THE NUMISMATIC NUANCE: Why Hunter Riley III is Breaking His Own Rule and Buying Collectible Gold Coins in 2018

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Published : August 02nd, 2018
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Category : Gold and Silver

In Stack Silver Get Gold, the world’s #1 best selling book on gold and silver, (go ahead and reread that one more time just for fun), I tell you to stay the hell away from numismatics unless you are willing to take the time to really learn how the collectible coin game works.

But in this article, which is the fulfillment of a promise I made in and follow up to the article titled Gold, Guns Wine and Fire, I’m telling you that my advice in my best selling book requires some nuance in August of 2018.

My best seller advice is not wrong, in fact, my numismatic advice in Stack Silver Get Gold is right for the vast majority of you 99% of the time.

However, if the fake news was doing the reporting, they would say it was wrong and I was probably a mean person who wasn’t nice to old people, children or dogs.

But the fake news doesn’t know about the Numismatic Nuance.

More on that in a moment….

First of all.

What are numismatics?

In the gold and silver market, numismatics are collectible gold and silver coins.

A coin that is collectible, historic or rare.

There are really three layers of cost included in each numismatic coin.

1: The cost of the gold or silver in the coin.
2: The dealer premium.
3: The numismatic or collectible value.

Because of the three layers of cost, some of these numismatic coins can be extremely valuable and/or expensive. They can cost way over the spot price of the gold or silver contained in the coin.

But don’t get too excited.

I used to collect baseball cards.

It was during the time of late 80’s early 90’s baseball card mania. You heard about the insane amounts some cards were selling for on the news almost every week.

Baseball card shops had lines out the door.

Trading activity between my grade school friends and I was furious and intense.

Cards were selling for hundreds to thousands of dollars.

Adults in card shops were scamming and ripping little kids and old ladies off.

The mania was insane.

Dogs and cats living together insane.

And then one day….

The mania stopped.

Collectible card prices plummeted.

No more lines at the baseball card shops.

The baseball card shops actually closed up, went out of business.

I still have all my baseball cards but even decades after the mania, most of those card prices are basically worthless.

Some of the prices of the cards remain pretty high, but there are almost NO BUYERS.

They are very hard to sell at those high prices, except for the most exceptional cards.

Most are just worthless pieces of colored paper.

Now the good thing about gold and silver numismatic coins is that their price can’t really drop below the price of the underlying gold or silver in the coin.

But the bad thing is that they can be vulnerable to baseball card-like mania and scams.

Not as bad as the baseball thing but still subject to the whims of the collecting public.

You can only sell your collectible coin above spot price if you can find a willing buyer.

So, for the most part, I say stay the hell away from numismatic coins unless you want to take the time and effort to really learn how the game works.

But there is some nuance to my advice on numismatics.

I am buying certain numismatic coins as you read this and I’m no expert in numismatic coins nor have I taken the time to learn how the game is played.

Why am I now buying numismatic coins and what exactly am I buying?

WHAT COIN? PRE-1933 Numismatic Gold Coins like the Liberty Head $20 Gold Double Eagle found here on the Miles Franklin website.

The $20 Double Eagle is made of 90% gold and 10% copper alloy and contains 0.9675 troy ounces of gold. They were minted from 1850 until 1933 when President Franklin D. Roosevelt basically ended the coinage of gold and made it illegal to own gold.

WHY AM I BUYING THESE COINS? Not only do these coins require no dealer reporting on purchase or sell back which means you can secretly stack them, and under interpretation of current law, they are non-confiscatable. The US government can’t take them from you.

Perhaps even more important, right now the premiums on these numismatic coins are close to the premiums you pay on regular, up to date American Gold Eagles.

In the 1990’s, during a 25 year long bear market, you could get these double eagles for premiums of about 15% over the spot price.

Around 2008, these numismatic coins were trading at premiums of 50-70% above their melt value. In 2008 when spot price gold was $1000, a 2008 $50 Gold Eagle was worth about $1050 and a Mint State 62 (MS-62) uncirculated $20 Gold Double Eagle was worth about $1650 when  you included the premiums.

I know you’re a smart reader and you probably just asked me a question in your mind that sounds something like “Hunter, what the hell is Mint State 62 or MS-62?”

