I just got into coin collecting this year, and was getting to the point where I was ready to start stacking. But everything keeps dropping. I know it's pretty hard to predict what the market is going to do, but I'm looking for whatever advice I can get. I always thought a rise in interest rates (like the Fed is talking about) would also bring up PM prices, but they keep dropping. Anyone know what's going on?
I can't tackle the broad question, but certainly the interest-rate analogy is faulty. When interest rates are rising, people and institutions allocate more capital to bonds, bank accounts, and derivatives, simply to earn the interest which PM's don't. This drop in demand puts a lid on PM prices; over time, gold prices and interest rates tend to show an inverse relationship. Personally, I continue to buy PM's with funds from collectibles sales. If you happen to believe that gold and silver prices are seriously manipulated, then the prices in the marketplace are almost meaningless anyway. Below is a Reuters headline of May 23, 2014. Barclay's is the 7th largest bank in the world. Not unreasonable to think that a week's worth of profits from their scheme would easily cover a $44 million fine. Barclays slapped with $44 million fine over gold price fix You can find plenty of dependable news sources reporting price manipulation. Do you think they would have paid the fine if they were innocent? This website has a good comparative graph, but I couldn't copy it: http://www.minefund.com/commodity-charts/real-gold.php
What were they trying to do? Drop the price? And I understand that the interest/PM market analogy may be wrong, but still, the PM market has been dropping for a while and was dropping even before the interest rate was expected to rise. Do you think that a strong economy will bring prices back up?
Your question would take 3 or 4 pages to answer. I encourage you to sign up for the free emails from the website www.24hgold.com which publishes commentary from all over the world. You will see many points of view pro and con. In a month, you will have a much better understanding. Another good site is www.prudentbear.com Short answer, will strong economy boost prices? No. If precious metal prices are allowed to surge to the upside, it suggests that the dollar is getting weaker despite foreign exchange rates. Maintaining the "full faith and credit" of the dollar (as the world's reserve currency) is absolutely critical to maintaining the dollar as the primary petroleum-settlement currency too.
Although it sounds counter intuitive, this is exactly what you want the PM market to be doing while you are building your stack. You're going to get more for your dollar this way as the herd keeps trying to unload volume as the prices go down. Just keep buying through the dips, history says the price of PMs will rise again eventually. You just need to have a long term horizon.
Like Race said, when prices are falling and you decide its time to stack you don't exactly want the price to keep rising. I rather see $15 an oz right now than $50 and oz or whatever it could be until I decide that I have stacked enough.
OP, first thing to understand about PM is how emotionally driven it can be. I just read an article from India how purchases there are down because the price has decreased. Now, think about that. What other product can you think of has LESS demand when the price DROPS? If you walk into Walmart to buy 2 of something, and see the price is much higher than last week, are you going to buy more or less? Same question but you walk in and its half the price you expected, do you buy more or less? Well, with pm many times the higher it goes the more they want to buy, and when it drops they do not buy. EXACTLY the opposite behavior they should have. If silver at $20 was attractive to you, then silver at $18 is a bargain, right? If it drops to $16 even better right? If you want to start stackign, start stacking, and do not let price weakness stop you. Like KoinJester said, buy X dollars worth a month. Everyone and their brother wants to "catch the bottom", but almost no one does, and in fact its almost physically impossible for a retail buyer o do so. If you want to know why, you can check out other threads where I explained it. Speaking of, WHY you want to stack, and if you are in an economic position to stack, is also a whole other question. I am not getting into that again here, so I am assuming you are in a position where PM purchases make sense.
From the evidence of the past year, I am likewise concerned about CT-ers' "economic position" to buy coins OR bullion. I see quite a few members dumping their coins, including coins that I personally have sold them. Stacking centers around one of the most liquid of all numismatic assets, you can sell out within the hour, and since that factor may tempt one to trade in and out, as a new buyer, I would examine my motives pretty thoroughly first.
It seems like it should be, but. I think most stackers (as opposed to "collectors") aren't just accumulating PM because they enjoy owning it, or looking at it, or consuming it. They're buying it as what I consider speculation -- the notion that, at some point, the PM will be worth more than the "future value" of the fiat they're spending on it. They might think of that future value as constant dollars, or post-hyperinflation BTUs, or crashed equities -- but there's still some notion that PM in the future will be worth more than whatever you're spending to get it today. Otherwise, the sensible choice would be to buy the PM in the future. Of course, there's an element of gambling. PMs might soar or tank; the dollar might "go to zero" in my lifetime, or it might not. But when PMs are dropping, there's a natural suspicion that they'll drop further, and be cheaper later. When they're rising, there's a natural suspicion that they'll rise further, and be more expensive later. A family member once told me that the key to investing is to buy things that are going up, and sell things that are going down. That's wrong. The key is to buy things that will go up, and sell things that will go down. The problem is, the only thing you can know is what has gone up or down, so you end up buying things that have gone up and selling things that have gone down. That's sort of the opposite of what you actually want. So, what to do about PMs? If I knew, I might be bragging about it here, but I'd certainly be spending more time actually doing it. There are ways to get insight into what will happen in the future, and to protect yourself more effectively, but they require more time and expertise than I can afford to spend or acquire. That's why I pay other people a substantial yearly sum to manage what constitutes "big money" for me; they have a good track record of doing a better job at it than I do, and I end up with more money even after expenses. I do have my own ideas about how things will go in the future. I just don't trust them enough to put big money behind them.
