Investment money flooding into silver has overwhelmed poor fundamentals and helped it to outperform gold, but the tide could be turning for precious metals and the probability of large losses is rising.

Silver's price declines in percentage terms is likely to dwarf those seen in gold, which some fund managers say has stronger supply-demand fundamentals.

"History shows that when you get a substantial correction in precious metals, silver falls more than gold," said Stephen Briggs, an analyst at Société Générale. "It's a more volatile market and smaller in value terms."

One big reason behind soaring metals prices has been the tumbling dollar, making commodities priced in dollars less expensive for holders of other currencies. The weak dollar also prompts producers to raise prices to protect profit margins.

Last week the dollar fell to a record low against the euro - with the euro rising beyond $1.60, an event that has caused many investors to question whether the dollar's declines will continue, or if it has reached a bottom.

"The dollar is not going to keep on depreciating forever," Briggs said. He said he expected gold prices to average around $900 an ounce next year compared with $1,025 this year, and silver to average $15.50 next year compared with $19.20 this year.

Financial uncertainty, which has underpinned precious metals since August, is to some extent becoming less important to investors seeking the higher returns that stocks and bonds offer.

With a weakened case for holding precious metals, prices have started to slip. The spot gold price is now about $893 an ounce compared with a record high of $1,030.80 on March 17, while silver is trading at $17 after recently hitting a 27-year high of $21.24.

Analysts at Goldman Sachs said recently that they expected gold prices to be about $835 an ounce in 12 months and silver at around $15.50.

From the end of last year to March 17, silver prices soared by more than 40 percent, while gold was up more than 20 percent. The heftier gains for silver were built on heavy investor flows.

Barclays iShares silver trust, the biggest U.S. silver exchange-traded fund, now holds more than 5,770 tons of silver, a rise of about 10 percent since the end of last year.

Gold holdings by StreetTracks Gold Shares, the world's biggest gold exchange-traded fund, which is listed in New York, stand at 591 tons, down about 5 percent since the end of December.

"Silver is probably going to fall more than gold in percentage terms," said Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus, a German metals trading group. "From an industrial and jewelry point of view, there has clearly been a decline in demand. There has been a lot of additional material coming to the market in the form of scrap."

More than 20,000 tons of silver were produced globally last year, compared with around 2,500 tons of gold.

The physical surplus in the silver market is expected by some analysts to rise to around 2,500 tons from a surplus of around 900 tons in 2007. The gold market could see a surplus this year of 600 tons from 500 tons last year.

"Fundamentals come into play when prices are coming down," said John Reade, an analyst at UBS. "Silver doesn't have gold's fundamentals."

Silver is often a byproduct of mining for other metals like lead, zinc and copper, and many mining companies are trying to ramp up production of those metals with some success.

That means more silver on the market. Together with scrap recycling, supplies are set to jump this year, while overall demand, including from exchange-traded funds, is expected to fall.

"Silver is very dependent on one source of demand - ETFs," Briggs said. "You can't get excited about silver in the same way as gold. Silver doesn't really have the same cachet."

"Demand from the photographic sector has been falling fast," he said, as consumers switch to digital photography from traditional cameras.

For gold, the picture is somewhat different. Mine production is expected to hold steady this year, but analysts expect output in South Africa, a major producer, to fall over the coming years because the ore that remains is deep in the ground and expensive to access.

Fabrication demand - for making jewelry and coins - is expected to continue unabated as rising incomes in emerging markets like China and India allow people to choose gold over silver.

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Which are the best markets today? With all the touting that goes on, it’s important to always keep in mind that no one knows which coins will perform best. Based on the history of the certified rare coin market, however, some areas appear more promising than others.

You probably already know which coins have been doing exceptionally well over the past five to ten years but lets take a look at them again. These are series that are widely collected by date or have such a strong collector or numismatic appeal that they have risen repeatedly over the past decade and still seem to be a good value today.

1. Key Date Coins; XF to MS65.
The best performing area of the rare coin market for the past nine years running. Think maybe they are topping out? Prices seem a bit silly relative to other coins? Acquisition cost relative to bids are too high? Well it doesn’t matter. These coins are the best, rarest, most known and most sought after, and they are being bought up by coin buyers with the deepest of deep pockets. They are desirable, rare, and not often seen for years at a time. They rarely go down and if they do it’s proportionally less to the rest of the market. This all translates to plenty of upside.

2. Early Walking Liberty Halves, MS64 and higher.
Rare date Walkers prior to 1929 have seen modest price increases over the last three years, but have done very well over the last ten. Rare dates from 1916 to 1928-S in gradesMS64 and higher are constantly in demand and are always on dealers want lists. Among the earlier dates, 1917-D , 1917-S , 1918-S, 1919-D, 1919-S, 1920-D, 1920-S, 1921-P, D and S, 1923-S and 1928-S are dates that inMS63 and higher grades have seen the strongest demand and the biggest price jumps in the series over the last nine years. A 1921-D in MS65 now trades for two half times more than it did in 2002

3. Lincoln Cents MS64RD and higher.
Seems anything even close to low pop, prior to 1950, has skyrocketed in demand and price. 200% gains or more over the last five to ten years.

4. Morgan Dollars; Key and Semi-key dates.
Low pop keys and semi-key dates in this series have doubled, but they are so sought after by date, they may double again. These rare dates in MS60 to MS65 continue to offer an explosive combination of rarity and popularity like no other date collected series with the possible exception of twenty dollar Saint Gaudens.

5. Early 18th and 19th century silver and gold type.
This includes Flowing Hair (1794 and 1795) and Draped Bust (1796 - 1807) half dimes, dimes, quarters, halves, dollars, $2 1/2, $5, and $10 gold pieces. Hard to find issues that were apparently way to cheap seven to ten years ago. Remember when a 1799 $10 in AU was a popular coin available for $5,500? They were rare and we all knew it, but they were over looked because of the grade. Today the same coin runs about $22,000.What happened? First and most important is that they are rare. They just did not survive 200 plus years in good condition. They were melted at various times as gold prices rose and because of their high face value not as many people could afford to save them as they did with cents and nickels. Today collectors and investors recognize this, along with the stunning beauty of the coin, and have taken them off the market. Expect the trend to continue and with so few coins around, today’s prices will seem low in five to ten years.

6.Twenty Dollar Saint Gaudens.
As I have mentioned before, better rare date $20 St. Gaudens have done exceptionally well over last decade. The rarest dates are up as much as 300% and in some cases 400%. Why have they done so well? Continued strong date demand for the most sought after dates by collectors, investors and set builders. Also, because of their beauty, size, and metal – they’re very popular! I think over the next decade or so some of the Key dates and Semi-key dates will out perform the general market five to ten times over. The great thing is you can buy many dates in grades that are still affordable. Thirteen dates to watch are the 1908-S, 1909-D, 1920-S, 1921-P, 1925-S, 1926-D, 1927-D, 1927-S, 1929-P, 1930-S, 1931-P, 1931-D and 1932.

The Best Coins from Undervalued Issues
The rare coins above have certainly done well but what about the rest of the market? One area that I think will be tomorrows winners are better dates from mint state and proof type series.

There is a free lunch of sorts in buying better-than-routine dates from good Type coin series if you can acquire them at or near relatively small premiums to the Type level.

Braided Hair Large Cents. Though all large cents are scarce coins and cheap right now, the MS65RD braided hair cents (the last variety issued 1839-1857) go for only $4,500, which is very little when you consider that PCGS has certified only 205 large cents as MS65RD and the NGC population is only 131. They are too scarce to be marketed commercially. Since no one dealer can acquire any significant quantity of them, they are not promoted. Their cost comes solely from rarity, so you get a lot of coin for the money. Braided hair large cents such as 1850, 1851, 1852, 1854, and 1856 can be had for almost Type money, yet each has an MS65RD combined PCGS and NGC population of 22 pieces or less, making them five times rarer than Type dates. Any date prior to 1850 seems like a great buy in MS65 regardless of color. The trouble is finding them. PCGS and NGC combined have graded less than 450 coins MS65 in all colors: brown, red/brown and red. Prior to 1850 there are only 16 coins graded MS65RD and 108 MS65RB’s by both services combined. If you can find an MS65RD or MS65RB at a reasonable level, which most are, buy it.

Capped Bust Halves. I love these in MS63 or higher because they offer the same opportunity all better date type coins do, plus they are becoming more widely collected by date. Minted from 1807 to 1839 these coins are quietly disappearing off the market. Two distinctly different types exist, lettered edge minted from 1807 to1836 and reeded edge from1836 to1839.Within the reeded edge varieties two types exist, those with ‘50 cents’ stamped on the edge and those with ‘half dol.’ on the edge. PCGS and NGC also grades over 50 varieties within the lettered edge dates, mostly over dates and large and small numbers.

Because of all the varieties and the fact that PCGS and NGC have graded enough coins in grades AU toMS64, they are becoming strongly date collected. Yet the premiums for better dates are still small compared to other date collected series. It’s a great time to be picking these up. The dates from 1807 to 1821 have an average MS63 population of just 17 pieces per year, as opposed to an average of 63 pieces per year for the years from 1822 to 1839. There is a premium for the earlier dates. Eleven of these dates run under $3,500 in MS63 condition, most are less then $600 dollars more then later dates in the same grade - for over six times the rarity.

Seated Quarters No Motto. Minted from 1840 to1865.I recommend them in all gradesMS64 or higher, but if you can find dates other than 1857, 1858, or 1861, you’re getting a bonus. Those three make up nearly half of the series population, that’s 101MS65’s out of the 230 for the series. These “common” dates run about $4,000 each in MS65. 53 different dates make up the other 129 MS65’s. In the early dates I like all dates from 1840 to 1853 in MS63 and higher grades.

Prices for these vary with MS64’s running about $2,850 and up. Among the proof no motto quarters, they all offer great value. Dates prior to 1858 are pricey because of their low mintages – 5 to 40 pieces made for each year. From 1858 to 1865 they struck between 100 and 1,000 each year. These later dates run about $5,650 each in PR65 and they have PCGS and NGC combined populations of 40 coins or less per date.

Seated Halves No Motto. All MS65 no motto halves are rare in MS65 and higher grades. Most have single digit populations inMS65 by either PCGS or NGC. Any date from1839 to 1853 in the early dates are great value in MS64 and higher grades. The 1853-P and O Arrows and Rays half can be bought in MS63 or higher. In the early Arrows halves (1854-55), the O mints are most common but are still great coins in MS64 and higher. I like these arrows halves inMS64 and higher. Expect to pay $3,300 to $3,500 for any date in MS64 and $2,500 more for the 1855/54. Like the No Motto quarters there are good dates in the series with low populations that won’t break the bank. Any date will cost you about $2,350 in MS64 and $5,800 in MS65. Try locating some early dates inMS64 for $3,000 to $4,500. Some neat dates are the 1840-P Rev. of 1839, 1843-P, 1847-P 1850-O and 1851-O. They all have combined PCGS and NGC populations inMS64 of 27 or less and PCGS and NGC see these dates once every couple years at best and that’s in any grade!

In MS65 some better latter dates that cost right at Type price are the 1856-P,1859-P, 1860-P, 1862-P, and the 1864-P. Don’t be afraid to pay an extra 15-25% for these dates if you have to, they are good deals and are worth even more than that.

Like the Proof no motto quarters, all the dates are excellent low mintage pieces. Prices are the same for dates 1859 to 1865 at about $2,750 for PR64’s and $6,400 for PR65’s. These are really good deals today when you consider they have mintages of just 460 to 1,000 pieces. That’s the total made, not the PCGS and NGC populations. The 1858, with just 100minted,would be a great find in any grade PR63 and higher. As a date it will run around 50% more than the other proof dates above.

Seated Dollar series. (both varieties, no motto and with motto). The 44 date series runs from1840 to 1873 and starting in 1866 the motto, “In God We Trust”, was added to the reverse. All gem MS65s from this series are quite rare with just single digit populations on many of the dates. The three most plentiful dates are 1860, 1871, and 1873.There are an additional 21 dates in the series with MS63 populations of 15 or more. Look for business strike samples of these dates in all gradesMS63 or higher and all other dates in any BU grades. Prices start at $4,500 forMS63’s and move higher for rarer dates. Proof no motto dollars are very tough to find in any dates other than 1862, 1863, 1864 or 1865. In PR65, for example, those 4 dates make up half the population of the series. Try to get these dates in PR64 or higher and any of the other dates in PR63 or higher. Good thing is you won’t have to pay any big premiums for the rarer dates after 1859, except for the 1866 no motto as there are only two known. The no motto’s in PR63 will cost you about $5,300 and with motto’s in PR63 are around $3,900.

