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Bullion vs Graded - merits, demerits and timing


Oldun

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OK, this is in response to an interesting comment elsewhere on the forum. Which is better ? Or which is worse ?

 

Have at it :D

 

Personally, I think, like many things it is about timing and personal preference but let's get lots of opinions as in the end, everyone will be right :)

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Anyone who thinks its binary choice doesn't have the knowledge or skill set to achieve their the full potential in terms of price when selling. There are different mechanisms for buying and selling. I don't care what I buy, if there is an opportunity to increase my wealth via my stack I will take it. I think bullion silver is where it is at for me but ultimately my profits go into my higher end collection. 

To add something else into the mix, I also use paper markets if their is an opportunity and those profits (to losses) are recorded and fed back into my stack.

I am not going to say other peoples opinions are wrong but ultimately Im in this to improve not only the size of my stack but also the quality of my collection and my standard of living in the future. I often have people ask how they can make some extra money dealing in coins and I genuinely believe on a very modest stack you can make 500 a month once you master your niche.

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For the wealth increasing bit I use the stock markets, but at the end of the day, that isn't real money and one computer glitch and it all disappears. I take some of the profits to buy gold and silver that can't. To buy and/or trade rare and graded coins would require a fair bit of time and research, bullion just required a 5 minute hunt for the cheapest price.

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4 minutes ago, Thelonerangershorse said:

For the wealth increasing bit I use the stock markets, but at the end of the day, that isn't real money and one computer glitch and it all disappears. I take some of the profits to buy gold and silver that can't. To buy and/or trade rare and graded coins would require a fair bit of time and research, bullion just required a 5 minute hunt for the cheapest price.

I think you have hit on something, it does take time and research. Your knowledge will dictate what you ultimately buy (within your price parameters). The more sophisticated you are the more likely when the opportunity arises you will make money. Anyone can buy and sell bullion because its easy and so the margins are lower..

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The thing is that most of the posts from long-timers on TSF revolve around graded and high premium stuff. I think there are a couple of reasons for this:

 

1. They have obviously been around for a long time and really know their stuff when it comes to numismatics. Most people, even most people who own PMs have next to no knowledge of this tiny segment of the market.

2. This may be a bit controversial, but I think there is some truth in it... Basically, silver bugs have been largely disappointed for a LONG time now. Bear market for 2011 to late 2015 and then bouncing around near this level for near 2 years since.  During such bear markets you get a LOT of people falling by the wayside as they lose interest. This is what makes it a bear market. I think the people who are now into graded stuff have done it largely as a response to a long period of falling/low spot prices.  Let's face it, if silver just went up and up for many years there would be much more interest and excitement about basic bullion silver and much less incentive to get everything slabbed as a way of maximizing premium.

 

 

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At @Oldun's request - the pros and cons of bullion vs graded - 

i'll start this off by giving my two cents - having experienced the wonderful highs of obtaining perfect graded silver bullion and numismatic coins - ms70 and proof 70's - it can be very exciting to add these types of coins to a collection - however from my experience over the last 2 years - the reality of having these coins develop milk spots - while in the holders has been - to say the least - a nightmare . There is no worse feeling than to open up a storage box to see a proof 70 1 ounce queens beast lion or a Netherlands proof restrike dollar or a Mexican libertad have little dots on the coin- or bullion coins graded ms70 like a Austrian philly, a 10 ounce queens beast, etc, with milk patches. What the &$@?. Bad luck?, luck of the draw?, just too much for me to deal with. 

That is why I will never buy any graded silver ever again unless I get it for just a few bucks over spot or can flip it for a quick profit before any problems appear on the coin.

Bullion on the other hand - I have no problem buying just to get ounces in the stack. Bullion coins could spot as well - but who cares - it's bullion.

 

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Bullion is simple. Numismatic investments are complex. Both are speculative and both have their place.

I prefer bullion as an investment, but have made money from numismatic coins and have a collection of coins that are part hobby part speculation.

