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Specializing
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Specializing
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coins, silver eagles, |
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EVERYTHING YOU WANTED TO KNOW ABOUT BUYING AND SELLING PRECIOUS METALS AND THEN SOME!!!!! BY ART ARBUTINE FORMAT: The first part of this is information about the author, and his firm, his economic ideas, and definitions. If you are interested only in the merits and specifics of the different coins, and bullion items, skip straight to the back pages, but you might want to come back later, and read everything as you should find it informative, and interesting, especially if you are contemplating the purchase of coins and/or silver and gold bullion. BACKGROUND: This pamphlet was created by Art Arbutine based on his experiences buying, and selling coins and precious metals since 1963. Art is a retired USAF Master Sergeant, and a 1971 graduate of the University of Tampa, with a Bachelor of Science degree, magna cum laude, in business, and economics. He is a life member of the ANA (American Numismatic Association) since 1963, and many other coin, watch and jewelry organizations. Upon retirement from the USAF in 1973 he and his wife Pat founded Belleair Coins Inc. Art has been a lifelong coin collector, specializing in world crowns, and Spanish Colonial. BELLEAIR COINS INC: This pamphlet is absolutely free, but as with many freebies, there are the mandatory commercial messages: We are located just north of Saint Petersburg Florida. Besides coins we actively deal in silverware, crystal and china using the name, The Silver Queen Inc. We are strong buyers of all diamonds, pocket and wrist watches, estate jewelry, military items and other collectibles. We are #1 rated by The Jewelers Board of Trade, and very favorably rated by Dunn and Bradstreet, with our annual sales of about $65 million. The numismatic staff includes me, my three sons, and my brother. My wife supervises the administration of both corporations. My two nieces run our retail jewelry department. We have three in the shipping department; six more who take or process the silver flatware orders. My daughter in law is the accountant. My two grandsons do odd jobs around the store, and are learning the business. As a long time coin collector who had limited funds for buying my coins, I often encountered the typical old time, impatient coin dealer who wouldn't give you the time of day unless you spent $100 the first five minutes in his store. I vowed that if I ever started a coin shop I would be friendly, patient and understanding to everyone. In 1973 I adopted the motto, Honesty *** Integrity *** Reliability, which all of us try very hard to live up to. We are very active, long time members of two electronic trading networks, Coinnet for coin and bullion; Polygon for jewelry and diamonds. This makes us trading partners with about 4000 dealers throughout the world. We attend many coin, watch, and jewelry shows, and have had bourse tables the past 24 years at the Hong Kong International show each September and the same at the Singapore Coin show every February. We are very competitive, and we know what we are doing, and can hold our own with anyone. Those who have dealt with us know we are reliable, honest and can be trusted. My oldest son runs our silverware pattern matching division, The Silver Queen Inc., probably the largest silver pattern matching service in the world. If you want a price print-out of your silverware, crystal, or china pattern, and/or information on buying or selling silverware, call 800 262-3134. If you have any questions about the information written here, or if you want to buy, or sell coins, jewelry, watches, etc., call 888 436-6463. We also offer a free pamphlet, "When You Have Coins to Sell", which lists the approximate prices we pay for US coins. If you want this free pamphlet call, write, or E-Mail to art@belleaircoins.com. Actually, this same website now contains a price list of prices we pay for, but it is not up to date for common silver coins due to recent fluctuations. End of commercial message. INVESTMENT: This is a buzzword that sets off alarms. The Government, particularly the Securities and Exchange Commission, directs all sorts of scrutiny towards all who offer something as "an investment". We are not offering or recommending any specific item. Our staff has never told anyone they should buy this, sell that, or swap their silver for gold, etc. The entire purpose of this pamphlet is to give all the facts, as we see them, and then let you decide if you want to put (invest) your hard earned money in some coins, or precious metals. RECOMMENDATIONS: We rarely make recommendations but feel strongly that people should consider putting at least 5-10% of their investment portfolio in bullion coins or other forms of precious metals. This should be considered a core holding as a hedge against inflation or “insurance” against some sort of financial disaster. Everyone has life insurance which is actually death insurance. Usually, no one collects unless someone dies. This is a very uncertain world. The chances of being hit by a tsunami or asteroid are remote, but not impossible. The nuclear threat has abated somewhat, but there is now a terrorism threat. Inflation appears to be out of control, and remember, the national debt is about 17 trillion dollars. This debt is not a myth. It is actual, real money owed by the Federal Government to American and foreign individuals, to insurance companies and other financial institutions, foreign governments, and others, in the form of currency, T-Bills and Treasury Bonds. No one mentioned will forgive the Government's debt. They all expect to be paid. At no time in the history of mankind has such massive debt ever been repaid. The first minute that the public sees inflation raise its ugly head, they will start buying silver and gold and other hard assets as the buying power of the dollar starts to diminish. As this was written, the year 2000 was more than a year and a half away, yet some were buying gold and silver in advance of what they see, as a financial disaster in the making due to some expected computer foul ups. The banking system is unbelievably dependent upon computers. Imagine what would happen if Arab terrorists exploded a crude atomic bomb on Wall Street or if some militant disidents decided to blow up the computers at each Federal Reserve bank, all at the same time with oil-fertilizer bombs, similar to the one that exploded at the Federal Building in Oklahoma City. All banks would be closed indefinitely, causing a panic so great that bartering with silver coins might be a possibility. This