Bullion vs Graded - merits, demerits and timing

[Thelonerangershorse]

HawkHybrid,

                Actually no, if you spend £5k on numi's at spot +15% then 15% of your £5k goes on the premium, and only £4250 goes on metal, if spot rises 10% you only make £425.

 

 

[Jester]

1 hour ago, KDave said:

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. 

 

1 hour ago, Thelonerangershorse said:

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

I was bringing my comments over from the original post made in the, "Today I bought..." thread as we were asked to do...

"Are there any common or garden variety stackers still around? Or have you all progressed to slabbed numismatic collecting snobs?" "...judging by the posts on this thread nobody gets excited unless it comes in a case and has a mintage in single figures." Not sure that falls into the respectful or educational category (or constructive for that matter). That's where my rant was coming from. Hope that helps to clarify my post.

[HawkHybrid]

let's make the maths easier(my calc. is playing up)

the coin is £5k cost. it's priced at spot +100%

so metal value is exactly half at £2500.

spot rises 10% but I get to keep the +100% premium

when selling.

metal value is now £2500+250(10%) = £2750

100% premium is another £2750 so total selling price

is £2750+£2750 = £5500 

profit is £5500-£5000 = £500 or the same as 10% rise

in spot.

the maths should be the same for spot+15%, I'm

feeling moderately confident I've got the maths correct?

 

HH

[Pete]

2 hours ago, Oldun said:

Here is a question: If you had 5,000 quid to spend and were told you must sell it in 5 years, which would you buy - bullion au or ag or a single coin  and if so, which one ?

I would buy sovereigns or half sovereigns or even Krugerands ( if there was no alternative ) provided they were no more than 2% above spot AND whilst spot is well below £1,000 per ounce - today for example.

[sixgun]

15 minutes ago, HawkHybrid said:

let's make the maths easier(my calc. is playing up) the coin is £5k cost. it's priced at spot +100% so metal value is exactly half at £2500. 

spot rises 10% but I get to keep the +100% premium when selling. metal value is now £2500+250(10%) = £2750

100% premium is another £2750 so total selling price is £2750+£2750 = £5500 

profit is £5500-£5000 = £500 or the same as 10% rise in spot.

the maths should be the same for spot+15%, I'm feeling modestly confident I've got the maths correct?

 

HH

The maths is correct but why does anyone presume the premium will follow the rise in spot price?

i do not see that collector value and metal value are directly linked. Yes a coin made of gold will probably be more collectible with the same design as an aluminium coin but i think the collector value and how it appreciates or depreciates is linked to many more factors than metal value. i am not aware of a study on this phenomenon but my instincts tell me there is much more to it than plain metal value.

So if metal prices rose 10% it does not follow that the collector value would rise 10%. It could stay the same, go up or even go down. 

[Pampfan]

Just looking at my collection of silver pamp bars - had I started buying them in 2010 and 2011 my average cost per ounce would probably have been around $45 per ounce (ouch) - at those prices I probably would not have been able to acquire the collection I have today - my point is that the period in which we decide to stack and buy is a little bit of luck as well. (I would have taken a pounding buying at those prices)

 

[Oldun]

Personally, I have been selling bullion and using my own income in order to purchase higher graded and somewhat rarer mostly sovereign coins (or having sovereigns graded to add value) recently. ..but I think I might start replenishing the boring ole bullion side of life soon..... to reload for another venture into upgrading when the time comes....not a fixed plan but we shall see. For sure I sold bullion sovs etc first and left all my shieldbacks and young Queen Elizabeth heads well alone.

[HawkHybrid]

@sixgun

the point I was originally trying to make was that

numismatics only made bigger profits on fixed

lump sum purchases: only if the premium rose

between the time of buying and selling. this is

versus low premium gold bullion. those who

think a larger rise in the price means a larger %

profit could be getting the figures wrong as

numismatics are priced higher so would give a

bigger value on the same % return. this has to be

countered by the fact that it cost more to

purchase in the first place.

my argument is that those buying numismatic are

hoping the premium above spot will rise when they

come to sell. if the premium stayed flat then they

would have made the same % gain if they had

bought bullion. I'm going to say that numismatic with

it's higher risk should be best reserved to those who

know what they are doing.