Specifically for grading, I can't get on board. MS 69 and MS 70 look exactly the same to me but are often priced very differently. Coins can be sent for regrading and come back with different results, mistakes are made with grading. People are collecting the grade and not the coin in many cases to achieve a set of MS69 or MS 70. Each to their own, there is a market for them but it is not something I can get into because I do not share the same value opinion for a slabbed coin as the majority of the market - I am aware the same ungraded coins are available raw in most cases in similar conditions or better, and so would rather seek those out rather than spend good money on the opinion of a grader and a plastic slab. I have owned slabbed coins in the past and found no satisfaction in owning them beyond raw coins I own, many of which I thought were in good condition but didn't have a number or plastic attached to them. 

Some people do value slabbed coins a great deal and I understand. There is a huge advantage to grading when it comes to sell and buy due to third party assurance of grade. There is a large barrier of protection against fakes. And clearly people find satisfaction in owning a set graded the same. I tried it, it's just not for me knowing what I know. All imo. 

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bullion is more an investment(referring to gold here).

graded/numismatic is speculation. all silver is

speculative, some more so than others. eg I can sell

a sovereign back to hgm at very close to spot. if I

was to do the same thing with a silver britannia I

would probably lose all the premium I paid.

speculation is entirely reliant on the secondary

market (dealers buy to sell on and not keep).

collectors buying numismatic are using disposable

or speculative currency. this is a very different market

to savings or investment currency that is used to buy

gold bullion. people are always told but rarely take to

heart that collectors items are likely to make you a

loss.

imo bullion and graded are completely different.

similar to how gold and silver are different.

 

HH

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1 hour ago, Pampfan said:

At @Oldun's request - the pros and cons of bullion vs graded - 

i'll start this off by giving my two cents - having experienced the wonderful highs of obtaining perfect graded silver bullion and numismatic coins - ms70 and proof 70's - it can be very exciting to add these types of coins to a collection - however from my experience over the last 2 years - the reality of having these coins develop milk spots - while in the holders has been - to say the least - a nightmare . There is no worse feeling than to open up a storage box to see a proof 70 1 ounce queens beast lion or a Netherlands proof restrike dollar or a Mexican libertad have little dots on the coin- or bullion coins graded ms70 like a Austrian philly, a 10 ounce queens beast, etc, with milk patches. What the &$@?. Bad luck?, luck of the draw?, just too much for me to deal with. 

That is why I will never buy any graded silver ever again unless I get it for just a few bucks over spot or can flip it for a quick profit before any problems appear on the coin.

Bullion on the other hand - I have no problem buying just to get ounces in the stack. Bullion coins could spot as well - but who cares - it's bullion.

 

I welcome your opinion because I was considering getting some coins graded but have sat on the fence and will now not bother.
I also note the relatively low selling prices on eBay for perfect slabbed MS-70 Silver Eagles.
Perhaps graded rarer coins or gold coins is another matter.

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I would agree. Graded coins have nothing to do with the material they are made in, just like art or paintings. It is the artistic desirability and the desire to own something of beauty and design or of notable historic importance and the value placed therein.

 

Of course, there are many mints take advantage f historic moments to produce profit by pumping out "modern numismatics".But in the main, that is a flippers' market or one for the very very very long haul, perhaps even to be left as a family heirloom several generations down the road.

 

Bullion is free from such concerns but is at the mercy of other factors that could bring sharp losses if overloaded at the wrong time without the ability to "see it through."

 

Timing is a much more important consideration when buying and selling bullion, it would seem (not talking about semi modern graded here more of the established graded coins here by comparison)

 

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Timing is important in both markets, arguably more so with collectables unless you are monthly cost averaging into strike on the day 2017 sovereigns or some such :P

The market for numismatics is similar to other collectable markets - prices change quickly and interest can be fickle, thanks to new releases, new and better designed series from other mint (how many lunar series?), anniversary designs, ect. Spot price is a separate factor; after the rises last year, shield sovereigns remained good value (the premiums fell as spot rose) for a while until the market caught up. Its an interesting market to say the least. 