paragraph is meant to explain the reasons for owning at least some modest amount of silver or gold, not to scare anyone into buying it. HARD MONEY: This refers to gold, silver and other precious metals. Our present currency is now backed by Treasury Bonds or Treasury Bills. In other words it is paper backed by more paper, little more than an IOU. The dollars we spend today are not backed by the gold at Fort Knox or our strategic silver reserves at West Point which has long since been depleted. Some circulating paper dollars have a promise to pay the bearers on demand. Pay what? We use fiat money, which is defined as money unconvertible to coins or specie of equivalent value. Most hard money people feel that our dollar is near worthless and it's just that no one has caught on to it yet. Hard money advocates feel that the national deficit is so great, the day will come when the government will have to repudiate the U.S. dollar, renounce the national debt, and start over again with money backed by silver and gold as it was in the US before the Federal Reserve act of 1913. The basic hard money premise is that some day a person will go into a bakery with a silver dime in one hand, with a $100 bill in the other. The baker will reject the $100 bill, as it is merely paper and sell the loaf of bread for that silver dime. This, of course, would happen only during a run-away inflation, an event that has occurred at more than 100 times this century in different countries throughout the world. It could happen here. Many expect it. The first sign that the hard money people might be right would be escalating inflation. INFLATION: The average person knows that inflation means high prices, but he doesn't really have a clue as to the reason. My definition of inflation is a rise in prices caused by an increase in money supply without a corresponding increase in the goods and services, (The Gross National Product). Example: If you isolate a group of people and give each a dollar and an apple, what price would we expect for an apple? A dollar would be a likely answer. Give the same group an apple and two dollars. Then what price? Probably two dollars. Why? Because you have doubled the money supply, without a corresponding increase in goods (apples). Another example is: If an economy consists of 10 trillion dollars in goods and services, and a government increases the money supply from ten trillion up to $15 trillion, against no corresponding increase in goods and services, then you will have 15 trillion dollars chasing 10 trillion dollars worth of goods and services, practically ensuring an inflation rate of about 50%. For the last 50 years or so, our U.S. Federal Government has been spending more than they have been taking in (increasing the money supply), causing inflation, and the massive national debt. Inflation makes the dollar worth less and hard assets worth more (more in terms of inflated dollars). Note: June 2002 I have added an article at the end of my comments, that you will not likely see anywhere else. It is thought provoking. STORING METALS: Your
5-10% core holdings against financial disaster should be stored
some place you could get your hands on them on short notice.
Monitored burglar alarms are incredibly cheap. Get an alarm
system, and then hide at least some of the metals in your dwelling
in some creative location, difficult for a burglar to find.
If you have very large holdings, the bulk becomes difficult. You
should consider a safe deposit box at a local bank. A small
home safe is a bad idea as crooks will just haul the entire thing away.
The #1 cardinal rule in investing in physical metals is: take
possession. Be careful as there are various financial advisors,
and metals companies that will store metals, many of
whom have turned out to be common swindlers. We don't like the
idea but there are legitimate firms who will store your goods for a
small annual storage fee. If you go this route, first check out
the company thoroughly, and then make sure none
of your metals are commingled with other investors’ or the
company's metals, but are in a secure vault in a box with your name
on it, and cannot be removed unless you sell or
trade the contents. There are legitimate, secure
institutions like the Bank of Delaware that will store metals for both
dealers and the public. Personally, I feel that
Delaware is too far away and metals should be close at hand. At one time
there was a state sales tax on coins in Florida, but
not if the coins were stored out of state. Now there are no state sales
taxes on US coins or any single purchase of coins or bullion that total
$500 or more. So, there is no reason to store coins out of state
to avoid the sales tax. We have changed our minds about bank safe deposit banks or having your metals stored at some remote location. Now we strongly recommend a burglar alarm system, and a creative way to hide your precious metals at home where you can get your hands on them. The massive bank failures and the fragile economy worry me. The government is doing everything wrong, and who knows, they might come looking for your gold and precious metals. Keep your metals close to you! IMPORTANT NOTE: Due to bank bailouts, stimulus packages, bankrupcies and other economic potential disasters, we no longer recommend putting metals in bank safe deposit boxes. “Bank holidays” might mean that you would not have access to your safe deposit boxes. Banks could close completely, or possibly for extended periods. This is a possibility. CONFISCATION: This is a bugaboo that seems to concern many hard money persons. By executive order of President Roosevelt in April 1933, "Persons are ordered to surrender all gold bullion and gold coins, except those of special value to collectors or rare and unusual coins.". Intent was to free money that was thought to be stagnating in gold. The nation was in the middle of the great depression, and this supposedly would stimulate the economy and spur economic recovery. In those days the people lined up like sheep at the banks, getting less than the world gold price for bars and ingots. At the time a $20 gold coin contained over $21+ worth of gold, but the citizens got only a paper $20 bill. Many of the big banking institutions shipped those $20 gold coins to Switzerland and other European banks where they received the full $21+. This is a reason that the greatest source for American gold coin has been from the European banks. By another executive order seven months later (after all the gold was confiscated) the dollar was devalued in terms of gold making a $20 gold coin worth about $35 in paper dollars. The citizen who dutifully turned in a $20 gold coin had $20. The person who didn't had a coin worth $35.00, which was several weeks pay for many. Do