Exactly Jeff. Its the exact same investing mindset that small investors use for equities. Small investors have a really terrific track record of buying high and selling low, which is why investor sentiment is one of the closest metrics I follow. I follow it and force myself to do the exact opposite of what retail investors think. Small investor sentiment is one of the most actionable, reliable predictors of market direction, if you do the exact OPPOSITE.
Interest rates will rise if investors lose confidence in the dollar, and want more return for the money for investing or reinvesting in our debt. Our indebtedness is still extremely high at nearly $18 trillion, but the growth in our debt has slowed considerably from the rate at which we were borrowing 4 - 6 years ago. At the same time, other nations are now more heavily leveraged than they were 5 years ago, making them higher perceived credit risks, thus making US debt more attractive (in relative terms only). Therefore, investors are pulling their money from the safe havens (metals in particular) they parked it in several years back to invest it someplace where they get more than just peace of mind. I do not believe our representatives value doing right over being popular, and I expect some sort of government manipulation of our currency to head off a confidence crisis. Any such manipulation will almost certainly reduce the real value of circulating dollars to conpensate the investors for the risk they took, and to remain in good favor with them. For that reason, I personally continue buying into weakness in the gold market, but I diversify my risk by only buying gold which is not considered generic. The investors likely will make a greater return than metalheads over the next few years but, if they are holding paper assets when the tide turns, and the turn will be very abrupt, their gains will all be lost, and we will be very comfortably protected in the metals they then will want.
I agree with much of ToughCOINS' comment, except for one point. The Fed will do ANYTHING, and I mean ANYTHING, to hold the line on interest rates. Even a small increment will throw the Treasury's financial instruments into chaos and possible insolvency. The banks, including foreign banks with significant presence in the U.S., will do whatever the Treasury or PPT instructs them to do. They already have. I further believe that if Scotland departs the U.K., you will see the markets react drastically. At this writing, they are still voting.
This is an example of the thinking I was trying to describe. You're predicting that there will be an "abrupt" event "when the tide turns", that "paper asset" gains will be lost completely, and that metals will protect against those losses. I don't consider any of those assumptions to be indisputable. Even if they were, it would be hard to know whether to buy metals now, or whether they'll still be cheaper later (but still before it's "too late").
Just curious, why do you think such a tiny country would have such a "drastic" affect on "the markets"? I could see Scottish equities get punished, since almost any scenario will be negative for them, but the major markets will care why? We are not talking Germany splitting in two here, we are talking about a small part, (economically), of the UK breaking off.
You're right, of course, that none of what I wrote is indisputable. It's very hard to write anything indisputable, except perhaps one's own name. Still, my claims are a logical extrapolation of the historically consistent human response to crises of confidence in currency, and to the rapidity with which information flows today . . . much faster than centuries or even decades ago. Data moves far too fast nowadays for a loss in confidence to be some sort of non-event. As for when to buy metals . . . I don't buy them when I think they are the cheapest, as that is the very best way to miss the boat entirely. Just like failing to sell high because one didn't think the top was really the top. I buy more when I can afford more.
Yeah, I hate when I go to buy something and the price keeps falling. I mean, I was really hoping to drop a cool 80K for a new car this fall, but now I'm forced to pay 69K. What bloody rotten luck I have.
My brother just started to buy .999 silver and he buys all that I can get and if the price is lower than the last purchase he likes it even more. It is price averaging. The roll of silver eagles he bought from an APMEX special for $21.00 each are now down to just above $19.00 each from the last couple of silver purchases from me. I sell them to him at my cost.
Forgive me if someone mentioned any of this above, but that's a lot of dialogue. *If you're stacking, don't worry about the ups and downs right now. Exploit the downs while they're there. If you want to make money short term, physical isn't the way. The premiums you pay, and the discount off spot you receive requires a big move before you break even, even though spot went up. *I quit trying to make sense of the price. All I know is that I don't know. Therefore I make small purchases. That way you'll be right small or wrong small. *I believe there will be a floor in metals near the cost of production, and I believe we're close to that. Can it go below that? Sure. It's not cheap or easy to turn a mine on and off, but blowing cash for the sake of not shutting down can't last too long. *Markets are stupid mechanisms some times. When prices sky rocket, you can't get people to stay away(housing, tech bubble, gasoline, bottled water, guns, ammo, midwest propane 2014 etc). They believe the prices may go clean over the moon. When prices are low, you can't get people in because they think the floor is going to collapse. I'm a big fan of running against the crowd in a panic. *Know your principles and stick to em. I harp on my buddy to move slowly and in equal amounts. But he's a die hard and just blew his entire wad on silver at $19.50 and wherever gold was. I told him I bought my bi-weekly share when silver was $18.30, and he's outta money for months now. If it goes to $17, I have some cash laying around to buy a little more. May take 1-40 years to strike it big in PMs, but I don't care. I like having my assets spread out in case one falls, others are there to float the boat.