Trade Dollars. Like the Capped Bust half series they are becoming very popular to collect by date. The most common mint state dates are 1875-S, 1876-S, 1877-S and 1878-S. All are recommended inMS64 or higher, though you’re getting a bonus if you can buy a date other than these four at 10%to 50%above the Type price. The four dates above will run about $4,650 inMS64. But some dates like the 1873-P and S, 1874- P and S in MS64, offer great value. I also like the 1874-CC and 1875- CC in MS63 or higher. They are popular mint mark dates that the grading services rarely see anymore. Proof trade dollars have something in common with proof three cent nickels. In both series, the early dates are rarest. Proof trade dollars dated 1873 to 1878 have lower populations than the 1879 to1883 issues yet they all trade for about the same price.

Look for earlier dates in PR63 and higher and the latter dates in PR64 and higher. PR63’s will cost approximately $3,200 and PR64’s around $5,500. Any date trade dollar in PR65 is a good value coin and are available for about $10,750 to $11,500

Will these Type coin series ever develop a strong date following? Impossible to say. But my money is on them becoming collected by date more and more over the next decade. You can see the trend beginning as buyers look for undervalued areas of the market. Rarity information is more available and buyers like getting extra value for their money.

Perhaps, a few years from now, when you put your “Type” coin in an auction, someone wanting or needing the date will attach a 50% to 200% premium to it that you never had to pay. Or better yet, maybe several bidders will.

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By Tim Grant
Pittsburgh Post-Gazette 4-15-08

It used to be that an IRA could be funded with only cash, stocks or bonds, but Congress has expanded the rules governing individual retirement accounts to include gold and silver bars and coins.

And more investors who are concerned about turbulence in the U.S. and global economies are taking advantage of that option.

"When you get into very volatile markets and people are afraid of stocks and bonds, they look for safe havens, and gold has always been a safe haven," said Nadav Baum, managing director of investments at BPU Investment Group in Pittsburgh.

Transactions for precious metals IRAs have increased 523 percent in the past eight months at GoldStar Trust Co., a leading custodian for self-directed IRA accounts, based in Canyon, Texas, said Trey Hightower, a precious metals specialist.

GoldStar's IRAs allow investments in gold, silver, platinum and palladium bullion bars and coins. Its precious metal assets under management were valued at $312 million as of last Dec. 31.

"The economy and the weak dollar is driving a lot of people into precious metals," Hightower said.

Traditional and Roth IRAs that contain precious metals operate under the same rules as conventional retirement accounts. The metals cannot be withdrawn from the account without penalty until the investor reaches 59 1/2 years old and withdrawals are required starting at age 70 1/2.

But the roundabout process of setting up a precious metals IRA is where the similarities end.

Investors must contact a self-directed IRA custodian who handles precious metals accounts. Once that account is open and funded with cash, the customer then contacts a coin dealer and locks in a price for the metals.

The IRA custodian issues a purchase order to the coin dealer and then the metals are shipped to a depository, such as HSBC Bank in New York. Once the custodian gets confirmation from the depository that the metals have arrived, the custodian documents it into the IRA account and pays the coin dealer.

"The customer never holds the metals while they're in the IRA," Hightower said. "But they can sell the metals within the IRA and take a cash distribution or take the metals out as a distribution."

The combination of dollar weakness, falling interest rates and rising inflation has created an ideal environment for rising precious metals prices. Gold, which recently traded above $1,000 a troy ounce, is known as a crisis commodity. It tends to appreciate in value under the worst economic conditions.

In 1997, gold and silver bullion were approved for IRAs. But only gold coins having a purity of 24 karat are allowed in the retirement accounts, with the exception of the 22 karat U.S. Gold Eagle. The South African Krugerrand is not permitted in an IRA because it is a 22 karat bullion coin.

David Morgan, a world renowned silver expert and founder of silver-investor.com in Spokane, Wash., said he was familiar with the handful of IRA custodians who handle precious metals and was not aware of problems with any of them.

"I'm not advocating you put all your IRA money into gold and silver," Morgan said. "There are a lot of people whose main savings is an IRA account, and therefore they should put at least 10 percent in precious metals."

One of the most innovative ways to buy and sell precious metals in an IRA was recently introduced by the Entrust Group, based in Reno, Nev. Through its partnership with GoldMoney.com, investors can buy and sell digital gold, which allows the movement of physical gold bullion in their IRAs from one account to another online.

The downside of holding precious metals in an IRA is the account owner must pay storage fees to the depository where the metals are held. And there are often big spreads in the buying and selling exchange rates.

Those fees can make bars and coins an expensive way to diversify a low-balance portfolio, which is why many financial advisers prefer to put clients into gold and silver exchange traded funds, which are traded on the stock market.

"There's not much advantage and a lot of disadvantages in having physical bullion," said Bruce Fenton, president of Atlantic Financial in Boston. "What happens if it's stolen or it melts? You don't have to worry about that if it's electronically protected."

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Hidden Values in a Hot Market
 By Kathleen Duncan - Pinnacle Rarities

One of the most frequent questions we’re asked is which series present the best values. There has been plenty written on those sectors of the market on the rise…seemingly most right now. We can, however, list quite a few which are excellent bargains. For the most part, these are coins that have not seen much, if any, price appreciation in the past two decades. Acquire a single coin, or collect an entire series. High quality, attractive coins from these areas should outperform the general market.

Red-Brown Indian Cents: We see many coins certified Red by PCGS or NGC that we believe are actually a Red-Brown. Buy those coins, instead, that are certified Red-Brown, which are near Red, and pay a fraction of the price.

Three Cent Nickels: This is a modest 23 coin series that has only a few stoppers (1883, 84, 85). The Proof series is only a bit longer (26 coins) but is easier to complete. Most proofs are available in cameo for a reasonable premium.

Seated Liberty Half Dimes: Capped Bust half dimes have charted nice gains, but this series is still asleep. The business strikes present a challenge to complete, with several exceptionally difficult dates. Legend Obverse Proofs (1860-73) present a much more collectible endeavor.

