Commodity Online

By Hubert Moolman
The worst part of the world’s current financial crisis is still on its way. The enormous debt levels present in our financial system is central to this crisis. This huge debt levels could cause the world’s monetary system to collapse, starting with the weaker currencies and quickly making its way to the major ones. Day by day the premier signal (gold price) of this collapse is getting clearer and should encourage more people to run for cover.

The world economy cannot recover and make progress until the gigantic debt burden is lifted. This can still take more than 10 years. If we have a deep and extreme collapse (in debt) much like the stock market crash in 1929, then it could be 10 years, and off course longer should the crash be less extreme but more distributed. I think 10 years is more likely, since major crashes tend to end in an extreme collapse. A peak in the gold price could be a good signal that we are at or close to a bottom of this debt crisis, and we are still far from a peak in gold.

There are various signs that indicate that we have reached the end of the prosperity part of the debt bubble. Some of these signs I have mentioned before, like the top in the Dow/gold ratio. The gold’s price is also another, it has increased 4.72 fold since beginning of this decade. You can also just look at headlines around the world of countries like Greece having a debt crisis. You can also go and find the following charts (which could be considered a good proxy for debt levels) and you will notice how these levels have consistently increased at least the last 50 years:

Cumulative rate of growth of M3 and Monetary Base
Household Debt as a percentage of GDP
You could probably look at your own finances as well as your neighbour’s for evidence of extreme debt levels compared to just a few decades ago.

Debts levels have become a huge burden and it will strangle the world economy for at least the next 10 years. The debt will have to be settled eventually, voluntarily (unlikely) or by force (death of all fiat denominated debt). All future production will be severely reduced by the debt obligation and the effects will be a world economy in chaos and possibly with life threatening phenomena like starvation being the order of the day.

That is just how it works when you have huge debt – you will have less of your future income/production available due to the debt obligation that has to be met every month.

This crisis cannot be stopped, but you do not have to be caught up in its worst effects. You have to educate yourself by seeking the right knowledge that will help you prepare for its worst effects.

Loss of Mint Luster Key Grade Point

By F. Michael Fazzari, Numismatic News April 01, 2010

I believe that once you learn how to recognize friction wear, rubbing, cabinet friction, etc., whatever the current term for loss of mint luster on the highest point of a coin’s design is; you can grade anything.

Let me suggest some universal aspects of grading that come into play even while examining unusual numismatic items. These ideas should be obvious to anyone who has given much thought to grading.

Think about these points:

Smaller coins are harder to grade than larger coins because they are harder to see. While it’s true that some sort of magnification aids your examination, the actual parts of the coin you are looking at are small to begin with.

The contact marks on smaller coins are generally less severe than the marks on larger coins. That’s because smaller coins are lighter. Light coins do less damage when they come into contact with each other while circulating.

With all coins, the contact marks become more detrimental the easier they are to see. Marks in a prime focal area are the most important to consider.

The amount of wear on a coin is relative to its size. Take for example an Indian Peace medal with a diameter of 75mm (slightly bigger than three Washington quarters placed end-to-end). A tiny amount of cabinet friction – enough to change the color of the medal’s highest point – would hardly lower the commercial grade of the medal into the AU range; yet that same amount of friction might lower the grade of a small coin one point.

As you grade a coin, no mater what its configuration, you are looking for a changes of color (independent of toning) indicating the loss of originality at that point. Coins these days come in all shapes and sizes. Have you seen the coins from the Somali Democratic Republic in the shape of motorcycles and guitars? Even unusual coins such as this have certain points that will show the first signs of wear.

It is very helpful to know what design details are present on a fully struck example of a coin you are grading but an experienced numismatist who knows the difference between a weak strike and actual friction wear can get around this requirement.

Keeping these points in mind, all the usual criteria used to arrive at a grade remain the same no matter what the coin looks like. These include strike and the number, severity, and location of marks. Eye appeal is always most important. Now let’s take a look at some unusual coins you may encounter and discuss how they might be graded.

I believe any unusual coin can be graded the same as a normal specimen. Fig. 1 shows one part of a double struck silver medal at 10 power magnification. In the micrograph, the fields are dark and the raised portions of the design are white. In the center, you can make out parts of the letters on the first strike that have been flattened by the second strike. Since the fields of this medal are mirror-like and free from marks or blemishes, this error coin has very high eye appeal. It would grade PR-68 or higher as an error or as a normal piece.

An allowance is made for off-center error coins that show an unstruck portion of the planchet remaining. While the originality of the unstruck portion should be judged, original planchet surface marks on this part of the piece should not be factored into the grade unless they are severe.

Figure 2 shows a waffled state quarter at 15 power magnification. Its golden color is due to the lighting conditions in the location where it was photographed. Let’s grade it assuming that the rest of the coin looks the same as the micrograph.

The piece has full, blazing, mint luster with no rub. That gets us into the uncirculated range. There are virtually no perceptible marks on the piece and it has high eye appeal. That gets us into the gem grade. There are some stress cracks from the cancel die used to disfigure the coin but one could argue that the cracks are part of the cancelling process rather than defects. Wouldn’t you agree that this is a beautiful example of a waffled coin?

