Article Written by Dan Duncan – Pinnacle Rarities
CoinWeek Content Partner

World War I was called “The War to End All Wars.” The sad irony is that it was arguably the war to begin all wars – at least for the modern era. A couple generations (or more) removed, it’s hard for us to get inside the average man’s head from 1921. But the horrors of that war included the use of nerve gas and mass genocide for the achievement of military goals. The resulting carnage statistics are estimated at over fifteen million civilian and military deaths. With that in mind, it’s easier to understand the sentiment for peace was overwhelming, and from this passion the Peace dollar was born.

Peace

This story begins with Allied forces pushing back against German occupation. By 1918, the German forces were defeated, and the negotiations of the Allied powers on how best to “punish” Germany began in Paris. These talks originally included seventy delegates from 27 different nations. This soon proved too complex to find any common ground and the actual treaty was drafted by just the three largest nations – The United States, France and Great Britain. Even with just three nations represented, decisions and agreements to key components were tough. Each nation’s goals conflicted with the others.

Ultimately an “unhappy compromise” was reached. It was called the Treaty of Versailles, and it officially ended the war in Europe. But stateside, the battle for a declaration of peace had just begun. Congress initially bucked Woodrow Wilson’s plan and even after the Harding administration took over, Congress on several occasions rejected the League of Nations and the ratification of the Treaty of Versailles. It wasn’t until the summer of 1921 that we passed the Knox-Porter Act, and peace was officially declared between the United States and Germany.

Dollars

The cost of the war was paid in silver from melted silver dollars. As our currency at the time was backed by silver dollars in the treasury vaults, the result of this debt was a recall on circulating silver certificates. Dollar production had been on hiatus since 1904, but the Pittman Act of 1918 ordered over 270,000,000 silver dollars to be coined to relieve this debt and replenish the Treasury’s coffers. The U.S. was going through a recessionary cycle and the Pittman Act went a long way to helping the economy recover. While authorization of the coinage of silver dollars passed in 1918, it wasn’t until three years later that the Peace dollar design was implemented.

Peace Dollars

The idea behind the new dollar design was a commemorative example to serve as a reminder of the atrocities from the war and the value of peace. The path to the enactment of the design was as turbulent as the road to peace itself. The Pittman act had paved the way for new dollars. But, the design ordered was the standard dollar or today’s Morgan type. At the time, monetized commemoratives coins had begun to make waves in numismatic circles and a number of different examples and denominations had been produced since 1892. Up to 1921, all commemoratives had been sold at premiums over face value and only a few ever inadvertently went into circulation. In 1918, as the war was ending, The Numismatist ran an article suggesting a commemorative that would circulate at face value.

This idea was batted around and in 1920 Farran Zerbe submitted a workable framework to the commemorative idea. Over the following fifteen or so months, the American Numismatic Association enlisted the help of Congressmen William Ashbrook and Albert H. Vestal. Their work along with the blessing of Mint Director Raymond Baker and the Commission on Fine Arts secured a “victory” coin’s place in circulating coinage as the silver dollar. The nation had yet to officially declare peace, but the proponents of the new dollar forged on. Short on time, they held a closed competition amongst the better known medalists and Anthony de Francisci won. His works included the recently released Maine Centennial Coin of 1918. His rushed Peace design met with equal amounts of scorn as delight. And after it underwent some cosmetic alterations, it was pushed through the necessary committees and approved.

1921 Morgans were in production for most of the year and were being struck at amazing speed. Upon approval, Baker ceased Morgan production but the Peace designs weren’t struck until the last week in the year. With little preparation time, the dies had not undergone much testing. The bold devices caused the dies to break prematurely and the design elements suffered from lack of sufficient pressure. Initial strikings of the high relief 1921 were not met favorably. The devices weren’t clearly struck up, the lettering wasn’t sharp and the coins were rumored to stack improperly. With die life and production speed compromised by the stylish design, the elements were flattened creating the lowered relief examples used for the duration of the series.

Mintages continued from 1922 to 1927 in large quantities tying up the mint production and causing low mintages of the other denominations of the period. In 1928 mintage numbers decreased, and once the Mint had satisfied the requirements of the Pittman Act, coinage of the Peace dollar was halted. It wasn’t until after the recall of gold coinage that new silver dollars were authorized. The Peace design was reborn with coins struck during 1934 and 1935 to fulfill the requirements of the Silver Purchase Act of 1934.

The design makes a brief encore appearance with the authorization of several million examples in 1964. And, in 1965, Denver coined some 317,000 1964 dated examples. Shortly thereafter, the Coinage Act of 1965 prohibited the production of silver dollars. The idea of a Peace dollar was scuttled with all coins destined for the melting pots. Examples of the 1964-D Peace dollar are rumored to exist, but with recent 1933 $20 legislation, the likelihood of anything ever surfacing is virtually nil.

Today, the Peace dollar is one of numismatics most popular series. The design is rich in history, one that begins as a commemorative coin and ends up an instrument of economic recovery. The story highlights the U.S. involvement in WWI, and its efforts to fund the conflict. The dollar was later used to stabilize the economy during the Great Depression. And now, the series is popular amongst collectors because of its relative affordability, the lack of any true stoppers and mostly for its lasting beauty. The historic past is one that spans three generations and the collectible nature means the Peace dollar will be enjoyed for many more to come.

Many clients are inquiring about their self directed New Direction IRA account buying metals. If you’ve taken an interest in purchasing real precious metals with your retirement account, it’s important to know what types of metals are allowable and the qualifications that must be followed to satisfy the IRS’ guidelines. This article sheds light of many of the different options available to precious metal investors and covers some of the more specific information regarding specific types of coins and bullion products for IRA investments.

First, let’s cover the basics. Your self directed IRA can only invest in Gold, Silver, Platinum and Palladium. The keyword here is “invest”. Your IRA cannot buy collectibles – your IRA is only investing in the metal itself, not rare or attractive coins. The metal must be in a certain form (usually coins or bars) and/or of certain purity. The purity or fineness of the metal is how the quality of the metal will be measured for your IRA.

When most of us hear about gold investment we picture the 400 ounce gold bars we have seen in movies. Extraordinarily heavy (about 25 pounds), those bars are also quite the expensive items, particularly with the recent price increases in gold. IRAs are often priced out of the gold bar market, but, fortunately, other options exist. One other option is smaller units of bullion, provided they meet the fineness, or purity level, requirement. Another option is coins.