Seated Liberty Dimes: Seated Quarters and Half Dollars have gotten quite a boost in the past 6 months. It shouldn’t be long before Dimes follow suit. This is an extremely difficult series to complete as nearly all of the San Francisco dates are elusive. There are many scarce dates, however, that can be purchased for reasonable sums even in gem to superb grades.

Barber Dimes, Quarters, and Halves: These sectors are showing some increased interest, particularly in auction, but with a bit of effort there are plenty of bargains to be found. There are 74 coins in each of the regular issue series, but only 24 in the proof series. Of course, you don’t have to complete a series to pick up some good values.

Peace Dollars: There are just 24 dates to this highly collectible issue. Nice coins can be somewhat of a challenge to locate, but the beauty of this great Art Deco design and there reasonable levels make this a worthwhile endeavor.

Classic Silver Commemoratives: This area of the market has actually fallen substantially over the past 5 years. The 50 unique designs (144 issues if you collect each date within those designs), each with an individual history behind production, form a unique niche in numismatics. Easily obtained fully brilliant or with gorgeous toning, depending on your preference. At the current valuations, what’s not to love?
 

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COIN VALUES Market Analyst
By Mark Ferguson

Demand is pushing up values for circulated coins virtually across the board. Exceptions include circulated early commemoratives, those minted between 1892 and 1954, and, of course, coins struck after the silver era ended in 1964.

The market price of silver bullion has pushed up values for silver coins such as dimes, quarter dollars, half dollar and dollars. But in addition to climbing silver values, real demand from collectors is being experienced for these relatively inexpensive coins.

The grades of Extremely Fine and About Uncirculated are most popular because these coins show almost all of the original details of the coins. About Uncirculated coins should show minimal friction on their high points, but no flattening wear.

Coins grading Extremely Fine should show a little bit of flattening from wear on their high points.

However, coins with weak strikes are often mistaken by some collectors as having wear. Examples that come to mind are the 1923-S Lincoln cent, which has a normally weak reverse, especially in the wheat ears.

1940-S and 1941-S Walking Liberty half dollars are often very weak in the center on both sides. Liberty’s left arm often appears flattened, as do the skirt lines. And on the reverse of these coins there’s usually a flat spot on the bottom half of the eagle’s breast.

Similarly, many Morgan dollars, especially those struck at the New Orleans Mint, have weakness on the eagle’s breast, obscuring the feathers. Many people confuse this weakness with wear.

Such weakness is most often reflected in the prices for such coins. Those same issues that are unusually strongly struck sell for premiums over listed values, whether they’re in Mint State condition or slightly circulated.

It is also important to note that circulated coins with contact marks that stand out, or that bear other blemishes – like spots – that distract from the overall look of the coins, sell for discounts below listed values.

Great rewards can be achieved by buying circulated coins in bulk and searching them. Examples include buying bulk circulated 90 percent silver coins or bulk groups of Indian and “Wheat” cents. Rewards also await those searching through containers full of circulated coins at coin shops and shows.

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The Silver Lining By Howard Ruff

The Silver Lining in every cloud” is the symbol of optimism. It is right up there along with gold and platinum for jewelry or wedding rings. Silver has been by far the most commonly-used monetary metal; silver coins are far more common than gold in much smaller denominations. It is the most common coinage used as money (the British pound sterling?); Silver coins have been standard currency in many nations in all ages of time, much more even than gold. It has been used more often than gold for coins because many silver deposits are much shallower than gold, so they have been easier and cheaper to mine, even by primitive methods.

But never before have government silver coffers been so bare.

Silver is used in more applications than any other commodity (aside from petroleum).

Those are the words of a well-known independent silver analyst. I agree with him that, despite the insanely profitable gold bull market, silver may not be just twice as profitable as gold in the next few years, but even more than that. Why?

He also says, “silver is in huge short supply, and the shortage is getting worse by the day; the silver inventories which depressed the price for more than sixty years are gone!” He’s certainly right if you are talking about silver at today’s price!

Unlike gold in the 70’s when Jimmy Carter decided that rising gold was an embarrassment to the dollar and announced gold sales from Fort Knox to depress the price, government can’t decide to dump their silver onto the market to artificially suppress the price – because they no longer have any! Silver is still the poor-man’s gold, and the time is not far away when the investment world finally wakes up to the shortages, and soaring demand will make it difficult to find any investment silver at any price this side of $100 an ounce.

In the inexorable law of supply/demand, price is the great equalizer. There is plenty of silver available – at the right price – and $14 to $17 is not the right price. At increasingly higher prices, silver jewelry and sterling silver will come out of the wood work. I remember back in the ‘80s when I put out my famous silver sell signal, my only recommended bullion dealer, made millions buying down and melting and salvaging all kinds of silver – sterling silver and bags of coins – as investors who believed me that the silver bull market was over, were melting down even heirloom sterling silver. The same thing will happen again, but at much higher prices. And silver will come out of India and China in the form of jewelry to be melted down, but again, at much higher prices. At these prices, with their economic boom over the last decade, the newly created middle-class Indians and Chinese are buying gold and silver jewelry.

Says the same analyst, “If you could find a commodity which was considered a precious metal and was far more rare than gold, wouldn’t today’s crazy price discrepancy ($12.50 silver and $700 gold at the time he said it seem utterly ridiculous?” I agree, but not necessarily for the same reasons.

When the world discovers the supply-and-demand fundamentals, silver will be the star for investors. The safest money will be made in physical silver held in your possession. Someday soon, the users who need it may not be able to buy physical silver at anywhere near today’s price because there won’t be any available in the empty warehouses. If they need or want some, they may have to buy yours or metals from India or China – at a much higher price!

How, Where and Why to Buy Silver

You have a lot of choices here, some better than others, some good and some just plain bad. Let me count the ways:

1. Junk Silver: The government stopped making 90% silver coins after 1964. These commonly circulated (not rare) coins can still be bought from coin dealers by the bag or half bag. A bag contains pre-1965 dimes, quarters and halves with $1,000 face value, weighs about 55 pounds, and the coins contain 715 to 725 ounces of silver. As this is written, a bag costs a bit more than $12,000 and half a bag is about $6,000. The coin industry calls this “junk silver.” They are “circulated,” have no numismatic (rarity) value, and you will not pay the face value of the coins, but the current value of the silver in the bag, plus a small premium. Many of them are being scrounged out of circulation and melted down into bullion bars; soon there may be a rising premium. Pay it. It’s worth it!
   