 

HH

[Oldun]

Here is a fascinating article from 2001 comparing numismatic investment figures (in The US) from 1981-2001. Boom years in the economy and interest rates etc so please remember the time scale.

http://www.onlygold.com/articles/ayr_2001/Why_Numismatic_Investments_are_Always_Horrible_Mistakes_Part_2.asp

 

I wonder if the same applies/would apply from 2001 to 2021 ?

 

[Thelonerangershorse]

3 minutes ago, Oldun said:

Here is a fascinating article from 2001 comparing numismatic investment figures (in The US) from 1981-2001. Boom years in the economy and interest rates etc so please remember the time scale.

http://www.onlygold.com/articles/ayr_2001/Why_Numismatic_Investments_are_Always_Horrible_Mistakes_Part_2.asp

 

I wonder if the same applies/would apply from 2001 to 2021 ?

 

It would be interesting to see the same figures from say 2000 to 2010.

[Oldun]

I know I am slipping from the title by posting about numismatics as opposed to grading but I found it interesting....many coins are being sent for grading that are certainly not rare.....but are collectible... so rare and collectible as opposed to rare or collectible ?

 

Numismatic coins are essentially rare or valuable coins that have an external value above and beyond the base value of the precious metal. Sometimes they are valuable because they are historical, one-of-a-kind, have special marks, or were minted in an out-of-the-ordinary way. There are many factors that can add value to a coin to put it in the category of numismatics, but they are all generally valued for being rare and collectable........................

 

If you look back at historical precious metal prices over time, you will see that prices always go back up after substantial market corrections. While the spot price of gold or silver has a major impact on bullion coins (essentially only worth their melt value), rare gold and silver coins have the potential to appreciate in value in both up and down precious metal markets. Their value is more dependent on external factors like collector’s demand, rarity, auctioning and timing—outside of the regular market forces that usually act on the price of gold.

Investing in rare coins can be a very profitable venture, but it is also quite possible that your investment could lose value, so it’s important to understand that, like any investment, there are no guarantees. Unlike buying gold or silver bullion coins, you would do well to do extensive research and really understand the rare coin market, especially since each coin will be different.

https://www.sbcgold.com/blog/bullion-vs-numismatic-coins-what-you-should-know-before-investing/

[HawkHybrid]

I believe a longer term healthy market for collectibles

is when the money chasing the prices comes from

disposable income. investment currency used to buy

collectibles should show a longer term lower rate of

return compared to the alternatives. if disposable

income is the main force bidding up the premiums

then it's fair to say that some of the best times to sell

collectible items is during the heights of big booms in

the economy where there are lots of disposable

income available.

 

(mentioning numismatic was my fault as that's where

I see all the grading thing heading)

 

HH

[SilverTanner]

1 hour ago, Oldun said:

Personally, I have been selling bullion and using my own income in order to purchase higher graded and somewhat rarer mostly sovereign coins (or having sovereigns graded to add value) recently. ..but I think I might start replenishing the boring ole bullion side of life soon..... to reload for another venture into upgrading when the time comes....not a fixed plan but we shall see. For sure I sold bullion sovs etc first and left all my shieldbacks and young Queen Elizabeth heads well alone.

I too will probably be selling some bullion this month - only the odd, very low grade, polished, ex-jewellery etc, although to see South Africa ponds, no matter how impaired, end up in the melting pot at HGM will be a little sad.

