auction is NGC graded MS-66. I just glanced at it quickly. I tentatively agreed with the 66 grade.

Matt Kleinsteuber carefully inspected it. He is very enthusiastic about this ‘Large Date’ 1846. It has “beautiful russets and blues,” Matt exclaims, “a true Superb Gem, wonderful.” Kleinsteuber is the lead trader and grader for NFC coins.

This 1846 ‘Large Date’ realized $25,300. If it was an 1846 ‘Medium Date,’ it would not have sold for as much. In this case, the premium for the ‘Large Date’ is perhaps $8000.

There were two Proof 1846 ‘Medium Date’ halves in this auction. The values of these Proof 1846 halves should not be directly compared to the values of 1846 business strikes, as Proofs are much rarer and are more expensive.

Each certified Proof 1846 in this sale is PCGS graded ‘64’ and is CAC approved. The first, at $35,937.50, brought slightly more than the second, which went for $34,500. Both prices are fair, though I feel more comfortable about the first coin than about the second. While the second Proof 1846 is more sharply detailed, the toning, surface quality and overall ‘look’ of the first are better.

Importantly, this session contained six Liberty Seated Half Dollars from the 1840s that are certified as Proofs by the PCGS or the NGC. All Proof issues from the 1840s are very rare.

IV. Eliasberg 1847

The Proof 1847 half from the Eliasberg Collection was in this sale. It is NGC certified Proof-64.

Louis Eliasberg formed the all-time greatest collection of U.S. coins and he had an excellent collection of world coins. This half dollar was auctioned by B&M of New Hampshire during April 1997, in New York.

On Jan. 4, 2012, the Eliasberg Proof 1847 half did not sell. I was present when the lot was offered. My impression is that a commitment of at least $24,750 would have been required to compete for it. The reserve was too high.

Consider the Pittman-Kaufman 1847, which is also NGC certified ‘Proof-64.’ It sold for $27,600 on July 31, 2008 when coin markets were peaking, for $16,100 in April 2009, when coin markets were bottoming, and for $16,675 in August 2011, at which time it was part of the Dick Osburn Collection.

It did not make sense for the consignor to require that bidding start at nearly $25,000 for the Eliasberg 1847. Even a collector or dealer willing to pay $25,000 may have wished to ‘see’ someone else bid before committing. There is a good chance, though, no bidder was willing to pay more than $21,500 for this coin on Jan. 4, 2012.

I like the Eliasberg 1847. Proof silver coins from the 1840s tend to be somewhat dark. This is often, though not always, an important sign of originality. Furthermore, natural medium to deep toning, of expected colors, should be celebrated, not penalized as one grading service seems to do. (Please see my three part series on appreciating naturally toned coins.) In my view, this Eliasberg 1847 half is certainly a Proof, is more than attractive, has naturally toned, and merits a grade in the middle of the 64 range.

V. 1853 Arrows & Rays

The quarters and halves of 1853, with ‘Arrows & Rays,’ are among the most famous and curious of type coins. Only in 1853, quarters and half dollars featured arrows on the obverse (front) and rays on the reverse (back). These are generally determined to be one-year type coins, or at least need to be regarded as a one-year subtype of Liberty Seated Quarters and Half Dollars, respectively.

Arrows & Rays Half Dollars are thus highly demanded by collectors who are assembling type sets. This auction featured both a business strike and a Proof 1853 with Arrows & Rays!

The business strike is PCGS graded MS-66 and has a CAC sticker. It has been moderately dipped and has naturally retoned to some extent. Further, it is mildly lustrous and has very few contact marks. In my view, its grade is around the border between MS-65 and MS-66. I am less favorably inclined, though, towards very apparently dipped coins than are the graders at the PCGS, the NGC, and the CAC.

This business strike sold for $69,000, which John Albanese finds to be “a strong price.” Indeed, I did not expect this coin to realize even $57,500. It did, though, realize this exact same $69,000 price at the Jan. 2008 FUN auction, four years ago. So, it is not quite fresh. Also, market levels for rare U.S. coins in general were higher in Jan. 2008 than in Jan. 2012.

For this issue, the PCGS has graded thirteen as MS-65, four as MS-66 and two as MS-67. This total of nineteen ‘gems’ undoubtedly includes multiple counts of some of the same individual coins. The NGC reports sixteen in MS-66 and zero higher. I doubt that these sixteen are all different coins, maybe nine of them are different. I have seen other gem business strikes of this ‘Arrows & Rays’ Half Dollar issue that I prefer to the one in this auction.

Any “Proof” 1853 Arrows & Rays half is extremely important. According to Heritage cataloguers, just five or six exist. At the moment, I recollect seeing just one other of this issue.

The one in this auction is PCGS certified ‘Proof-65’ and has a CAC sticker. Bruce Morelan reveals “that this is the Nevada collection coin.” (Please click to read my article on The Spectacular Nevada Accumulation and the Morelan Collection of Type Coins. )

Bruce Morelan had included this half in his type set. For reasons apart from the present or future market prices of coins, Bruce decided to sell his half dollars and he consigned this ‘Proof’ 1853 to this auction.

The finish on the 1853 ‘Arrows & Rays’ halves that are certified as ‘Proofs’ is substantially different from the finishes on certified Proof Liberty Seated Half Dollars of most other dates from the 1840s to the 1860s. Plus, there are other significant differences. These 1853s are very interesting coins.

While these special 1853 Arrows & Rays halves (and corresponding quarters) are not business strikes, I have never felt certain that “Proof” is an appropriate term for them, though I have come to accept it. When I reflect upon many of the silver coins from the 1850s that the PCGS or the NGC has certified as ‘Proofs,’ especially those with some or most design elements (devices) that are not even close to Proof ideals, this coin and probably a few similar ‘Arrows & Rays’ Half Dollars qualify as Proofs, in accordance with the criteria employed by the PCGS and the NGC, respectively. Certainly, these are close to being Proofs, special strikings of some kind.

The Nevada-Morelan ‘Proof’ 1853 was dipped, maybe more than twenty-five years ago. It has been naturally retoning to an extent. Further, this coin has minor hairlines and contact marks, mostly on the obverse (front). In my view, this coin’s grade is in the ‘low end’ to middle part of the 65 range, somewhere between 65.25 and 65.4.

This Nevada-Morelan 1853 realized $184,000, a price that John Albanese says “is about right”! Although the PCGS price guide value is “$200,000,” I regard this $184,000 result as a strong price, well within the retail range.

In 2007, Heritage auctioned the Kaufman 1853 Arrows & Rays half for $149,500. It is NGC certified “Proof-66.”

VI. Proof 1857

The Proof 1857 half in this auction is PCGS graded Proof-65 and has a CAC sticker. “It is beautiful,” John Albanese exclaims. John reveals that he bid, or was planning to bid up to, $34,500 for this coin. It sold for $35,937.50.

This exact same coin was auctioned by Heritage on July 31, 2008, when coin markets were literally peaking. It then realized $28,750. The Numismedia.com retail guide value for this coin is “$15,310,” as of Jan. 30, 2012. Proof 1857 halves, however, are rare in all grades and are distinct condition rarities in 65 grade. Guide prices may not be even close to actual market prices as Proof-65 1857 halves do not trade very often.

In general, Proof 1857s are rarer than Proof Liberty Seated Half Dollars of the 1860 to 1865 time period, which are of the same ‘No Motto’ type. The current PCGS price guide value is $35,000 for this coin, though I did not check this guide value prior to the auction.

The PCGS has certified just two 1857 halves as ‘Proof-65’ and none have been PCGS certified at a higher level. The NGC has certified three as ‘Proof-65’ and just two higher. This is the only certified ‘Proof-65’1857 half that is CAC approved, and the CAC has not stickered one of a higher grade.

The point of citing such data here is to further demonstrate that it is very difficult to gauge the market value of and analyze the auction result for this specific coin. Overall rarity, condition rarity, individual attractiveness, place of this coin’s grade in the 65 range, number of people collecting Proof Liberty Seated Half Dollars ‘by date,’ and other factors may have contributed to the auction result.

VII. 1859 Business Strike

Business Strike 1859 halves are scarce in all grades. Further, these are extremely rare in MS-65 and higher grades. The one in this sale is NGC graded MS-66 and has a CAC sticker. While 66 is a fair grade, its grade is not even near the high end of the 66 range, in my view. The $19,550 result is very strong. I was expecting a price in the $12,500 to $15,500 range.

This 1859 business strike is one of the finest known representatives of this issue. Only two have been PCGS graded MS-66 and none have received a grade higher than MS-66 from the PCGS. Three have been graded MS-66 by the NGC and one has been graded MS-67. Not all the NGC graded MS-66 1859 halves, though, would be graded MS-66 by the PCGS.

