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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 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
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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

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 Jim Kingsland for Certified Assets Management International
A CoinWeek Content Partner

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

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

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

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

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

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

By Mark Ferguson for CoinWeek – MFRareCoins.com

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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