Initially, the IRS deemed all coins to be collectable and disallowed IRA investments in coins.

In the mid-1990s, after realizing that a 400 ounce gold bullion bar would be prohibitively expensive for most IRAs, Congress revised the rules and allowed IRAs to own certain coins in addition to bullion.

Generally these IRA allowable coins fall into two categories:

Category #1: Coins specifically listed in the Internal Revenue Code, and defined as NOT being collectable. These include only the American Eagle coins minted by the US Mint. Specific coins include:

• American Gold Eagles – Proof and Non-Proof

These coins are issued by the US Mint in both Proof and Uncirculated (non-proof) form. Because the coins are specifically listed as NOT being collectables, they are allowed in your IRA. Prices for Proof and Non-Proof Gold Eagle coins vary due to a number of factors including the availability, original production, and date.

Interestingly, these US minted coins are not of sufficient purity to classify them as bullion. They are only approximately 91% pure gold. The other material in the coin off sets the softness of the gold and makes the coin more durable. Gold Eagles arrive in one of 4 forms: 1/10, ¼, ½ and 1 full ounce coins.

• American Silver Eagles. – Proof and Non-Proof

These coins are issued by the US Mint in both Proof and Uncirculated form. Because the coins are specifically listed as NOT being collectables, they are allowed in your IRA in proof and non-proof form. Prices for Proof and Non-Proof Silver Eagle coins vary due to a number of factors including the availability, original production, and date. Silver Eagles land in only one form: 1 full ounce coin. They are of bullion fineness, but are only .999 (three nines) due to the addition of a touch of copper for added durability.

• American Platinum Eagles. Proof and Non-Proof.

These coins are issued by the US Mint in both Proof and Uncirculated form. Because the coins are specifically listed as NOT being collectables, they are allowed in your IRA in proof and non-proof form. Prices for Proof and Non-Proof Platinum Eagle coins vary due to a number of factors including the availability, original production, and date. The rarest of birds, the Platinum Eagles are minted in 4 forms: 1/10, ¼, ½ and 1 ounce coins. These are of .9995 fineness.

Any of the above coins which have been graded for condition by certification organizations and placed in tamper-proof plastic containers called “slabs”, will generally fall into the collectible category and thus are not allowed for IRAs. Recently a national certification service has initiated an authentication service for bullion coins. Authentication provides a guarantee as to the purity of the metal and the weight of the coin. While the authentication process does place the coin in a tamperproof container and give it a unique serial number, it is intended for verification only and does not move the bullion into the collectable category.

If you’re not sure about this, ask your self directed IRA provider or metals dealer. All US minted coins have nominal face values, but the true value is based on the value of the metal in the coin.

Category #2: Some coins meet the minimum fineness requirements but are not rare enough to receive collector attention.

• American Gold Buffalo coins. Non-Proof Only

First minted in 2006, they are of bullion fineness, .9999 fine (known as four nines). Note that the specially processed proof version of this coin is NOT acceptable, due to the treatment raising the value of the coin beyond the value of the metal.

• Gold Coins – .995+ note that gold is a soft metal (although heavy) and thus most typical minting includes other alloys to harden the coin. Therefore most minted gold coins intended for use as currency do not meet the fineness requirement.

• Silver Coins – .999+

• Platinum – .9995+

• Palladium – .9995+

Non-coin forms of metal, such as smaller gold bars, must be manufactured to meet specific weight specifications for the amounts of metal included and meet the above fineness requirements.

In addition to these American options, there are some coins issued by mints of other nations that do meet the fineness requirements:

• Australian Nugget (Kangaroo) Gold coins .9999 fine

• Australian Kangaroo and Kookaburra Silver coins .999

• Australian Koala Platinum coin .9995 fine

• Austrian Philharmonic Gold coins .9999 fine

• Austrian Philharmonic Silver coins .999 fine

• Canadian Maple Leaf Gold coins .9999 fine

• Canadian Maple Leaf Silver coins .9999 fine

• Canadian Maple Leaf Platinum coins .9995 fine

• Canadian Maple Leaf Palladium coins .9995 fine

• Mexican Libertad Silver Coins .999 fine

• Isle of Man Noble Platinum coins .9995 fine

Some examples of coins that don’t meet the fineness requirements are: Austrian Corona and Ducat, Belgian Franc, British Sovereign and Britannia, Chilean Peso, Columbian Peso, Dutch Guilder, French Franc, German Mark, Hungarian Korona, Italian Lira, Mexican Peso and Ounza, South African Krugerrand, Swiss Franc, and any coin that falls into the “Rare”, and thus collectible, category.

Again, if you’re not sure about the fineness, ask your metals dealer to verify it.

Next time, we will talk about the process of getting metals into your IRA or other tax sheltered account. Note that Health Savings Accounts, another plan that can be self directed, is also eligible to be self directed and purchase metals.

by Louis Golino for CoinWeek

Dr. Michael Bugeja was appointed last year to serve on the Citizens Coinage Advisory Committee, which advises the U.S. Secretary of the Treasury on U.S. coin and medal designs and themes.

He is also a columnist for Coin World magazine, where he writes the “Home Hobbyist” column, and writes the “Coin Capsule” feature for Coin Update News that deals mainly with graded coins. He is very active in the numismatic arena, and has served as president of the Ames Iowa Coin Club, helped organized Coin-A-Rama,” a large Midwestern coin show, writes a blog about the auction platform Proxbid, and buys and sells coins at a local shop in Iowa.

In addition, Dr. Bugeja is Director of the Greenlee School of Journalism and Communication at Iowa State University and a former journalist and editor for United Press International. He is the author of numerous books and articles on issues such as ethics and poetry, among many others.

The CCAC was established though a 2003 law to advise the Secretary of the Treasury on the themes and designs that appear on all U.S. coins and medals, including circulating coins, bullion, commemoratives, and Congressional Gold Medals and other medals. It also advises on what people, events, or places should be honored with commemorative coins and makes recommendations on mintage levels.

The Treasury secretary makes the final decision on coin designs, but the recommendations of the CCAC play a critical role in informing those decisions.

After each of the committee’s meetings, it sends a letter to the Secretary with the minutes of the meeting. According to its web site (http://www.ccac.gov), “The CCAC serves as an informed, experienced, and impartial resource to the Secretary of the Treasury and represents the interests of American citizens and collectors.”