The originality of this coin probably was a factor in its strong realization. The deep brownish-russet tones, and blue hues in some areas, are soothing. Furthermore, it has very few contact marks. This 1859 is a pleasing coin overall.

VIII. Proof 1860

The 1860 half in this auction is PCGS certified ‘Proof-67+ Cameo.’ It sold for $43,125. The PCGS price guide value is $43,500. This coin glistens.

Matt Kleinsteuber reveals that he “was the consignor” and was excited about this coin. “It is very pretty. It is devoid of hairlines. I made it,” meaning that Matt was the submitter when it was graded ‘67+.’ “It is one of the best ‘No Motto’ Proof Seated Half dollars that I have ever seen. I thought it would bring more money,” Kleinsteuber declares.

I did not expect it to realize a higher price. In my view, the $43,125 result is strong.

High quality, Proof Liberty Seated Half Dollars, in general, tend to be very attractive. I am surprised that more people do not collect them.

Collecting Proofs of the post-1866 types and/or business strikes of the pre-1866 types would be enjoyable, in my view. Furthermore, I am surprised that more people do not assemble type sets of Liberty Seated Half Dollars and/or coins of other Liberty Seated series.

Each collector may choose a grade range that matches his or her budget and tastes. Most circulated Liberty Seated type coins are not expensive. Even a type set of uncirculated Liberty Seated Half Dollars is not costly relative to prices in general for uncirculated 19th century U.S. silver coins.

©2012 Greg Reynolds

News and Analysis on scarce coins, markets, and the collecting community #92

A Weekly Column by Greg Reynolds

Regarding the FUN Convention auction in Orlando earlier this month, I discussed quarters last week, the Garrett-Jacobson 1829 ‘Large Date’ Half Eagle the week before, the Eliasberg-Atwater-Jung 1793 Chain Cent right after the sale, and Dr. Duckor’s Saints before the auction. (Clickable links are in blue.) The topic now is bust half dollars that sold during the first Platinum Night session, on Jan. 4, 2012.

In this auction session, the selection of half dollars had more depth than the offering of quarters. It is not practical to cover all or even most of these halves here. So, I have chosen bust halves for the present discussion. Next week, I will focus upon Liberty Seated Half Dollars. Eventually, I will write about rarities of other denominations in the FUN auction, perhaps including a specially struck 1927 nickel, an 1802 half dime, a 1799 dollar, and some more gold coins.

I. Flowing Hair Half Dollars

Flowing Hair Half Dollars were minted only in 1794 and 1795. A PCGS graded VF-30 1794 sold for $27,600, which may seem just slightly strong to an analyst who has not seen the coin. Jim McGuigan asserts that it has “questionable color.” In my view, it has significant issues relating to its ‘colors.’ The $27,600 price is very strong, given the characteristics of this particular 1794 half.

In Nov. 2011, Stack’s-Bowers (SBG) auctioned another 1794 that is also PCGS graded VF-30, for $25,875. It was naturally toned and much more desirable overall than this one.

The next lot was a 1795 (Two Leaves variety) half that is PCGS graded MS-61. It has been moderately dipped in the past and has naturally retoned to some extent. I just glanced at it briefly. I tentatively find it to have minimal abrasions. Furthermore, it has less friction than most certified ‘MS-61’ bust halves. Plus, this coin’s overall appearance is somewhat pleasing.

Even Jim McGuigan grudgingly accepts that the assigned 61 grade “may be okay.” Jim is known to be tough on coins that are certified as grading MS-61 or MS-62. For decades, McGuigan has been a specialist in pre-1840 U.S. coins. He attends almost all major auctions and leading coin conventions.

Although this exact same 1795 half sold for $54,625 in May 2007, I find the current $51,750 realization to be strong, well within the retail price range. The values of many coins have not returned to respective peak levels that were reached during 2007 or during the first eight months of 2008.

II. 1797 Half Dollar

Draped Bust Half Dollars of 1796 and 1797 are much rarer than Flowing Hair Half Dollars of 1794 and 1795, though each pair of dates constitute two-year types. Draped Bust, Small Eagle Half Dollars were minted only in 1796 and 1797. These are the rarest type coins of all series of silver U.S. coins.

The 1797 half in this auction is NGC graded ‘Extremely Fine-45.’ In terms of widely accepted price guides, the $86,250 price would seem to be very weak. Experts who have seen the coin, however, tend to be unsurprised by this auction result.

McGuigan regards this 1797 half as “VF-30, cleaned” and suggests that “maybe” the PCGS would grade it as “VF-35.” McGuigan and I each found this coin to have an awkward, washed appearance that is not rare for Draped Bust, Small Eagle Half Dollars.

In September, SBG auctioned this exact same 1797 half for $89,700. Further, it seems that, even earlier, Stack’s auctioned this same coin on March 23, 2007 in Baltimore. Although the online catalogue images are a little murky, I believe that it is the same coin. If so, it then realized $95,450.

As I have stated on numerous occasions, fresh coins tend, on average, to fare better at auction. For a coin to be fresh now, it must NOT have been publicly offered, such that many dealers and/or collectors know about it having been offered, for more than five years. This 1797 half is not fresh.

Additionally, circulated 1796 and 1797 halves now seem to constitute a category for which PCGS graded coins tend to be worth substantially more than NGC certified coins of the same respective grades. Price guides do not incorporate such wide gaps. Not too long ago, most collectors would have treated PCGS certifications equally, more or less, with NGC certifications, with respect to circulated bust halves. Market realities change over time, and such changes are often not reflected in price guides.

III. 1807 Draped Bust Half

In this sale, the first bust half that I became enthusiastic about is an 1807 Draped Bust, Heraldic Eagle coin that is PCGS graded MS-64 and has a CAC sticker. Draped Bust obverse, Heraldic Eagle reverse Half Dollars were minted from 1801 to 1807.

While this 1807 half is not exciting and maybe has the attractiveness of a 63+ or 64 minus grade coin, it is exemplary in a technical sense. There are minimal contact marks and this 1807 half does not exhibit any noticeable friction. Moreover, I do not remember any significant hairlines. The fields are impressive. Plus, for this issue, this coin is sharply struck. Also, it scores high in the category of originality. This 1807 half grades 64.4 or so, in my view. The price realized of $28,750 is strong, a full retail price.

IV. 1809 Half with Bars (|||) Edge

It is tricky to analyze the result for the 1809 Capped Bust Half in this auction, as it is of an unusual edge variety with irregular repeats of somewhat parallel bars among the words that are usually found on the edges of coins of this type. Capped Bust, Lettered Edge Half Dollars were minted from 1807 to 1836.

The 1809 ‘with bars’ ||| edge half in this auction is NGC graded MS-66 and sold for $43,125. John Albanese asserts that this “price is very strong.” I find it to be extremely strong and puzzling.

In 1809, other halves were minted with repeats of so termed “XXX” or “XXXX” devices between words on their respective edges. These seem to be sloppy, hand-engraved characters of some sort, which look more like graffiti than ‘X’ letters. Coins with such X devices on edges are even scarcer than those with the (|||) ‘bars’ edge. Most 1809 halves have normal edge devices, as the term ‘normal’ is defined in this context, typical letters for the type.

It has been argued that these extra edge devices are indicative of experiments. I doubt, however, that these 1809 halves relate to experiments. My guess is that some U.S. Mint employees were bored and added these devices in whimsical manners.

I was under the impression that collectors assembling sets of Capped Bust Half Dollars usually seek at least three 1809 edge varieties, normal edge, bars (|||) edge and XXX edge. Regarding this subject, I consulted Sheridan Downey, who is a specialist in varieties of Capped Bust Half Dollars.

“The ||| and XXX edge 1809 bust halves are anomalous” edge varieties that are listed in a widely read book covering all U.S. coins, according to Sheridan Downey. The Merriam-Webster online dictionary defines ‘anomalous’ as “inconsistent with or deviating from what is usual, normal, or expected,” and as “of uncertain nature or classification; marked by incongruity or contradiction.” “There are no other ‘edge varieties’ listed for the series” in the same guide book, Downey emphasizes.

I note that the famous researcher Breen addresses these varieties in his comprehensive encyclopedia that was published in 1988. Breen points out that there are a large number of edge varieties of Capped Bust Half Dollars and that it does not make sense for the (|||) bars and XXX varieties of 1809 halves to be specially itemized without mentions of many others.

Downey implies that these two ‘edge varieties’ should not be listed as separate entries in guides, except in very specialized volumes. I agree. While I am usually respectful of traditions, the significance of these edge varieties is grossly exaggerated. These seem to be barely noticeable, irregular varieties, perhaps due to thoughtless behavior of some U.S. Mint employees, rather than coins that should be treasured as distinct issues. In my view, these are not separate issues and should not command substantial premiums.