you trust our government more today? Some hard money people feel that if there is a runaway inflation, the congress might not take the responsibility for all that deficit spending, and blame gold hoarders, and demand government confiscation. Personally I feel that this is an unlikely scenario. For one thing the government will have a difficult time finding those who own gold, as there are no identification requirements when purchasing gold, and today's citizens will never line up like sheep as they did in the 1930's. I feel that Government confiscation of coins and bullion should be the least of worries. Feb 2009: I’m more concerned about it now. Who knows what could happen if this crazy government got into a financial meltdown? There are rumblings now about the “underground economy”, and horders of metals might be unpatriotic, might be money launderers, part of the reason our economy is tanking, etc. Be very quiet about your metal stash and try to buy your gold and silver anonymously as you can. REPORTING LAWS: Buying your coins or metals: As previously mentioned there are no ID requirements when purchasing gold or any bullion. You could buy a million dollars worth of gold bullion by personal check, and nothing is reported to Uncle. The only time you would be required to show ID and social security number when buying metals, would be if your purchases were $10,000 or more, and you paid by cash or cashier's check or travelers cheques or money orders. This would be reported to the government as a cash transaction or equivalent of $10,000 or more. There is a government term called "related transactions". A large lump of cash cannot be deposited at one time, and used to spread purchases over a period of time to circumvent the cash reporting laws. Dealers are also required to report, "suspicious cash transactions". SELLING YOUR COINS OR METALS: If a person sells any or more of the following in a single day, dealers are required to make reports to the Government: $1000 face in US silver coins 25 South African Krugerrands 25 Canadian gold Mapleleafs 25 Mexican gold Onzas 32.15 ounces of a .995 gold ingot (one kilo) 100 ounces of palladium bars 25 ounces of platinum bars 1000 troy ounces of silver ingots Note: There are no reporting requirements when selling any US gold or silver Eagle bullion coins or any numismatic gold coins US or foreign. Family members can’t split sales to circumvent reporting requirements. The government term, "related transactions" applies here too. The sale of coins or bars cannot be juggled around to circumvent the reporting requirements. WEIGHTS AND MEASUREMENTS: As you read through the various described coins you will see the abbreviation "AGW", and this means Actual Gold Weight. Any alloy is disregarded, and this is the amount of pure 24K gold contained within the coin. The AGW is expressed in troy ounces as all precious metals are traditionally bought, and sold in troy weight and occasionally grams. A troy ounce weighs about 10% heavier than an avoirdupois ounce (an ounce of food, postal letter, etc.). Except for the US England and a few British Commonwealth nations, the rest of the world uses (metric) grams. Many European silver and gold bars such as those issued by Swiss Credit are designated in grams, rather than troy ounces. Some silver bars are offered to the public in grains, leading them to believe they are getting a very large amount of silver. A few measurements follow: 31.1 grams = one troy ounce 28.3 grams = one avoirdupois ounce 480 grains = one troy ounce 1000 grams = 32.15 troy ounces (a “kilo”) CHOOSING A DEALER: Naturally, since we are in the business of buying and selling coins, we do hope you will choose us. Americans were not allowed to own gold from April 1933 until Jan. 1975. The average buyer is a bit nervous and inexperienced when it comes to buying bullion. In most large urban areas there are at least several dealers. The coin business is always very competitive. Gold and silver are basically commodity items and as with all commodities, the dealers have to work close and be very competitive or they won't get much business. Most people choose a local dealer that they feel they can trust, and with whom they feel comfortable. There are many good bullion dealers throughout the US who do a lot of business via the Internet, phone and mail, but the only problem is that one can't just walk around the corner to make a fast transaction, or straighten out any problems face to face. People should shop around ask around and deal where they feel it is to their best interests. The local dealer can be a great asset. There are many national bullion dealers. There have been some who were scammers. All require payment in advance and have a delivery time of 30 days or more. During that 30 days your metals are out there in no man’s land. Additionally, the companies keep a perfect computer record of every piece of gold and silver that you bought. Should the government go for confiscation like they did in 1933, the first place they would go would be to the big companies with a perfect computer record of who bought what. PROMOTING: Many people are naive and gullible and might fall prey to promoters. When we say "promoting" we are referring to the practice of taking some common numismatic items, or creating a silver bar or such, and hyping it at very high prices via mail news print, or phone. Among the three types of promoters, telemarketers are the absolute worst! Some offer coins or bullion at skyhigh prices. Others offer good deals but they abscond with your money. Slick talking phone operators will offer very enticing gold or silver commodity options. If they actually place your order, (most don't), they hide their enormous commissions within the option contract making it unlikely you will ever see a profit. Legitimate commodity brokers or coin dealers never solicit business on the phone. If one calls you, hang up immediately. Most everyone has seen a full page newspaper ad promoting, "America’s First Coins", or "a horde of recently discovered silver dollars", or some ingot that looks like a $100 bill, or large hockey puck sized pound or half pound "coins". These are promoted at enormously inflated prices. Don't bite! The third type of promoter is the coin dealer who has a monthly, or quarterly newsletter. He can't sell the same items every issue, so he looks for some common coins that are available in large quantities and then they are hyped as "a unique opportunity", or great potential" or as a "triple play", etc. This type promoter usually prices his material at 20-50% above normal retail. If any promoter has something that really interests you, and you are tempted to go for it, check with your local commodity brokers or coin dealers for their