Pondering The State Of Bullion

Discussion in 'Bullion Investing' started by Randy Abercrombie, Aug 29, 2018.

  1. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    I don't purchase bullion for investment purposes. My selfish reasoning is that I enjoy owning old gold and silver. I have absolutely no intention of liquidating. It is written in my will to disburse among my heirs when I leave this party. For me, this is not a pathway to any financial future.

    That said, I am somewhat confused by what appears to me to be a general negative view of the current bullion market. It feels to me like I am almost stealing the stuff at current levels. And I have certainly increased my stacks of late. Hence my confusion;
    • A recent thread by a dealer/member offering a review of the Dalton Georgia coin show included a lament about the poor performance of ASE's and the like in his stellar review of the show.
    • Visiting my dealer yesterday and asking about early 20th century gold. A very apparent look of disgust crept across his face. I changed the subject.
    Several other instances come to mind but for the sake of brevity I'll leave it at that. In short, to me it seems this would be a rather exciting time for those of us that love to hold gold/silver. However I am rather starting to get the feeling that I may be straddling my heirs with a dead dog rather than a financial gift. Are gold and silver losing their sparkle in the digital era?
    longshot likes this.
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  3. Clawcoins

    Clawcoins Well-Known Member

    It totally depends upon one's point of view So in a sense, Overall it's mixed.

    If you business model relies upon spot price and you bought earlier and spot has been trending down then you certainly do not like this market.
    If you are a buyer, you love it basically.

    Current trend is down (which has been going on for years).
    The current drop has this effect:
    (a) stackers are enjoicing as they are in a buying frenzy;
    (b) investors who have held for long periods of time where spot was way above current spot are cringing as they don't know whether to sell or hold.
    (c) pure PM market investors have been dumping it in the last couple of months
    (d) hedgers, are buying as they think it should only go up from here.
    (e) you and me .. don't really care. but like the lower "spot" prices and hope that PM based coins go down in price to make them more affordable
    (f) resellers that bought tons of ASEs earlier in the year at higher prices are cringing and pushing up premiums to cover that particular loss if they brought prices down.

    PMs will always have a value. What that value is, is for the future to determine. I remember buying St Gaudens AU at $440. Now? much more. The push from the $600 to last several years was mostly based on globalization. Now prices can be based on saturation theories.

    Marketing has a lot to do with it now. The amount of PM tokens/rounds etc has boomed lately. PM IRAs, marketing houses, etc

    we follow these trends and chat about them from time to time in the silver gets crushed thread.
    Last edited: Aug 29, 2018
    Randy Abercrombie likes this.
  4. spirit

    spirit Member

    PMs like everything in life, are cyclical, asymmetrical as they may be. I will only worry when central banks and countries start massively selling their gold bullion; which is very improbable.
    Randy Abercrombie likes this.
  5. ToughCOINS

    ToughCOINS Dealer Member Moderator

    I happily plod along, buying coins I like, and selling them to buy more coins I like. Whether the market is going up or going down, it just doesn't get better than this for me.
    Randy Abercrombie likes this.
  6. Ana Silverbell

    Ana Silverbell Well-Known Member

    The answer is yes, bullion has lost its sparkle but as far as US pre-1965 silver coins, the answer is no. Paper precious medal (PM) contracts manipulate, usually depress, PM prices in a weak industrial economy. People who buy bullion are playing in a rigged market.

    The smart thing you have done is you buy "old gold and silver" coins, especially early US. These have tended upward in spite of a decline in PM prices. Have you noticed that uncirculated Morgans and Peace dollars, for example, have remained firm even though PMs have declined? Or is it just my perception? It seems so since when was the last time you bought XF or better US pre-1965 silver coins anywhere near melt value? It only happens if you've been "afflicted" with a good-luck virus.
    Randy Abercrombie likes this.
  7. desertgem