Good Time to Mentor a Young Collector

By Bill Brandimore, Bank Note Reporter March 15, 2010

I’ve been thinking about the low number of young people involved with this hobby. It’s not really that surprising an observation, but there are very few collectors in the 12 to 30 age group. I’m sure most of you have noticed this.

By contrast, most of us older collectors began collecting while we were in that age group. It was usually the result of a job such as peddling papers or clerking in a mom and pop store when we discovered this neat hobby where we could collect things for free. We could put an item away for its face value, and many times the item would be worth a dollar or two.

I found a 1916-D Mercury dime on my paper route. At the time it was worth $5.

Later, especially if we were history buffs, we would hook up with paper money. My early stamp collecting experience let me fall quickly in love with intaglio printing on a large enough scale that you didn’t need a magnifying glass to enjoy it.

Those kinds of free collecting incentives no longer exist. If we want to see a healthy population of collectors that will buy our collections when the time comes, we need to do some personal mentoring.

Mentor was the good friend of Odysseus, who agreed to teach his son Telemachus how to be a man while Odysseus was away fighting in the Trojan War. Mentor did, and Odysseus found a good man in Telemachus when he returned 20 years later to reclaim his kingdom. The secret was getting them young.

My Dad gave me the Christmas envelopes to play with when I was 8 or 9. I enjoyed putting things in an album.

I went to the post office and bought 12-cent plate blocks. I learned so much. To this day I remember that Ohio came into the Union in 1803, because a 1953 stamp was issued to celebrate the 150th anniversary of Ohio’s statehood.

On my paper route I got a few Barber coins and Liberty Head nickels. I enjoyed filling the holes in my albums. Later I discovered paper money, in particular, Fractional Currency of the Civil War era. I was definitely hooked.

How do we hook our children and grandchildren today? How do we capture the neighbor kids for numismatics?

The American Numismatic Association puts a lot of emphasis on Young Numismatists programs. A local club I belong to, the Wisconsin Valley Coin Club, draws a crowd at its annual show by putting out a bucket of cents and folders for youth who accompany their parents to our show. It’s a big hit, as the kids enjoy it and the parents are free for a while to explore the dealer inventories.

A personal touch, however, with follow-up, seems to be even better. We need to invite these kids to our meetings, sign them up, and make sure they have a ride to meetings.

Perhaps interest them in a Lincoln Cent collection featuring the Memorial reverse. After all, these coins go back 50 years now, and you can get them free out of change. It really is like a treasure hunt.

As the youthful practitioners get into the swing of things, we can introduce them to $1 Federal Reserve Notes, district sets, fancy numbers, and on and on.

So, take a personal interest in the youth that might be in your coin club. Give away a few Lincoln cents, an Indian Head cent or a Buffalo nickel. It might have the same magical affect on them as it did for us.

What really got me excited back in 1952 was finding a very well worn 1909 Barber quarter. It was older than my Dad, and it was free for face value.

I really believe there is something genetic about collecting. None of my kids are interested beyond assuring me that they think my currency is really cool. They might even spend five or 10 minutes looking at my treasures before their eyelids droop.

At the same time, there are young people out there who are latent collectors if we can only press their genetic collector button. Give it a try, it worked for Mentor.

Show business this month of April includes the Military Payment Certificate Collectors Fest at Sandusky, Ohio. George Cuhaj and I are making it a point to attend.

From all reports, this is one of the most enjoyable collector encounters you are likely to attend. Everyone I talk to who has been there returns. These specialists are enthusiastic collectors.

For information, drop a line to Fred Schwan at the BNR Press, 132 E. Second St., Port Clinton, Ohio 43452-1115-04 or call 419-732-6683.

Other April attractions include the Wisconsin Valley Coin Club Show, April 25. It works if you’re in the north central Wisconsin area.

Central States Numismatic Society holds its annual convention in Milwaukee, April 29-May 1. This show has lots of dealers, exhibits, educational sessions and great camaraderie. This show always seemed to have a good deal of paper money, and this was true even when paper money wasn’t nearly as hot as it is now.

Whatever you do this spring, get out to a coin show. You never know what you’ll find.

One nice feature of small shows is that frequently the dealers at these shows are not up on all the paper money fields. If they haven’t bought the book, you might make a great find.

Looking a little further ahead, we’re all eagerly awaiting the International Paper Money Show in Memphis, Tenn., this June. This will be Lyn Knight’s first Memphis event as the show’s owner. I know we can count on a great auction and splendid exhibits.

It is also pretty hard to beat all the restaurants on the Mississippi. I generally take a nice evening ride on a trolly car. It is quite refreshing after a hard day on the floor, and a great meal. So mark your calendars for June 17-20.

On the market side, it looks as if prices truly are beginning to respond a bit—especially better Nationals and large-size type. If you’re looking for a bargain, pick up on Fractional Currency, Colonial currency and the notes of the Continental Congress. Small-size is offering some bargains, as well, but nice small-size is still bringing nice prices.

As always, e-mail me at billb3883@verizon.net. I enjoy your questions and comments. If you’re at a show I’m attending, come on up and say hello.

