Weekly Market Report 03/19/12

This week’s Market Report provides you with an update on the precious metal markets and the reasons why I feel the rare coin market is getting ready to make a sizeable move higher.

GOLD

Another week of volatility in the world’s gold and silver commodity markets. Gold opened the week at $1,715 per ounce, and closed the week at $1,655.80, dropping $55.70 for the week. Gold is still up $90 per ounce (5.75%) since the beginning of the year, and still on track to reach over $2,000 this year.

Last Wednesday Gold reacted negatively to Federal Reserve Chairman Bernanke’s policy statement to Congress sharing his positive views of the U.S. economy. The Fed’s statement buried any hopes of more monetary easing (QE) in the short term and took away one of the main pillars for short term optimism for gold and silver prices. Remember, this decline in the Gold and Silver price is just temporary, the fundamental reasons for owning precious metals are still in place.  Gold traded down to $1,634 per ounce on heavy trading before we saw sizeable buying come into the market, closing on Wednesday at  $1,642.90, down $51.40 per ounce.

The International Monetary Fund on Thursday approved a 28 billion euro ($36.7 billion) bailout for Greece, part of a broader international rescue package for the debt-strapped euro zone member. Now, Spain and Portugal are waiting in line for an ECB and IMF handout. In other words more paper money is going to be printed.

March 14, 2011 marked the 112th anniversary of  U.S. gold on the Gold Standard, which was ended by President Nixon in 1971. Please read the following article to better understand what the original purpose for a U.S. Gold Standard was.

http://www.mintstategold.com/investor-education/1900_us_adopts_gold_standard/

SILVER

Last week Silver declined $1.60 per ounce in active trading. Silver closed the week at $32.60 per ounce after reaching a low of $31.62 per ounce because of Wednesday’s Fed announcement. Silver refused to stay below $32 for very long. Bargain buyers from around the globe, particularly in China and India, were very aggressive buyers around $32 per ounce.  At these levels the Silver/Gold ratio is 50.79 to 1

PLATINUM

This week’s Platinum price correction was minor, only $9.40 per ounce, closing at $1,675.50. This puts Platinum at a $19.70 per ounce premium to the gold price.  Yes, since I recommended buying Platinum back on January 6^th, when it was trading at a $206 discount to gold, it has rallied $275.80 (19.7%) . For many of my clients who acted on that recommendation, I would keep 10% of your precious metal investment in Platinum. I would then trade the balance of your Platinum investment into investment quality gold and silver rare coins, as they offer the best value at this point. See Rare Coin Update below.

Rare Coin Update

All the signs are saying that the Investment Quality Gold & Silver Rare Coin Market has started its long awaited upward move. In October of 2008 our country suffered the biggest financial crisis since the 1929 stock market crash, which resulted in the Great Depression of the 1930’s.

With concerns over financial liquidity, skyrocketing unemployment, and the residential real estate defaults, the U.S. rare coin market has had major setbacks.  Gold has increased 100% since October of 2008, and while high end rarities ($50,000 and above) are higher; Investment quality rare coins ($2,000 to $49,000) have been unchanged to lower; and Collector coins ($10 to $1,999) have dropped substantially.

After 3 1/2 years, the longest in my 50 year numismatic history, all the major signs are showing that the quality rare coin market is starting its long awaiting rally. Let me explain why we could see a 30% move higher by year end.

1)    There are two major rare coin trading networks, CoinNet and Certified Coin

Exchange (CCE). CoinNet caters primarily to small dealers and offers an open broadcast system by categories, allowing dealers to post buying and selling messages. CCE offers over 650 of the World’s largest rare coin dealers the ability to make open broadcasts, as well as post bids or asks, for PCGS or NGC certified U.S. coins. Dealers can use the U.S. Trading boards to bid or ask on generic classes of gold and silver coins, as well as specific coins by grade, date/mint mark, type, and grading service.

I continually monitor the quantity of bid and ask prices as an indicator of the health of the rare coin market and to keep me abreast of prices and availability. In the past two months I have noticed a sizeable increase in bidding, and a lack of ask prices on many gold and silver rare coins. As of Friday, March 16, 2012, there are ask prices for 17,417 rare coins (worth $9 million dollars) on CCE, while the bids have risen to over 189,000 for investment quality gold and silver rare coins (worth $261 million.) That bid/ask value ratio is 29 times. The bid/ask value ratio is one of my primary rare coin market indicators, and I have never seen it that high.

2)    Most dealers, including myself, have record low inventories of Investment

Quality certified rare coins. At the last major Coin Show in Long Beach (Feb 1 - 3, 2012), I was looking to buy PQ quality CoinStats recommended Gold and Silver coins, as well as rare coins on clients want lists. On average during 2011, I was able to buy around $300,000 to $500,000 per show, based on my time commitments and the length of the show.  At the FUN Convention in Florida in January and the Long Beach Expo last month, I spent less than $50,000 and I worked for 3-4 days looking, as well as attending scheduled meetings with collectors and dealers to make  offers on collections.

3)    In the past three months I have been contacted by many rare coin collectors and

investors who have been inactive since 2008. In speaking with them, I have learned that they are more confident about their businesses and the economy, and now have money available to buy rare coins.  While healthy U.S. economic news may be short term negative for gold/silver bullion, it is positive for the rare coin market.  With the recent rally in the stock market, low interest rates, and gold and silver doubling in price in the past 3 ½ years, the rarity premium is at a record low, so buyers are coming back to rare coins for long term capital appreciation.

What I am recommending?

The best values for long term appreciation can be found in U.S. Gold Type Coins and Morgan/Peace Silver Dollars. PCGS/NGC certified Investment quality rarities such as $20 Gold Saint Gaudens and Liberties (minted from 1894 to 1928) are the most popular with collectors and investors. These $20 Gold coins are trading at about the same prices as they were in 2008, and gold has doubled since then. I recommend, based on your budget, adding the highest grades of CoinStats recommended dates/mints you can afford. Gem MS65 to MS68 are true rarities, and historically increase at a higher pace than the lower grades.

The most popular U.S. Silver coins are the U.S. Morgan and Peace Silver Dollars (minted from 1878 to 1935.) Again, I would recommend non-generic dates/mint PCGS/NGC certified MS65 or higher for the best long term appreciation. Investors should use CoinStats in selecting the scarcer investment dates.

Considering the low supplies, increasing demand from dealers, collectors and investors, and the improving domestic economy, I am getting very aggressive with my buying prices and I would recommend you do the same. At the upcoming Whitman Baltimore Coin Expo and the Central States Numismatic show three weeks later in Chicago, I will be bringing a heavy checkbook.

If you haven’t already emailed me your current want list, please do so immediately as I leave on Wednesday morning.

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% of investment capital

Diversification:  Gold 50%, Silver 40%, Platinum & Palladium 10%

Diversification includes 50% in long term investment quality rare coins and 50% short term bullion products

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All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Stuppler & Company’s knowledge at this time.  Stuppler & Company disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein.  Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability.  All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions.