U.S. Mint sees uneven gold and silver coin sales as prices fluctuate
SAN FRANCISCO (Hard Assets Investor) -
The first-quarter roller coaster for demand for gold and silver coins from the U.S. Mint ended on a decidedly upward trend in March.
"We will continue to see a roller coaster here, up and down, up and down," said Don Kagin, president of Tiburon, Calif.-based Kagin's Inc., the nation's oldest family-owned rare coin firm. "But demand for gold and silver remains strong worldwide. Long term, you will still see gold and silver prices rise."
The gyrations in the underlying price for gold and silver have created opportunities as well as challenges for investors in gold and silver coins.
First, coin prices don't always move in lock step with gold and silver prices. What's more, different classes of coins are showing varied levels of strength and weakness relative to each other.
"Generic gold coins are going begging," Kagin said. "Only in the highest level of grade and rarity, museum- and legacy-types of coins, those are bringing in record prices. People see these kinds of coins as great stores of value."
The coin sector is a bifurcated market, Kagin said.
"We are seeing record prices for rare coins at the same time there is a moribund lack of interest in generics that you can pick up anywhere," Kagin said.
The next area of interest for coin buyers could be pieces with rare dates.
In January, U.S. Mint sales of silver coins soared to their highest levels in a year and sales of gold coins jumped to peaks not seen since August 2011.
That was followed by a February rout that caused sales of American Eagle gold bullion coins to slump 83 percent lower and sales of American Eagle silver bullion coins to plunge 76 percent.
But then came March, and the roller coaster zoomed higher.
Total sales of American Gold Eagle bullion coins nearly tripled, and soared 197.6 percent higher than the February levels, according to production figures from the U.S. Mint.
Sales of American Silver Eagle bullion coins jumped 70.6 percent from the month before.
However, compared with the first quarter of 2011, coin sales slumped.
In the January-March quarter of 2012, sales of American Gold Eagle bullion fell 29.7 percent from the year-ago first quarter. Sales of American Silver Eagle bullion coins fell 18.4 percent.
"Prices for coins have not fluctuated that much," said Larry Goldberg, a principal executive with Los Angeles-based Ira & Larry Goldberg Coins & Collectibles. "If you get the right rare coins, they seem to do well no matter what the price of gold."
Which kinds of coins do experts tend to chase these days?
"I like $20 gold pieces in mint state," Goldberg said. "They are not priced that much over the bullion prices. They are probably the best buy out there right now. They have good numismatic value. I like to put these kinds of coins away. We've been buying them up."
For silver coins, Goldberg favors silver eagles made by the U.S. government. He also likes old silver coins, preferably dated 1964 or older. These can command 23 times to 24 times the face value.
"If you get into a hardship where people don't take paper money any more, if you want to buy some food, you can use the silver half dollar," Goldberg said. "That's a good item to put away, just in case."
It's also possible to buy directly from the U.S. Mint.
Investors can obtain a U.S. Mint print catalog or visit the Mint's online catalog. You can get on the mailing list if you prefer the printed version, or you can start searching the online catalog immediately. Both will list the Mint's latest offerings in both silver and gold.
Investors should consider a key caveat, considering the warning about the sluggish demand for generic coins.
The U.S. Mint usually sells only current coins and coin sets, although you can often find the previous year's coins and sets for sale, too. Some of the most popular U.S. Mint offerings include the annual Proof Sets, Uncirculated Coin Sets, bags and rolls of America the Beautiful Quarters, and collector's versions of the American Eagle coins such as Silver Eagles and Gold Eagles.
FLEE OR PLAY?
Should investors interpret the first-quarter volatility as a warning to stay out of the market? Not so fast, experts say.
Even in the face of the current ups and downs, the fundamentals of investing in precious metals remain solid, whether people are eyeing coins, bullion, ETFs or other vehicles.
"The outlook is the same for gold and silver; the fundamentals remain the same," said William Rhind, managing director of ETF Securities in New York. "You have negative interest rates, lax and loose monetary policy by way of money printing. You have stimulus efforts, coupled by elevated sovereign risk from Europe."
Other experts agree. The overall macro picture hasn't changed in any material fashion, said G. Miguel Perez-Santalla, vice president of purchasing with APMEX Inc., one of the nation's largest and most active precious metals dealers.
"All the fundamentals are in place," Perez-Santalla said. "You still have a weak economy in the United States. Europe is looking at a weak economy. China is weakening."
Money printing, stimulus projects, quantitative easing and government deficits all contribute to a recipe that tends to devalue paper currencies, including the U.S. greenback.
"All currencies are being devalued versus commodities because of the constant injection of capital into the system," Perez-Santalla said.
The policy in the U.S. of ultra-low interest rates presided over by the Federal Reserve could trigger consequences before long.
"By making more credit available, that is akin to printing more money, and that could ultimately cause a great deal of inflation somewhere down the road," said Walt Breitinger, president of Breitinger & Sons, a commodities futures brokerage.
Investors may be affected by a growing unease about the state of the world and the impact that current events have on their finances and assets, said Bob Higgins, co-president of Certified Assets Management International, which is a rare coin wholesaler.
"We have a lot of life-changing events going on right now," Higgins said. "A lot of calamities are possible. Precious metals are insurance policies to protect against a calamity."
Bottom line: Investors have more than a few disturbing economic trends to ponder.
But because gold and silver are typically quite volatile, that could be a prescription to get burned, if an investor doesn't precisely handle entry and exit points.
"If an investor's timing is bad, they can incur large losses," Breitinger said. "It's important that they study the markets and work with someone who is an expert and can help them accumulate as much gold and silver as possible at the lowest possible price. If they try to predict the dips or spikes, at some point, they will wind up a loser."
Breitinger used the example of people who bought silver at $50 an ounce in the 1980s, then were battered by a price collapse down to $3. Some 30 years later, those investors would still be underwater on their purchases.
CONSIDER DOLLAR-COST-AVERAGING
"For any precious metals investor, if gold and silver look relatively cheap at some point, I would dollar-cost-average into the market," Rhind said.
Investors should also incorporate their belief in the fundamentals of precious metals into their approach to buying gold or silver.
"We sell precious metals as a means of insuring against world calamity," Higgins said. "Pretend you are shopping for an insurance policy. You shop around for the best insurance premiums."
This is a case where using the Internet can really help investors shop around for the best prices in gold and silver coins and bullion.
In particular, people who are buying gold and silver coins will find a great variance in what dealers will charge for premiums over the spot price of the respective metals.
"Some sellers are taking advantage of the popularity of gold and silver to overcharge for the premiums to the spot price," Higgins said.
None of this changes the wisdom of keeping track of the fundamentals, experts say. In one month, the world didn't suddenly eliminate its debt, nor did the U.S. and other major industrial nations banish their appetite for spending and printing money to support those expenditures.
"Clearly, the average person understands that you don't get out of a large amount of debt by adding more debt," Rhind said. "Investors know that one way to get out of a debt crisis is to literally inflate your way out by massive monetary easing."
That strategy inevitably leads to currency devaluation.
"And if you are worried about the value of your currency, if you worry it will be worth less tomorrow compared with today, that leads you to hard assets such as precious metals," Rhind said.
Article published courtesy of Hard Assets Investor -
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