Fractional gold has purpose, or does it?                                      
Posted by Dave

Since sales of fractional gold American Eagle bullion coins began in June, the tenth-ounce coins have moved out the door at a reasonable pace.

As of July 13, buyers had taken 300,000 of the small coins. They are popular as jewelry and they also are popularly used by promoters to entice novice gold buyer’s to get genuine U.S. Mint gold at a price that doesn’t choke a horse.

One-tenth of the present $1,200 price of an ounce of gold is much easier for novice buyers to part with than the cost of the one-ounce coin.

Obviously, though ,with sales approaching 700,000 pieces, demand for the one-ounce coin is not hurting. Savvy investors need no introduction to it.

Sales of the half-ounce coin at 31,000 pieces and the quarter ounce at 44,000 coins are betwixt and between. They aren’t the standard investment coin and they are not nearly as popular as jewelry. So what exactly are they?

In days when $2.50, $5 and $10 coins were needed to make change for gold $20s, the smaller sizes had a purpose.

With investment coins, you don’t need to make change, though I have seen the concept bruited about online as the fractional gold coins are tipped as needed when the currency system breaks down and change in gold will again be required.

Judging from current fractional gold American Eagle sales, perhaps that point is a rather hard one to make.

Knowledgeable Gold Buyers Wanted
June 08, 2010
By Dave

I had a call from a married couple yesterday. They did not identify themselves to me, though it is possible they did so when they first reached my colleague Debbie Bradley.

After the call was transferred to me, it was the wife on the phone. She wanted to know if there was such a thing as a $50 gold piece.

I told her about the $50 American Eagle one-ounce coin.

I explained that these coins had been struck by the U.S. Mint since 1986 and that they were then sold into the bullion market, priced and traded at the current price of gold plus the mark-up.

She wanted a ballpark figure, so I said $1,250 plus the mark-up, which I said fluctuates.

She wondered why she couldn’t find this information in her book, though she never told me what it was. Perhaps she would have, but her husband was asking questions in the background and finally his wife gave him the phone.

He wanted to know about $20 gold pieces and what they were worth. I told him they traded among collectors based on condition.

He was impatient with that. He asked what’s the base price if the coin was in terrible condition.

I said it was worth the gold price or roughly $1,250 because it contained 96 percent of an ounce of gold.

He retorted that that’s what I had told his wife was the base price of the gold $50.

I said that’s because they are both approximately the same weight.

“You mean the $20 weighs the same as the $50? How can that be?

More or less, I replied, because the $20 was struck 1933 and before and the American Eagle was struck to a different standard starting in 1986.

He couldn’t seem to wrap his mind around the concept of the $20 and $50 coins being roughly the same weight and repeated the same questions.

Then he threw in the statement that someone was offering him coins for $500.

I replied that if they were one-ounce coins they were probably fake. I suppose I could have said stolen, but I didn’t get that far before he blurted out:

“I don’t buy fakes,” he exclaimed indignantly.

I asked why anyone would sell a coin to him with a base value of $1,250 for $500.

He was silent and still indignant.

He did not volunteer the identity of who was offering him the coins or what this person or firm claimed the coins to be.

After 10 minutes of this, he was ready to go, said good-bye and hung up.

I fear that the callers are going to end up having less money at the end of the week than what they started with.

By Dave:

Make Sure You Have Something Real
May 07, 2010

Each morning as I start my day, I check the Kitco website to see what precious metals are doing.

Yesterday I wrote down $1,180.10 for gold and $17.52 for silver. This morning I wrote down $1,197.80 and $17.63.

If those numbers were the only information you had, who would think that the financial system almost melted down again yesterday purportedly due to some glitch?

That’s some glitch.

While it is easy to get wrapped up in online virtual reality, it is important to take a step back from it. Even the stuff that is supposed to be real online might not be.

That’s hard to wrap my mind around.

A little typing mistake can disrupt the world economy or worse.

That sort of puts typos in newspapers and blogs into perspective, doesn’t it?

That isn’t really my point, though. What I think is important to take away from this episode is the necessity of having some things in your life that are real and not affected by virtual reality. Obviously, home and family come to mind, but to whatever list you might compile, keep in mind that a coin collection is very real. You have it no matter what. There is some value there no matter what.

The same is true about gold and silver. Whatever happens, both metals are real. There is value there. There always will be. Market analysts simply argue about current and future prices not about whether they will have any value at all.

That’s something to hold onto.

My point, I think, is true whether next year’s gold price rises or falls. Gold is real. Real is good and it is something that can’t be trumped by whatever happens online.