This will be converted into rare/graded coins which should give a much greater return over time - I just wish I had sold a week or two ago and that I had more bullion

[Pipers]

I have been buying gold for a long time and sold in 2011-2012. I started buying gold again and silver for the first time when silver coins were around the £20 mark around 2013 a mistake and silver has not been kind to me though gold has been one ofmy best friends within investment.   I don't buy graded coins and have never felt the need to grade a coins though if a coin came along at a good price in a plastic container I would buy it. 

IMO slabbing is an American way to go though I can see why some prefer to slab eg easy to store, looks smart to some, can identify straight away what condition it is in when or if you sell to distant prospective buyers, all of this into consideration I still prefer Coins in normal form I like to hold it maybe with gloves but I hold the coin I get a loop out and try to grade the coin myself with a 10* loop, it's part of the enjoyment of buying gold coins for me.  

Silver coins as I mentioned before though not a novice anymore I am not experienced, milk spotting on expensive coins this usually is only on modern 999 coins I have noticed older coins that are lower in silver content have do not seem to get milk spots they do get tarnished, this is preferred IMO. 

Stacking, I stack I buy gold coins at the best price I can on dips though I must admit gold is near it highs in £ terms, Silver is not though the premium on silver coins is disgusting IMO . Then with silver you can sell at above spot atm, in the future who knows?  I tend to buy Government coins Gold and Silver and the instantly recognisable coins. I always look at the real silver gold ratio when buying bullion, that's the sell ratio, the fast sell price!!  Collectors maybe stuck with their charge for months to get anywhere near the price they want or they have to advertise heavily (which is time spent not earning money) ; I have never heard of a collector take this into account when selling. 

I like stacking and one can pick up some nice coins at good prices.  I just will not pay silly money. 

[Pipers]

I also buy silver flatware from eBay when the price is right, and I do not have to worry about storing flatware I can clean it to my heart's content!

[KDave]

I have bought quite a bit of silver for near spot in the form of flatware its a good way to invest in my experience. Keeps the missus happy having something to burn her candles in too 

Selling takes a bit more effort and luck, the spread is low so selling on ebay is tricky with the fee structure but there are other ways to sell it. People seem quite happy to take scrap off your hands for slightly above spot on ebay though, I guess the offers help but they seem rare at the moment.

I have never seen anyone trying to slab a candlestick yet either which is a plus. 

[SovTracker]

If we are talking about investment, then two main principles apply......

The product and

Time

Whether the product is Stocks and Shares or a Gold Sovereign is irrelevant because the value will rise and fall often forgotten is Time

Time can be split again into 2 parts.

The timing of the investment

The time the investment is sold. The longer the term should smooth out the peeks and troughs.

With this in mind, I prefer old Gold Sovereigns - why?

They are not making them any more - a 1887 Sovereign has a limited supply.
Why? Because collectors hold them and the ones on the market are limited. If I buy just 1 and hold it because I am investing for the long term (time) then the value theoretically rises - there are less available.

Find the right rarities and things get interesting - the 1937 George VI Proof is a good example on the price increase over the last 5 years or so where the gold price has actually fallen.

So that brings in Numismatic collectors that adds Supply and Demand to the equation.

Then there is Slabbing / Grading. Grading a 1850 Sovereign and getting just an MS62 can double the value of your investment.
A PF70 on a 2017 is far more common - look at either NGC or the PCGS Population Reports.

Unfortunately, then there are collectors following the herd. There are dealers who prey on this aspect of the herd mentality. A good example is the 2017 Proof Sovereign. Both graded and ungraded prices have fallen in the last 3 months because there has been plenty of supply and buyers are getting scarcer.

The flipper dealers will have made their money 6 months ago and any they hold now are probably costing them nothing due to the profits made on those sold.

We all have our own views on what is right or wrong - there is no single simple answer.

One thing I love about my old sovereigns is that I can handle them without fear of doing much damage.

I've found Sovereigns covered in all sorts to make them look better but once Slabbed you know what you have, whether the Grader has got out of the right side of bed that morning though is another question!

Happy stacking - whatever it might be.