    

2. Engelhard Silver Bullion bars: For larger amounts of silver, you can buy Engelhard 1,000-ounce bars and store them in a safe depository. They can be bought from any of the coin-and-bullion dealers listed in the Appendix. If they are to be stored any place other than where you bought them, or you have taken personal possession of them, they will have to be assayed when you sell them, which can be expensive and time consuming. If they are in storage, be sure they are in trust with an independent trustee.
   
    

3. Silver rounds: some private mints have manufactured some coin-like “rounds” which you can buy from a coin dealer for very little premium.
   
    

4. Semi-numismatic coins: These coins have some of the features of rare coins and bullion. Their price is based on their rarity and lack of flaws, plus the value of the bullion they contain. They are especially interesting for more than one reason; the numismatic value is based both on their age, and their condition, but the bullion content gives them a price floor, because if they ever lose their scarcity value, they can never be worth less than their bullion value. I really like them a lot.
   
    

5. Silver in the ground: Silver mining stocks will be huge winners in the next few years. They are leveraged to the price of bullion, and will grow much faster than coins. They will be like a license to print money!
   
    

6. ETFs:Silver ETFs(Exchange-traded Funds) have recently been launched and are sold on the American Exchange (ishares Silver Trust (AMEX: SLV). It is a convenient way to buy silver. You can buy or sell your shares of the ETF at will, just like stocks. They will trigger a lot of silver buying, and are a very-bullish development as it exposes million of potential, non-traditional investors to silver. The ETFs will also have to buy huge amounts of silver to meet their legal obligations, which will be a big demand factor, which is bullish! We’ll be watching them closely to be sure they do the required buying.
   
    

7. Futures Contracts: Caution! These are highly leveraged, because you will only have to put up a fraction of the value of the silver in the contract, enabling you to contract for several-times as much silver with the same amount of money. As silver goes up, if you don’t get a margin call along the way, you will make a lot more money than if you own physical silver. But if it temporarily goes down, you will lose your money a lot faster. If you have 10% margin and silver doubles in price, you will make ten-times your money. But if silver goes down 10%, you will lose all your money. Futures are only for those with a lot of money to risk, and nerves of steel. Most of you should avoid them, and the profits in mining stocks may be just as profitably leveraged. The COMEX futures-contract exposure is at least as great as all the known silver bullion inventories in the world.

This form of paper silver will boom price-wise as long as bullion does, but in the long run, by far the most safety will be with physical silver, especially if there isn’t enough inventory left for silver-users to get delivery settlement on their futures contracts to meet their commercial needs, and they will be forced to raise their bids so they can get you to sell them yours.

Where Did The Silver Go?

A lot of the world’s underground silver deposits were laid down very shallow when God created the Earth, so it has been easily mined over the years, even by primitive methods, and most of the world’s easy, cheap silver has been dug up. The world is now dependant on increasingly hard-to-find-and-mine deposits. There is continuing production of by-product silver found along with copper, lead and other minerals. The old, shallow pure silver mines have been depleted or are getting harder and more expensive to mine. Much of the cheap, easy, underground silver is exhausted.

The world’s biggest supply of above-ground silver is in India, but it’s not in ware-houses owned by the government. It is in the form of jewelry. It is a form of wealth worn by millions of Indians. No one person or government can decide to sell some reserves for any reason. It will take mass psychology, and that will take a lot higher prices.

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Investing in Bullion and Collectible Gold Coins By Cali Zimmerman

With the price of gold at record highs and the U.S. economy on the downslide, it’s no wonder that many investors are setting their sights on gold to hedge against the falling dollar. Many investors think gold bars are the most reliable and cost effective approach to buying gold, but gold coins offer benefits that bars do not because of their smaller denominations and viability as currency.

The first gold coins were made by King Croesus of Lydia in approximately 560 B.C. These coins were not pure gold, but were made from electrum, a natural alloy of silver and gold.

When the process later became more refined, coins of pure gold and silver were created. The use of these coins spread to many civilizations, including the Greek and Roman Empires and, later, throughout European countries.

Gold coins typically cost slightly more than their gold content is worth, because a 4 to 8 percent premium is added for minting and distribution. However, coins may make up for this added cost because they are easier to sell and manage and are more widely collected than gold bars. While minted gold bars typically come in weights between 1/10 of an ounce and 20 ounces, coins range from 1/20 of an ounce to one ounce. The smaller size and more manageable shape of coins can be a strong asset if an investor wishes to sell a small portion of gold, or to use it as currency in the event of a breakdown of the U.S. monetary system.

Bank safe deposit boxes are recommended for keeping gold secure, but it is also possible for investors to keep some of their coins at home. Floor safes are a good choice, as an aboveground safe may announce the location of valuables and be stolen, according to OnlyGold.com.

“If it is not in a safe, spread [gold] around in many small caches. Some of the places suggested by our customers include under floorboards, in lofts [and] buried in the garden. Although these may sound rather facile, they probably work well in practice, especially if others do not know they are there,” according to TaxFreeGold.co.uk.

Gold does not tarnish like silver does; however, gold is a soft metal that can be scratched or dented. This can lower the resale value of collectible coins, so gold coins should be protected from rough handling.

There are two main types of gold coins: bullion coins and collectible coins.

Bullion coins

The term “bullion” refers to a form of metal in which its value comes primarily from the worth of the metal itself rather than from an artificial currency value. Bullion coins are priced and sold according to the weight of gold within the coin, plus the additional premium mentioned earlier.

Bullion coins are available in many different weights with the most common being 1/20, 1/10, 1/4, 1/2 and 1 ounce. Many countries make some type of bullion coin. Though the designs vary from country to country, and sometimes from year to year, gold coins are sellable in all countries. Different countries may also produce coins of varying purities, which affects prices.

The U.S. Eagle coin is named for the image of a bald eagle it bears on its surface. They are available in platinum, gold and silver. Golden Eagles are 91.67 percent pure. According to GoldPrices.com, this makes the coins harder and more difficult to scratch. The Canadian Maple Leaf bullion coin is 99.99 percent pure. The South African Krugerrand, the first national bullion coin ever released, is a 22 karat coin alloyed with a small amount of copper for durability. Many other nations, including Australia and China, also offer their own national gold bullion coins.