Gold Volatility Whips Market

By Patrick A. Heller February 23, 2010

Other News & Articles

• Gold Volatility Whips Market
• US Mint 2010 Gold Eagle Coin Values, MS70s Average $1340/oz
• US Mint Releases Millard Fillmore Dollar, Offers 25-Coin Rolls

The gold market suffered but overcame two major onslaughts last week.

After U.S. markets closed last Wednesday, the International Monetary Fund announced that it would offer the remaining 191.3 metric tons of gold from its planned gold sales onto “the market” rather than central banks. By making it appear that more than six million ounces of gold might be dumped onto retail channels over time, some investors panicked into selling, which pushed down the gold price.

Gold eventually fell more than two percent but then recovered all lost ground within 24 hours of the announcement.

The nature of the IMF announcement indicated that it was done to drive down the price of gold. Revealing such plans is a tactic that guarantees that the IMF sells the gold for the lowest possible price. If the IMF was really trying to raise the maximum funds for its own operations, it would not sell its gold by this process.

The quick recovery in gold prices meant that another tactic was needed. Late on Thursday afternoon, the Federal Reserve announced that it had increased the interest rate banks would have to pay the Fed for overnight borrowings. This was meant to be a signal that interest rates might rise in the near future, which again knocked down precious metals prices.

Still, gold came right back the next day. Over the weekend, Asian markets climbed as high at $1,130. When the U.S. markets opened Monday, the price was immediately taken down to the $1,110-$1,115 range.

There is a huge incentive to hold down gold prices this week. Gold options expire Tuesday, with more than 5,000 call contracts (over 500,000 ounces) that could be exercised at a price of $1,100. Should the COMEX close Tuesday above $1,100, these contracts for immediate delivery would be called. That would put a supply squeeze on the dwindling COMEX gold dealer inventories, which are down 25 percent in the past three months to only 1.65 million ounces.

Also this week, Fed chair Ben Bernanke will be testifying before the House Financial Services Committee and Senate Banking Committee. There is an effort under way to encourage a member of one of these committees to ask Bernanke the very same questions about admitted Federal Reserve gold swap arrangements that the Fed has refused to disclose in response to the Gold Anti Trust Action Committee’s Freedom of Information Act Request. If ever there was a week that Bernanke needed to appear competent, this is the week.

The U.S. government, the member nation with the largest voting power in the IMF, leaned on the IMF to make it appear that some of its gold might be sold to the public (which, if it occurs, I think will at most be only a token percentage of the total), then risked crashing stock and bond markets by raising one of the key interest rates. To me, these actions were obviously taken solely to try to suppress the price of gold.

Such extreme measures worry me that there are some horrendous financial developments about to break. There are so many potential crises waiting to collapse that I cannot discern just which ones they might be.

In the short term, I expect extremely volatile gold and silver markets. I expect to see more extreme efforts made to hold down prices at the same time that demand for physical metals soars. Daily swings of 5-10% are possible. I expect that the result of all this volatility will be significantly higher prices than we see today.

The safest way to participate in the continuing long-term bull markets for gold and silver is to buy physical metals, not paper contracts, and avoid trading on margin. As prices are whipsawed, those with margin accounts could actually lose money despite prices eventually reaching new highs.

In the 1979-1980 bullion boom, I worked as a certified public accountant. One client was a commodity broker who personally bought several thousands of ounces of silver on margin. The day before the price of silver rose almost consecutively until it reached the January 1980 peak, it dipped about five percent. This client was unable to cover the margin call and saw his silver position closed out. If you don’t buy on margin, you won’t have this risk. At that time, I owned significant positions in gold and silver coins, almost all of which I sold in early 1980 for sizable profits.

The idea of purchasing precious metals on margin is to multiply the hoped-for profits. However, in volatile markets, the strategy could backfire. Buy physical gold and silver with your own funds, then relax and sit back to watch the coming fireworks.

Patrick A. Heller owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” the company’s 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 Coin Update (www.coinupdate.com) and Financial Sense University (www.financialsense.com). His periodic radio interviews can be heard on the Korelin Economic Report at http://www.kereport.com.

Auction prices show pause in ’09 results December 31, 2009
by  Mike Thorne

Summary

“Gold Hits All-Time High,” “Unemployment Tops 10 Percent,” “10 Percent of Homes Are in Foreclosure,” “Dollar Rises, Gold Falls,” screamed the headlines in 2009. But how has the uneasy economic situation affected you personally?

“Gold Hits All-Time High,” “Unemployment Tops 10 Percent,” “10 Percent of Homes Are in Foreclosure,” “Dollar Rises, Gold Falls,” screamed the headlines in 2009. But how has the uneasy economic situation affected you personally?

And how has it affected the coin industry? It would certainly make sense for coin collectors to cut back on hobby purchases because of the troubled economy.

But has this really happened? One way we might be able to tell is to take a look at numismatic auctions in 2009.

The year certainly started well enough for Heritage Auctions, one of the industry giants, as the Heritage FUN auctions in early January brought in $65 million in sales of rare U.S. coins, U.S. paper currency, and ancient and world coins. Highlighted in their U.S. coin sales were pattern pieces from the Queller Family Collection. (David Queller’s 1804 dollar realized $3,737,500 in a Heritage sale in 2008.)

One of the Queller collection’s better patterns was an Numismatic Guaranty Corp.-graded PR-62 1880 $4 gold Stella, Coiled Hair type. With just 18 pieces known, this popular rarity realized $575,000. The auction record for the type is $977,500, achieved by a PR-66 Cameo example in 2005.

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One metric I’ve used in recent years as a gauge to the health of auction activity is the number of $1 million coins crossing the auction block. In 2008, for example, I noted four such coins. In 2007, I counted five million-dollar sellers, and in 2006, the figure was again four.

For 2009, I counted only three million-dollar coins, although a fourth coin came really close. With one exception, the million-dollar coins are not ones you would have predicted to receive such exalted amounts.

The one you could have predicted, however, is sometimes called “The King of Coins.” It’s an 1804 dollar sold by Heritage Auction Galleries at its April 29 to May 2 sale in Cincinnati, Ohio, at the Central States Numismatic Society Convention. The coin was part of the Joseph C. Thomas Collection.

Once owned by Amon G. Carter, Sr., who paid $3,250 for it in 1950, this is a Class III 1804 dollar, of which just six are known. Class I, or original, 1804 dollars were minted in the 1834-1835 period, and eight are known. Restrikes were made in 1859 and have a slightly different reverse than the originals; Class II, of which there is only one piece, has a plain edge.

Graded PR-58 by Professional Coin Grading Service, this coin is the best of the three Class III dollars available for private ownership. It sold for $2.3 million, “a new world record for its class,” according to Greg Rohan, president of Heritage. “Thursday [April 30] night’s price made this particular 1804 dollar the seventh most valuable coin ever sold at auction.” (Note that all figures given in this article include the buyers’ fee, which is typically 15 percent of the winning bid.)

Although $2.3 million sounds good for a Class III 1804 dollar, the same coin sold by private treaty in a deal brokered by Heritage for $2,475,000 in 2006. Thus, it’s possible that the current buyer, NGC founder John Albanese, got a bargain in a depressed market.

The second million-dollar coin sold on May 29 at a Heritage auction conducted at the Long Beach Expo, in Long Beach, Calif. The winner was the finest known 1856-O $20 gold piece.

Graded Specimen-63 by PCGS (and also by NGC earlier), the $20 gold piece realized $1,437,500, more than double the $542,800 it brought in 2005. (“Specimen” refers to coins that are neither business strikes nor proofs but are obviously specially made, with some characteristics that distinguish them from business strikes.)

Is this coin actually worth the amount it brought? Bob Green, a specialist in Liberty Head double eagles, “was very surprised that this coin sold for $1,437,500. I would not have bid more than $1 million.”

Similarly, Greg Reynolds, a numismatic researcher and expert, said, “In my view, the price realized was a little high, given current market conditions. A circulated 1856-O could probably be purchased, at some point over the next 18 months, for less than $475,000.” His prediction proved prophetic, as an NGC-graded AU-58 1856-O sold for $460,000 at a Heritage auction in Los Angeles in mid-summer.

Amazingly, the third coin that sold for more than a million dollars was a large cent. Specifically, it was a 1795 large cent with reeded edge, which is typically listed along with normal varieties, so it’s considered enough of a regular issue to be included in a complete collection of large cents.

This particular 1795 reeded edge cent was PCGS-graded VG-10 and was part of the Dan Holmes large cent collection. The collection was sold in an Ira and Larry Goldberg (with Chris McCawley and Bob Grellman) auction held Sept. 6-8 at the Beverly Hills Crowne Plaza. When the bidding stopped, the coin, which is the best of the five or six pieces known of this variety, had realized a whopping $1,265,000. The pre-sale estimate was just $250,000.

Another coin in the Goldberg sale almost achieved the million-dollar mark, a 1799 large cent graded MS-62 by NGC. This coin realized $977,500, again with a pre-sale estimate of $250,000.

In an article about the Holmes collection sale, Greg Reynolds noted that the 1799 cent now resides in a PCGS holder with a grade of MS-61. Reynolds himself grades the piece AU-58, and McCawley and Grellman consider it AU-55. I view  this as a good illustration of the grade inflation that often occurs at the certification services when a scarce or key date is involved.

Two other coins worth mentioning are a pair of 1793 Strawberry Leaf cents. One (NC-2 variety) graded Fair-2 by PCGS sold for $264,500, and the other (NC-3 variety), optimistically graded G-4 by PCGS, went for $218,500. Surely the Fr-2 coin is one of the lowest-grade coins ever to sell for more than a quarter million dollars.

— — —

2009 must have been the year for large cents, as another example of the 1793 Strawberry Leaf (NC-3) variety became the most valuable large cent (until later in the year) when it sold for $862,500 on Jan. 5 at a Stack’s auction in Orlando. After the sale, the coin received a grade of VG-10 from PCGS. It’s the finest of just four known examples of this variety.

Another auction with record-breaking large cent sales occurred early in the year, at Ira and Larry Goldberg’s Pre-Long Beach auction held Feb. 1-3. Featured was part of the Ted Naftzger Collection of large cents consisting of middle date cents (1816-1839). Highlights included an 1823 cent graded MS-66 Brown by PCGS. Against an estimated value of at least $35,000, it realized an astounding $299,000.