opinions. In fact, it is a good idea to consult with a full-time coin dealer before buying from any sources unfamiliar to you. There is a major credit card company that currently markets older U.S. gold coins at double retail, even higher. You may have seen their advertisement in the airline flight magazines. S I L V E R C O I N S A N D I N G O T S U.S. COMMON SILVER COINS: These are the coins we used for change until 1964. This category has very little numismatic premium. Their value is the 90% silver content. A slang term for these coins is "junk silver", but dealers usually refer to them simply as, "90%". These are often traded among dealers by the "bags", or "half bags". The bag refers to $1000 face value in a cloth bank bag. This weighs approximately 55 regular pounds, and 720 troy ounces of pure silver. Dealers usually deduct a few ounces for wear on the coins, using 715 troy ounces when figuring the troy weight of a "bag of silver". If silver is $5.00 an ounce, then multiply $5 X 715 to determine the metal (intrinsic) value of the silver in a bag of coins. During inflationary periods there is usually a great demand for silver coins; then bags are bought and sold at a big premium over the actual value of the silver. When the demand diminishes, bags trade at or below the silver price and are often sent to the refinery and melted. Silver coin is an excellent way to invest in silver. American 90% silver coins are widely recognized, extremely liquid, and can be broken down into small denominations, as small as a single silver dime. Dealers will always pay higher for bags or half bags, opposed to just a few silver coins at a time. The only drawback to the silver coins is that they are quite bulky. 40% SILVER-CLAD HALVES: These are half dollars dated 1965-70. After silver coins were eliminated in 1965, Congress decided, for some obscure reason, to continue a small amount of silver in the half dollar. These contain outer layers of 80% silver, bonded (clad) over a core of pure copper. The ASW (Actual Silver Weight) is .148 troy ounce in each coin. Most all these get melted. The only advantage of clad halves is the very low risk. If you pay 65¢ per coin and silver drops below $3.50 the most you can lose is 15¢ per coin. The big drawback is even greater bulk than in 90% silver coins. Our opinion: This is not the way to go. COMMON DATE U.S. SILVER DOLLARS: These are very popular coins. They contain .77 oz. ASW, and almost always have a large premium over the silver content. With silver at $5 an ounce they contain about $3.85 in silver, but often sell for almost double that. When the silver price shot up during the "gold rush" of 1980, the premium for silver dollars over silver was practically nothing. Why pay a high premium now if you are going to get only the silver price if silver takes a big jump? High grade numismatic, or rare dated silver dollars, were a different story. They rose dramatically higher as silver increased. We say, common dollars, no. High grade or rare date, yes. 100 OUNCE SILVER BARS: These are very popular with people who want to buy a lot of silver. The buy-sell price difference is very small, and the bars are very compact. A #10 safe deposit box will hold more bars than a person can lift. Buyers should purchase widely known, accepted brands such as Englehard, Johnson Mathey, Sunshine Mining, etc. Odd brands and older bars that are not exactly 100 troy ounces will be discounted when they are sold. One can also purchase 1000 ounce bars, and they are a bit cheaper than 100 ounce bars, but due to the massive size and weight (about 70 pounds) they are not recommended. GENERIC ONE OUNCE SILVER ROUNDS OR BARS: The rounds are always .999 silver and weigh a troy ounce. Silver bars have been minted by various “private mints" and refiners since the middle 1960's. Many ingots are from the 1965-75 era, and have some commemorative or special event theme and were called "art bars". At one time these were collectable but most are now worth only their silver content. The one ounce bars and rounds are almost always accepted by dealers, and there have been extremely few problems about weights or fineness. These are especially popular because the premiums over silver are relatively small, 25-75 cents per ounce. These are a good buy, if the premium stays this low. ONE OUNCE SILVER EAGLE COINS: These are legal tender $1 coins, sold at $1.30 over the silver price by the US Mint only to dealers since 1986. Coin dealers generally sell small quantities retail for $2 over silver and rolls of 20 coins for about $1.75 over. This is a high premium to pay over the silver price. Our opinion: It's nice to own American silver like the one ounce Eagle coins but if silver rises to $10-15 or more, dealers will likely not pay more for silver Eagles than generic rounds or ingots, so why pay a big premium now? However, the Eagle is preferred over all others at times when the premium is very low. This is based on our observations during the "gold rush" of 1980, and other bullion surges since then. Note: (June 2002) We have a new, recent article on this website, “Investing in US Eagle Coins”. CANADIAN SILVER COINS: These might be OK for Canadians in Canada, but the American dealers look at them as undesirable 80% scrap silver. A dollar's worth of Canadian silver coins, including the silver dollars is .6 ASW. The Canadian government also has a one ounce bullion coin, the Silver Maple Leaf, with a $5 face value. This is recommended only if you can avoid the very high premiums charged by the Canada Mint. MEXICAN SILVER COINS: This includes the government issued "Onzas", 100 Pesos, and Libertads. Some of these are actually popular in southern California, Texas, and Arizona but generally fall into the undesirable category at most coin shops. The one ounce Libertad is one troy ounce of pure silver, and is usually sold around the price of common generic rounds. The other coins are .900 and .720 fine silver. Promoters do occasionally hype some Mexican issues, but unless you really like Mexican coins, stay away. STERLING SILVER MEDALS AND BARS: These were issued by "private mints", and some sets of these have interesting themes such as space, trains, planes, automobiles, guns, etc. A few actually have a small collector value, usually very small. The vast majority are melted. Sterling silver is 92.5% silver, 7.5% copper. When silver makes a fast move up, all the refineries become overloaded, and the prices dealers pay for sterling silver is greatly discounted. This has happened as recently as April, 1998 when silver rose from about $5 to $7 in a few months. If you love trains, find a set of, "Famous Trains" ingots, then it is a good investment. Otherwise, buy coins or widely recognized forms of .999 silver.