In my view, the CCAC is a critical link between the numismatic community and the U.S. Mint.

Dr. Bugeja serves in a position on the committee that is reserved for someone specially qualified in numismatics. The CCAC also has members who are numismatic historians and researchers, sculptors, experts on medallic arts, and so forth.

By serving on the CCAC, Dr. Bugeja plays an important role in promoting the hobby we all love so much and representing the views and interests of coin collectors.

I recently interviewed Dr. Bugeja about his work with the CCAC and his views on modern commemorative coins, circulating coins, coin design and artistry, the state of the U.S. coin market, and his interest in coins.

LG: 1.) Last year you were appointed to serve on the CCAC. Please briefly describe your work with the committee.

MB: I was chosen for knowledge of numismatics, after responding to an open call for applications. Because of my work for Coin Update News and Coin World, in addition to my love of the hobby, I was chosen in a very informative application process. I was asked pertinent questions, and I addressed them in part by recalling U.S. Mint history, especially as it related to coin design. The research and interview process prepared me well for the design critiques that we routinely do in our public sessions. I remember that I also am there to promote the hobby. As a collector, that always helps in the critiquing of designs for US coinage. We have a very good group of experts and a proactive, engaged and committed chair in Gary Marks. He prepares an agenda, the Mint sends designs in advance of the meeting–often with pertinent background information on legislation or commemorative occasions–and we analyze at home and then share in committee. Often, you’ll see preconceived ideas change during discussion. That’s the exciting part about being on the committee.

LG: 2.) Do you agree that the maximum authorized mintage levels for many recent U.S. commemorative coins have been far too high, which has depressed secondary values for many issues? It almost seems as if the Congress and the Mint have forgotten that these coins no longer have anywhere near the level of demand they did in the 1980′s, when they sold in very large numbers.

MB: As you know, often mintage is legislated and the Mint does what it can to fulfill obligations. But yes, I think mintage levels have been too high on some modern commemorative coins. I recently did a column for Coin World on privy marks and how Canada, for instance, uses them rather than mint coins commemorating one occasion in different coin denominations.

LG: 3.) I thought the Mint was working with the Congress to set lower mintage levels, but I noticed that the authorized level for many releases in the next couple years is still much too high, such as for the Marshall Service commemorative half dollar at 750,000. The most recent commemorative halves, the 2011 Army coins, only sold a total of about 108,000 pieces. Is the committee making an effort to suggest to the Treasury Secretary that these levels be set more realistically?

MB: In the meetings that I attended, that topic had not been debated or discussed at length with respect to commemorative coins. We have discussed mintage levels with presidential [$1] coins because of the recent news stories about the backlog of coins in storage. Personally, I think hobbyists want presidential coins to continue, but at lower levels, perhaps just in mint and proof sets, as we did with the Kennedy half dollar.

LG: 3.) Do you agree with the view some people have expressed that there have been too many military-themed commemorative issues in recent years (Army and Medal of Honor coins last year, infantry soldiers this year, five-star generals next year, etc.)?

MB: I really don’t have a personal position on that. I have great respect for those who serve our country in the armed forces. Also, since ancient times, military symbols and icons traditionally appear on coins. I believe we need more women on our coins. And I would like iconic women, such as Lady Liberty, to look like real women of different ethnic backgrounds, rather than media images of female beauty.

LG: The second part of this interview will appear next week. In it Dr. Bugeja discusses coin artistry, the use of classic images of liberty on our coinage, and other issues.

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 Ross W. Bailey, From The E-Gobrecht – 2012 Volume 8, Issue 1
The Electronic Newsletter of the LIBERTY SEATED COLLECTORS CLUB

This article distills the lessons gleaned from my ten years of experience as an active buyer and collector of rare coins on eBay. Over that period of time, I’ve made many mistakes, and you, the reader, will benefit from this by hopefully avoiding making these same mistakes. My goal is to help you have a better buying experience on eBay, by buying as many coins as possible that are genuine, original and worth the prices paid. Also, although the target environment is eBay, these strategies can be easily adapted to other auction venues – Heritage, Stack’s-Bowers, etc.

Some Expertise

I am assuming that you know how to use the eBay search facility to locate listings of coins that are of interest, that you know how to track these listings using the “Watch this Item” facility within “My eBay,” that you are familiar with the mechanics of bidding, and that you have at least some rudimentary ability to grade the types of coins that are of interest to you. However, if you need any help with any of these features, contact me thru the E-Gobrecht editor and I will try to help you out.

Terms of Art

One term used to describe a rare coin is that it is “Original.” In U.S. numismatics, “original” means that the coin has not been cleaned, tooled, re engraved or messed with in any way, and that any departure of the coin from its mint state has happened naturally, in the form of circulation wear and toning. Buying a coin that is original and problem free should always be your goal.

Conversely, in European numismatics, and occasionally in the U.S., the term “Original” is used as a synonym for “Authentic.” I always use “original” in the U.S. sense. To convey authenticity, I use either “authentic” or “genuine.” When you come across an eBay listing of a coin that is described as original, it is important to understand which meaning applies. Sometimes, but not always, the seller’s meaning is clear from the context. If it isn’t clear, you can ask him.

Why Original?

Why is it important to stick to original coins when at all possible? Because the rare coin market says they are worth more. They are the only coins that PCGS and NGC will grade and encapsulate
.
All other things being equal, an original coin is simply worth more than one that has been cleaned or has some other problem. PCGS (Professional Coin Grading Service) will encapsulate a coin that is genuine but not original. However, they won’t grade it. NGC will only encapsulate it under their NCS service. ANACS will grade a coin that is not original, and will assign it a “Details” grade.

Getting Started

So let’s assume you have located an eBay listing of a coin that you are interested in. How should you approach it? First, you want to know if the coin is original and problem free. If the coin has been certified by PCGS or NGC, you know it was the grading service’s opinion that the coin is original. That counts for a lot.

If the coin was graded by ANACS (not a details grade), you know that ANACS thought the coin is original. This counts for something, but less than if the coin was graded by PCGS or NGC, as I have seen too many ANACS graded coins that have been cleaned.

But suppose the coin is raw. How do you tell if it is original, assuming the seller says nothing about originality in the item description? Unfortunately, even with a very good photograph under natural light, it is unlikely you will be able to tell if the coin is completely original and problem free. So your first step should be – ask the seller! The way I like to ask the question is as follows: “Has this coin been cleaned or had anything else done to it that would prevent it from being certified by PCGS or NGC?”

I ask the question this way regardless of whether or not I intend to get the coin certified. Note that what you are asking for is an opinion, not a guarantee that the coin will slab. How the seller responds to this question has a very important bearing on whether I will bid on the coin or not. Here are some of the responses I have gotten in the past.

1. I have no idea, I’m not an expert.
2. I didn’t clean it. I don’t know what happened to it before I bought it.
3. It may have been cleaned, I’m not sure.
4. It’s been cleaned. PCGS won’t certify it.
5. It hasn’t been cleaned and doesn’t have any problems. It should certify.

If the seller states point blank that the coin has been cleaned or has some other problem, I move on and look for another coin. You might be surprised how many sellers know about a coin’s problems, won’t mention them in the auction listing, but will cheerfully disclose the problems when asked. If the seller says the coin hasn’t been cleaned and will certify, I make my plans to bid, however I seldom get this response.

You will often get responses #1, #2, or #3 above, because many sellers are not professional numismatists, and simply don’t know what to look for to determine originality. Characteristics of cleaned coins include (1) the coin has a washed out, pasty look; (2) the coin is below AU in grade but is “white”, i.e. has no tone; (3) the coin has odd, unnatural looking tone (also a characteristic of artificial toning); (4) the coin has hairlines, indicating a cleaning. Unfortunately, it is very difficult to tell from a typical auction listing photograph whether or not a coin has any of these characteristics, which is why it is so important to have a return privilege.

Return Privilege and Photos

In U.S. numismatics, many if not most professional coin dealers offer an unconditional return privilege of from 3 to 30 days when they sell on eBay. (Sometimes, a return is not offered on coins that are certified.) The theory behind the return option is that, even with a photograph, you can’t really tell what a coin looks like until you get it in your hand.

For this reason, when I buy coins on eBay, I usually try to avoid coins where the seller does not offer a return privilege. Only when I am relatively certain about exactly what I am buying (for example the coin is certified), do I depart from this rule.

Having a return privilege is a powerful way to control your risk. When offered, a return option limits your risk to a round trip of shipping expenses. It allows you to bid in situations where you wouldn’t dream of bidding without it.

Have you ever seen a listing of a coin with a photograph that was so bad that it was like having no photograph at all? Your initial reaction might be not to bid, but if a return option is offered, and the coin seems from the description to be just what you are looking for, go ahead and bid. You are likely to win it for a lot less than if it had a good photograph, because a bad photo inhibits other bidders. The converse of this principle is also true. That is, when the coin’s photo is really good, showing all of the detail and the natural color of the coin, then bidding is likely to be very heavy. I sometimes find myself avoiding these listings simply because the bid price gets too high.

As far as the number of days for the return option, even one day is long enough for me in most instances, because I usually know within a few minutes of receiving a coin whether I want it or not. In those instances in which I decide to return a coin, as a courtesy I notify the seller immediately by email of my intent, and I put the coin back in the mail the same day I receive it.

Getting Coins Certified

I get most of the raw coins I buy certified by PCGS, or occasionally by NGC. Although I would like sellers to guarantee that their coins will certify, few sellers are willing to do so. However, if the return period on the coin is 30 days, that is long enough for me to submit the coin to PCGS under the “regular” service, receive it back from PCGS, and, if it doesn’t certify, return it to the seller.

This issue is most important to me when we are talking about very expensive, raw coins. In this case, when the return period stated in the listing is less than 30 days, I try to negotiate with the seller (before I bid) an extension of the return period to 30 days.

Also, I’ve found it best to be completely up front about what I am doing. That is, I tell the seller that I plan to submit the coin for certification, and return it if it doesn’t certify. I also tell the seller that my return is contingent on the coin grading or not grading, not on the numerical grade that PCGS assigns.

In other words, if PCGS grades it, I keep it, regardless of whether it comes back, for example, a VF35 or an XF40. I do this because I feel that the major risk is of the coin not grading at all, much more than the risk of getting a grade other than what I expected. I find that sellers are more apt to go along with me if the contingency is constructed this way.

Besides cleaning, there are other things that will prevent PCGS from grading a coin, for example artificial toning, rim bruises, scratches or any other type of damage. These problems are usually obvious from a decent photo, unless they are very minor. And if they are very minor, PCGS may go ahead and grade the coin.

Other problems include re-engraving (where someone tried to reestablish detail that had been lost from circulation wear), and tooling, usually performed in an attempt to “fix” a scratch or other problem. These latter two problems I find very difficult to identify. But fortunately, my experience has been that they don’t occur all that often.

Bidding – the Hidden Reserve

One of the more irritating things that sellers do is to place a secret reserve on a coin’s listing, with the opening bid some lower amount. Instead of a reserve of $500, you would think that they could simply make $500 the opening bid amount. The theory is that allowing bidders to bid below the reserve stimulates bidding activity. My suspicion is that just the reverse is true, that is, I believe that hidden reserves tend to inhibit bidding.

There is however a simple solution, which can actually turn this situation to your advantage. That is to simply ask the seller what the reserve amount is. My experience is that 80% to 90% of the time, sellers will respond to an email by disclosing the reserve amount. This is particularly true if the listing has run for a while with little or no bidding.

Once armed with the reserve amount, you can plan your bidding strategy. If the reserve amount seems to be reasonable, you can bid it. If it seems to be too high, you can plan to let the listing end, and then, if no one has won the coin, you can make the seller an offer at some price below the reserve amount.

In the latter situation, I will typically make the offer (using “Ask the Seller a Question”) a few minutes before the listing ends, due to the fact that eBay makes it difficult to contact the seller for an expired listing. If the seller likes your offer, it is simple enough for him to re list the coin with a “Buy it Now” at your price.

Bidding – to Snipe or not to Snipe

There are at least three schools of thought when it comes to bidding strategy.

The first is a “one-bid” strategy, and it is to bid as early as possible with the absolute highest amount you are willing to bid for the coin, and then to sit back and wait for the auction to end.

The second strategy is to bid early and low, then if you are outbid, bid a little more, and if you are outbid again, bid a little more, etc., etc. I find this to be a common strategy with novice bidders (i.e. low feedback score).