Another key in the Naftzger collection was an 1839/6 PCGS-graded MS-65 Brown. This cent was described in the auction catalog as an “indispensable piece for anyone trying to assemble a Mint State ‘Red Book’ collection of Middle Date … large cents.” With a PCGS population of one, with none finer, the coin was estimated at $50,000 and up. The final price was up, way up, in fact, as the coin realized $264,500.

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Of course, 2009 was the 200th anniversary of Abraham Lincoln’s birth and the 100th anniversary of the Lincoln cent. Thus, it seems appropriate to consider how Lincoln cents fared at auction.

In the sale held March 27-31 in Baltimore by Heritage, for example, one of the top ranked lots was a 1969-S doubled-die obverse cent. Graded MS-63 Red by PCGS, this coin, with an estimated population in all grades of between 17 and 32 pieces, brought $86,250. Heritage sold two more 1969-S doubled die Lincolns at an auction in October. Graded MS-63 Red by NGC and AU-55 by PCGS, the two sold for $57,500 and $54,625, respectively.

At the March Heritage sale in Baltimore, a 1955 doubled-die Lincoln cent, graded MS-63 Red by PCGS, realized $5,750. This amount is nearly 100 percent over the wholesale value given in the Coin Dealer Newsletter (CDN or Greysheet).

A 1917-S cent, graded MS-65 Red by PCGS, went for $12,650 in the Heritage Long Beach Signature Auction held in February. This is more than 140 percent over the CDN wholesale bid. Also, this price illustrates the meaning of “condition rarity,” a common coin in lower grades but rare in higher grades.

An even better illustration of condition rarity can be seen in a Lincoln cent result at the Heritage September sale in conjunction with the Long Beach Expo. There, a 1925-D cent, graded MS-66 Red by PCGS, realized an astonishing $74,750. This is a coin with a PCGS population of just two pieces.

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Condition rarities in other denominations also garnered major amounts in 2009. For example, in the Heritage FUN auction, held in Orlando from Jan. 7-11, an 1892-S Morgan dollar graded MS-67 by PCGS sold for $460,000. In low grades, the 1892-S is worth little more than a common date.

In late March, at the Bowers and Merena auction at the Baltimore Coin and Collectibles Expo, the second highest seller was another 1892-S Morgan. This coin, graded MS-66 by PCGS, realized $201,250. As you can see, a single grading point made more a quarter-million dollar difference. Although I haven’t seen the two coins, I wonder if the MS-67 piece looks $250,000 better than the one graded merely MS-66.

In the Buffalo nickel series, one example of a condition rarity is the 1926-S, a low-mintage date that’s relatively common in grades such as Good and VG, but decidedly uncommon in VF and above. Two uncirculated 1926-S nickels sold in the Bowers and Merena auction at the American Numismatic Association National Money Show in March in Portland, Ore. One, graded MS-63 by PCGS with a CAC sticker, sold for $25,300. The other, PCGS-graded MS-64, without a CAC sticker, realized only $14,950.

CAC stands for Certified Acceptance Corporation, and for a fee, CAC will examine a certified coin and determine whether or not it’s accurately graded. If it is, CAC attaches an oval-shaped green sticker as a stamp of approval. As you can see from the above example, the CAC sticker appears to have made a huge difference in how the two coins were evaluated.

Another Buffalo nickel condition rarity crossed the auction block at the Bowers and Merena auction at the ANA World’s Fair of Money in August in Los Angeles. The coin was a 1925-S nickel NCG-graded MS-66, which realized $87,400. This is a date that doesn’t cross the $100 mark until the grade of XF.

Earlier I mentioned a 1925-D Lincoln cent graded MS-66 Red by PCGS that sold for $74,750. At the same sale, a common (in low grades) 1920-D Buffalo nickel, graded MS-66 by PCGS, with a CAC sticker, brought the same $74,750 as the 1925-D Lincoln.

In the Walking Liberty half dollar series, the 1919-D is a slightly better early date in circulated grades that becomes a condition rarity in mint state. As one illustration of this, Heritage auctioned a 1919-D PCGS-graded MS-66 at the Central States convention in late April, early May for the astounding figure of $253,000. Of course, this coin is considered the single finest certified 1919-D.

The final condition rarity I’ll mention is an 1886-O Morgan dollar. This coin is valued as a common date in most circulated grades but becomes much less common in mint state. At the Heritage Summer Fun Signature sale, held in early July, an 1886-O, graded MS-65 by PCGS, with a CAC sticker, sold for $149,500.

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Key date coins, coins that are the keys to completing a particular series, also brought in large amounts at auction in 2009. At their Central States auction, Heritage sold a 1918/7-D Buffalo nickel for $253,000. It undoubtedly helped that the coin graded MS-66 by PCGS and was tied for the finest certified example.

At the Scotsman Auction Company’s Midwest Summer Sale held in St. Charles, Mo., the second highest price in the sale went for the big key Mercury dime, the 1916-D. Graded MS-65 FB (Full Split Bands) by PCGS, the coin realized $38,525. This amount is $25 over the current CDN bid price, which means that the coin sold for wholesale.

