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Don’t let bullion make you feel stupid

The bullion markets have a way of making you feel stupid.

You can be absolutely convinced the market will go up and it instead goes down.

You can be absolutely sure it will go down and it goes up.

It is a rare person that will base his actions on a view that gold or silver will go sideways, yet depending on your time frame it is a possible outcome.

I was looking at the one-month silver chart on the Kitco website this morning.

The month of March had merry runs up and down.

The trendline looks like part of a roller-coaster.

However, the outcome was basically sideways.

What do I conclude from this?

Since I think like a coin collector, it might come as no surprise that I use this evidence to assert that buying opportunities come more than once.

If you happen to miss an attractive price, don’t beat yourself up with thoughts of feeling stupid.

Just think of it as missing a bus.

Another will come along.

This interpretation, of course, reinforces my view that coin collectors who have 10, 20 or 30 years ahead of them can systematically assemble a coin collection and do so at price entry points that will reward their efforts when they complete their sets.

Not all coins are made of precious metals, but their price behavior in the market often is  similar to those that are made of precious metal.

This is because of dealer cash flow.

If dealers are making a bundle buying and selling bullion-based coins, some of that profit tends to find its way into classic collector coins and prices then rise.

When dealer cash flow drops due to lack of interest in bullion or price declines, they have less money to put to work and all coins generally suffer.

For the truly rare coins, like 18th century and early 19th century U.S. pieces, down markets tend to simply be a pause rather than a price decline and up markets tend to make new highs.

The question is why aren’t more collectors taking advantage of the market for classic rarities instead of waiting for the cyclical bus that is bullion?

Buzz blogger Dave Harper is winner of the 2014 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper “Numismatic News.”

 

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