The third, also a one-bid strategy, is to bid the highest amount you are willing to go a few seconds before the listing ends. This strategy is referred to as “Sniping.” After ten years of experience, I can state unequivocally that sniping is the best strategy, because it affords you the maximum chance to win the coin, and at the lowest possible price.

The key aspect of sniping is that because your bid is made with only a few seconds left on the listing, nobody has a chance to bid in reaction to your bid. Thus sniping protects you against bidders employing bidding strategy number two. If you bid at any time other than a few seconds before the auction ends, bidder number two will see your bid and decide he can go a little higher, which can only have two possible results, both of them negative. Either you will be outbid, or else you will not be outbid, but will end up paying a higher price for the coin.

Conversely, sniping prevents bidder number two from reacting to you because he has no time in which to do it. Sniping also protects you against some of the bidders employing strategy number one. That bidder thought he was bidding his highest possible bid, and expected his bid to prevail. When he sees your bid, however, he decides he can go a little higher. Again, the key to sniping is that it prevents anyone from reacting to your bid by bidding again.

Bidding -

What Price to Offer or How High to Bid There is no hard and fast rule about how high to bid or offer for a rare coin. Part of the answer is very personal (How badly do you want it?). But even if you desperately want a particular coin for your collection, and you are willing to pay some premium, you still want to know that you haven’t paid substantially too much.

For U.S. coins, there are retail pricing guides that provide some guidance. These include the Red Book, PCGS Price Guide, and Numismedia. The only price guide I am aware of for World coins is Krause, but I find Krause’s prices to be out-of-date most of the time and therefore of limited use.

For U.S. coins there is a good bidding strategy that relies on the pricing guides. This is to use the guides to determine what a coin is worth, and then bid 10 to 20 percent above this value. You can feel better about this strategy if you try to limit it to coins which you feel for some reason (e.g. outstanding toning, pedigree) are worth a premium over retail.

The reason this strategy works is that there are a substantial number of bidders out there who adhere to the price guides pretty strictly, and won’t bid above them. So by going 10 to 20 percent above the retail price, you eliminate a lot of the bidding competition.

You will notice that I refer to retail pricing guides and have not mentioned wholesale guides like Greysheet. My experience has been that most bidders use retail guides, and not wholesale guides, to base their bidding strategy. Consequently, if you base your bidding on Greysheet, you will likely be outbid most of the time.

For gauging how high to bid for world coins, I am afraid there is no substitute for experience. I rely on Krause not to decide how much to bid but to establish a ballpark or an order of magnitude, i.e. is this a $300 coin or a $3,000 coin. To decide how much to bid on Russian rubles, I rely on my years of experience, and auction records. I also rely on one dealer and three or four other collectors for advice, all of whom know much more about rubles than I do.

Avoiding Counterfeit Coins

Although there is no absolutely foolproof way of avoiding bogus coins, there are a few things you can do to protect yourself. First, in the case of coins sold within the U.S., the Hobby Protection Act requires any non-genuine coin to be stamped “Copy” on either the obverse or reverse. In my ten years of collecting and bidding on eBay, I have only been stuck with one counterfeit U.S. coin that I know of, a bust dollar, and I didn’t know it was counterfeit for five years after I bought it. When it came time for me to sell it, ANACS gave me the bad news.

Since I had bought the coin from a reputable U.S. dealer, and since virtually all reputable U.S. dealers offer a lifetime guarantee of authenticity, I was able to recoup my purchase price from the dealer from whom I bought it. However, I lost all of the profit from the increase in price that the coin would have generated had it been genuine, which was thousands of dollars.

The key to avoiding most counterfeits is to always consider the source. Thus, there is a dealer from China selling Russian rubles (which I collect). He has recently listed five 18th century rubles, all of them rare issues worth thousands, each with an opening bid price of $49.95, each offered with no reserve. Red flag? Of course, this is an easy one. Think to yourself, “where could he have gotten them?”

There is no good answer. Even without the knowledge that there is a flood of well made counterfeit coins emanating from China, this is an easy one to detect. I’ve gotten to the point that I simply will not bid on any coins listed by sellers located in China. It simply isn’t worth the risk. Thus my key for avoiding counterfeits is to try to avoid high-risk sellers. This is because I don’t have the skill to detect a well made counterfeit coin after I have it in hand. That’s the job of the grading services. I know you can weigh it and do other things, but I prefer to rely on a strategy that keeps you from buying likely counterfeits (consider the source), rather than a strategy that detects counterfeits after you have already purchased them.

Despite the strategy of “consider the source,” there may come a time that you purchase a coin whose authenticity is in question. This happened to me a couple of years ago when I purchased a ruble for about $900 from a seller in Romania. I should have simply not bid on the coin because I was somewhat suspicious concerning authenticity, but it was a date I really wanted, so I bid anyway, and won the coin.

However, before I bid I contacted the seller and told him that if I won the coin, I would be submitting it to PCGS and would be returning it if it turned out to be a fake, and without his agreement to accept these terms I would not bid. Of course the seller assured me that the coin was genuine (based on what?). PCGS however, ruled the coin was counterfeit, so I returned it, and thus limited my loss to two round trips of shipping expenses – not a small amount, but nowhere near $900.

Then there is the seller in Germany selling on the German eBay web site, www.ebay.de. He sells rubles which he claims he found in his garage, so he knows nothing about them and therefore cannot guarantee their authenticity. What a story!

Of course I believe he knows darn well his coins are bogus, and tries to prey on buyers who will buy his coins in the hopes that they are genuine. It is a cardinal rule that I will not bid on or buy a coin from a seller who will not guarantee authenticity.

Negotiating the Price

Whenever a seller lists a coin that I want with an opening bid amount or a reserve that is substantially above the market price, I see an opportunity for negotiation. When I see this situation, I expect the coin not to sell during the auction process. Some-times I will wait until the listing has almost run out of time (See Bidding – the Hidden Reserve above), or sometimes I will send an immediate email to the seller, which states “If this coin does not sell, I would like to offer X for it”.

Both the substance of my lowball offer, and the fact that the offer is made early in the listing sends a message to the seller, without stating it explicitly, that I consider his Opening bid price/Reserve price/Buy-it-now price to be way too high for the market, and that he shouldn’t expect to realize much more than I am offering. Of course someone may still bid and make me look a little silly, but more often than not no one bids, and the negotiation begins.