The PCGS price guide values an 1809 ‘with bars’ edge at $30,000 in MS-65 grade, as opposed to $17,500 for a PCGS graded MS-65 1809 half with a typical edge. The PCGS price guide does not value this issue in MS-66 grade, as there are no PCGS graded MS-66 coins of the ‘with bars’ variety.

“The XXX and ||| [bars] edge 1809s are sought by [guide book oriented] and Registry Set Collectors,” Sheridan Downey asserts. “Date and Overton-variety collectors don’t care about them.” Varieties of Capped Bust Half Dollars are typically identified and catalogued with a system that was originally developed by Al Overton.

Maybe the solution to the puzzle is that the buyer and/or the underbidder were thinking about including this 1809 in a PCGS or NGC registry set. There are popular categories in both the PCGS and the NGC registries for which three edge varieties of 1809 halves would be needed for a complete set of Capped Bust Half Dollars, an 1809 normal edge, an 1809 XXXX edge and an 1809 ‘with bars’ edge.

An objective relating to a registry set seems to be a plausible and logical explanation for the $43,125 result for this coin. After all, this 1809 is the highest certified representative of the ‘with bars’ edge variety. In April 2009, Heritage auctioned an NGC graded MS-66 1809, with a typical edge, for $14,950. The die variety, irrespective of edges, of that 1809 is rarer than the die pairing that was used to strike the $43,125 1809 ‘bars edge’ half being discussed here. Is it fair to suggest that the ‘with bars’ edge variety must have been the major factor factor contributing to the $43,125 result?

After all, the assigned 66 grade is debatable and very few high grade representatives of this edge variety have been documented. Downey “looked at but was not particularly impressed by the NGC [graded] 66” with bars (|||) edge half, this coin. I did not grade it as MS-66. I am not sure that the PCGS would even grade it as MS-65. The $43,125 price is one of the more interesting results in this auction.

Also, this NGC graded MS-66 1809 ‘with bars’ edge coin was previously in the collection of George Byers, which Stack’s auctioned in October 2006. If it then sold, this same realized $21,850, about half as much as the current result. I covered that auction for Numismatic News newspaper.

V. Run of Capped Bust Halves

There was a run of NGC certified Capped Bust Halves in this auction, several of which received grades that are sharply debatable. Very few are exemplary. The prices realized were moderate to strong for these overall, considering that several have characteristics that are causes for concern.

The following is a list of dates, with NGC grades in parentheses, and corresponding prices realized: 1810 (MS-65) $10,925, 1812 (MS-66) $14,950, 1814 (66) $15,625, 1815/2 (61) $19,550, 1817 (65) $10,925, 1817/3 (64) $17,250, 1819/8 (66), $16,100, first 1822 ($12,650, second 1822 (66) $10,925, 1828 (66) $12,650, 1830 (66) $9200, and 1834 (66) $11,500.

The 1815/2 is a scarce date and one of the keys to the series of Capped Bust Half Dollars. The one in this sale is NGC graded “MS-61.” Jim McGuigan suggests that this coin has “questionable toning.” Although I just glanced at this coin very quickly, I did not conclude that the toning was artificial. Even if the toning on this coin is not entirely natural, most collectors and dealers would probably accept this coin as being natural enough. It may have naturally retoned after a moderate to heavy cleaning. It is gradable, in my view.

Coins of the 1815/2 date that grade above MS-60 are subject to tremendous demand.Indeed, the PCGS CoinFacts site estimates that just a dozen 1815/2 halves grade MS-60 or higher. I suspect that there might be a few more than twelve. Nevertheless, the 1815/2 is scarce in all grades and is an important condition rarity in MS-60 and higher grades.

Even IF the 1815/2 in this auction merits a grade of MS-60 rather than MS-61, it would still be an extremely important coin. I reiterate that the MS-61 grade is probably fair, in accordance with widely accepted grading criteria. Even a MS-62 grade would not be ridiculous.

On July 31, 2008, when rare U.S. coin markets were peaking overall, Heritage auctioned a different NGC graded MS-61 1815/2 half for $18,400 and auctioned that exact same coin again in August 2010 for $12,650. This one brought more, $19,550. It may be true that this one is superior to the 1815/2 that was auctioned in 2008 and 2010. Generally, though, the $19,550 result for this specific 1815/2 is a fair to strong price.

The PCGS certified ‘Proof-64’ 1826 half in this auction did not sell, perhaps for three reasons. First, it has become stale by appearing in at least four auctions since 2005. Second, it exhibits a series of serious horizontal scratches near the numerals 1826, which cause some potential buyers to wonder about the assigned 64 grade. Third, even if its grade is held to be a solid 64, the reserve was just too high. A bid of more than $73,000 would have been needed to buy this 1826 half. Such an aggressive reserve discourages some bidders, possibly including people who might have been willing to pay $73,000 or more if the coin was unreserved.

This 1826 is very attractive and it is educational in the sense that it has powerful Proof characteristics. There are Capped Bust halves that are certified as Proofs yet might not be Proofs. This is not one of them. This half dollar is, indisputably, a Proof from the 1820s, and is very important as such.

VI. 1823 ‘Broken 3’ Half Dollar

The star of the Capped Bust Half Dollars in this sale is an 1823 half of the ‘Broken 3’ variety, which is distinct from the ‘Patched 3’ 1823 and from the ‘Ugly 3’! None of these should be confused with the 1823 issue that has normal numerals.

The unusual numeral ‘3’ varieties are all scarcer than the regular 1823 half with normal numerals. The ‘Broken 3’ coins, though, bring a higher premium than the ‘Patched 3’ or the ‘Ugly 3.’ The ‘Broken 3’ name refers to the fact that the top half of the 3 is mis-aligned with the bottom half and leans to the right. It seems to be disjointed.

The ‘Patched 3’ is characterized by additional metal where the top half and the bottom half meet and elsewhere. The ‘Ugly 3’ is mis-shaped, though not to a startling extent. On the die employed to strike 1823 ‘Ugly 3’ halves, in areas adjacent to the numeral 3,‘ die metal is missing and hot metal from the planchet (prepared blank) flowed into areas about the numeral ‘3’ while each coin was being struck. Improper punching of the numeral ‘3’ into the respective dies may have caused or contributed to all three of these unusual numeral ‘3’ varieties.

In my opinion, one 1823 is sufficient for a set of Capped Bust Half Dollars. Most collectors feel otherwise and find themselves compelled to include four 1823s in their respective sets. Coins with noticeable differences in numerals sometimes attain the status of ‘distinct dates.’ I just do not find the differences among the numeral threes in these cases to be especially important. I suggest that it makes sense for only collectors of die varieties to be concerned about them.

The one in this auction is certainly one of the finest known 1823 ‘Broken 3’ halves. Indeed, Downey says that the “1823 ‘Broken 3’ NGC MS 66 was more interesting” than the NGC graded MS-66 1809 that I already discussed. “It may be tied with the Overton Plate coin for finest known,” Sheridan declares. The “Overton Plate coin” is the 1823 ‘Broken 3’ coin that is pictured in the Overton reference book on die varieties of half dollars.

This 1823 ‘Broken 3’ is NGC certified “MS-66*,” including a star that is awarded by NGC graders to coins that they maintain have superior eye appeal. Furthermore, it is CAC approved. In my view, its grade is in the high end of the MS-66 range. Indeed, it is an especially appealing coin overall. John Albanese exclaims that it is “gorgeous.”

For some reason, the Numismedia retail guide value of $44,380 did not appear on the online listing for this coin on the Heritage website. Though it is strong, I did not find the price realized of $51,750 to be surprising. Albanese did. John states that this “price is very strong.”

If it is possible, then it may be very difficult to find another 1823 ‘Broken 3’ half that truly grades MS-65 or higher. In the minds of many collectors, this issue has the status of a distinct ‘date.’ After all, a numeral in the ‘date’ is different. While I am not convinced that it should have the status of a distinct ‘date,’ I find the ‘Broken 3’ variety to be much more important than the ‘with bars’ variety of 1809 halves that each include a few irregular bar devices on the edge in addition to the typical lettering.

I emphasize that it is not my intention here to cover all the pre-1840 halves in the Platinum Night session of Jan. 4. I selected some that are particularly newsworthy based upon consideration of their rarity, popularity, unusual characteristics, and/or strength of price realized.

©2012 Greg Reynolds

News and Analysis on scarce coins, markets, and the collecting community #91

A Weekly CoinWeek Column by Greg Reynolds

At the FUN Convention in Orlando, Heritage auctioned around $55 million worth of coins. In addition to a special section devoted to Dr. Duckor’s Saint Gaudens Double Eagles, lead offerings were organized in two Platinum Night sessions, gold coins on Thursday, Jan. 5 and U.S. coins of copper, nickel and silver on Wed., Jan. 4. I have already devoted columns to each of the two coins that sold for $1.38 million, the Eliasberg-Atwater-Jung 1793 Chain Cent and the Garrett-Jacobson 1829 ‘Large Date’ Half Eagle. (As usual, clickable links are in blue.) The topic here is quarters that were offered in the Jan. 4th Platinum Night session. A variety of rarities sold.

