A simple and rational reason to hold gold.
Click download link to listen on this device: Download Show
Hi Don,
More than “very interesting”. How about “very nonsensical and crazy”!
Big Al
ditto
Hi Big Al,
Rick is probably correct reguarding the forward price of gold in the near future. Not to worry, many people will be adding to their positions, and will sleeping well at night. Best to you.
Thanks Keep Stacking,
Call me crazy, but I do sleep well at night!
Big Al
Al,
What are your feelings towards Exeter now that XG has entered in to a transaction? Do you think management will focus on its prized asset in Chile? Gold in ground for Exeter is selling at 7 dollar an ounce at today’s share price of $1.84 – crazy cheap but Caspiche has its concerns.
HI CaliJoe,
I know that Brent Cook doesn’t think that Caspiche is economic. Most other people who I talk with are of the opposite opinion.
What else can I say other than I like the management of this co.
Big Al
I know you tell folks to own bullion, but would love you to interview some folks who can also tell us the benefits of investment in numismatic coins. Thanks Al!
Michael,
IMHO, rare coins are like fine art: The Rembrants and Picassos (high grade very rare coins) will do well while the run of the mill (art and graded coins) will have a difficlut time covering their selling premiums.
Bobby
Bobby,
Interesting point to someone like myself who knows very little about collecting coins,
Big Al
Michael…..I have collected coins like Bobby for over 50 years….
My first advice….is if you do not know anything about coin collecting….
you are at a disadvantage to begin with…
Iike any business, coin collecting is both a hobby, investment and business.
Hobbist….generally do not make money….
Investment….you can definately make money….
Business…..you are guaranteed to make money…..(OR you will be out of business)
Business and investment portion , relates to your question……
Before, you get started, you will have to know how to
1.grade the coin or find someone who is a professional grader
2. know the different grading houses…..
3. know the terminolody….like what does MS 63,MS 64 , AU 55 mean etc..there are 70 catagories..
4. what effects the value of the coin, rarity, mint mark, how many coins are
graded in a certain grading catagory , and how many are graded better than the
one you might be interested in purchasing for your investment….etc.
I could go on ……but, you see it is a little more involved than just, thinking
you might like to invest in numismatic coins…..
I would not discourage you ,,,because I have found it very rewarding as an
hobby , to start, and investment now….
Best….O^OTB…Jerry…
Thanks for the comments on a subject that I know very little about.
Big Al
That’s a great summary by Jerry O^OTB. I started collecting numismatic coins a few months after I started buying gold, ie in early 2002. I bought an 1821 Sovereign. That has doubled in value since then, maybe tripled. Gold is up x5. However, between 2002-2004, the numismatic coin nearly doubled while gold hardly went up in sterling terms. So they are not fully correlated investments. In a way, that’s a good thing.
One great factor with collecting even lower grade low premium over gold numismatics is that I have found that I fell reluctant to sell my old coins. I have at times dumped a few Krugerrands or swapped them for something else without a second thought only to find that gold has doubled and tripled since. However, the numismatic or semi-numismatic coins I find I want to keep, not trade – and I have had some of those for the entire run in gold for 10 years. There is more resistance to selling them. Then later, if I find that I originally bought a gold $20 piece for $400 and now it’s $1600+, I can then relax about it; it isn’t going back to $400, at least I don’t think so!
If I was thinking abut goldcollecting starting now, maybe it would be different. Everything was cheap in 2002, now not so. A lot of numismatic coins are fully priced, maybe overpriced. Maybe gold is too. Premiums on semi-numismatics (common pre-1933 gold coins) see to have fallen close to zero, maybe it is time to buy these or maybe it’s just that in deflation, it’s the number of ounces that matters and the collectability factor might be gone for quite a while.
Even so, I like mixing and matching – and getting interested in numismatics is a great education in monetary history – and history in general. I never knew the order of all the Engllish kings and queens until I started coin collecting. Now I can just reel them off.