A high-grade example of the key date 1918/7-S Standing Liberty quarter appeared in the Heritage Long Beach sale in February. Graded MS-65 by PCGS, the coin brought $66,125, which is slightly below the current CDN bid price.

In Morgan dollars, I noted two sales of high-grade Mint State examples of the key date 1889-CC. In NGC-graded MS-64 PL (prooflike), one sold at the Heritage February Long Beach sale for $51,750. A much better example sold at the Heritage January FUN sale for an unimaginable figure of $531,875. The coin was graded MS-68 by PCGS.

For collectors who consider the proof-only 1895 Morgan part of the series, an NGC-graded PR-66 Cameo example realized $57,500 at the Heritage Dallas Signature Sale held in October. This would have to be considered an incredible bargain, as the current CDN bid price for this coin is $75,000. This may be just another example of the sale of a great coin in a down market.

— — —

Unusual items found ready buyers in 2009. Some of the most unusual items were found in Stack’s Americana Sale held in late September in Philadelphia. For example, a 1906 Indian Head cent struck in gold realized $276,000. The coin was probably struck on a planchet intended for a gold quarter eagle. Graded AU-58 by NGC, the coin may be unique.

Another unusual item was a large-size Thomas Jefferson Indian Peace medal struck as thin silver shells. The medal realized $345,000, which was well beyond the pre-sale estimate and set a new record for U.S. silver medals sold at auction.

A 1942 aluminum pattern Lincoln cent realized $126,500 in the Heritage Signature sale in May in which an 1856-O double eagle grossed more $1 million. The Lincoln pattern was graded PR-66 by PCGS, and is considered to be R8 (Rarity 8, 2-3 known).

Last, but not least, another new record was set at an auction sale held in conjunction with January’s FUN event. Held by the Original Hobo Nickel Society, the sale’s 145 lots garnered $47,728.95, eclipsing 2008’s record by more than $11,000.

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Proving once again that Registry Sets (sets of coins certified by either PCGS or NGC and ranked according to average grade and completeness) can bring in big bucks, a complete set of nickel three-cent pieces went for $304,750 at a pre-FUN sale held by Bowers and Merena Auctions in Orlando. The nickel three-cent pieces comprised the top-ranked PCGS Registry Set in their category (Business Strike Three-Cent Nickels). At the same sale, a PCGS-graded MS-63 example of the always-in-demand 1921 Saint-Gaudens double eagle sold for $287,500.

— — —

One way to get an idea of the state of the auction market in 2009 is to look at coins that sold more than once during the year. For example, Heritage offered the same 1933 $10 gold piece twice, first in January and then again in August. Graded MS-65 by PCGS, the coin sold for $488,750 early in 2009 but brought only $460,000 in midyear. Did the market decline more than 6 percent in a little over six months?
As another illustration of a particular coin selling for less later than it did earlier, the 1880 Coiled Hair Stella that I mentioned as part of a Heritage sale in January was auctioned a second time in August. The realization was “just” $546,250, or slightly more than 5 percent below the $575,000 it earned in January.

Instead of asking whether the sale of these two coins represents a decline in the market from January to August, perhaps a better question would be, “Why were the two coins placed in auction again so soon after being purchased?” I’m reminded of the TV commercial in which a man purchases a painting at auction and then immediately tells the auctioneer that he wants to sell it. Obviously, this is not a good way to handle items that are bought for investment.

— — —

That’s my survey of the auction scene for 2009. What does it show? As always, desirable coins brought big money, although perhaps not as big as in some recent years.

Still, given the state of the economy things undoubtedly could have been a lot worse in 2009 than they were. If the recession is really over, as we’re told, then numismatic auctions in 2010 should make banner news. I, for one, will be a keen observer.

Gold’s golden journey through the ages

 

NEW DELHI (Commodity Online) : The precious yellow metal is going great guns by setting new records since last week.

Let’s see how the yellow metal achieved every milestone on its journey to the top.

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* January 1980 – Gold hits record high at $850 per ounce. High inflation because of strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution, prompts investors to move into the metal.

* August 1999 – Gold falls to $251.70 on fears of central banks reducing reserves, and mining companies selling gold in forward markets to protect against falling prices.

* October 1999 – Gold reaches a two-year high at $338 after agreement to limit gold sales by 15 European central banks. Market sentiment toward gold begins to turn more positive.

* February 2003 – Gold reaches a four and a half year high on safe-haven buying in run-up to conflict with Iraq.

* December-January 2004 – Gold breaks above $400, levels last traded in 1988. Investors turn to gold as risk insurance.

* November 2005 – Spot gold breaches $500 for the first time since December 1987, when spot hit $502.97.

* April 11, 2006 – Gold surpasses $600, the highest since December 1980, with funds and investors jumping into commodities on a weak dollar, firm oil prices and geopolitical worries.

* May 12 – Gold prices peak at $730 an ounce with funds and investors pouring money into commodities on a weak dollar, firm oil prices and political tensions over Iran’s nuclear ambitions.

* June 14 – Gold falls 26% to $543 from its 26-year peak after investors sell out of commodity positions.