In this situation, you should never be afraid to make a lowball offer for fear of insulting the seller. And it is this initial offer that is critical to a successful negotiation. Likewise, the seller’s initial response to your offer will tell you pretty clearly if you have gauged the situation correctly, and whether or not the negotiation is going anywhere. If the seller responds with a counter-offer that is only a token amount below his initial price, then either he has not given up on getting a huge profit, or else he paid way too much for the coin himself, and is now stuck. (There is a third possibility, namely that you do not have as firm a grip on the market as you had thought.) Whatever, the negotiation is now over.

If on the other hand, the seller counters with a price that is substantially below his initial price, you have basically won the negotiation. It is now only a matter of either accepting the counter offer, or countering yourself to try to get the price even lower. I just completed a negotiation for a ruble being offered by a seller in Luxembourg for a buy-it-now price of $650. My sense was that this coin was worth somewhere in the $300-$400 range, so I made an offer of $325, exactly half of asking price. The seller countered $440, I countered $350, the seller countered $415, I countered $375 (my last offer, since eBay for some curious reason will not allow you to make more than three offers), the seller countered $390, and I accepted. That’s 40% below the initial buy-it now price.

by Louis Golino for CoinWeek

Late last year the 25th anniversary American silver eagle sets that were released at the end of November dominated the modern U.S. coin market.

There was literally a frenzy of interest in these sets. Thousands of opened, unopened, and graded sets traded on e-Bay and elsewhere, and for a while prices were rising almost daily, as is the usual pattern following the sell-out of a hot Mint item.

Interest in the sets remains high, and many were bought and sold at the recent FUN show held in early January in Florida, but the frenzy seems to have cooled a little bit, as collectors turn to other issues and prices begin to stabilize.

Price performance

Graded sets, especially those with a perfect MS/PF-70 grade for each of the five coins in the set, have been eagerly sought by collectors. But as I suggested would happen last fall, prices for 70 sets have fallen dramatically from what they were bringing when the sets were first released.

Raw sets have been bringing approximately $750, but many retail coin dealers charge $850-$1,000. I have noticed that many sell out quickly of their stock of sets.

Sets graded MS/PF-69 are now trading at the same levels, or just above, what raw sets bring. Not long ago they sold for a premium of a couple hundred dollars over a raw set.

Prices for 70 sets vary quite a bit. NGC sets sell for $1100-1300 on e-Bay, while PCGS sets are bringing $1400-1500 typically.

With all the sets being graded it will be interesting to see how many fresh, original raw sets remain in several years.

Prices for the 2006 20th anniversary sets recently saw a nice bump. I suspect this is because newer collectors who bought the 25th anniversary sets found out about the earlier sets and decided to get them too.

With more buyers and the same supply of sets (250,000 total but with no estimates of how many raw sets remain), prices went higher. Raw sets are now fetching close to $500, whereas before the release of the 25th anniversary sets they could be had for $400 or less.

I predict that unopened 25th anniversary sets, which are eligible for submission to the grading services, will be remain a hot commodity, and prices for them may eventually reach almost the same level as 70 sets. An unopened box of five sets recently sold for $4600, or $920 per set.

The Mint and grading companies

Meanwhile, tempers remain flared among many collectors, especially towards the Mint, but also to a lesser degree towards the leading third party grading companies, especially because of their requirement to ship the entire unopened box and then pay a special fee to have it returned.

Because so many sets are getting 70 designations values for 70 sets and singles have dropped significantly from initial levels.

On the other hand, since we can not check the quality of unopened sets prior to submission to the grading companies, it is a real gamble to submit them in hopes of getting the top grade. If one receives 69′s or less, it is hardly worth the considerable expense and trouble of sending them in.

Another important point is that the percentage of sets that have been graded 70 by NGC vastly exceeds those graded 70 by PCGS even though retail prices are not always different for the two.* For example, at Modern Coin Mart (http://www.moderncoinmart.com) the NGC and PCGS sets both sell for $1450. Eventually, prices for PCGS 70 sets should be much higher than NGC sets.

The U.S. Mint continues to be the subject of almost constant criticism from collectors who were unable to order a set from the Mint, or who did, but who feel the Mint botched the release of these sets.

There is a broad consensus that a household limit of five was too high for a set that appealed to so many collectors. Views are more diverse on whether more sets should have been made. But I think we should also give the Mint credit for producing a beautiful set that should perform well in the coming years.

2012-S

A major development that emerged from the recently released U.S. Mint Annual Report for 2011 is that the Mint is considering releasing another San Francisco burnished coin, a 2012-S eagle. The report says the Mint officials look forward to expanding the burnished eagle “S” series this year.

Some collectors were upset by this news because it means only one coin, the 2011 reverse proof, is now unique to this set. Moreover, if there are more “S” mint coins, and since there was a reverse proof in 2006, no coin in the set would be totally unique.

But first of all, it is not a done deal that the Mint will issue more “S”mint eagles. And second, what really matters is the mintage levels rather than the uniqueness of coins, at least in my view.

Since the mintage of the 2011-S remains at 100K it will still be the lowest mintage non-proof silver eagle issued. Unless the Mint issues something later with a lower mintage, this coin will remain a major key.

I would recommend holding on to any sets you own for the long haul if you can, and don’t worry if they start an S mint series. If there is a 2012-S, it will undoubtedly sell several hundred thousand. Besides, who knows what they will do for the 30th anniversary, though I doubt it will have a mintage lower than 100K after all the flack about the 25th anniversary sets.

One key factor that should help support higher prices for the 25th anniversary sets is the fact that so few people own the entire mintage. The Mint has indicated that the average order was for 3.7 sets. Factors in the dealers and e-Bay entrepreneurs who managed to get far more than 3.7 sets, and this means that something like 20,000, or more likely even fewer people, own all 100,000 sets.

A significant number of them appear to be owned by collectors who plan to hold on to their sets for the long haul, even if they bought multiples, and an ever-expanding number of silver eagle collectors, should mean higher price levels in the coming years.

Finally, there is the issue of possible new varieties and error coins from this set, which I will address in a separate article soon.

*To illustrate the point I examined the population information on the PCGS and NGC web sites for two of the coins in the 25th anniversary sets. At NGC 72% of the 2011-W coins received MS-70, whereas at PCGS only 54% were given the top grade. For the 2011 bullion coin, the NGC number was 70%, and the PCGS figure was 52%. The figures vary from coin to coin in the set, but the pattern is there. It is clear that PCGS gave out the top grade much less often than NGC.