.999 S I L V E R F A
C T S
.999 SILVER 1 TROY OUNCE COINS: These are issued by established
governments and have some nominal value such as $1 for the US silver
eagle; $5 for the Canadian silver Maple Leaf, etc. The nominal
value is always a fraction of the silver value. It gives the coins
legal tender status though no one would spend a coin for the nominal
value when the silver content is many times that. These coins are
preferred over silver rounds, and usually always initially cost more
because the governments issuing them charge a high minting fee.
For example, the dozen or so distributors who buy the silver eagle coins
directly from the US mint have to buy about a million dollars worth at a
time, and have to pay the mint up front, about $1.50 a coin over spot.
Under normal circumstances the distributors sell these to coin and
bullion dealers 500-1000 at a time for about $1.75 a coin over silver.
During the recent mint stoppage, the distributors were selling the
eagles to dealers for about $4 over the silver price due to the short
supply and great demand. Things are back to normal now; the mint
has plenty of silver eagles to go around (June 09).
The mint ran out again in Dec 09 and the premiums went sky high for a
while.
.999 ONE TROY OUNCE SILVER ROUNDS: These are coin-like, made by
silver mines (Sunshine Mining etc.), refineries (Engelhard Industries),
and many other private mints. There has never been any scandal
concerning these and generally all are accepted as one troy ounce of
fine silver. These are almost always a dollar or two cheaper than
the official .999 silver coins. Virtually none of these are
collector items, but some buyers prefer the bigger name rounds like
Engelhard and Sunshine. Among coin and bullion dealers, all are
just silver rounds and there is rarely any price difference between
them. These are all die struck and have been bought and sold in the US
since the early 1970’s.
.999 LARGER TROY OUNCE SILVER RECTANGLES AND BARS: These are all
made by refiners, mines and private mints. These commonly come in one,
ten and 100 ounce size, but there are also a few five and 50
ouncers. Virtually all the one ounce size rectangles are die struck.
Most of the large size older bars were made from a casting process
where the silver was poured into a mold and then the trademark and
fineness and weight were later stamped. Most all the modern bars
are die struck or “extruded”, an Engelhard process where the metal is
rolled (extruded) into thick sheets, trademark serial numbers and
weights added in the same process. All 100 ounce bars have serial
numbers. The larger size bars are popular because they are more
compact, fit nicely into safe deposit boxes and easily hidden in homes.
PROBLEMS WITH 100 OUNCE SILVER BARS: During the “gold rush” of the
1980’s silver was approaching $50 an ounce. Someone bought a bunch
of Engelhard extruded bars and hollowed out much of the silver and
replaced it with base metal. This happened over a short period of
time and when it was discovered it caused a mini panic. There weren’t
that many bars involved and most were detected with a simple method:
Place the center of the bar on top of a couple big coins or most
anything and tap the top of an end with a table knife or hammer and the
bar will “ring”. The ones that were filled with base metal will
“thunk”. I explain this only because it happened. Very few
dealers have ever bought a bad bar; It is almost forgotten and it is no
problem now. If you buy a 100 ounce bar from a dealer insist that
the serial number be noted on the invoice, so in the rare event that
there was a problem you would know where to go. There are still
some odd weight (104.5 oz, 99.65 oz, 100.9 oz, etc) .999 silver bars out
there from obscure mining operations, refiners such as Empire Mining
even companies that refined X-ray waste. The silver is almost
always .995 or so. The fineness is not the problem; it is that
very few investors will buy odd-ball bars. When a dealer buys
these older odd weight bars, they go to the refinery and are bought for
way below the silver price. Stick with widely recognized, exact
weight bars.
1000 OUNCE COMEX DELIVERY BARS: Comex uses 1000 ounce .999 silver
bars to satisfy contracts, both buying and selling. These are
rather ugly, like a long skinny loaf of bread, crudely poured and the
stamps are also crude. Rarely does one of these weigh exactly 1000
troy ounces, but they are all close. The total weight is around 70
regular pounds. They are difficult to move and expensive to ship.