* Nov. 7, 2007 – Spot gold hits 28-year high: $845.40/ounce.

* Jan. 2, 2008 – Spot gold breaks above $850.

* March 13 – Benchmark gold contract trades over $1,000 for the first time in the US futures market.

* March 17 – Spot gold hits an all-time high of $1,030.80 an ounce. US gold futures touch record peak of $1,033.90.

* Sept. 17 – Spot gold rises almost $90/ounce, a record one-day gain. Investors seek safety amid equity market turmoil.

* Feb. 20, 2009 – US gold futures rise back above $1,000 an ounce to a peak of $1,005.40 as investors turn to gold as major economies face recession and equity markets tumble.

* Sept. 8 – US gold futures hit $1,000 an ounce for the first time since February as the dollar’s weakness, concerns about the sustainability of global economic recovery and worries about future inflation underpinned sentiment.

* Nov. 3 – Gold crests $1,080 an ounce, defying dollar strength as the International Monetary Fund’s 200-tonne sale of gold to India’s central bank boosts sentiment.

* Nov. 6 – New York gold futures rise to a record above $1,100 as the dollar eases in the wake of weaker-than-expected US non-farm payrolls data, while spot gold hits a record high at $1,100.90 an ounce.

* Nov 26 – Spot gold rises above $1,192.60 per ounce, extending gains from the day before.

* Dec 1 – Gold hits record highs of $1,198.70 an ounce in Europe, as the dollar weakens against a basket of currencies after policy comments from the Bank of Japan.

* Dec 3 – Spot gold price rises to $1,227 per ounce.

Physical Gold Shortages Result In Higher Premiums

By Patrick A. Heller December 01, 2009

Last week I discussed how South Africa Krugerrands dated before 2009 had pretty much disappeared from the wholesale market and that even supplies of 2009 Krugerrands were not necessarily available for quick delivery.

Pre-2009 Krugerrands continue to be unavailable from wholesalers, but the 2009-dated coins are now readily available from some wholesalers. A spokeswoman for the Rand Refinery in South Africa, the manufacturer of Krugerrands, told me that they currently have no backlog of orders and that any primary distributor who makes a purchase can get prompt shipment.

The dilemma for would-be gold buyers is that 2009-dated Krugerrands trade at a higher premium than did earlier-dated coins.

Last Wednesday, the U.S. Mint announced that it had to suspend sales of 2009-dated American Eagles as they had run out of product to deliver. The day before, the U.S. Mint announced that it had suspended sales of the 2009 silver Eagle dollars as their inventory was exhausted.

In reaction to these supply shortages, as you might suspect, premiums rose on just about all the lower premium forms of physical gold. The premiums on major gold coins, those at or close to an ounce of gold content, now sell for $5-12 per ounce more above the gold spot price than they did two weeks ago. I anticipate that premiums will rise further before the end of the year and that supply shortages will spread to other coins and ingots.

Higher gold and silver prices have brought out soaring numbers of customers selling gold jewelry and also a huge increase in the number of customers purchasing physical gold and silver to protect their financial health. This past Monday, my company served about five times the normal daily number of customers than we served a few years ago. Both the number of transactions and the average size of transaction are much higher than they used to be.

My company staffed a booth at the Michigan State Numismatic Society (MSNS) Fall Convention this past weekend. Show attendance was extremely heavy on Friday and Saturday and heavier than normal on Sunday. So many people came to the show that several visitors complained about having difficulty even finding parking places, a problem I have never heard since I first worked this show in 1981. My company enjoyed the highest sales at any coin show since the 1979-1980 bullion boom, topping the previous best show by almost 25 percent!

Customer demand was strongest for bullion-priced gold coins, followed by unusually strong demand for collector U.S. gold coins. Surprisingly, virtually all of the collector U.S. gold coins we purchased at the show resold quickly and never made it back to our store.

Last week the spot price of gold set new record highs by Wednesday. Almost every news development indicated growing demand or tighter supplies of physical precious metals. India’s central bank revealed that it was now negotiating to purchase all of the remaining gold that the International Monetary Fund was planning to sell over the course of multiple years. There was even a report that the German central bank may begin purchasing gold reserves.

However, the U.S. Thanksgiving holiday provided a prime opportunity for the U.S. government and its trading partners to try to temporarily stem the rising price of gold. When commodity markets are closed somewhere around the globe, trading volumes are lighter, which makes it easier to manipulate prices with less effort. In 2008, for instance, the closing COMEX price on the Monday after Thanksgiving was 4.3 percent lower for gold and 7.3 percent lower for silver than the closing prices on the day before Thanksgiving. It took all the way until Dec. 11 for the prices of both metals to close higher than on the Wednesday before Thanksgiving.

With the price of gold threatening to top $1,200 and the COMEX closed last Thursday (and only lightly traded on Friday), it was an ideal time to knock down gold and silver prices. That is what happened, with the price of gold on Friday trading as much as $50 lower intraday than it did in foreign markets on Thursday.