In answer to your question - if I only had 5K to invest and no more, I would invest in a combination of bullion and numismatics - 4K into gold and silver, 1K into something speculative, perhaps a strike on the day 2017 sovereign :P 

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I vote sovereigns.

it's a great time to buy gold bullion. you get all the

benefits of it holding it's value and some speculative

shtf potential thrown in almost for free.

if I bought a sovereign at ~$1900/ozt and sold it at

~$1100/ozt I would have lost ~38% of my currency.

that's if I was unlucky enough to get everything as

wrong as they could be. just getting one thing wrong

by selling back to a dealer on silver causes losses of

~20%.

I think percentage losses on gold bullion is exaggerated

and it's a lot safer but less exciting. imo allocated

savings should go into gold bullion and only use

disposable income for speculative items.

 

HH

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Good points in terms of physical, and indeed gold is certainly more liquid of the investments but the investment case is still somewhat speculative, certainly if you go by the traditional view in terms of general commodity investment. If looked at in the context of vaulted or ETF investment, the difference in premiums on gold and silver are low or non existent, at which point the remaining difference is that gold is seen as a traditional hedge and insurance, where are silver is entirely speculative. 

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In my opinion, it's utterly presumptuous for one person to tell another that the pursuit they've chosen to follow (stacking versus collecting, bulk bullion versus numismatics) is wrong or incorrect or as it was put earlier...snobbish.  You do your thing, I'll do mine.  You're certainly within your individual rights and welcome to have your opinions of my approach but unless I ask for them, please keep them to yourself. 

If you want to be a bulk PM bullion stacker or a numismatic collector or both, rock on...it's entirely up to you but one is not more virtuous or noble than the other.  If done properly, both take time, research and smart purchases to yield the best results.  Since joining the Forum, I've seen good and bad examples by both camps...

Numismatics:

Good Example, @Sovereign's recent acquisition of a very high grade (AU58) 1820 full Sovereign.  That's a wise investment that will serve him well in the future should he decide to sell.

Poor Example, a recent post in the Gold thread where a Forum member commented that they'd just bought a few Gold coins (semi-numis) and was hoping someone could tell him/her more about them and what they might be worth.  I scratched my head and thought, you didn't do any of that legwork before making a purchase decision?

Stacking:

Good Example, the posts I've read from dedicated Forum stackers where they research and discuss trends over time and make more aggressive purchases when the market takes even a brief intraday dip to drive down their cost per ounce.

Poor Example, Forum members who profess to be stackers but end up purchasing high-premium Silver as their coin of choice.  Again, if that's what you want to do, who am I to tell you it's wrong.  I guess technically, you can "stack" high-premium Silver, it just doesn't really meet the spirit or techniques of what's considered a PM bullion stacker.

So in the end, I think this Forum is better off for having both types of approaches represented and would be less for it without one or the other.

 

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I think most members here, with some notable exceptions, are stackers/recent buyers of modern numismatics and so when conversation turns to grading, it is predominantly about 69/70 levels only, whereas the deeper market lies at much much older, lower graded coins and not necessarily in au or ag.

 

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Tracking pure bullion is easy in terms of price. Then there is tracking it in terms of relative value long mid and short term. 

Do graded coins dance to the same tune ? Sometimes yes and somtimes no. 

 

Interesting monologue 

 

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18 minutes ago, Jester said:

In my opinion, it's utterly presumptuous for one person to tell another that the pursuit they've chosen to follow (stacking versus collecting, bulk bullion versus numismatics) is wrong or incorrect or as it was put earlier...snobbish.  You do your thing, I'll do mine.  You're certainly within your individual rights and welcome to have your opinions of my approach but unless I ask for them, please keep them to yourself. 

 

This is an interesting post Jester but I can't find the remarks about one method being more snobbish than the other or is that from another thread?

I agree with your sentiment on doing what is right for oneself, though personally I am always interested to hear the respectful opinions of others so that I can learn from another perspective, many of my wins certainly in terms of numismatic investments have come from members of this forum, as have my strategies for acquiring precious metals been developed by discussion on the forum and elsewhere. 