The commodity exchange makes it very expensive (shipping charges,
excessive fees) to add or remove from the COMEX warehouse. These
are seldom bought or sold from the general public. In our store we
see just a few per year. They can be bought from coin and bullion
dealers for spot less a few percent, and are sold for spot plus a few
percent. These are not popular and not recommended for general
buyers of silver. G O L D C O I N S A N D I N G O T S SOUTH AFRICAN KRUGERRAND: This 22K gold coin contains an ounce of pure gold and is alloyed with approximately 1/10 ounce of copper. Fewer are now produced, but there are still millions in the U.S. Most all are in mint condition, and the dates on the coins mean nothing. This coin is very popular, because it is universally known and sold at the smallest fraction over the gold price. If you can get them at a premium lower than the US eagle or other gold one ounce items, it is a good buy. U.S.GOLD EAGLE: When the government created this $50 gold coin in 1986 it was meant to compete with the Krugerrand, so they made it the same physical size, same fineness. The only difference was to add a 3% silver alloy which gave the coin a more golden look as opposed to the coppery-gold appearance of the Krugerrand. The government sells gold Eagles only to big dealers (distributors) at 3% premium over the gold price. Fractional Eagles are also available, but sold at a much higher premium and are recommended only for gifts & jewelry. Eagles generally sell for about $17.00 higher than the Krugerrand, but some of that is usually recovered when selling back to the dealer. Personally, I'd go for the cheaper gold because if gold does go up, and people react like they did in 1980, an ounce of gold will be an ounce of gold and no one will care what it is. Some favor the Eagle over the Krugerrand because they feel the Krugerrand would be subject to possible confiscation but the gold Eagle, a legal tender coin, would not. I'm a skeptic to this theory. US 24K BUFFALO: This is a new coin released in June 2006. It is the firstever US pure gold coin. The premium is a little higher than for the US Gold Eagle as there are very few on the secondary market. As yet there are no fractional gold Buffalo coins. The same information in the previous paragraph is applicable. U.S.$20 GOLD COIN: This .900 fine gold coin contains .9675 AGW and was last made in 1933. The numismatic value varies greatly due to demand, availability, condition, and the price of gold. In 1980 when gold was very high, common circulated $20's sold at just a little over the gold price. In 1998, with gold at about $270, the premiums over gold were almost $150. Though this contains about an ounce of gold, it is really a numismatic item, and not recommended for those who just want to own gold. These have a strong appeal to collectors and have been a good investment for many. Not recommended here, though, unless the premium gets very low, then they are a "best buy". If it ever gets to where $20’s and Eagles are about the same price definitely buy the $20 gold coin. June 2002: this theory has proven itself correct. When this was written the premiums on common $20 gold coins was about $150 per coin. Now it is about $30, just on a small rise in gold. Further addition November 2005: This theory again has proven itself correct. As of this date the platinum price has about doubled, to $962 an ounce. This week we bought a complete 1997 four piece US Mint platinum proof set. No one would pay more than the scrap price for it. We cracked the coins out plastic capsules and threw them in with the other platinum scrap. The customer paid Uncle almost double the platinum price back in 1997. He would have been better off to buy the cheapest platinum bar available, as we have recommended here. The increase in the platinum price did not push the premium up. The rise in platinum absorbed it. This will happen in similar gold and silver situations. Read and heed what is written here about buying semi numismatic bullion related items. It will save you a lot of money in the long run. CANADIAN GOLD MAPLE LEAF: This 24K, $50 face value coin contains one ounce of .9999 gold. It sells for about the same price as the US gold Eagle and is very popular in the orient and places where people prefer fine gold. This, the Eagle, and Krugerrand are just about a toss up as to the best way to go. Buy whatever is the cheapest. AUSTRIAN OR HUNGARIAN 100 CORONA: These are .900 fine gold, .98 oz AGW coins. Austrian or Hungarian coins have the exact same physical size and content. Both are official government restrikes, made many years since 1908 or 1915. There is nothing wrong with the coins but the odd size, .98 oz, makes it hard to figure the gold value. Not recommended unless you can get them below their actual gold value. The same goes with the newer 1 troy ounce Philharmonic .999 Austrian gold coins. CHINESE ONE OUNCE PANDA: This is a large 24K one ounce gold coin, no alloy, made since 1982. The Chinese change the designs of the Panda on the coins each year giving some of them considerable numismatic value. In fact, many Americans bought one every year to get each new design. The first issue, 1982, was selling for over $2000 and the premium for even the common Pandas was $50 or more. Then the June 1989 massacre of the dissident Chinese students in Tiananmen Square ended popularity of the Panda gold coins, and now most trade just a little over the gold price. The 1982 date and few others still have some numismatic value. Pandas are a good deal if they can be found at a low premium. MEXICAN 50 PESO: This .900 fine gold coin was widely bought & sold in the U.S. before 1975 when it was not legal for Americans to own gold. The AGW is an oddball 1.205 troy ounces. They are somewhat popular in Texas, California, and Arizona. Occasionally the Bank of Mexico buys these coins at a small premium. Because of odd weight and the fluctuating premium, most buyers will avoid this coin. No one likes the odd-ball weight. Only recommended if really dirt-cheap. OTHER GOLD COINS: There is no shortage of selections here. You can buy any of the following gold coins: sovereigns, rubles, ducats, lire, francs, rands, marks, shillings, etc., etc. Many of these coins are a promoter’s dream. They have old dates and a lot are very available in quantity in uncirculated condition. Take the Russia five rouble gold coin as an example: It is circa: 1897, and almost always found in uncirculated condition and can be bought a little over the gold price. Promoters get them slabbed, (Graded by a grading service), and then promote them at inflated prices because they are choice uncirculated, even though most come uncirculated and no one cares. If you can get a good buy on any world gold coins, go for it. Be cautious buying gold coins at the flea markets, auctions or from strangers. Counterfeits are not usually a great problem among dealers, but they exist. If you are offered "deals" check with a coin expert before buying. GOLD BARS: Swiss Credit and some American refineries make die struck .999 gold bars that have certificates matching the number on the bars. It's a little more risky buying bars as opposed to one ounce coins, as some bars can be tampered with rather easily. The premium on gold bars is generally a little more than the Krugerrand, and a little less than Eagles or Maple Leafs. Stick with coin unless the