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Coin collecting skills useful in bullion market

One of coin collectors’ necessary skills is the ability to tell scarce items from abundant ones.

The scarce ones command high prices.

There is no doubt that 1804 dollars or 1913 Liberty Head nickels are scarce, rare actually, and are worth millions of dollars.

An MS-70 Morgan dollar is valuable because it is almost unknown.

An MS-70 2018 Lincoln cent, well, not so much.

Being able to determine the scarcity factor to determine value is useful in the bullion market also.

Much of the value of gold depends on its scarcity.

Because silver is also an industrial metal, the scarcity component of its value is less, but it still exists.

There are bottlenecks that can create temporary scarcity in the bullion market.

The key is not to get caught up in the moment and overpay because of temporary conditions.

On Sept. 6, the Treasury told its authorized purchasers and the public that it was temporarily sold out of silver American Eagle bullion coins.

It had ratcheted back production levels because of a prolonged period of low demand.

Last week, 1,037,500 silver Eagles coins were sold.

This weekly number was greater than monthly sales for six of eight months in 2018.

“The United States Mint is in the process of producing additional 2018 American Eagle Silver Bullion Coins. We will make these coins available for sale shortly,” the Mint said.

How many potential buyers of silver Eagles will now want to buy them because the Mint says it cannot supply them?

I hope not too many, but past market conditions prove the opposite.

Paying high markups for coins in temporarily short supply is a quick way to lose money over the long term.

Yet some people do it.

While we await to see how long it will take the Mint to catch up with the present demand situation for silver Eagles, let’s turn to gold.

There has been theory out there that we may be experiencing “peak gold.”

That is, gold production is at the highest level it will ever attain.

This is because old mines are exhausting their reserves faster than new mines are being found.

Sounds plausible, doesn’t it?

However, there are two things to keep in mind.

Before oil’s price collapse that began in 2014, there was a peak oil theory.

It, too, sounded plausible.

But anybody investing in oil over $100 a barrel was badly burned in the price collapse.

Even now, oil is still far below $100 at $68.

What happened?

Fracking restored American oil production to record high levels.

Peak oil theory met market reality and lost.

Now the United States looks shortly to become the largest oil producer in the world.

What about peak gold?

Take a look at this story about a new gold discovery in Australia.

Perhaps it, too, shows that not all major gold deposits have been found.

Coin collectors can use their numismatic skills to tell the difference between permanent scarcity and temporary bottlenecks.

There is nothing a coin collector hates more than paying more than necessary.

Buzz blogger Dave Harper won the Numismatic Literary Guild Award for Best Blog for the third time in 2017 . He is editor of the weekly newspaper “Numismatic News.

 

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