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 Louis Golino for CoinWeek

This article discusses world coins from 2011 that I believe are the best of the year either because they are significant and interesting issues, or because I think they will appreciate in value over time.

It includes numismatic releases and collectible bullion coins with limited mintages. All were issued last year, but some are dated 2012. Australia and some other countries put the following year on coins issued during the last quarter.

Almost all are silver coins, and the lunar dragon releases dominate this survey because they largely dominated the modern world coin scene in the past year.

The selection of coins is also based on in part on the past price performance of similar coins, or coins in the same series. Past performance with coins, as with stocks or anything else, is no guarantee of future performance.

These kind of coins are purchased primarily because the buyer likes the design, or the coin has some other personal significance or resonance for them.

But many also have solid worldwide demand and very low mintages and therefore may increase in value separate from their metal content.

1.) Year of the Dragon releases: Perth Mint coins

The number and variety of dragon-themed 2012 coins is remarkable. It is the “largest annual coin program on the planet” as explained in an excellent recent survey that appeared in Numismaster .

The coins were issued by many countries, particularly in Asia and a number of Commonwealth countries, to mark the 12th and most popular sign of the Chinese Lunar calendar, the dragon. The Chinese Lunar season begins in February.

These various dragon coins have been so popular worldwide that bullion producers have even released a number of dragon-themed silver and gold bars and rounds to cash in on “dragon-mania”.

The coins issued by the Perth Mint in Western Australia have attracted the most interest of all the 2012 dragon coins because of a combination of attractive designs, low mintages, and Perth’s reputation for excellence.

The limited edition sets of proof silver dragons, the dragon lunar type set, and the rectangular colored dragon set elicited the most interest. These sets sold out in hours between September and December 2011.

Prices have moderated after peaking following the sell-outs, as almost always happens with limited issue modern coins – American and foreign.

But they still sell for substantial premiums over issue price, and as those sets change hands from speculators to collectors, prices should eventually go even higher given the limited supply.

American collectors tend to focus so intensely on U.S. coins that I think we can lose sight of what appeals to people in other countries.

Foreign collectors, as John Winkelmann of Talisman Coins explained in my interview with him last year, are much more interested in world coins than Americans are, although the number of world collectors in the U.S. is growing.

Jeff Garrett recently wrote a commentary for NGC in which he predicted that world coins will become more popular and more valuable this year.

The U.S. market for Perth Mint coins is strong. Just be careful to shop around and study e-Bay closing prices over time to get a sense of the real value of an item before purchasing it for an inflated retail price.

For example, a couple months ago I was able to purchase a gilded Perth dragon issued in 2000 and graded MS-69 by NGC (with a very low population) for less than $200 even though the same coin retails for $500 at several major dealers.

The 2012 one ounce silver bullion dragon, limited to 300,000, currently sells for about $90-100. If one looks at the performance of earlier Perth dragon releases from 2000, I think the 2012 bullion coin is worth purchasing.

In addition, the one ounce gold bullion dragon, limited to 30,000 pieces, which sells for about a $300 premium over the gold price also has good long-term potential. There are smaller gold dragons in the same design as well as two ounce and larger coins.

The 2 ounce silver proof Dragon, which was only released as part of a 1,000-edition set, is my favorite coin from the vast Perth 2012 dragon line-up. It is a truly scarce coin with sold demand. It is a larger diameter than most two ounce coins.

Once in a while an NGC-slabbed example is offered on e-Bay, but this does not happen often, and I know of only one U.S. dealer who has carried this coin; John Maben’s Modern Coin Mart.

2.) Other dragon releases

In addition, there are some beautiful and very low mintage dragon issues from other countries. Rather than list them all, I will highlight a couple that readers may not be aware of and which I find to be interesting coins.

France released an attractive lunar coin that has an intricate depiction of a dragon on the obverse, and an image of famous French fable writer Jean de La Fontaine on the reverse, and a mintage of 10,000. The coin is available in the U.S. from Royal Scandinavian Mint .

The Mint of Finland produced what is one of the more unusual dragon releases for the country of Fiji.

Many smaller countries have European mints produce their coins for them. Poland made a color pad dragon for the Asian-Pacific island nation of Niue.

The Fiji release is the Yin and Yang dragon, which uses color pad printing, and consists of two pieces that fit together and which are reversible. It is a very popular coin, but only 4,000 are available, which has already driven prices from about $135 to a current retail value of $200.

Finland also made a filigree dragon for Fiji. It is a very elegant coin also limited to 4,000 pieces.

3.) Canadian Wildlife Series

This is a new bullion series modeled on the highly successful half ounce wolf coin released in 2006 and featuring animals that live in Canada. Each coin is limited to 1,000,000 pieces, and with worldwide demand most dealers regularly sell out of their relatively limited supply of these coins.

The coins released so far include the grizzly, wolf, and cougar. The first two already carry a premium and sell for about $50 each. The cougar, the most recent issue, is still available for about the same price as an American silver eagle (2011 mintage of almost 40 million), making it an excellent way to purchase silver.

4.) Kookaburras

The Kookaburra is the national animal of Australia. Each year since 1990 the Perth Mint has issued one, two, and ten ounce and one kilo bullion coins depicting kookaburras.

The one ounce coins are limited to 500,000 and carry a premium over silver content. Retail prices for the coins vary a lot depending on the dealer.

From what I have seen the ten ounce coins seem to carry the highest retail premiums for past releases. Even the 2012 ten ounce coin is hard to find and usually sells for a relatively high premium over melt value compared to other large bullion coins.

6.) Italian commemoratives

The Italian Mint issues very attractive 10 euro proof silver coins that are issued in limited numbers. They are among the harder to find world issues. Their level of artistic achievement is extraordinary.

The two from 2011 I would highlight are a coin honoring Amerigo Vespucci, the Italian explorer for whom the American continent is named, and a coin marking the 500th anniversary of the birth of famous Italian painter and architect, Giorgio Vasari, who also founded the field of art history.

The Vasari coin is probably the most attractive world coin issued in 2011, in my view. It is also available from Royal Scandinavian Mint. This coin is part of a series honoring Italian artists.

