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What’s in name? Much, if collector, investor

Happy New Year! Say that again? OK. Happy New Year! Don?t get it? Well, you shouldn?t. I need to explain, so I will.

As this issue was being put together, gold?s price hit a level that exceeded my year-end forecast of $650 a troy ounce. It closed April 28 at $651.80. For gold traders, it is indeed a happy new year. For me, it is just evidence of the fact that I am eight months off in my price forecast for 2006.

It gets no better with silver, either. I forecast $11 a troy ounce, which seemed like quite an increase from the $8.82 year-end 2005 price. It wasn?t enough by a long shot. The market jumped over my forecast March 29, a month before it jumped over my gold forecast.

What does this mean? The first thing it means is I am not an investment advisor. My opinions about gold and silver prices are purely for the entertainment of my readers. I imagine when I am wrong it is more entertaining than when I am right, as I was in my calendar year 2005 and 2004 forecasts. But that is why Joel Edler runs his Coin Market contest. The same person has never won it twice. Our in-house staff version has much the same results.

What I am smart enough to recognize though is that when the market runs by my forecast in four months, something significant is occurring. After all, my $650 target was 25.7 percent more than what the precious metal closed 2005 at.

Now what? It is clear the markets are getting friskier. Is the end around the corner? We have quoted several people in recent issues who have run up the caution flags. Caution is a good thing. At the very least, markets are volatile. A profitable situation can turn into loss in the space of a few trading hours on the commodity exchanges and vice versa.

Collectors should only buy gold in two forms: coins they want to add to their collections and any other gold they care to buy that is clearly marked ?risky speculation.? Suitable personal controls should be placed on the amounts of money spent on the second category of purchase. If I really want to joke, I would say wedding rings fall into the second category also. But now I am really straying far beyond the territory of this column.

I had an e-mail exchange with someone recently where I tried to make the point that the Numismatic News audience is comprised of collectors. His clients were investors. His retort was basically, ?What?s the difference??

It is true that all collectors are investors of a sort because they get the benefit of any price increases that coins in their possession have experienced. However, that is not their primary purpose. It may not even be a secondary purpose.

It is definitely false to say that all investors are collectors. In my 28 years at this desk, most of the people who have told me they were investors definitely have not been collectors. Often, that has harmful consequences.

In my time it is not usually collectors who have contacted me with the conviction that precious metals can only go up and asked what they should buy. Collectors for the most part don?t call me and tell me that they can?t sell the coins they just bought two week?s ago for the same amount of money that they spent purchasing them. Collectors usually don?t call me to find out what the Coin Market says about the value of the coins in their investment package.

Collectors have their own frustrations, but they all hinge on how better to pursue their goal of putting a collection together. Investors? sole concern is price. For many of them, that is all they know about the coin in their possession: the price they paid for it.

Unfortunately, there is little I can do for an investor. It stings to be told that the research should be done before the purchases start.

A collector has a rich background of knowledge to draw upon. A noncollector investor has nothing to draw upon but whatever happens to be in the sales pitch that is delivered on television, online, in the mail, or in person. That is not much to go on and it is very cold comfort should anything go wrong. 

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