Yes, I realize that this auction will not be forever remembered as a landmark offering of quarters. Nevertheless, some of the quarters included are terrific and others are fair examples of relatively expensive quarters that are found in the marketplace. Several of the quarters that I discuss are rarities in absolute terms and almost all are condition rarities.

Quarters are extremely popular among coin collectors and learning about relatively expensive quarters often results in a greater understanding of the quarters that thousands of collectors can afford to buy. Indeed, more than 400,000 people collect U.S. quarter dollars. I trust that many are interested in reading about rarities that they will never buy and may never even have a chance to see. When I was collecting Barber Quarters, I enjoyed reading about Draped Bust and Capped Bust Quarters.

Unfortunately, I just did not have time to view and research all the important coins in an auction that totaled $55 million! I apologize for omitting Standing Liberty Quarters. Draped Bust, Capped Bust, Liberty Seated and Barber Quarters in the first Platinum Night session are covered herein.

I. 1796 Quarters

Quarters featured a Draped Bust obverse (front) design and a so-called ‘Small Eagle’ reverse (back) design in 1796 only. These are among the most famous and popular of all U.S. coins. There were three 1796 quarters in this Platinum Night session. The best of which was one of the stars of the whole auction.

It is one of only five 1796 quarters that is PCGS graded “MS-64.” Like many 1796 quarters, it is semi-prooflike, with appealing reflective surfaces. The natural, mild gray-blue toning is attractive. The devices are lighter in color than the fields and are soothing. The obverse (front of the coin) is sharply struck for a 1796 quarter.

This coin is attractive to very attractive overall and has minimal abrasions. Its grade, in my view, is in the middle to high end of the 64 range. I doubt that any experts were surprised that this coin has a sticker of approval from the CAC.

John Albanese declares that it is a “beautiful, original prooflike coin.” John is the founder and president of the CAC.

Laura Sperber was the successful bidder for this coin, which realized $253,000. Albanese finds this to be “a very strong” price. In my view, it is very strong to extremely strong.

“Given the present market, $253,000 is perfectly acceptable,” David McCarthy suggests. “This the best 1796 quarter that I have seen in two years or more,” McCarthy asserts. David is the senior associate at the Kagin’s firm.

John Brush is even less surprised by the result than is McCarthy and is even more enthusiastic about the coin than I am. “A gorgeous piece that is very high end for the grade,” declares Brush, “arguably the nicest PCGS MS-64 [1796 quarter] you would be able to find. The auction price should not be such a surprise as the coin was truly a monster,” Brush exclaims. He is vice president of David Lawrence Rare Coins.

For a “MS-64” 1796 quarter, the Numismedia.com guide value of “$143,000” may be a little low. I really expected this coin to sell for an amount between $190,000 and $215,000.

In terms of price guides, the PCGS graded “MS-63” 1796 would seem to have brought a weak price in this sale. Experts who carefully examined this coin, however, would not regard the $97,750 price as weak. It is not an impressive coin.

David McCarthy states that “the color on the coin looked unusual. This coin didn’t look desirable to me.” I also had a negative reaction to this coin’s color. I certainly did not grade it as “MS-63.” For this specific coin, the $97,750 price is very strong.

The third 1796 quarter is not gradable. There are many other non-gradable 1796 quarters that I find to be more desirable than this one. The surfaces on this coin are upsetting. It was authenticated and encapsulated by experts at the NGC who determined that it has been “repaired” and “whizzed.” Furthermore, I detected other issues. It is said to have the “details” of a “Very Fine” grade 1796 quarter. The price realized of $14,950 was moderately strong, as it is not unusual for a Very Fine “details” coin to bring a price commensurate with a Good-06 to Very Good-08 coin that is gradable.

McCarthy’s interpretation is different from my own. He finds that this not gradable 1796 quarter is “not that bad” and that “$14,950 is reasonable. [This 1796 quarter has] a lot of detail, though it clearly had some work done, [including that] the drapery was re-engraved. It is okay for what it is,” David finds. “It has the details of a VF-35 or better. There is a lot of meat and detail for under twenty grand on a 1796 quarter. We are penalizing ‘problem coins’ a lot more now than was done in the past,” McCarthy adds.

It is true that a problem-free Very Fine-35 grade 1796 quarter would have a retail value above $40,000. Someone might be very happy paying $14,950 for this one.

II. 1804 Quarters

Quarters dating from 1804 to 1807 have a Draped Bust obverse (front) along with a Heraldic Eagle reverse (back) design, which is sometimes called the ‘Large Eagle’ design. Though not nearly as famous or nearly as rare as 1804 dollars, and of a different species, 1804 quarters are rare and famous. Indeed, 1804 quarters are strongly desired by collectors.

Three 1804 quarters were offered in the first Platinum Night session. The first is NGC graded ‘Very Fine-30.’ I did not spend a lot of time viewing this coin, just a few seconds. It is probably okay. The price realized of $14,950 is fair to strong.

The second is NGC graded “AU-50.” It did not sell. A bid of around $40,000 would have been required to buy it. While in terms of price guides or past auction records, $40,000 might seem to be a low level for this coin, experts who have seen the coin might figure that this coin is not even worth $40,000. It has ‘issues,’ in my view.

The third 1804 quarter is one of the stars of this auction. The Pittman 1804 is especially famous and important. John J. Pittman formed an epic collection, which was auctioned by the firm of David Akers from 1997 to 1999. In 2012, the Pittman 1804 sold for $149,500, which John Albanese regards as a “very strong” price.

The Pittman 1804 is attractive plus and its toning is definitely natural. Furthermore, this quarter has very few contact marks. If it did not exhibit some moderate friction on the highpoints, it would grade MS-63 or MS-64.

The Pittman 1804“was one of the coins that I liked best in the sale,” McCarthy remarks. “That coin was original and charming. I was [bidding] more than $125,000 for it. I was not surprised that it brought what it brought. You just do not see coins that look like this very often,” David exclaims.

III. ‘Large’ Capped Bust Quarters

Capped Bust Quarters, with the Latin phrase ‘E. Pluribus Unum’ on the reverse, were struck from 1815 until 1828. This phrase is not easy to translate. I suggest ‘From Many Emerged One,’ and that it was a tribute to the independence, unification and growth of the United States. The first type of Capped Bust Quarters was struck from 1815 to 1828, and this type is often referred to as ‘Large Size’ or as ‘Large Diameter.’

In this Platinum Night session, there were two 1818 quarters with normal numerals. The Eliasberg 1818/5 overdate quarter was in this auction as well. It did not sell because the reserve was unreasonable. The Eliasberg 1818/5 is an excellent coin.

The first 1818, with normal numerals, is NGC graded “MS-65.” This is a coin issue for which PCGS certified and/or CAC approved coins tend to be worth considerably more than NGC graded coins without CAC stickers. Even so, I really like this specific coin.

I have seen this coin at least four times in four different years, assuming that the pedigree listing by the Heritage cataloguer is accurate. Unfortunately, I do not have immediate access to my copy of the catalogue for ANR’s auction of Oliver Jung’s type set on July 23, 2004. In any event, I do remember seeing this exact same coin in August 2011, shortly before Heritage auctioned it for $14,950 in Chicago. I liked it a lot then, too. It is a very attractive coin.

Light hairlines are present on the surfaces, though are hard to see. One short medium abrasion is not a really big deal, though it is a little annoying. All the imperfections are consistent with a 65 grade.

The toning on this NGC graded MS-65 1818 is natural and is very appealing. The gray inner fields are nicely balanced by green outer fields. Patches of orange-russet and touches of blue blend in well. If this coin was ever dipped, it was many decades ago.

At $16,100, this coin realized more than other NGC graded “MS-65” 1818 quarters in past auctions. A year ago, Heritage auctioned a different one for $15,525.

The next lot sold on Jan. 4, 2012 was a PCGS graded “MS-65“ 1818 with a CAC sticker. It brought $33,350, a very strong price.

This PCGS graded 1818 may have the surface quality of a 66 grade quarter. It is not quite very attractive and certainly does not have the eye appeal that most experts would associate with a 66 grade Capped Bust Quarter. I would hope that it does not upgrade, though my guess is that s few serious bidders were probably thinking that it might upgrade.

The greenish tones are appealing as is the underlying luster. This PCGS graded 1818 brought more than the PCGS retail guide value of $32,000 and more than relevant auction prices in the near past. It is (or was) in a pre-1990 PCGS holder and may be fresh. A coin is ‘fresh’ if it has not been publicly offered, notably in the mainstream of the coin business, for more than five years.

The 1820 quarter in this sale is noteworthy. It is PCGS graded “MS-65” and has a CAC sticker. Further, it is one of the highest certified 1820 ‘Large 0’ quarters. The zero is literally large and this variety tends to have the status of a distinct ‘date.’

This 1820 quarter did not sell. There were no bids above $37,375, so the reserve was effectively at least this high. The corresponding value in the PCGS price guide is $35,000. The NGC Coin Explorer values a “MS-65” grade 1820, with a ‘Small 0’ or a ‘Large 0,’ at $34,380. Was the reserve for this coin unreasonable?

“I really like the coin a lot,” John Albanese says. “I know it was dipped, but it was a really nice coin. The reserve just a little too high,” John adds.

Although I am a strong supporter of the CAC and I usually agree with Albanese, I feel compelled to dissent in this case. This coin has a few significant hairlines here and there, which I find to be annoying. More importantly, this coin was substantially dipped (immersed in an acidic solution) not long ago and has a very awkward appearance. While it merits a MS-65 grade in terms of the grading criteria employed by the PCGS or the NGC, I really do not like it. Please see my three part series on appreciating naturally toned coins (part 1; part 3). This 1820 may become more desirable after it naturally retones to a considerable extent.

The 1821 quarter in this auction is not fresh, though it is an appealing, naturally toned coin. I have seen it in two or three previous auctions, in recent years. While it is NGC graded “MS-67,” my guess is that experts at the PCGS would not grade it as MS-67, and I doubt that the CAC would approve it. Even so, it is a pristine gem coin and a very important ‘Large Size’ Capped Bust Quarter.

The NGC Coin Explorer and Numismedia.com value an 1821 at “$89,380” in “MS-67” grade and at “46,150” in MS-66 grade. This coin sold for $40,250 at this auction.

While $40,250 may seem to be a weak price to a collector who followed the auction from home, the result is not weak and makes sense, in my view. Despite the fact that the holder indicates a “MS-67” grade, this coin really grades “MS-66” and the auction result is in accordance with the underlying reality. If it were certified as grading “MS-66,” I would be enthusiastic about the coin and its holder.

Matt Kleinsteuber asserts that this 1821 is “a gorgeous, original type coin and a wholesome value.” Matt is the lead grader and trader for NFC coins. I agree that this coin scores extremely high in the category of originality and is an excellent value at $40,250.

IV. ‘Smaller’ Capped Bust Quarters

I prefer not to refer to the second type of Capped Bust Quarters as being ‘small.’ The diameter was just slightly reduced to approximately the diameter of currently produced quarters. From 1831 to 1838, quarters feature a noticeably different Capped Bust obverse design and a reverse design that does NOT include this Latin phrase, E. Pluribus Unum, which is sometimes called a ‘motto.’ Clearly, the quarters of 1821 to 1828 and those of 1831 to 1838 are two different design types.

The 1831 quarter in this auction is PCGS graded MS-65 and has a CAC sticker. Albanese remembers this coin. “It has been dipped. If you like bright Washington Quarters, you would like this coin, a blazer. This is a good choice for someone insisting on bright white coins,” John points out. In my opinion, it looks awkward.

It certainly brought a strong price, $25,300. This exact same coin realized $24,150 at the Heritage Platinum Night event during the Summer 2008 ANA Convention, when markets for rare U.S. coins, in general, peaked. Since 2009, there has been increased interest in rare gold coins and demand for many rare silver coins has lagged. The fact that this coin realized a higher price in 2012 than it did at the peak of a long and tremendous boom in rare coin markets is curious.

The next coin, an 1838 Capped Bust Quarter, was auctioned twice in 2006, for $13,800 and $19,500 respectively, according to Heritage cataloguers. It sold for $32,200 on Jan. 4, 2012, which is a very strong price.

Like the 1831 in this auction, the 1838 quarter is PCGS graded MS-65 and has a CAC sticker. I am much fonder of the 1838 than of the 1831. In my view, this 1838 is attractive to very attractive, is technically strong with minimal abrasions, and has pleasantly, naturally toned. Its grade is in the middle of the 65 range.

John Albanese declares that the 1838 is a “very tough date in gem. This is one of the better 1838 quarters that I have ever seen. [It is] ten times rarer than an 1831 in MS-65 and higher grades,” Albanese notes.

V. Liberty Seated Quarters

Liberty Seated Quarters were minted from 1838 to 1891. There are a few subtypes. There were six Liberty Seated Quarters in this Platinum Night session. In contrast, there were eleven Liberty Seated Dimes and more than twenty Liberty Seated Half Dollars in this auction session.

The 1843-O quarter in this session is newsworthy because it features a ‘Large O’ mintmark. The ‘O’ for New Orleans is much larger on a small percentage of 1843-O quarters. Some collectors are willing to pay a substantial premium for a large ‘O.’ In the minds of most collectors, however, the ‘Large O’ variety does not have the status of a distinct date. The 1854 ‘Huge O’ issue is much different, as the ‘Huge O’ was hand engraved rather than punched into the die. Generally, mintmarks were punched into dies.

A PCGS graded “AU-53” 1843-O with a regular ‘O’ would be worth less than $1500. This coin sold for $8,050!

This is an extremely strong price. The $8050 result seems to include more than a $6500 premium for a variety that is not widely discussed and is ignored by most collectors of Liberty Seated Quarters. It is unlikely that anyone honed in on this specific coin for other reasons. It does not have great surfaces. Is the $8050 result an auction record for a circulated 1843-O quarter?

The 1853 Arrows & Rays quarter that is PCGS certified “Proof-63” really requires a separate discussion. It sold for $39,750, an amount that is higher than I expected it to bring.

The 1854 quarter in this sale is, indisputably, a Proof, though it is just not an exciting coin. It is PCGS certified ‘Proof-64.’

McCarthy refers to it as “a reasonably attractive coin.” I thought that it just barely makes a 64 grade, perhaps it merits a grade of 64.2. The $13,800 result was unsurprising.

I did not take the time to closely inspect the 1858 that is NGC certified ‘Proof-66’ and has a CAC sticker. John Albanese regards the $12,650 result as a fair market price.

There were two 1859-S quarters in this auction, each of which is PCGS graded “AU-50.” The 1859-S is one of the key dates in the series of Liberty Seated Quarters, especially of the ‘No Motto’ type.

The first 1859-S is vastly superior to the second. The first did not sell. My impression is that a bid of at least $18,400 (=$16,000+15%) would have been required to acquire it. The second sold for $16,100, an extremely strong price, given the nature of this specific coin. It would have made more sense, in my view, to pay $18,400 or a little more for the first rather than $16,100 for the second 1859-S.

VI. Barber Quarters

This auction contained a small, though important, group of condition rarities of better-date Barber Quarters. An 1896-O is PCGS graded ‘MS-66’ and has a CAC sticker. It brought $17,250, less than the $20,700 that the Eliasberg-Duckor 1896-O realized on July 31, 2009 in Los Angeles. If my memory serves fairly, the Eliasberg-Duckor 1896-O is a much better coin. The consignor was lucky that this 1896-O realized $17,250.

John Brush disagrees and he is very enthusiastic about this 1896-O. “Only two CAC [approved MS-66 1896-O quarters] are known with one MS-67 higher,” Brush emphasizes. “We [at DLRC] were an underbidder on this coin and thought it was extremely nice. The date is under-rated compared to other pieces as they just don’t come available in auction or privately. We thought that this coin sold reasonably for the quality that it represented,” Brush maintains.

In contrast, Albanese regards the $17,250 result as a fair market price, neither strong nor weak. It is a greater amount than I expected this 1896-O to bring.

The 1896-S is scarcer than the 1896-O. Indeed, the 1896-S is one of the three key dates in the series of Barber Quarters. The 1896-S in this sale is one of nine that is PCGS graded MS-65 and it is one of only two CAC approved MS-65 grade 1896-S quarters.

This 1896-S brought $47,437.50. Albanese reports that the CAC bid or would have bid around “$46,000” for this coin. Brush likewise reveals that DLRC was “an underbidder on this piece and thought that the coin was quite nice. We think that gem Barbers are great coins, especially with the CAC sticker,” Brush states.

As for the 1900-O in this auction, I disagree with the certified “MS-67” grade. The $15,525 result is very strong for this specific coin. If it were a more impressive coin, it would have sold for much more.

My favorite Barber Quarter in this auction is the 1905-O. It is PCGS graded MS-66 and is CAC approved. It is very attractive plus, with really neat natural toning. Indeed, the colorful appearance of the reverse is terrific.

John Brush reveals that DLRC “bought this” 1905-O. “With only four certified by CAC in this grade, and none higher, this date seems to be a good value in the series and we were excited to actually win this item. We have not tried to place the coin, but we like buying O-mint Barber Quarters in near finest known grades in the series, especially with CAC stickers,” Brush explains.