7.) Silver Britannia

Finally, another well-designed bullion coin to consider is the 2012 silver Britannia from Great Britain. It is the latest in series that started in 1998. It is limited to 100,000 coins, but can be obtained for under $40. Some earlier issues sell for several multiples of that price.

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 Louis Golino for CoinWeek.com

One of the purposes of this column is to provide readers with coverage and analysis of the constantly evolving markets for precious metals because those dynamics play such a big role in today’s coin market.

After a difficult fourth quarter of 2011 when metals declined sharply, prices have been rebounding recently, and gold in particular is in a consolidation phase, building a base of support in the $1600-1700 range.

Silver and platinum have been underperforming compared to gold, although both are off their recent lows of roughly $26 and $1400. At their current levels of roughly $30 and $1500 respectively, both white metals look like a bargain to me, especially if the economy continues to improve.

As they were falling in price during the fall, commentators were again proclaiming the end of the gold bubble, or at least questioning whether gold had peaked, something which mainstream financial analysts do almost every time gold declines a few dollars.

In fact, most serious gold analysts, such as Jeffrey Nichols, a precious metals columnist for Coin World, believe gold will be several multiples of its current price in the coming years.

Mr. Nichols said recently that he thinks gold could see as much as a 50% gain in 2012 from the recent low of about $1580. “Prices of $3000, $4000, and even $5000 an ounce are very likely during the course of this long-lasting bull market, a bull market that still has years of life left to it,” according to Mr. Nichols, who regularly travels to China to speak on gold.

Europe and the Dollar

The decline in metals that took place after gold peaked in early September was driven by three main factors.

First, hedge funds and other institutional investors had to liquidate precious metals to cover losses in other asset classes that had not performed as well; second, such investors typically rebalance their portfolios at the end of a year; third, the European debt crisis resulted in a flight to quality, as investors sought the perceived safety of U.S. Treasury securities.

If the situation in Europe deteriorates, that will probably drive gold in particular to new highs, as wealthy Europeans seek to preserve their assets in the face of a declining euro.

The unusual circumstances that prevailed in the fall, when gold declined as concerns mounted about Europe, may be ending, and the more normal pattern of seeking refuge in gold, rather than the dollar, may return.

However, heightened volatility is widely expected. If the U.S. economy continues to rebound during the year, which is by no means assured, gold could face substantial temporary headwinds.
Meanwhile, both the Indian wedding season and the Chinese Lunar New Year are approaching, which helps underpin demand, since gold and silver are the most popular gifts for both occasions.

Inflation

Precious metals are often described as an inflation hedge more than anything, but I think the relationship between inflation and precious metals is more complex than most people realize. There is no reason gold and other precious metals can not increase in the absence of inflation, as has been the case for years now.

A reader commentary published in Numismatic News recently argued that because inflation is likely to remain low, metal prices will remain low, and silver may never even reach $50 again. The writer was responding to the almost constant talk one hears from some bullion watchers that hyperinflation is a looming threat in the U.S., a point most economist would dispute.

When it comes to inflation, one must distinguish between the short to medium-term and the longer-term outlook. I think one also has to make distinctions in terms of regions of the world since some currently face inflationary pressures, while others face deflationary prospects.

It is likely that while our economy is still getting back on its feet, which will take several more years at a minimum, inflation will continue to trend low within the U.S., and in Europe there are even concerns about deflation, as recession fears grow.

In China and other emerging market economies inflation has indeed trended higher in the last couple years, providing part of the impetus for gold and silver demand there, but inflation in China has begun to moderate in recent months.

It is also true that the U.S. government, through its calculation of the consumer price index, understates the real rate of inflation, probably to save money on entitlement programs that have cost of living adjustments based on the rate of inflation.

But that does not change the fact that there is little likelihood of high inflation, or especially of hyperinflation, in the short-term, though it could emerge at some point in the future, especially if the dollar continues losing purchasing power, or even collapses.

Quantitative easing

The hyperinflationists point to the two rounds of quantitative monetary easing the Federal Reserve has engaged in since the start of the current crisis and argue that all that money creation will lead to high inflation (which it may indeed, just not for some time).

In a slow economy in which people and companies are hoarding their cash, a lot of those extra dollars the Fed has printed are not circulating. They are sitting on the balance sheets of banks and corporations.

That partly explains why the monetary easing programs have not resulted in much inflation so far. The inflation we have seen has been primarily in energy costs, which are not part of what the government calls core inflation (something I have always found odd).

In fact, many gold bulls keep hoping the Fed will announce another round of quantitative easing, believing that is the sure path to higher prices.

More QE would indeed be bullish for metals because it will lead to further dollar depreciation and weakness, not because hyperinflation is on the horizon. But given all the controversy surrounding QE 1 and 2, the Fed will be very careful before undertaking QE 3, and is only likely to do that if the U.S. economy reverses course and conditions worsen substantially.

In Europe the prospects for monetary easing are much stronger, perhaps even inevitable, since it is probably the only way to deal with the debt crisis there, i.e., through reflation, or devaluation of existing debt. But that action will also lay the groundwork for the next crisis.

Interest rates

When it comes to understanding the precious metals markets and where metal prices appear to be headed, it is the interest rate, especially the yield on U.S. government debt and other supposedly safe bonds, that really matters, at least in the absence of serious inflationary pressures.

That is because if investors at some point down the road are able to receive a decent after-inflation return on assets which at least in their view are relatively risk-free, such as Treasury bonds, they will flock to them, which is likely to depress stock and metal prices. Riskier assets tend to underperform when interest rates rise.

But we are years away from any such development, and that is probably the main reason why most precious metal experts think the gold bull run will not end anytime soon. Gold should continue to do well as long as real interest rates (after inflation) remain negative. It is even possible that gold and other metals could rise after rates are substantially higher, depending on overall economic conditions.

In addition, new supplies from mine production will not be enough to satisfy expected future demand, as Mr. Nichols noted. And central bank purchases and long-term gold buyers in Asia are reducing the available supply of the metal.

Recent data out of China shows a record amount of gold was imported, as Chinese authorities seek to diversify their financial holdings. And it is illegal to export gold out of China.

The bottom line for gold and the rest of the precious metals complex in 2012 is they are widely expected to perform very well, but volatility will remain very high. Investors should expect declines of 20% like the recent one, or even more, but the trend line will likely still be up substantially in December.

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.