Bernanke's FED Remarks and the Bulllion Market

To be fair, this is a "Bullion Investing" sub forum that happens to be provided by the owners of a forum devoted to coin collecting. There are other forums that are devoted to silver and gold where there might or might not be a coln section. The conversations are quite different.

 

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This from "Sovereign Society" recently, clarifying a possible reason for the tumble in the gold price:

"And on the last day of February, just a week and a half ago, it happened again...

"The action in the precious metals markets again reeked of Washington and perhaps Brussels.

"The day began with gold and silver moving higher.

"Gold traded up to $1,792.30 an ounce, while silver traded up to $37.58 an ounce, running right through its $36 resistance level. At the same time, gold was fast approaching its key psychological level of $1,800.

"It just so happened that on the morning of February 29, Fed chairman Ben Bernanke was speaking before Congress. Meanwhile, the ECB was printing, injecting or simply giving $803 billion to more than 800 banks as part of its long-term financing operation amid the Greek debacle.

"Over the past few years, every time Uncle Ben has flapped his lips publically, the prices of precious metals have exploded higher. This time, as Bernanke spoke and the ECB printed euros, something different happened. [h=3]A Huge Sell Order in Gold[/h]"Some close friends who trade gold in the futures pits on Wall Street told me that as Bernanke spoke a huge order came into the gold futures pit.

"That order, given by financial giant JP Morgan, was to sell 15,000 contracts of the yellow metal, that's 1.5 million ounces of gold. And at $1,790 an ounce, that is $2.7 billion worth of the precious metal. That is a huge order that took less than one minute to execute.

"Now I've been trading precious metals for more than 30 years. I have executed some of the biggest orders in the gold and silver futures pits that the market has ever seen during that time.

"And, I have seen other market players execute huge orders. Finesse is often an important factor in executing a large order - and I can tell you there was not a hint of finesse used to execute that massive order on February 29."

 

See the topic about Silver Lease Rates going negative. It's almost a sure sign the above will happen.

 

You're going about it the right way. I would just add that coins are probably closer to investing in real estate than to stocks. Every one is a bit different and the bid/ask spreads are high. So factor that into your decision. Also, in many cases [perhaps most], the seller is in a position to know more about each individual item than the buyer since they've owned it a long time and had the chance to research it more thoroughly. The buyer typically has less time to research and decide on a particular item. And in hunting for "bargains," don't just look at recent auction prices. Also look at prices over the past decade to help decide just how high and how low a coin can go in price under varying supply and demand conditions [assuming you just aren't flipping them]. Good luck.

 

My response to Smitty about coins as investments, I would have a few comments. One, while those books are fine, I find them written more from a dealer perspective. They say its for a collector, but those men have been around the industry do long that there are tons of things that they simply assume you know or know how to do. Therefor their advice may be good advice for advanced collectors, not so much newer ones. Second, the buy/sell spread Cloud talked about is simply huge. So huge that it prohibits most "investing" in numismatic coins from being profitable if bought and sold in the retail space. The only way to reliably make short term money, or have good long term results, is to buy like the dealers do at the same discount. Collectors posting how they collected for 30 years collectible coins and when they sold they sold for a cumulative loss are so common as to be boring. Our own Doug posts the same results. If good collectors collecting over a 30 year time frame end up at net losses, that is telling me that numismatic coins have a problem in the investibility area. My own collection of US coins, excluding bullion, may or may not be above water. I made some good buys over the years, but also many mistakes, (like most). I imagine if I sold them all to a dealer I would be a net loser, and would have to sell them direct to collectors to try to do better than break even.

There is one thing I ask of collectors who wish to "invest" in coins. Buy a decent coin without problems for say $500. The next week go around at a coin show and see how much dealers will offer you. That opens a lot of people's eyes.

Chris