Also, Brush asserts that the “overall attractiveness” this 1905-O quarter is “not evident online.” I very much agree. Connoisseurs of Barber coinage would really enjoy tilting this coin under a light. It is enticing. The $8625 price is weak.

Brush and Kleinsteuber both like the 1906-O that is NGC graded “MS-68.” It sold for $14,950. “The coin was nicely original and in hindsight, I wish we had bid more on the piece,” Brush says. Matt Kleinsteuber emphasizes the aesthetic characteristics of this coin, “absolute pristine surfaces, [with] amazing hues of green and russet-red, a wonderful coin.”

I, too, very much like the toning on this 1906-O. In my view, however, its grade is just MS-67. The $14,950 result is moderate to strong.

The 1913-S is scarcer than the 1896-S. The 1901-S, the 1913-S and the 1896-S are the three keys to the series of Barber Quarters.

The 1913-S in this sale is exemplary. It is very attractive, with mellow natural toning. Further, it has minimal abrasions. The price realized of $25,300 is almost strong.

I did not see the Proof 1915 quarter in this first Platinum Night session. It is PCGS certified ‘Proof-67 Cameo’ and CAC approved. Matt clearly remembers it, “monster color, just beautiful!” This 1915 went for $16,100, a very strong price.

The assortment of scarce and rare classic quarters in this auction is memorable. I enjoyed viewing and writing about them. Next, I will cover half dollars that sold in this Platinum Night session.

©2012 Greg Reynolds

By Jim Kingsland for Certified Assets Management International
A CoinWeek Content Partner

In March, 2011 I took the pro silver side of a gold/silver debate in CoinAge Magazine on which metal would outperform on a percentage basis in 2011. My positive silver ideas were empowered by the freight train momentum that developed early last year for silver that eventually shot silver to within a hair’s width of closing above $50 in late April.

Obviously, my bullish outlook was destroyed thanks to the series of margin hikes that were implemented by the Chicago Merc. I’ll say it: When the real owners of the market (various giant banks), with their massive short positions in silver were about to be shellacked, the silver bulls had to be neutered (of course they and I forgot about the possibility of not one or two margin hikes, but of many margin hikes). Yes, you could argue that slower world economic growth, even good old profit taking chilled the price of silver, but those margin hikes in and of themselves are what led to the collapse of silver from its 2011 high.

In 2011, silver fell 7 percent, while gold rose 10%. While I am no longer going to take an official bullish, or bearish stance on silver, let’s say I am waiting for the opportunity to pick up MS state generic Morgan dollars (those beautiful silver coins from the late 1800′s to the early 20th century) in the $25 range. The coins should either be certified by PCGS, or NGC and encased in plastic holders. You can do the math, but I will do it for you. Since there is a slight premium for Morgans to the spot silver price, at the present $27.78 spot price, to get my $25 buy price on Morgans will require action that my bullish friends won’t enjoy. This bottoming process could take some time to play out, but who knows.

My thought is to have nothing to do with silver futures, or SLV and pick up the real thing on further dips as some very cheap insurance, not as a way to game a new silver bull market, but has a hedge. Forget about the silver to gold ratio for now. Yes, it’s out of whack historically, but then again this isn’t a late 19th century bi-metallist society that we’re living in. We are living in a deranged system where everything, including these metals, are priced in the ever vanishing power of the paper dollar (which is masked by what everyone focuses too much attention on – that dollar index). Forget about the kook internet reports of physical silver being priced well above the spot paper price. Little old me as a coin dealer can still get silver for about $1 over spot and lots of it, not just a few ounces.

The rumors of a physical shortage of silver is a sales tactic aimed at getting ignorant people to pay a big premium to the hucksters. Forget about all of the claims that silver will become so rare soon that it will be rarer than gold. That one leaves me speechless. The tall tales are fun, but none, NONE have kept silver out of an ongoing downward trend. The best apologists for silver in the business have been largely ineffective. For now, the silver market is muddled and will remain so, so long as the CME and its margin hikes remain. Funny that they haven’t since removed the hikes, now that things have calmed down. But I digress.

Insurance to offset the collapsing paper ponzi system – now that’s not so crazy. We buy insurance for all sorts of potential negative events. I believe that one day silver will become far more valuable than it is now, but let’s not be so anxious for that to happen. When this dog called silver eventually has its day, there will be many other things to be worrying about (eg. securing supplies of food, etc). Silver, and gold for that matter, should be accumulated by people who have an understanding about the monumental shift that’s taking place. What would that be? The coming end to fiat paper, back to hard money. This has happened before in society. It is unlikely to be pleasant. There are many who have admitted to me that they want nothing to do with silver, or gold – that they have faith in the present system. I am fine with that, though they register in my mind as the sitting ducks class. Lol.

By Mark Ferguson for CoinWeek – MFRareCoins.com

There have been three major trends driving the coin market during 2011 that are continuing to influence the market into 2012. All three of these trends are economically driven.

The most influential of these trends has its roots deep within the global economy. It’s the global debt bubble. Here in America that debt load reaches from individuals to municipalities, county governments, state governments, and finally the Federal government. And sovereign debt, as we all know, is in crisis mode around the globe.

As a result, gold has been a hot commodity throughout 2011 and during prior years. Many financial professionals even refer to gold as a currency. Silver has also been considered a financial metal, in addition to its industrial utility, and routinely follows the market trend on the heels of gold. Although, we’ve seen some divergence in the short-term market trends between these two metals as the gold market has reacted to economic crises, especially as its price has climbed during 2011, as shown in the charts below. This divergence is illustrated as the gold price was driven to comparatively loftier levels than the silver price during the July to August period when Congress found itself in a stalemate over raising the debt limit.

Gold began 2011 at a closing price on the London exchange on January 4 at $1,388 and ended up the 2011 year at a closing price of $1,531 on December 29. In the interim it reached a closing price of $1,895 on two consecutive days, September 5 and 6, after breaking through the $1,900 benchmark in intraday trading. The low price for gold during 2011 was a closing price of $1,319 on the London exchange on January 28.

Silver started 2011 at a London closing price of $30.67 on January 4 and ended up at a closing price of $28.18 on December 30. During the interim in 2011 silver reached a high closing price on the London exchange of $48.70 on April 28, after coming within cents of its all-time high price earlier in the day. The 2011 low was $26.16 on December 29. The silver price showed strength from mid-July to mid-September by remaining in the low $40s during that time, while the gold price continued to advance to its all-time high of around $1,900.

But those are just short-term trends. Below are charts of the gold and silver prices from January, 2000 to the present. Clearly, these two metals are in a long-term price trend that’s rising. You can see how silver prices are traditionally more volatile than gold prices. Of course, when investing in these metals, it’s difficult, if not impossible, to pick the short-term highs and lows at which to buy and sell. I urge my customers to go with the long-term trend. Don’t buck the trend. Don’t try to outguess the market. Dollar cost averaging, by purchasing at various price levels over a period of time, is often used by some of my customers to even out their costs when buying.

So, what does all this mean to the coin business? It has meant much more business for coin dealers, but higher prices for collectors who collect common date coins that are heavily influenced by gold and silver prices. On the other hand, many collectors have used these price advances as opportunities to cull out some of their common gold and silver coins and use the proceeds to purchase more expensive collector coins they’ve always wanted, but couldn’t afford.

The higher prices have also brought out into the market lots of accumulations of coins the general public has had stashed away for decades. And along with the gold and silver coins the public has sold to coin dealers have been coins of better date “collector coins.” Some better date silver coins have gone into the melting pot, as their collector values have been exceeded by their silver values. But a lot of these kinds of coins have wound up in coin dealers’ inventories.

And this illustrates another major trend in the coin hobby. Except for some die-hard collectors who have solid jobs, middle class collectors have been largely cut out of the collecting market. Job losses, debt reductions, and general caution over spending have curtailed their coin collecting activities, and some established collectors have had to become coin sellers, instead of coin buyers, for the same reasons. This trend has resulted in soft prices and lower sales for many collector coins regularly purchased by the middle class – which is the majority of people.

So if it wasn’t for all the increased business in the precious metals area, many coin dealers probably would have been forced to close up shop during the past two or three years. Instead, most dealers have had very good years in business during that time.

However, on the high end of the coin market, business has been brisk in selected areas. Investors looking for alternatives to main stream investment vehicles have been buying high end rare coins, including “trophy rarities,” in which to park some of their money.

A great example of this is the 1787 Brasher Doubloon, with the “EB” punch on the eagle’s breast, which sold for $7.395 million at the end of 2011. This is now the third rare coin that has sold for more than $7 million. The first was back in 2002 when a famous 1933 $20 Saint Gaudens gold coin sold for $7.59 million. It’s the only example of this coin issue that the U.S. government has legally allowed to be privately owned. The third coin ever to sell for more than $7 million was a 1794 silver dollar, believed by some numismatic researchers to have been the first silver dollar struck at the U.S. Mint. It brought $7.85 million during spring, 2010.