    desertgem MODERATOR Senior Errer Collecktor Moderator

    I do disagree with this part as the contract issuing company to satisfy regulations have to provide reasonable financial backing on their contracts since the early 30s. Since almost all do not have near the dollar backing to issue contracts naked one way, they have to issue offsetting contracts. So for every sell@set date/price they have a corresponding buy@date/price. They make their millions in that they will keep the commissions each way, the customers can win or lose big if they are wrong, and half will be wrong. If investors perceive that PM will go more one way than the other, the prices of a contracts to be issued changes accordingly, and investors/users of silver or bullion dealers change their prices accordingly also and their future needs by buying offsetting contracts themselves. Contracts can be extremely useful for investors hold large amounts of physical bullion as investments. By buying straddles ( contracts on both sides of the current value of their holdings) they will be protected from dramatic and costly changes in the monetary value of their investment downward and yet get rewarded if instead the price goes back up. They only lose if the value stays near the same until expiration. Paper contracts/options are a tool, but they do not often affect the physical value one way on their own, they reflect the expectations of the purchaser.

    Probably why it seems to cause downward movement is that unaware bullion investors mainly buy physical when it is going up and sell when it is far down or hold forever. Gut reaction is not investing. IMO Jim
    Lesbian Cow likes this.
  8. Dave M

    Dave M Francophiliac

    IMO, unless you heirs have specifically stated that they are all interested in collecting bullion, old furniture, hummel figurines, or beanie babies, leaving anything other than cash to them is essentially "straddling my heirs with a dead dog". I've been through a couple such situations, and heard of plenty others like it, and the current price or collectability of the item really doesn't come into play for the heirs.
    -jeffB and Randy Abercrombie like this.
  9. losthomer

    losthomer Active Member

    Gold and silver will probably always have value and some "cool" factor. I wonder how much inherited junk silver has been spent at face value. Probably doesn't happen as much with gold.
    Randy Abercrombie likes this.
  10. RhinoEmpire

    RhinoEmpire Hi-Yo (Ag)

    It's a financial gift UNLESS you are living significantly below your means to continue to purchase silver. I always felt like my grandparents deserved more. I would have been upset to find out that they had a bunch of PM's stashed away to hand down.

    I agree that the market is bearish at the moment. I have doubled my steak in silver, tripled gold, but my PM portfolio value has stayed the same. I believe PMs will bounce back.
    Randy Abercrombie likes this.
  11. Santinidollar

    Santinidollar Supporter! Supporter

    It’s not a big deal for me. I buy 1 Oz. AGEs here and there. It’s only an extremely small hedge for me. When buying classic gold coins, I don’t worry about spot prices.
  12. Ana Silverbell

    Ana Silverbell Well-Known Member

    My point is that paper is used to manipulate the prices of PM, e.g., physical silver. There is not enough silver to deliver on the paper contracts, which depresses prices. The Silver Institute website has an older article entitled, Silver Price History, which tracks the historical price of silver since 1950. One trend that seems to be evident is that article is that when the economy is strong and physical silver is needed for industry, silver prices spike. Not really trying to say anything more than that.
  13. TheFinn

    TheFinn Well-Known Member

    I look at gold, and to a lesser extent silver, as cash. I value them against the commodities (gasoline, groceries, etc.) that they can buy. You'll notice that when the PMs were going up, so had the cost of gasoline. Gasoline went down, so did the PMs. I got hit pretty hard in 2000 and 2008-9 on my 401(k). So, after losing about 1/2 of the value, should I hate the stock market? That is the rigged game. I can only invest in a limited number of stocks and bonds. The only reason they go up really is because people have to continue to invest in it. When the Baby Boomers start retiring in big numbers, they will be selling the holdings they have, which will increase the quantity, and with the current demographics, we know there will be less demand. China, Russia and other countries are putting away gold to back their currencies, which is something many Western countries don't - Canada has less than 100 oz. in their holdings, which I think will come back to bite them.
  14. mikem2000

    mikem2000 Lost Cause

    In My opinion you very post is conflicting. You say you ENJOY collecting Gold and Silver for Selfish reasons, so great, go ahead and collect. Many of us collect/spend money (including myself) on things that will not offer much of a return, or even more likely, a substantial loss. So what, we like doing it.