Did YN Programs Have Impact?
April 19, 2010

Coin collectors often wonder what the future holds for the hobby. Speculation about it makes interesting reading.

One aspect of the future of numismatics is that it is largely determined by demographics.

Current collectors are counted by the number of them born between 60 and 50 years ago.

Why?

Because the prime decade of coin collecting for most hobbyists is their 50s. It has been that way for 100 years.

So the health of the hobby is determined by the number of 50-year-olds who decide to get in there and spend time and money on their favorite hobby.

Subtract the number of collectors who reach 60 this year from the number who turn 50 and the resulting number will tell you whether we will grow or not. If the number is positive, growth is likely.

True, there are collectors who are 49 and 61, respectively, but they are not part of the key demographic group.

In the next 10 years we will begin to see whether all the Young Numismatist programs that became mainstream in the 1970s will have any impact at all on the numbers of collectors in their prime.

About half of all collectors started before they were 20 and we will see if YN programs in their youth makes them return to the hobby in any greater numbers. Most collectors who started as kids put the hobby aside for a while as graduation, jobs and families became priorities. They then return in middle age as time and finances permit. Perhaps more will report that they never left the hobby, or returned sooner.

About 40 percent of collectors begin after age 40.

That leaves the great demographics wasteland of ages 20-40 where only 10 percent had their beginnings in numismatics.

The next 10 years should be a good one for the hobby overall. The question in my mind is what happens to YN programs if we see no evidence in that period that YN programs had any impact on the overall collecting life pattern of those who will be in their 50s during the coming decade and who would count among their number those very first YNs.

Join the ANA Family
April 05, 2010

By Dave

The weekend was family time for many Americans, myself included. Conversations went one way and then another. There was the new baby coming in October. Kids are going back to school today after time off. There was the talk of tickets to a baseball game in Milwaukee today and the Boston-Cleveland basketball game that was playing in the background.

None of these conversational topics would or even should make headlines. What makes them important is that they all are part of family news.

This morning I was thinking of this and a comment Tom Post, the show general chairman of the American Numismatic Association convention in Fort Worth, Texas. made to me a week ago.

Tom did a superb job. If there were any glitches, I didn’t see them or hear of them.

But in a quiet moment Tom and I were just chit-chatting. He said that before 2009 he had never been to an ANA convention. That startled me a bit.

He was no stranger to coin shows generally, so it is not like he had to take a crash course in numismatics.

I’m a regular at ANA events. It is my job. Other regulars have to pay their own tabs and yet I see them show after show, year after year.

There are many conversations that occur at ANA conventions that don’t make the headlines. They are the numismatic version of family gatherings.

These conversations tie many people together in many small ways much as a family is tied together. That’s what makes attendance at these events so important. Certainly not everyone has the free time or money to attend every convention, but every collector should consider going to an ANA at least once to see what the experience is like.

You never know, it might lead you to become a regular, too. You might just find you have a numismatic family there.

Dark Gold Thoughts Not Dark Enough?
March 19, 2010

 By Dave

Back when gold ownership was legalized in the United States on Dec. 31, 1974, there was a lingering fear that the coins that had been illegal to own since 1933 would once again become illegal to own.

Advisors told gold buyers to stick to coins like the standard U.S. gold coins struck before 1933 as well as world coins like British sovereigns and French 20 francs of similar vintage.

This seemed to be an unnecessary precaution as the age of the convenient one-ounce bullion coins was dawning.

The fear that gold would once again be called in by the government in a manner similar to what was done by President Franklin D. Roosevelt in 1933 shows up from time to time in the writings in the blogosphere.

Can it happen again? Sure, the legal underpinnings for a recall still exist.

Will it happen? Probably not.

But if you happen to believe the government is cooking statistics to understate inflation and overstate employment, manipulating the gold market, hiding the fact that it has secretly sold all of the gold in Fort Knox (which is a rumor that has existed all the way back to when Ike was President) – if you believe all of this, why would you believe that the government would let you keep your gold if the worst does indeed happen to the economy?

If the American government would default on its debt after not doing so for 221 years through the Civil War, Depression and World War II, would not political pressure in Washington be so intense as not to allow profits to be taken by those owning gold?

In a dollar collapse, would not the authorities be rooting out gold owners with the same zeal as the IRS presently is chasing tax dodgers with Swiss bank accounts?

Would coin collectors get a pass as they did in 1933 because the Treasury secretary was a coin collector and the President was a stamp collector?