bars are real cheap. P L A T I N U M A N D P A L L A D I U M PLATINUM COINS: There are four to choose from: the new US $100 face platinum Liberty coin, the Canadian platinum Maple Leaf, Isle of Man Noble, the Australian Koala, and a couple others. They all contain an ounce of pure platinum. The Isle of Man Noble is currently about $10 cheaper than the other three, and would be my choice, just because it is cheaper, but it's a toss up. Russia supplies most of the world's platinum. Production and distribution are seldom stable. The price of platinum fluctuates much more than gold or silver, and buying it is usually more speculative than the other metals. PLATINUM BARS: Several refineries make high quality, ounce platinum bars, die struck, serially numbered with certificates. Some sell a little higher than others, why, I don't know. If the premium is higher on the coins, we recommend the cheapest bars. PALLADIUM: This metal seems to be almost completely controlled by the Russians. Shipments are often withheld; contracts are delayed; and the situation is often unstable. Palladium rose dramatically above gold in May of 1998, (the first time in history), and almost caught platinum. This is an industrial metal. Its main consumption is in catalytic converters with a few applications in dental alloys, and in jewelry. Don't even think about it. SILVER vs GOLD: We often get asked, “Which is the better investment, silver or gold?”. Here are some tidbits of information that will in- form you of the history of both metals. The gold/silver ratio has fluctuates a lot in recent years. In 1967 it was 15-1. In 1997 100 to one. The ratio today (Feb 2004) is 62 to one. In earlier years it was thought to be correct at 16 – 1, which was based on the physical ratio of silver to gold in the ground at about 17-1 Much of the gold produced is from deep mines. There are many gold mines and companies extracting gold from the ground. However, about 80% of all silver is produced as a by-product of zinc, silver, copper and lead mining. Mines that exclusively produce silver are rare throughout the world. Any drastic rise in gold, will mean much more production but a large rise in silver would not. You choose. CONCLUSIONS: If you are thinking of buying just bullion, consider the advice offered here; use common sense; then buy something with a very low (or the lowest) premium over the metal price. If you are thinking of buying numismatic coins, then disregard the metal content and buy something really collectable. During the "gold rush" of 1980, the demand for rare numismatic coins was great; prices sky rocketed. The same was not true with common coins with some bullion content and some collectors value. Example: Take a typical coin hyped by promoters as a "triple play". The coin has, (1) $5 silver content, (2) $4 face value, (3) $5 numismatic value. Thus the "triple play". If you were to buy this coin for $10 and the silver price doubles, the numismatic value will be absorbed and the coin will still be worth only $10. EVERY coin like this became scrap silver as metals increased during the "gold rush" of 1980, and it is my opinion one should avoid coins like this, unless you enjoy collecting them. Buying metals is like shopping for anything. Learn all you can about what you are buying. Shop around and then make an intelligent decision. Addendum: The preceding was written in 1998, and little has changed as to my advice on what to buy, however since the Twin Towers tragedy, the threat of terrorism is very real, not just theoretical as I had speculated a few years ago. In recent years I have told people who asked that I didn’t think there was any great reason to put money into metals, as that market has been dormant for the longest time; there was little inflation; people throughout the world seemed happy to just own US $100 bills. The fundamentals for buying metals at the time were just not there. Several weeks after 9-11 I announced on a major electronic trading network that I have changed my mind, and the basic fundamentals for owning metals are in place. Since then gold has gone up about $90 an ounce. The “War on Terrorism” isn’t going to be cheap. Our role as policeman of the world has expanded. Where is the money coming from, to fight the war on crime, the war on drugs, the war on poverty, and other Federal projects? These are all budget drainers and sure to cause inflation, which means to protect yourself you should now seriously consider purchasing precious metals as a hedge against upcoming inflation. Added: Oct 2005: The Iraq war will prove to be one of the biggest budget drainers since Vietnam. Added: Sept. in 2006. The new “gold rush” is here. Metals have gone up risen at levels that are reminiscent of the gold rush of 1980, however this time it is real. There are no Hunt Brothers manipulating the market and this time I don’t look for metals to go back down. UPDATE: March 2008. Everything and I mean EVERYTHING I predicted about what to buy and not to buy has been near perfect. As of this date dealers are buying circulated and even lower grade uncirculated US $20 gold coins at below gold value. The rise in gold and silver have eliminated virtually all the numismatic value on marginal collector’s coins that contain a lot of gold and silver, and the demand for numismatic coins is still rising. We are mired in the Iraq war, which is costing more than a billion dollars a day (conservative Government estimates). The government has to borrow about $3-4 billion a day from the privately owned “Federal” Reserve banks just to pay the interest on the 9 trillion or so debt. Inflation is rampant; the dollar is headed down the hopper. Anyone that thinks McCain or Obama or Hillary will stop the inflation probably still believes in Santa and the Easter Bunny. Ron Paul was the only candidate who knew what the problem is and what to do about it and he was soundly rejected by the sheeple who voted in the elections. Everything I have written here through the years about inflation and the dollar: Expect more of the same. Gold $1000; platinum $2100; palladium $541; all are new all time highs. Silver is lagging behind at $21, a 25 year high. Addition: March 2009. Bush has just given the big banks a trillion dollars, and Obama close to that, increasing the money supply and national debt by a couple trillion dollars in less than a few months, and evidently more bailouts and money giveaways soon to come. People are coming into the store buying gold and silver more than we have ever seen. They are not speculating or looking for a profit. They are buying for insurance or survival if the worse were to come. The premium on everything is sky high, $85 an ounce over gold and $5 over silver to buy a US silver eagle, with silver at only $13.50 an ounce. They don’t ask “How much? Just how many (do you have)?” Hardly any customers are selling their gold or silver and everyone wants to buy. Note: April 2010, the mint has resumed a virtually unlimited supply of silver and gold coins and premiums are back to near normal. There is plenty of metal to go around, however if “everyone” got nervous about the declining dollar and the demand for metals got real strong again, the mint would run out of inventory and the premiums would go up. Many are asking what would happen if the worst (an economic meltdown) were to happen? Therefore I have written the following:
WORST CASE SCENARIO.