    Now you second statement says you are doing for your heirs. Do they like Gold and Silver? If not, you are doing them no favors. If you plan is to leave your heirs something of value, I would invest in index funds and T bills. This simply has much better odds of maximizing their inheritance. I have seen many folks "justify" their hobby by saying it for their kids. I call shenanigans on that. If that is you hobby and you do it for yourself, that is fine, but the "justification" is bogus.

    Now, if you enjoy collecting, who cares about the general negativity, those feeling are strictly from an investment point of view. If you are not investing, and just collecting, that is just not your problem. As far as "prices being so low, you are stealing it" well if that were true, that is not a problem, but most likely you are really not even getting a fair deal. Both Gold and Silver are significantly above historical averages over the last 100 years and I of course am talking AFTER YOU ADJUST FOR INFLATION.
    Last edited: Aug 30, 2018
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  15. mikem2000

    mikem2000 Lost Cause

  16. mikem2000

    mikem2000 Lost Cause

    THE only Reason???? really, stocks go up because the company (both assets and income stream) grows. If you own a single share of stock and in 15 years, the company has three times the assets and is generating 5x the revenue, you can bet that share of stock went up in value, not because more people continue to invest, but the actually value of the company has increased. This is unlike PM's which sit there like a lump and do nothing. It would be nice to put an ASE in box, open it up 15 years later and see three of them when there used to be one, but that is just not going to happen. For stocks, it happens all the time.
    Dave M likes this.
  17. crazyd

    crazyd Active Member

    Its a weird time all around for things. I inherited 70% of my coins from my dad. I buy here and there - usually once a year when I get a bonus from work - and then only use a 1/4 of my bonus. I do keep an eye and while prices are down - I see (in my limited view) notable markups over spot still around. I stopped buying my yearly ASE proofs because I could not handle that the markup is actually higher then years before. I collect to collect - and as last option to cope with a financial "S... hits the fan" day in my life.
  18. -jeffB

    -jeffB Greshams LEO Supporter

    So that's good news, right? If The Powers That Be are artificially (?) holding the price of silver down, then "people who buy bullion" are playing in a market that's rigged in their favor.

    Or, possibly, the "rigged" market is just a market, doing what markets do, finding an equilibrium among buyers, sellers, hedgers, cheerleaders, and skeptics.
    losthomer likes this.
  19. -jeffB

    -jeffB Greshams LEO Supporter

    Except when they didn't:


    To show movement in the other direction, a loaf of bread that retailed for $3.49 2011 is now $4.29 when it's not on sale. At one point in 2011 a silver quarter was worth more than $7 in silver value, meaning it would "buy me" two loaves of bread. Now, it would take almost two silver quarters to buy one loaf!
    Randy Abercrombie likes this.
  20. Gilbert

    Gilbert Part time collector Supporter

    For years I accumulated PMs, not for investment purposes, just insurance against the unexpected. As things turned out the world has not fallen apart, so in retrospective the cash would have been better spent buying shares of Apple. But such is life. For the past twenty years I haven't purchased any PMs, save numismatic coins. Like many here, I will probably never sell any of my collection or PMs. When the time comes, my children can hire an estate attorney to figure things out.:)
    Randy Abercrombie likes this.
  21. Ana Silverbell

    Ana Silverbell Well-Known Member

    It is always a market but it is not a free market. When FDR made ownership of gold illegal, that was a market in which "buyers, sellers, hedgers, cheerleaders and skeptics" found an equilibrium. Not a free market.

    When an investor buys a PM contract on the futures market, where they are sold, the contracts are created and sold without pairing it to physical PM, for delivery of the PM. Reserves backing these contracts are too thin, in my opinion.
  22. Clawcoins

    Clawcoins Well-Known Member

    Bullion will always be around.
    There will be various people with various theories, various types of investments, etc etc etc.

    All of us here, or hopefully most of us, look for the lowest price to buy that bullion investment at any one time whether rounds, bars, ASE/AGE, foreign etc.

    That will put us ahead of the chase, whatever we think that is.

    To me, If one really believes in PMs, then they should also support PM IRAs.
    Technically, one should be tracking their capital gains in selling PMs. Otherwise their cheating the system.
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