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34 minutes ago, Jester said:

In my opinion, it's utterly presumptuous for one person to tell another that the pursuit they've chosen to follow (stacking versus collecting, bulk bullion versus numismatics) is wrong or incorrect or as it was put earlier...snobbish.  You do your thing, I'll do mine.  You're certainly within your individual rights and welcome to have your opinions of my approach but unless I ask for them, please keep them to yourself. 

If you want to be a bulk PM bullion stacker or a numismatic collector or both, rock on...it's entirely up to you but one is not more virtuous or noble than the other.  If done properly, both take time, research and smart purchases to yield the best results.  Since joining the Forum, I've seen good and bad examples by both camps...

Numismatics:

Good Example, @Sovereign's recent acquisition of a very high grade (AU58) 1820 full Sovereign.  That's a wise investment that will serve him well in the future should he decide to sell.

Poor Example, a recent post in the Gold thread where a Forum member commented that they'd just bought a few Gold coins (semi-numis) and was hoping someone could tell him/her more about them and what they might be worth.  I scratched my head and thought, you didn't do any of that legwork before making a purchase decision?

Stacking:

Good Example, the posts I've read from dedicated Forum stackers where they research and discuss trends over time and make more aggressive purchases when the market takes even a brief intraday dip to drive down their cost per ounce.

Poor Example, Forum members who profess to be stackers but end up purchasing high-premium Silver as their coin of choice.  Again, if that's what you want to do, who am I to tell you it's wrong.  I guess technically, you can "stack" high-premium Silver, it just doesn't really meet the spirit or techniques of what's considered a PM bullion stacker.

So in the end, I think this Forum is better off for having both types of approaches represented and would be less for it without one or the other.

 

I thought the whole purpose of this thread was to ask peoples opinions.

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I started in 'old' numismatics long ago (from an interest in history) and from the 1990's I just picked up bulk random silver and gold lots at auction whenever they were near spot price although I am regularly informed that boxed sterling silver proofs take up far too much space :lol:.

Due to the premiums and VAT on silver, palladium and platinum I have not bought any 'modern' stuff for quite a long time and trade these using ETFs in an ISA/SIPP and will be selling my 'real' stack should silver double from here as I have many more 'virtual' ounces and that will make life much simpler. For gold I stack the real stuff, this is mainly bullion sovereigns although anything near spot is fair game as I don't think I will ever bother the capital gains tax threshold!

For me the best financial returns over the years have been from quality 'old' numismatics, either high grade or rare coins or both:D and slabbed coins just protect my investments in this area and that the main market is the US - it is an extremely interesting, but long and never ending learning curve though.

So I both 'stack' and 'numi' and just have to be careful where they cross the line - I still find treating EF sovereigns as bullion difficult!!

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The question revolves around profit. Where is there most profit to be made in coins? There is no comparison otherwise.

Since 2011 metal prices have declined and then traded in a range. Profit has been made primarily in the collector element of coins. So currently collecting collectible coins whether in a slab or raw will be most profitable. Should we see a big upward move in metal prices i would expect bullion collectors who have amassed a lot more metal will do better. 

The two methods of investing in coins are quite different. You can marry the two which i what i try to do, by buying coins i think will become more collectible. If they don't i still have the gold or silver and have not spent too much on the collectible element. This is the way of investments, not all your investments will be successful but hopefully on average you make a profit.

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scenario 1

if £5k was used to buy numismatic coins at spot+15%.

these were sold at spot+15% but spot rose 10%.

scenario 2

if £5k was used to buy sovereigns at spot+3%. these

were sold at spot+3% but spot rose 10%.

who made more profits?

(the thing is they both made the same profit of 10% on

£5k or £500)

you only make more money out of numismatics if the

premium rose above that of when you bought it. rises

on numismatics looks bigger because they are valued

higher.

given a fixed amount in £'s to invest you want the one

that offers the best risk/reward(%) that you are willing

to accept.

(people should be free to choose as they wish, but it's

always preferable to make informed decisions to the

best of your knowledge, after first expanding your

knowledge to the best of your abilities. don't confuse

yourself, declare it how it is and then choose what you

personally want. using the right precise terms helps

here.) 

 

HH

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