In their darkest thoughts, perhaps gold owners are not thinking darkly enough.

Hop Away from “Bargains”
March 18, 2010

 By Dave

I started my day in the dentist’s chair, so I am a little late getting started in the office this morning.

As is the custom, I was visiting with the dental technician/hygienist who was cleaning my teeth between periods of simply keeping my mouth open as she picked, scratched and polished.

Her daughter has reached the point in her life where she has figured out that the Tooth Fairy doesn’t exist. The story of how she figured it out was interesting as every kid is different.

The technician figured that Santa Claus and the Easter Bunny would soon be toast as well.

That got me thinking about the numismatic equivalent of Santa Claus and the Easter Bunny.

What I came up with was the strong tendency among collectors to equate a low price with a good deal. Buying coins for 50 or 60 percent of the usual retail price has been the goal of some hobbyists.

While it is by no means impossible to score a deal from time to time, the appearance of being able to consistently buy coins for significantly below the prices printed in retail price guides should cause the would-be purchasers to have a flashing red light in his mind.

These coins might just be not what they are represented to be. They might be tampered with or overgraded.

Coin offers significantly below retail should be approached with caution. Have the coins checked out by a grading service, or make sure there is a return privilege in case it becomes necessary to return the coins.

Bargains are nice. They can happen. But when you see nothing but bargains think that it might be a case of the Easter Bunny – a delusion or fable, but without the happy ending

Just What are Those KM Numbers?
March 02, 2010

by Dave

I had a phone call. It was one I had been expecting for several years, but in that time it has hardly happened.

The question had to do with the Coin Market Price guide section.

What are those KM numbers and what do the letters stand for, I was asked?

Ever since my firm started applying the world coin numbering system to U.S. coinage I have been expecting questions.

KM stands for Chet Krause and Cliff Mishler who invented the numbering system that is used as a shorthand by the world’s collectors. Instead of giving long descriptions, all you need do is give country, date, denomination and the KM number and any collector with the Standard Catalog of World Coins can tell you what it is.

This shorthand is necessary for making concise price lists.

This kind of numbering system never caught on with U.S. collectors because there is much less to keep track of.

However, our computer system is such that it is easier to apply numbers to all coins than to try to go on listing U.S. coins without numbers.

The change made collectors of U.S. coins who live outside the United States very happy.

For American collectors, it was hardly noticed.

As I said, I was expecting this call for a very long time.

Quarter not a gold strike February 22, 2010 By Dave: Remember the gold-plated state quarters that were being sold on cable television? Not everybody does. I had an e-mail inquiry about one that turned up in circulation. “I recently found in my pocket change a 1999-D Georgia state quarter that is gold in color rather than silver. It resembles the color seen in a Sacagawea dollar, or the new Presidential dollar coins. Is this a common finding or a fake or … ?” This is a logical question, especially since it could be a wrong metal error. I was able to tell the writer what it is he had. The surprise to me, I guess, is not so much that one of these coins made it into circulation, because I have had inquiries of this kind a few times before. What is surprising to me is that so few of these gold-plated quarters have been spent and then found by collectors and others. As people scramble to find money to pay bills, more of these novelty coins are likely to find their way into circulation. Will the trickle become a flood? Let me know if you have seen any.

We hobbyists are used to the shortages that have manifested themselves in the gold bullion American Eagle market on an off for the past 18 months, but how will we react to mandatory purchases?

It sounds strange, I know.

However a possibility exists that not all 2009-dated gold American Eagles will be sold by the time the 2010 coins go on sale to the authorized purchaser network on Jan. 19. As of Jan. 13, the Mint had 51,000 of the 2009 gold American Eagles on hand, which represents roughly a half month’s supply.

The Mint has a plan to get rid of them if buyers don’t step up to the plate between now and Jan. 19.

Force them to buy.

Any buyer who wants 2010 gold American Eagles will have to also buy 2009 coins until the supply is deleted.

For every three 2010 coins they purchase, they will also have to take one 2009 coin.

Will the market absorb these without fuss, or will this turn into another grievance against the Mint?

The date should make no difference to investors. Gold is gold, but collectors or other buyers who are focused on the new date might not care for the older coins and resent yet another unexpected turn in the secondary market for these coins.

On the other hand, perhaps the premium for the 2009 gold will fall enough on the secondary market to induce investors to take the supply, thereby achieving more bang for their investment buck.

Let’s watch and see.

One more thing, because the Mint ran out of 2009 silver American Eagles Jan. 12, possible mandatory purchases apply only to gold American Eagles.

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