This article was originally printed in Numismatic News.
The second wave of the precious metal sell-off has occurred. Silver is $32.84 and gold is $1,484. What does this mean? My primary consultant, the groundhog, says “we’re in for a long hot summer.” That’s a jest, but it may hold a lot of truth regarding the coin market.
We have seen a meteoric rise in the silver dollar sector nearly across the board and along with it all other lower priced silver coins. Without the support of bullion there will be some question as to where many of those coins will settle. It is a somewhat complex question because supplies have been altered since many items went into the melting pot and no longer exist. I took hundreds of borderline G-4 common Barber coins and put them into common silver bags for 33-34 times face value, which was 20 percent over the previous week’s retail value. I know it may seem sacrilegious, but that is the real world.
The obvious trigger for metal declines was COMEX raising margins on silver contracts five times in nine days. This is not unlike what was done to the Hunt brothers when they tried to corner the market in 1979-1980. The underlying cause however may be somewhat more subtle but now seems obvious. Quantitative easing by the Fed ends June 30. Traders in expectation are running to cash because they fear deflation when the money pumps stop. But where will the $2 trillion already created go?