When Jubilee Jim Fisk and Jay Gould tried to corner the gold market in 1869, the flamboyant Fisk would stride onto the Gold Room floor of the New York Stock Exchange. Everyone would notice him. He would not just trade. He would conduct his own public relations blitz among the traders to convince them the metal was going up, up, up.
It was a remarkable display. It worked for a time. However, Gould got wind that the U.S. Treasury was going to release gold to break the would-be gold corner. He knew that he had a very narrow window of time to sell out his position to prevent his own ruin. If he told his partner, they both would be ruined. So he didn?t. While Fisk was buying and loudly voicing how high gold was going, Gould was selling. When the word reached the floor that the Treasury was selling, Fisk was ruined. So were many other traders, but not Gould.
You would think that the partnership of Fisk and Gould would have collapsed at the betrayal. It didn?t. Gould advised Fisk to simply renege on his contracts. He did, saving much of his money, thereby helping to ruin a few more traders.
Within three years Fisk was dead, shot by a jealous suitor of his mistress. He might just as easily have been shot by a ruined gold trader.
What?s the lesson in this? Well, gold and silver are going up. That is obvious. We have reported on it in Numismatic News. Words of caution have been uttered by prominent coin dealers to not get carried away. They base this advice on their experience of the last time in 1979-1980 when a dizzying run higher was followed by an 80 percent collapse in the price of silver and a nearly 50 percent decline in gold in just two months. Investors were ruined. Some coin dealers were also.
This memory guides those who lived through the period. Naturally, in 26 years since the last peak, there are people who think that this time it is different. They contact me. They want me to play Jubilee Jim Fisk. They want the Numismatic News front page to read, ?Silver hits $14 ? $25 is just around the corner.? One silver investor called and asked me to contact his favorite silver market guru so that I would get the straight story about just how high the metal would go. I asked him if he owned any silver and how much. He said he had 8,000 ounces. That being the case, he has done rather well in recent weeks. If silver goes from the current price to $20 or $25, he will do better. Naturally, he wants me to help his cause along. I can?t do it.
Another person contacted me. He said he wrote an article for another paper. In consequence, he said, the price of the coin he mentioned quintupled on eBay. Would I like him to do a story for World Coin News, a sister publication to Numismatic News, which I also edit? No, I am afraid not.
On the other side of the coin, I had a recent e-mail from a person who complained that there was too much mention of precious metals in recent weeks.
That being the case, I think I am doing it about right. The current market gyrations have news value because they affect every owner of gold and silver. That means nearly all of my readers. Even if they don?t have a speculative bone in their body, the price hikes of precious metals are pushing up the prices they have to pay for coins in their collections.
Just as in 1979-1980, the cash flow dealers generate by buying and selling bullion helps finance purchases of rare coins, pushing their prices up as well.
Collectors who follow their hobby impulses will do just fine. They will remember the present period as I remember 1979-1980. It is a fascinating spectacle to watch.
I do not know when markets will return to a more measured pace. However, the more hyperventilating contacts I receive, the likelier we are nearing a blow-off top of the kind that followed the 1980 peak.
But what do I know? All I have is gray hair, memory and the caution both breed. The writers ?know? the U.S. dollar is doomed and precious metals will continue to rocket. We?ll see, won?t we?