Collectible coins

Numismatic—or collectible—gold coins are not priced based on their weight in gold. Rather, their selling prices are based primarily on their rarity, age and condition. “Numismatic coins are cherished for their beauty, historical significance, and their potential investment value. Hence, numismatic coins sell at a significant premium over their intrinsic gold content,” according to AmeriGold.

Modern gold bullion coins are not minted in limited numbers, so they are not likely to gain as much value as rare, collectible gold coins when gold is in a bull market, according to the American Gold Exchange.

Although condition, or grade, does not particularly matter when buying and selling bullion coins, these things are important when dealing with collectible coins. Coins in Mint State will be worth more than coins that have been scratched or otherwise damaged.

“In most cases, collectors should look for coins in the highest grades they can afford. However, many of the sharpest collectors and investors will seek out the key rare dates of a series, which can be astronomically expensive in Mint State, in one of the lower grades—provided that they can find a coin with exceptionally high quality for the grade and excellent eye appeal,” according to the American Gold Exchange. “These high quality, lower grade coins are often a better value and far more affordable than the higher grades.” This premium above the coin’s actual gold value varies widely from coin to coin depending on demand, according to American Eagle Exchange.

For investors buying coins, here’s something to consider: Gold is classified as a collectible, which means that profits are not taxed as capital gains but as ordinary income, according to BankRate.com. Long-term capital gains are taxed at a 15 percent rate for those in the 15 percent tax bracket, but gold investments can be taxed at rates of up to 39.6 percent. Those considering putting their money into gold coins should consider what these rates might do to their returns.

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No rules apply for coins  By Mark Ferguson

"Recession!"

That's the hot topic in the news these days. Some economists say we're in one, some say we're just close.

I often get asked what the coin market in general does when stock prices go higher or lower, when interest rates are high or low, and what coins do when the economy is good or bad, for example.

The most important thing to keep in mind is that there are no rules.

I am not an economist, but speaking as a numismatist I can point out what's happened to the coin market during modern times.

We used to see coin prices rise and then plateau, rise again and plateau again. However, in early 1980 after gold hit the then record high of $850 most "investment grade" coins, namely Mint State 65 pieces, continued to rise and then promptly proceeded to fall by about 50 percent, beginning around income tax time in early April that year.

Prior to that time dealers reaped huge, easy profits from buying and selling bullion products during 1979 and early 1980 and they plowed these profits into what they knew – rare coins.

This is similar to what we've seen during recent years in the housing market – builders put their profits into apartments and commercial buildings, because that's what they know. Now many of them are having a tough time of it.

However, in today's coin market many dealers are heavy on cash and low on inventory. This is because the coins they'd like to own have been picked over and are in collectors' hands rather than floating around coin shows and auctions.

In observing what's going on in the coin market and in talking with dealers and collectors, the anecdotal indicators show that today's coin market is sound.

Demand in general is still very strong and coins on want lists and sought to satisfy many dealers' appetites are difficult to locate.

Some people think gold should be priced, not near $900 per ounce, like it is now, but around $2,000 per ounce, when adjusted for inflation.

That's probably the only rule that is constant – rare coins and precious metals' prices do well during times of inflation.

Other than that, there are no "rules" as to how the coin market is affected by the general economy.
 

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Douglas Winter Numismatics Market Report January 15, 2008
 

After the dust settles from a major coin show and a major auction, there are always a number of things that can be learned. I learned a lot from the 2008 FUN show and, more specifically, from the Heritage FUN auction.

1. If someone is wealthy and they really want a coin, price no longer appears to be an object. Case in point: the 1805 quarter that was sold as Lot 2775 in the Platinum Night 2008 session. It was graded MS66 by NGC and it brought an absolutely incredible $402,500. What is even more incredible is the fact that this exact coin sold for $74,750 one year ago (almost to the day) in Heritage’s 2007 Platinum Night session. With the click of a mouse, even the most inexperienced collector could have determined this, thanks to Heritage’s unparalleled degree of transparency. Clearly the coin market is strong right now but a nearly-six times increase in the price of a neat but not world-class coin? Gulp. And you want to know something even more amazing about this sale? The two collectors battling it out for the 1805 quarter were bidding on line and, in all probability, never saw the coin in person or had an independent dealer look at it for them. In fact, they may not have even had a bidding strategy other than: “I want this coin and must have it no matter what it sells for.” And this was just one of many prices in this sale that I regard as absolutely amazing.

2. The last time that coins sold for numbers like this at auction may well have been at the 1979 and 1980 Garrett sales. There is one HUGE difference between those numbers and today’s seemingly crazy auction prices. In 1979 and 1980 the end users for most of the six and seven figure coins that were selling at auction were dealers. Today it is virtually all collectors. That makes me think that the coin market of 2008 is a lot healthier than the admittedly twisted market of 1979 and 1980.

3. Heritage has created a model that rich new collectors trust and that they obviously find entertaining to use. Collectors can bid live on their computers even if they are in a hotel room in Kuala Lampur and they know the reserve and/or opening bid level for every coin in the auction. Unlike at most other coin auctions, these collectors know they aren’t going to get jerked around at a Heritage sale and that’s why we are seeing something unparalleled in numismatic history beginning to emerge in 2007 and 2008: exceedingly wealthy people who will never set foot in a coin show and whose identity will never be known to more than a small group of industry insiders are quietly dominating the high end of the market like never before.

4. Previously dormant areas of the market can turn around very quickly. As an example, Proof silver coins from the 1840’s and the 1850’s were extremely tough sales for many years. In fact, I can remember dark, overgraded coins from the Starr sale in 1992 languishing in the market for at least five to eight years and some of the less attractive coins from the Pittman sales taking years to find homes. Out of the blue, these early Proofs are now selling for huge prices. In the Platinum Night session, a group of four very rare Proof quarters (1841, 1844, 1845 and 1850) brought a remarkable $1,322,500 including $460,000 for the 1850 in NGC PR68. Before the auction I would have guessed that these four coins would have brought in the area of $750,000 collectively. From what I hear, there are now two or three deep-pocketed collectors who have suddenly started to put together date sets of business strike and Proof Seated coins. That fact, plus the availability of some very rare and really exceptional issues in the FUN sale created a Perfect Storm scenario and ignited a formerly-dead series. Which formerly dead series will be next?