Of these three sales, the recent Brasher Doubloon sale has best demonstrated how much great American numismatic rarities have appreciated in price during the past several years. I’ve been writing regular major market reports about the U.S. coin market for the past decade or more, for several publications, and in doing so I’ve observed these transactions and have knowledge about the backgrounds of some of these coins and have talked to some of the principals involved. I know most of them well and do business with them. This Brasher Doubloon, one of just two pieces known, but also unique in its own right, is one of the most important coins in American numismatics, and for that matter, is also one of the most important coins in world numismatics.

Of the other two coins mentioned above, the 1933 $20 Saint Gaudens coin came from Europe when it surfaced, just a few years before its famous 2002 public auction sale in which the U.S. government participated – an interesting story to search for if you’re not familiar with it. These 1933 $20 gold coins were illegal for Americans to own and some numismatists believe this 1933 $20 is the famous King Farouk specimen, sold during the 1940s. Previously, it could not have been sold publicly, as it was in 2002, because of the risk of confiscation by the U.S. government, until it became the only example of this coin issue to be declared legal to own. So a previous price was never established in which to compare the 2002 sale.

Similarly, the 1794 silver dollar mentioned above was thoroughly researched by the seller and is believed to be the first silver dollar ever struck at the U.S. Mint. It was given the status and grade of “Specimen-66” by PCGS, and previous to its sale, it was extensively exhibited by the owner who has referred to this coin as a national treasure. Reportedly, the seller purchased it several years before the 2010 sale for “millions of dollars,” but its status had been elevated during the time he owned it, making it difficult to compare its price appreciation with the coin’s previous status.

So, the recent sale of the Brasher Doubloon for a reported $7.395 million, with the Ephraim Brasher “EB” punch on the breast, as compared to the other example which has the punch on the wing, is most important in illustrating the trend of the market for trophy rarities because it is a coin that has been known for years and has been exhaustively researched. It has not had a change in status like the other two important coins mentioned above have had. This doubloon was last sold at public auction during January, 2005 for $2,990,000…and now for $7.395 million in a private transaction.

So what are the people who invest such large sums of money expecting when they buy these trophy rarities? First, such buyers aren’t just freely throwing their money around, like the proverbial rice after a wedding ceremony. Negotiations for such rarities are usually well thought out, and sometimes tricky. Secondly, buyers expect these coins to at least hold their values, but hopefully to appreciate. They are looking for investments that are alternatives to risky mainstream investments, and these buyers are often expecting economic inflation during the next several years. And thirdly, another consideration taken into account is the vast price differential between these high end numismatic rarities and record-selling works of fine art, which are now bringing more than $100,000,000 on the high end.

While the coin market probably won’t see those nine figure price levels anytime soon, the reasoning is…there’s huge potential for the price of famous American numismatic rarities to close the gap with fine art, even by a comparatively small margin. Therefore, is it possible that some of the great American numismatic rarities could become worth $25 million or more, for example? Absolutely!

by Louis Golino for CoinWeek

This is the second part of my year-end review and outlook for the coming year. The first part addressed the numismatic market. This one covers precious metals.

Bullion market

2011 has been a roller coaster of a year for precious metals. This article only addresses gold and silver, but it is also worth keeping an eye on platinum, which I believe is undervalued at today’s $1400 level.

Silver came very close to reaching its 1980 price of $50 per ounce in late April, but has declined 40% to $29 since then.

Gold hit an all-time high of $1920 on September 6*, but since then its price has usually been in the $1600-1700 range, and many analysts believe even lower prices are coming.

As of now, for the year gold is up 12%, while silver is down about 5%, and equities are basically flat for the year. Despite all the sound and fury about gold being a bubble that has burst, it continues to be the best-performing asset class, as it has for the past decade.

A lot of the recent price decline in gold is due to dollar strengthening, as investors seek the perceived safety of U.S. Treasuries at a time when the European crisis seems to loom larger every day. To help put things in perspective, in euros the price of gold is only 100 euros off its all time nominal high reached in September (1300 to 1200).

For the year that is finishing, the key questions in the precious metals realm are: Why did gold decline sharply after hitting its all-time high in August? Second, why is gold apparently no longer viewed by many investors as a safe haven asset? For silver, why did it fail to surpass $50 this past spring and decline by 40% since then?

Looking foward, for the coming year, the main questions are: Where is gold’s price headed? Is it moving towards $1500 or less as the bears predict, or will it reach new highs in 2012? And will silver continue to hover where it is now, or even decline to $20, especially if the economic recovery falters? Or will it hit new high well above $50, as silver bulls predict?

A series of macro-economic factors will help shape precious metal markets in 2012, including: the European debt and banking crisis and the possibility of European quantitative easing, what happens to the U.S. economy, the value of the dollar; and prospects for further quantitative easing in the U.S. Each of these factors is intertwined with the others.

Gold

Some analysts have begun to speculate that either the European Central Bank, or the Italian government, might liquidate some its gold to raise funds to increase liquidity, especially if the bond vigilantes continue to try to raise the cost of borrowing for Italy to unsustainable levels (over 7%). Italy will need to refinance many billions in government debt in 2012.

Italy currently has the fourth largest gold reserves in the world.

While I would not rule out the possibility of Italy selling some of its gold, I believe it is more likely that we will see increased buying of gold by central banks for asset diversification.

China, despite all the headlines indicating it is buying and mining precious metals as fast as it can, continues to hold all but 2% of its foreign reserves in dollars, as noted recently by Brent Arends in http://www.marketwatch.com. If the world continues to lose faith in the long-term prospects for the dollar, China is virtually certain to shift more its foreign reserves into gold.

A senior Chinese central bank official made just this recommendation the day after Christmas. That would be a major market mover for the price of gold.

Other countries’ central banks, including those in India, Russia, and Malaysia, have added to their gold holdings this year.

In 2012 the ongoing European debt and banking crisis is likely to put pressure on the price of gold, which may seem counter-intuitive. But as I explained in the fall, gold’s role is changing.

What has changed in gold this year is that it is now seen as a risk asset, like equities, rather than a safe haven to flock to when riskier assets are down.

But the long-term fundamentals, most analysts agree, remain very bullish, especially since governments around the world lack effective tools for dealing with the economic crisis and are likely to continue using the main tool left: currency devaluation, which reduces the value of a country’s debt, but also raises the prospects for future inflation.

Moreover, supplies continue to be constrained by the cost and difficulty of finding new deposits, and demand is strong, especially in Asia.

In the short-term, European economic troubles could result in more selling pressure on gold, but 2012 is expected to be (finally) the year of reckoning for Europe. The European Central Bank is likely to be forced to print money (quantitative easing) to monetize the debt of European countries, and this should eventually push gold over $2,000.

Silver

For silver, a different set of dynamics will play out.

Continued economic slowdown would clearly put a damper on silver prices, but silver is a hybrid metal, both industrial and precious. If the gold market reaches new and sustained highs, it is likely to bring silver along with it.

A major wild card is possible resolution of what Kitco has called “The Great Silver Debate.” That is a reference to the idea that silver prices are manipulated by the U.S. government working with large banks involved in the metals trade to suppress prices through techniques such as frequent margin hikes.

Silver bulls believe firmly that a day of reckoning is arriving in which the true extent of silver shortages will be revealed, but it is hard to say when that will happen.

Silver did not decline by 40% since late April because demand for it declined. In fact, demand for silver remains very strong, as seen in the record-number of American silver eagles sold this year and tight supplies at silver bullion dealers.

It is the disconnect between the physical and paper markets; repeated margin increases; and the need to cover losses in other trades that explain silver’s decline. In particular, paper silver speculators got spooked by silver’s wild ride after April, while large institutions have had to sell metals to raise capital. But long-term physical investors have continued to take advantage of low prices to add to their holdings.

According to Paul Tracy of http://www.seekingalpha.com, 25% more silver is consumed than mined every day. Even if one accounts for silver recycling, the shortage of silver in the world should eventually drive silver a lot higher, probably well over $100 per ounce.

Silver also seems very undervalued now since according to Mr. Tracy, silver is 17 times more abundant than gold, but one can buy 54 ounces of silver for an ounce of gold.

Lessons of 2011

Overall, I remain bullish on precious metals for the long-term based on the fundamentals of supply and demand. But we also were reminded in 2011 how imperfect the precious metals market is, and how much it is shaped by macro-economic factors, regulatory regimes, and the performance of other asset markets.

So it would be prudent not to assume that there will be a direct correlation between global economic turmoil and the price of gold and silver, in which investors flock to metals for safety. We have learned that things are more complicated than that.

Happy New Year to CoinWeek readers!

*In my December 23 article on the coin market, I said gold hit an all-time high of $1906 on August 22. This was based on a chart I found at Kitco, but the correct date and figure are $1920 on September 6.

Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

by Adrian Ash
BullionVault
Tuesday, 20 December 2011

Cheer up! This permanent state of emergency is doing a wonderful nothing to unwind the bubble…

SO 2012 will mark the fifth anniversary of the global financial crisis. There’s little reason to think it’s reached its end yet. Merry Christmas.

Banking and household leverage in the rich West has barely ticked lower from the credit bubble’s historic peak of 2007. Financial leverage has only been reduced by a fraction, while governments have been stuffed like a French goose with that new debt spurned by the private sector since 2008.

So why this slow, seemingly permanent pain? Because interest rates are still set at zero, with no uptick in sight – an emergency measure that’s now etched in stone. “There is a lot of financial stress out there,” the UK insolvency specialist Begbies Traynor moaned last week. “[But] if it wasn’t for low interest rates the number of insolvencies would have been twice what they are.” Twice as many debtors would have enjoyed a write-down, in short. But do you really think their creditors sleep any better knowing what’s keeping debtors in debt?

The gambit of low rates – first played in mid-2007 and now stuck – comes from studying the Great Depression of 80 years ago. If only the US Federal Reserve had slashed rates to zero, then today’s central bankers could have avoided the deflation of their grandparents. Low teaser rates under Alan Greenspan have thus become permanently low revolving rates under Ben Bernanke. Which is where the mechanics of this depression stands apart from the downturn of, say, 30 years ago.

Back then, central bankers imposed deflation by hiking short-term interest rates towards 20% per year. Today the credit crunch is priced into the weakest balance-sheets only, and in the interbank lending market, where liquidity has vanished again in 2011. Contrast with the early 1980s’ depression, when bond yields badly lagged policy in forcing through the deflation. Ten-year US Treasury yields, for instance, broke into double digits 10 months after the Federal Reserve’s overnight target rate breached that level. It wasn’t until 1983 that the curve reverted to normal, with 10-year bonds offering a higher rate of return than overnight credit held at the Fed.

The impact of this policy-driven deflation? A rise in the Dollar so strong – both in real purchasing and forex conversion terms – that it unwound all of gold’s plunge for non-Dollar investors.

That we’re living through deflation again today is plain, no matter how far the Fed and other central banks string it out. A deflation in credit, asset prices and economic activity. A deflation that doesn’t need shop prices to fall; it’s still “a deterioration of the monetary standard”, this one characterized by volatility as much as deleveraging, but also squeezing debtors every time the Dollar rises.

That in turn is squeezing creditors, of course, now terrified of default and writedowns but so far spared the actual pain. The worst of all possible worlds results. No new investment, because lenders won’t lend and debtors won’t borrow. No write-down or write-off of existing debt, lugging a permanent drag onto economic activity. And meantime the Dollar remains money the world over, proving last decade’s Cassandras early, wrong or just stupid.

Call me all three if you like; the last thing the world wanted pre-2007 or today is a rising Dollar. Not the US, China, Europe or anyone else. So just to screw the most people the most, that’s what we keep getting. But only in fits and starts. Which like the wonderful nothing achieved by zero interest rates, might just be the very worst we could ask.

Plenty of chart analysts and media hacks will tell you today that the price of gold just broke below its 200-day moving average. The smarter ones will add that it fell through the uptrend starting with the great deflation of Lehman’s collapse, too. But only in US Dollar terms, we note here at BullionVault.

Look at gold ex-the Dollar – as our bright orange line does above. The Dollar devaluation, forced through by Ben Bernanke cutting in line and slashing rates faster than anyone else in 2007-2008, worked such magic that non-Dollar investors are now – to date – wearing a much shallower top-and-drop pattern in gold so far.

This might matter. Because gold has outperformed all other assets (and very nearly all mutual and hedge funds too) since the eve of this crisis. Most people thank the inflationary response of central banks everywhere. A handful think gold’s rise might instead be due to bullion offering the perfect deflation escape – a route to extricating yourself from the debtor/creditor relationship underpinning the vast bulk of alternative homes for your savings.

Either way, a Dollar rally is rarely good for the gold price. And no one, least of all the Bernanke Fed, wants to allow a persistent Dollar rally on their watch either.

Adrian Ash
BullionVault

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Commentary By Louis Golino for CoinWeek

In a recent online comment Numismatic News editor David Harper suggested that it was time to “dial down the rhetoric” when it comes to how coin collectors view the Mint.

Mr. Harper asked “Has Mint bashing simply become a form of social greeting among collectors for whatever the problem there happens to be?”

I found this to be a very appropriate comment at a time when virtually everyone thinks the Mint screwed up the launch of the 25th anniversary American silver eagle set.

The numismatic community – coin collectors, coin dealers, and the coin media – has been almost unanimous in its condemnation of the U.S. Mint’s handling of this program.

What bothers me is that a sense of balance is generally missing from the harsh language most collectors use when discussing the Mint’s handling of these coins.

For example, a couple of weeks ago Coin World devoted an entire page to comments from editor Beth Deisher and a guest columnist as well as another page of letters to the editor to all the problems with the Mint’s launch of the anniversary set. The same type of comments appear in countless online coin forums and blogs.

I also made some similar points in some of my articles on these sets such as this one
[http://www.coinweek.com/category/news/expert-columns/louis-golino/].

Most people readily make all kinds of harsh statements without balancing out their view with something more positive, which is what I have always tried to do.

Moreover, a lot of collectors seem to think that if only the Mint were privatized, all would be well with U.S. coins.

But I suspect that privatization would create as many problems as it would solve, and I highly doubt that it would be the panacea many seem to think it would be.

In this case the commenters in Coin World almost never state the most important point about the anniversary sets, which is that they are gorgeous and beautifully displayed in cobalt blue hard plastic boxes. How about giving the Mint some credit for issuing a top-notch product?

In fact, quality control for this set was so good that an unusually high number of coins are receiving mint state and proof 70 grades.

As a result, prices for 70 coins and sets are dropping fast. Reverse proof 70′s that were selling for $800 recently can now be obtained for less than $500 on e-Bay.

On the other hand, numerous collectors have reported receiving sets with damaged coins, coins outside capsules, etc. The sets should have been packed with some kind of material to prevent these problems from occurring.

I contacted the Mint about this issue and was told that it is looking into it, but I have not heard anything yet.

Moreover, the Mint did not have to issue this set, and many people expected it to wait another five years until the 30th anniversary of the silver eagle series.

The majority of people who comment on the Mint’s handling of this set agree that it would have been more appropriate to have a household limit of one, or perhaps two to three sets.

But beyond that, there are no clear answers as to how the set’s launch could have been better handled.

If the Mint’s web site had already been upgraded, an even quicker sell out would have been assured.

I have given it more thought, and I now tend to agree with the view that the playing field was actually pretty level on this one provided you were persistent.

To be sure, one needed to be able to devote the entire afternoon to ordering these sets and high speed internet was essential.

Some collectors seem to think they were entitled to a set because they are long-time, devoted collectors of the series.

A lot of disgruntled collectors have suggested the Mint issue more sets. Mint officials recently stated that that is not going to happen.

According to an article from the issue of Coin World posted online on December 12, the Mint settled on the 100,000 mintage limit as a result of inventory and production issues.

On Dec. 8 Mint spokesman Michael White said that the mintage limit was based on many issues “including reserving sufficient blanks for the anticipated high demand of the 2011 September 11 National Medals, and production capacity at our facilities, especially at Philadelphia where both the American Eagle Silver Reverse Proof and 2011 September 11 National Medals are minted.”

Mr. White also reiterated that the Mint is undertaking an “aggressive review of how we brought the product to market so we can better serve our customers in the future” and that the lessons learned from this experience would be applied to future limited edition coin issues.

The handling of these sets by the grading companies, specifically industry leaders NGC and PCGS, has also been an issue of contention with many collectors.

Both companies require that submitters send the entire set in an unopened box in order to qualify for 25th anniversary set pedigree, as stated on a slab insert.

That has imposed significant costs and hassles on people who want to have one or more sets graded.

But rather than showing concern for how this requirement affects its customers, NGC and PCGS seem to keep coming up with more and more hoops to jump through.

For example, one must ask that the original government packaging be returned, pay a special return shipping fee, and if you forget to request that the OGP be returned to you when submitting and later request it, you will be out of luck.

A majority of collectors were already turned off by many of the practices of these companies such as so-called first strike/early release designations, and the anniversary set requirements seem to be the last straw for many, especially for many PCGS customers.

NGC has a reputation in the coin community for having better customer service and policies that are more collector friendly.

In this instance, for example, NGC’s grading fees were substantially lower than those of PCGS, and the special fee for return of the OGP is negligible at NGC, but at PCGS it costs $150 to have the OGP for five sets returned.

I have still not decided whether to have any of my sets graded. I prefer to focus on enjoying the coins themselves.