In the numismatic or collectible coin market, there is a grading scale known as the “Sheldon Scale”. This scale helps collectors determine the physical condition of coins which helps to determine their value.

The Sheldon Scale is a coin quality rating scale that ranges from 1 to 70. A “1” rating means the coin is in the poorest condition. A “70” rating or grade means the coin is as perfect as it can be.

MS stands for “Mint State”. You get the MS rating if the coin is graded at 60 or above. Mint state coins have never been in circulation outside of where they were minted. But just because a coin hasn’t been in circulation does not mean it has no damage. Mints can damage coins in how they mint or handle the coin which explains the different grades from 60 to 70.

Here’s an overview of the MS 60-70 grades and what they should look like:

https://www.pcgs.com/News/A-Quick-Reference-G...int-State-Coins

Here is the US Mint’s description of what mint state coins and below mint state coins should look like:

https://www.usmint.gov/learn/collecting-ba...n-grading-scale

So what are the premiums on these Double Eagle numismatic coins today?

Depending on the quality of the coin, you can find them for premiums in the single digits today.

My Miles Franklin precious metals broker just told me the premiums were super low a month ago and have come up a bit since then but you can still get these coins for premiums at just 5-8% above spot price.

If you’re new to precious metals investing, without going in to too much detail, the premium is the amount of money over or under the current spot price of silver that you pay or receive when buying or selling the metal.

Andy Schectman, founder of Miles Franklin, says he has never seen numismatic premiums low like this in his entire precious metals career.

So you are allowed to break my “stay the hell away from numismatic coins” rule when their premiums become close to, equal to or lower than the premiums you pay on up to date Gold Eagles.

I call this rare situation the numismatic nuance.

Anytime you can buy a 100+ year old gold coin like the Liberty Eagle at close to or lower than the premium on gold bullion, the numismatic nuance is in effect and you can buy those numismatics all day long.

Over and over and over.

Because not only are you getting the gold in the coin but you are also paying the dealer premium equal to that of a normal gold eagle and you are getting the future collectible value of the numismatic gold coin at basically no cost.

As the Sovereign Man, also known as Simon Black, likes to say, buying these numismatic coins right now is like getting a free call option on the premium of the co target="_blank"in. Here’s a brilliant article he recently wrote on the numismatic nuance. By the way, if you are not subscribed to and following the Sovereign Man, you are missing out on good stuff. Get on his email list now.

HOW TO PLAY THE NUMISMATIC NUANCE

When the premiums of these pre-1933 coins are close to the premiums of regular gold eagles, you buy the old coins by the truck full. Today, we are seeing these premiums in the $50-$100-ish range. So here’s how I’m playing it….

I’m buying the old double eagles now.

They will always be worth at least their underlying gold price and I will make money when the price of gold goes up so, unlike baseball cards, I am hedged in this area.

But what I really want is their premium to go up, so that is what I’m waiting for.

Say I’m paying a $100 premium now. When we see another collectible style mania and the premium price starts to rise to HUNDREDS of dollars over spot like it did in 2008 or 2011 I’m going to trade my numismatic coins in for regular gold bullion.

Let’s say their premiums rise to $500 over spot and I originally paid $100 over spot.

That would mean I’m getting $400 in basically free gold for every numismatic coin I trade in for regular gold bullion.

I’m increasing my stack big time.

At no cost.

It’s the same strategy I told you to use in target="_blank" my last article about junk silver.

Since my readers are smart, and you are reading this article, I think you understand the strategy of the numismatic nuance now.

We’re seeing this numismatic nuance happen today, in August of 2018.

So get on the horn and call Miles Franklin at 1-800-822-8080

Tell them the world famous Hunter Riley III told you, in unnuanced terms, to load up on the pre-1933 double eagles you saw earlier in this article.

Don’t ask me what to do about your baseball cards.

I have no clue.

Maybe trade them for gold next time.

Hunter Riley III
Fish Creek, Wisconsin
Early August, 2018

PS….You can get in touch with HR3 at his webs target="_blank"ite Stack Silver Get Gold Buy Bitcoin. You’ll learn all you need to know about precious metals and cryptocurrencies.

PPS…Please take just one minute to email this article to a friend or share it on your Facebook page because it helps Hunter find more smart readers like you.

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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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