5. In the area of branch mint gold, it was interesting to see the very strong performance of many issues. The strongest prices realized were for the key date or one-year type issues that have been in great demand for the last few years. In the gold dollar series, a very nice PCGS AU58 1855-D sold for $37,375 (Trends for this issue in this grade is $35,000). The fact that this piece was choice, original and well struck helped propel it to what has to be a record price for an 1855-D dollar in this grade. There were some very attractive 1861-D half eagles in the sale and this is an issue that has shown great demand in the last few years but very few pieces have been available. A PCGS AU58 sold for $43,125 (Trends is just $35,000) and a spectacular PCGS MS63 brought $207,000 which is a record auction price for any Dahlonega gold coin.

6. When I was discussing the “how to” details about the Carolina Circle collection with its owner, one of the most important decisions to make was whether to regrade the pieces that had been slabbed years ago or to leave them as is. Given how hard it is to find a fresh deal these days, I made the decision to keep them in their original holders. Was my choice right? At this early point, it’s hard to say with certainty as you can rest assured that virtually every one of the old holder coins will be broken out of the original holder and sent to PCGS or NGC to be regraded. But given the prices that many of these coins brought, I’d have to say that people are going to have to hit some pretty major Grading Home Runs. Here are just a few examples. An 1841-C $5.00 in an old PCGS AU53 holder sold for $13,800. With AU58 Trends at $12,000 this means the coin will have to grade at least MS61 to be a decent deal. An 1846-C in PCGS AU53 brought $12,650. With AU58 Trends at $14,000 this coin will need to grade at least AU58 and even at that level the dealer who purchased it won’t make any money. A very attractive PCGS AU50 1851-C sold for $12,650 which is considerably more than AU58 Trends. To be even a marginal deal for the buyer this coin will have to grade at least MS60 to MS61. One final half eagle of interest was a lovely PCGS AU58 that brought a rousing $17,250. With MS62 Trends at $15,000 this coin will have to grade at least MS63 to be a good deal. From AU58 to MS63 seems pretty optimistic to me…

7. The appearance of CAC coins in the FUN sale was of great interest to many market observers, myself included. I am planning to write an in-depth analysis of their performance in my next blog but the early results seem pretty strong with premiums ranging from a low of 10% to a high of well over 50%.

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2008 Crystal Ball Survey
 
By Doug Winter on Sunday, January 6, 2008

For the last few years, I have been asked by Maurice Rosen, publisher of the excellent Rosen Numismatic Advisory newsletter, to be a contributor to his annual Crystal Ball survey. This feature, which generally has the participation of a half dozen or so very knowledgeable dealers, is an excellent way for me to analyze the coin market and the questions asked by Maurice are diverse and interesting. Here are my answers to the 2008/2009 RNA Crystal Ball Survey. Please note that due to the length of this article it will appear in two parts.

1. What’s your outlook for the coin market in 2008/2009?

I think the market will be mostly strong in 2008 although I think we will see continued bifurcation as we have the last few years. By this I mean I think there will be great strength at the absolute upper end of the market and we will also see good demand for interesting lower priced coins but the middle market will continue to be weak; possibly more so than in 2007. I foresee some weakness in the economy in 2008 and I would imagine that because of the housing slowdown we will see fewer people throwing sizable amount of disposable income at things like coins. Really good coins, though, are going to do awfully well in the coming years. There just aren’t many of them around.

2. What areas of the market look to be the best performers in 2008/2009? Please state your reasons.

I think type coins will be a very strong performer in 2008, especially Seated and Barber coins in MS64 to MS67 and PR64 to PR67. Coins like this have been too cheap for too long and people have finally gotten wise to this. Early coins have gotten too expensive for most people (in higher grades) and the grading standards tend to be pretty atrocious in this area. I think a number of collectors are realizing that a smart place to be is in the Seated and Barber arena. You can still buy really nice coins that are 100+ years old for less than $5,000.

I expect that rarities and trophy coins will be extremely strong this year. I find it amazing that an 1804 $10 sold for $5 million dollars recently and I’ve got to think that $1 million dollar sales are going to be reasonably routine in 2008 and 2009.

I would expect that Proof Gold will do nicely in 2008 as will better date $5 Indians and $10 Indians.

In rare date and early gold, I think anything that is choice and original will be in demand this year. I am already noticing a large price spread between crusty coins and scrubbed coins and I think this will continue as originality becomes more and more in vogue in 2008. Here’s my advice for collectors and investors in 2008, 2009 and beyond. Buy coins that are interesting and which have good aesthetic appeal.

3. What areas look to be the weakest? Again, please state why.

I would expect that silver commemoratives are going to stay very weak in 2008 unless some large marketing firm decides to promote them. They seem like great values right now but there are just too many of the little buggers around and unless you can count on selling thousands and thousands of coins, you can’t control the promotion.

I would have to think we will see some weakness in Registry Set coins that are perceived to be overvalued.

I also think that, with the exception of gold dollars, small-sized coins are not going to do well. As collectors get older and older, few people are able to see coins like Three Cent silvers and half dimes.

This is going to sound a little bit general but coins that are ugly are going to do poorly in 2008. No matter what the plastic says, if a coin is off quality, it will be hard to sell.

4. Since the 2001 lows, coin prices by some averages are up 20-50% but gold is up about 200%.

A) Have your clients expressed concerns about this?

How could they not express concern? While some areas of the market have done fabulously since 2001 (early type, early gold, rarities) many other areas have been extremely flat. In some cases, truly rare coins in relatively popular series are actually down in value since 2001, especially if you take out the gradeflation factor(s).

B) What do you tell them?

The truth. Which is, in my opinion, that as much as I love coins and the coin market in general, there are some problems that need to be cleaned up. These include accurate price reporting and the need for greater consistency among the grading services.

C) How do you see coins and gold performing from here on?

I think we’ll see gold break through the $1000 barrier but I’m not really sure where the short-term and medium-term caps are going to be. Perhaps $1250-1500– after that, who really knows? I think price performance in the coin market is going to be selective. As I mentioned above, the market is becoming more and more bifurcated. I think there are going to be fewer collectors in the future but there will be more extremely rich people dabbling. If you buy the right coins and hold them long enough, you should do well. If you buy so-so or average quality coins you won’t do as well. Investors should learn to think like collectors and buy the sort of collector-quality coins (and, no, the expression “collector quality” does not mean 1901-S quarters in Fine) that have traditionally appreciated well over the course of time.

5. The U.S. Mint is the biggest coin dealer. Are they helping or hurting the coin market? Please explain in detail.

I can’t possibly imagine that it’s helping the coin market that hundreds and hundreds of millions of dollars are being spent on modern products that might (or might not…) be spent on rare coins. At least the Mint is now far more receptive to collectors than in the past and they seem to have extended the olive branch to the collecting community after years and years of disliking us.

6. Coin grading has come a long way since PCGS started in 1986. A) What further advances are needed? B) How would they impact the market?

I’ve spoken with clients of mine who are involved in hedge funds or private equity groups and most of them won’t do a coin deal because the numbers are just too small. These guys are looking at doing $250 million+ deals (in many cases more than this) and a little $25 million to $50 million coin deal is just too small for them. That said, there is always the chance that a hedge fund guy who loves coins might do a fund as sort of a lark. But every time we’ve seen large funds in the coin market, the results have not been good.

If a fund were to be established, it needs to be run by someone like John Albanese who is very smart and very ethical. I assume that a fund run by someone like John would focus on really rare coins like Proof gold, early type (silver and gold), classic rarities and popular individual issues like High Reliefs, Pan-Pac Octagonal and Round $50’s, etc. This is essentially what the Ohio Fund was focusing on and I think they did a very good job in terms of buying coins and focusing on specific market areas.

7. A) How do you feel about the concept of “seals of approval” on graded coins?

I wish they weren’t needed but I think at this point in time they are a good idea—provided, of course, that the people involved with them are doing it for the right reasons.

B) What will the effects be of such slab labeling?

I think we are already seeing an effect. At least one of the services has become considerably more conservative in their grading in the past six to nine months.

8.Coin auctions:
A) What’s your best advice to consignors?

1. Don’t assume that auctions are always the best way to sell all coins.

2. Learn which firms sell which types of coins for the most money. As an example, I use one auction firm exclusively for any very low population 20th century coin I own as they get much better prices for these coins than anyone else. Conversely, I use another firm exclusively for more “sophisticated” coins as they do a better job describing them and their audience seems to be a bit more dialed in to these sorts of coins.

3. Don’t choose an auction firm solely based on their consignment rate. You get what you pay for.

4. The best times of the year to sell coins at auction are at FUN in January and at the ANA in July or August.

5. Hire an advisor to help you decide how to best market and sell your collection even if you think you know what you are doing. If you do it totally on your own the chances are good that you will leave money on the table.

B) What’s your best advice to bidders?

1. Hire a well-qualified representative to bid for you at auction. It is the best 5% you will ever spend.

2. Never bid sight unseen on any coin at auction worth more than $1,000. And, no, you can’t accurately grade a coin based on images!

3. If you attend an auction in person, come prepared. Know what you what to bid on, what you want to spend and how much you are willing to stretch on any coin.

4. Sometimes the best auctions are the ones you don’t buy out of but which you learn from.

9. Two sophisticated investors come to you to provide them a portfolio for a 5 to 10 year hold, one investing $25,000, the other $250,000.

A) How would you construct the portfolios?

$25,000 portfolio, as follows:

1. Stars Obverse Liberty Seated Dime, PCGS or NGC MS66, cost $4,000-5,000+. I think this has the potential to be a $7,500 coin.

2. No Motto Liberty Seated Quarter, PCGS or NGC MS65, cost $5,000-7,000+. If possible I would try to find a coin dated in the 1840’s and pay a premium of 20-40% for it. This could easily become a $10,000++ coin.

3. Barber Half Dollar, PCGS MS66, cost $4,000-5,000. I can see this coin becoming worth $7,500-10,000.

4. Liberty Quarter Eagle, PCGS or NGC PR65 Cameo, cost $12,500-15,000. I think this has the potential to become a $20,000 coin.

For the silver coins, I would try to buy very pretty originally toned pieces and for the Proof gold coin I’d try to find a coin that was not over-conserved.

$250,000 portfolio as follows:

1. A neat early copper coin, such as a 1793 half cent in AU or a nice Wreath cent or a pretty 1794 Cent with a good pedigree. I would avoid a Chain Cent as I think these are currently overpriced. I’d spend around $25,000 on this coin and I think it has the potential to double in the next five years.

2. A cool $25,000 early silver coin. It might be a really nice AU 1795 half dollar or a very pretty early dollar (preferably a 1796, 1797 or 1798).

3. A Large Size Bust Quarter in PCGS or NGC MS65. I’d be very selective when buying this coin and would hold out for a coin that had great original color, minimal friction on Liberty’s cheek and a good strike. I’d be willing to spend up to $25,000 on the right coin. This type could be worth $35,000-45,000 in a really hot market.

4. A great looking piece of early gold in the $25,000-35,000 range. I might look for a nice MS63 to MS64 Capped Bust Right half eagle or a Fat Head half eagle (1813, 1814, 1818 or 1820) in MS63. Again, I’d be ultra-selective and avoid a piece that has been processed. Although early gold has gone up a lot in price in the last five years, nice coins still have upside potential.

5. A small group (four to six coins) of Colonials priced in the $2,500-5,000 per coin range. I would use an expert in this area to be my guide and would shoot for coins that he thought were accurately graded and really attractive for the issue. This is a $10,000-20,000 investment that could double in the next decade.

6. A really neat New Orleans half eagle or eagle from the 1840’s worth $20,000-25,000 would be my next purchase. Having focused a significant amount of attention on these coins in the last few years, I know how incredibly rare they are and I think they are still wildly undervalued.

7. I’d finish the portfolio off with one or more of the following: a great piece of Proof gold from the 19th century, preferably in PR65 or higher and preferably with an original mintage figure of less than 50 coins; a few great No Motto Liberty Seated silver coins, preferably No Motto mint marked coins in MS63 to MS65 with pleasing original color and a few neat collector coins—things like perfect EF Carson City half dollars or lovely original AU Bust halves. All of these areas still seem like good values to me and have excellent upside.