While we have seen an increase in demand for gold and silver from less than wealthy purchasers, it has not yet reached a frenzy, which would be a sign of nearing the top of a market. Most of the increasing demand in the past year seems to be coming from governments, central banks, investment funds and very affluent individuals. For example, investor John Paulson, who earned billions of dollars in 2007 selling short collateralized debt obligations, announced recently that he was establishing a $6 billion fund to focus on purchasing gold. Paulson also stated that he would invest $250 million of his personal fortune in this fund. With such signs of growing demand, even ignoring the two factors I discuss below, I think there is little prospect for the price of gold to ever sink under $1,100 again. On the other hand, I am highly confident that gold will end 2009 above $1,200, possibly much higher.

So, no matter what effort may have been made to suppress gold and silver prices in the past few days, I expect that impact will quickly be overturned.

There are two developing stories that could result in exploding prices for gold and silver in the near term.

The initial reports about gold-plated tungsten 400-ounce gold bars that China’s central bank recently received from bonded warehouses look like they may just be the beginning of a much larger scandal. Analyst Jim Willie reported that the initial discovery involved the receipt of four of these bars that came from bonded warehouses in the United States. Willie predicts, and it makes sense to me, that the bonded warehouses for gold bars are soon going to have to test every bar for authenticity before they deliver it. On top of that, the warehouses will also have to provide an extra guaranty of authenticity which would make them liable should the bar later turn out to be counterfeit. Should the warehouses not offer these customer protections, a panic could develop where owners of paper contracts seek to covert their paper holdings into physical gold that they can trust.

The Commodity Futures Trading Commission (CFTC) has been working for more than a year on possible regulations to minimize the potential for manipulation in the U.S. commodity and futures markets. It is possible that the proposed regulations could be announced as early as December. Conceptually, the trading limits would be determined in relation to the number of contracts normally traded by producers and manufacturers so that an investor could not establish a position large enough as to distort the market. However, I have heard of a number of potential loopholes in such possible regulations. For instance, one story is that the limits would only affect long positions, leaving short sellers free to manipulate the market. Another story is that investors who already have positions beyond the trading limits would be allowed to keep such large positions under a grandfather clause. I have also heard that these trading limits might apply to all commodities other than gold and silver.

The reason why any proposed regulations might exempt short sellers of gold and silver contracts is because of the extraordinarily large short positions held by banks. For instance, should JPMorgan be required to reduce its humongous silver short position, the silver commodity and futures markets would fail. There is simply not enough physical silver readily available in the entire world, no matter the price, for JPMorgan to cover its exposure.

Should the CFTC announce new regulations imposing trading limits on investor holdings of commodity and futures contracts and not leave any exemptions for the holders of large gold and silver short positions, gold could reach $1,500 and silver pass $30 in as little as 24 hours.

For many reasons, if you are considering owning physical gold or silver, I recommend that you take action sooner rather than later.

Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, the company’s 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 Financial Sense University (www.financialsense.com). His periodic radio interviews on WILS-1320 AM can be heard at http://www.amlansing.com, on the Korelin Economic Report at http://www.kereport.com, and on Coin Chat Radio at www.coinchatradio.com.

Inside the Global Gold Frenzy

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‘Solid’ Half Dollar Honors Wisconsin’s Solid People

By Paul M. Green, Numismatic News November 06, 2009

There is a pretty good case to be made that the Wisconsin half dollar is worthy of special recognition from a national audience, too. To mark the centennial anniversary of the Wisconsin Territorial government, those responsible went to the people for design ideas and appropriately for a state where education has always been a major priority it was a University of Wisconsin student by the name of David Parsons who created the original design, which was then made technically acceptable by Benjamin Hawkins.

The design of the Wisconsin half dollar has an obverse featuring a badger on a log with the state emblem and arrows, which represented the Black Hawk War in the 1830s. For the reverse, there is the Territorial seal that includes a forearm holding a pickaxe over a mound of lead ore and the inscription “4TH DAY OF JULY ANNO DOMINI 1836.”

The Wisconsin half may not have been the most artistically accomplished of the historic commemoratives, but it had a number of things that we like to think reflect the state in a positive light.

It’s worth remembering that in 1936 there was a virtual flood of commemoratives of all types. Some of the topics were appropriate, while others were not of national significance. State anniversaries seem fair game, but in 1936 they got down to city anniversaries, so while interesting, the fact remains that the Wisconsin half dollar was an appropriate topic in a year when that was not always the case.

Something else that can be said about the Wisconsin half is that there appears to have been nothing unusual in its marketing. That cannot be said for some of the other issues that year, including the famous Cincinnati Music Center half dollar that was suspect in terms of the topic as no one could find any reason to call Cincinnati a “Music Center” and even more suspect in terms of the marketing and what happened to the profits.

In the case of the Wisconsin half the mintage of 25,015 appears to have been a legitimate reflection of the sales. There are no reports of any significant unsold hoards and that is unusual, for at the time frequently large numbers of other unsold commemoratives ended up in the hands of dealers for sale at a later date.

We find the prices of the Wisconsin half reflect what was a reasonable supply that received reasonably good care from the collectors of the day. The Wisconsin half lists for $255 in MS-60, and an MS-65 is $400. Those levels are not high for a commemorative with its mintage.

While it might not be rare, you could probably suggest that the Wisconsin half is a solid coin. That’s its reputation and it fits the coin as well as the state and its people.

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