I sell gold and silver daily to people who are worried about the
economy. Many have heard or read scare stories that our economy is
crumbling and that they should have some gold and silver as an insurance
policy against the worst case scenario which is a massive hyper
inflationary economy where paper money will become worthless or near
worthless and people will revert to a barter system.
They
ask me, “What would I do with a silver round or silver coins or one
ounce gold coins if the worst happened? Publix won’t likely take
them and the banks would likely be closed. Where would I get food?” My
answer and opinion is that this is unlikely to happen here, but it did
in post war WW1 Germany and in many banana republics. There could
be a very short time where the banks are closed and people are so unsure
about paper money that no one would take it at any price.
In
this unlikely scenario, people would revert to using old pre 1964 silver
coins as temporary money. If you think we are headed down this
road, it would be a very good idea to stock up on at least several weeks
of food and medicine, just in case. Please understand, I am
writing this only because people have asked. I am not predicting
this or trying to scare anyone, just explaining what would likely happen
should the absolute worst happen, in answer the questions I am
frequently asked in our store.
Most
every banana republic, Mexico, Brazil and many other S. American nations
have faced runaway inflation and complete lack of confidence in the
circulating paper money. In every case it has been the same:
Go to the bank and turn in the old money (in the case of Mexico 3000
pesos to get one “New Peso”) and get a new currency with some government
promise to be sensible and balance the budget and stop deficit spending.
No
matter how bad the economy might become, we would still have a central
government, and it is likely they would do the old-for-new before the
dollar became completely worthless. Every American would have to
go to the bank and turn in maybe thousands of our current Federal
Reserve dollars for one new money unit which might, for example, be
designated as a “Treasury dollar”. This could be done with an
absolute promise to balance the budget, or with some link to backing the
new unit by gold and silver. It would take something like this to
restore confidence in the new monetary unit.
So,
you might ask what would we do with our gold and silver? Well, the
government cannot inflate your physically owned gold or silver. It
will keep its value. You will not be able to directly spend your
gold and silver on the economy but you can go to your local coin dealer
(and maybe even banks) and cash it in for many dollars worth of the new
currency.
In
1980 the last “gold rush” was a false one because the Hunt Brothers
cornered the commodity markets through leverage, owning more gold and
silver through COMEX leveraging than existed at the time, and it did not
last long. During that time, the banks got into the act and they
were buying and selling bags of silver coins and dealing in gold coins
competing with the coin dealers. If there is a turning in new
money for old, it is very possible you could redeem some of your gold
and silver directly through the banks to get the new treasury notes.
How
does gold and silver keep its value in cases of hyperinflation?
Here is a recent example in our hemisphere. In the early 1970’s
the exchange rate for a Mexican peso to the US dollar was about 4 – 1.
It took four Mexican pesos to equal a US dollar.
In
1970, let’s say Pablo owned a 50 peso gold coin which does contain 1.2
ounces of pure gold and he stuck the coin under his mattress. Juan
owned a 50 peso banknote. He also hid the note under his mattress.
Both the banknote and the coin at this exact moment were close to the
same value about 15 dollars. Note: The gold coin was actually
worth a little more at the time but I don’t want to crunch numbers on
this example.
In
the 1980’s, about 15 years later, Juan turned in his 50 peso banknote at
the bank (3000 old pesos for one new one) and got the equivalent of less
than 2c in US dollars. Pablo owned the 50 peso coin, 1.2 ounces of
gold which was worth hundreds of US dollars. In this example the
gold held its value and the inflated paper money did not.
There
has also been talk about the US getting involved in a basket of
currencies, doing away our Federal Reserve banknotes, and a adopting a
new unit called the amero. Of course this would be completely
against the constitution, but as of late our politicians pay little
attention to the constitution. Personally I think this is
unlikely, but who knows?
The
“Amero”:. People ask me about this. There have been very
casual, preliminary talks between Mexico, Canada and the US, to start a
new currency like the European euro, called the amero. It is very
very unlikely anything like this would ever happen. Nothing is
planned nor has been seriously discussed about it. There are
rumors, though. One talk show host said that we have sent 300,000
brass euros to China, which is ridiculous. He showed an actual
amero coin on his show, with the Denver mint mark.
If
you look on ebay you will see all sorts of amero brass, copper and
silver coins being offered. All of these are “fantasy coins”,
something that never existed, that someone dreamed up to make a fast
buck. They are privately minted and have no legal tender status
and never will. In addition, no serious coin collectors pay any
attention to them. There are no legal tender ameros paper or
metal, and unlikely there will ever be.
Note: Any comments, favorable or not, or suggestions about this pamphlet would be welcomed. BELLEAIR COINS INC. THE SILVER QUEEN 1350 West Bay Drive (For silverware) Largo Fl 33770 same address) FAX (813) 586-0822 (727) 586-0822 Toll Free 888 436-6463 Toll Free 800 262-3134 belleaircoins.com silverqueen.com email: art@belleaircoins.com greg@silverqueen.com COPYRIGHT 2008. May not be reproduced in whole or part.
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1350 West Bay Drive,
Largo, Florida
33770 USA
toll free 1 888 436
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