In sayint that some numismatics are getting expensive, it’s the very highest grade (MS65+) numismatic coins that have really performed if that grade is VERY SCARCE. Thye have run away in price as have the rarest dates. Lower grade coins and common coins (even in nice grade) seem to be underperforming, so cmmon $20 pieces for instance seem to be trading almost like gold bullion. Maybe it’s because the very highest grade coins are being bought by the rich. Meanwhile, everyone else is trying to pay off their debts and so the lower grade or common coins are being sold off by less wealthy who are deleveraging. So paying a very high premium on anything that isn’t unusually high grade is something that I personally would be reluctant to do.
There are also a lot of charlatans selling common date pre-1933 coins at huge premiums, claiming they are ‘rare’ when they are really near-bullion items – watch out for those people!
Ditto Silverbug Dave,
There are some really good and honest dealers out there, but you have to be very careful!
Big Al
You know what Silverbug Dave, I just may join you!
Big Al
Sure Michael, no problem.
Big Al
European leaders appear ready announce a $943 billion deal to bail out Spain and Italy………print….print…..print…..that will not be deflationary.
Where do we start? From the Telegraph article:
Under the proposed deal, two European rescue funds – the £400 billion (€500 billion) European Stability Mechanism (ESM) and the £200 billion (€250 billion) European Financial Stability Facility (EFSF) – will buy bonds issued by European countries.
1. I hope we all remember that the EFSF and newer ESM funds are CREATED money. So the EU is taken a pool of borrowed money and using it to buy bonds of nations in crisis. Sounds familiar. Oh yeah…it’s like when the Fed has to repurchase unsold treasuries. They just create new money to float new borrowings.
2. Every time a country like Ireland, Greece, Portugal, Spain or Italy need funds from the previous EFSF and newer ESM, they no longer contribute to those funds. This is a really key concept. If various countries are so broke that they need rescue, they cannot very well keep contributing to the funds that rescue them! Therefore, the # of contributors to these special financial security funds is dwindling.
3. €600 billion Euro will last Spain to mid-2013, maybe, or Italy to mid-2013, maybe. It isn’t enough to float both, and it certainly isn’t enough to keep funding Greece at the same time, nor any other country that may soon need help.
4. When I last checked this in October 2011, the EFSF (it’s funds) were being turned-into the ESM. I would have to do another accounting, which I don’t have a lot of time to do, but it’s interesting how slowly the EFSF’s balance diminishes. The disbursements seem greater than what was deposited into the funds.
In effect, a bunch of borrowed money (commitments to the EFSF/ESM) is being used to borrow more (via Spanish and Italian bond purchases), from an smaller and smaller group of contributing nations. France, the UK, even Germany…they don’t have the ability to keep creating more money to refund the EFSF/ESM. i.e. if true, this latest bailout almost depletes both funds. What’s going to happen when more money is needed in 2013?
What’s going to happen John W?
Easy! There will not be enough chairs in this game and many will be left standing!
Big Al
Two choices Tex,
Tear the house down and rebuild or print, print, print.
The first and sensible option will not happen until it does so at its own volition.
Big Al
I wonder what Rick’s timeline is. His gold price “suggestion” (not really a forecast) seem to be contingent on the results of Europe. I think many of us on KER are looking past that, well into the next decade, when considering the need to hold gold and silver.
John w,
I think you just defined the difference between a trader and investor.
Bobby
ditto…..bobby………great thought john…..
Yes, John W, we are looking well into the future. And, in my opinion, that is the way to look at it!
Big Al
John…….question…..Didn’t Sinclair post a statement….earlier this week saying the banks,,,were now allowed to hold gold on their books, as the safest asset.?
Check out …”.FDIC to go along with Basil III”, to hold gold on their books….
I do not follow Jim so closely as to be able to answer. But yes, there’s been enough news about BASEL talking about the tier-one cap ratios and gold that I think it’s good to go.
I agree with Rick that gold may not reach the absolute values that most of us are thinking about. To support that reasoning, today was a good indication. The DOW shot up in anticipation of an Operation Twist extension or even a QE3 announcement. What does gold do…….it drops about $8. I was always on the belief that QE3 or the creation of more $$$ would move gold higher. There’s a lot of factors moving through this that only hindsight will tell the story. To quote Big Al………..”it’s all very interesting”.