cnpcoins

Who Should NOT get a Gold or Silver IRA

Much time, energy and money is spent by companies advertising Gold and Silver Individual Retirement  Accounts. They often cite an upcoming currency or stock market crash or other calamity, all of which serve to hide a very simple fact: These companies make a fortune selling these accounts. After all, someone has to pay for those ads! And they are not for everyone.

While PM IRA’s (Precious Metals IRA’s) have many advantages, those benefits are much greater for some people than for others, and for some, they are not advisable at all. What criteria should you look at to determine if a PM IRA is right for you?

First, let’s look at the structure of PM IRA’s. You need three parties, a precious metals dealer, an IRA administrator, and a certified storage facility. When you open a PM IRA, you first set up the account with the IRA administrator, usually by rolling over or transferring funds from your existing IRA or other eligible retirement account. You then work with your precious metals dealer to purchase the materials that go into your PM IRA, and place them physically in a certified depository in your segregated account. Often, the precious metals dealers act as the facilitator for the entire transaction. You the customer never touch the metals purchased.

While the dealer makes his money on the purchase and sale, both the IRA administrator and the storage facility charge an annual fee (usually around $100 and $150 respectively. That $250 per year is not a lot per se, and on a large account, it is negligible. However, on a small account, those fees can represent a hefty percentage. For example, on $10,000, the $250/year represents an annual 2.5% load, heavy for an IRA.
More important than the fee is the question of whether precious metals fit properly into one’s overall financial plan. This is a more complex and completely personal determination, and relies on such questions as to whether it’s better to hold metals in an IRA, or buy them with after tax dollars, so as to have one’s metals in possession, where they are liquid without tax penalty. One’s age and retirement goals also come into play. Many people use both methods.

There is also a numismatic trap in precious metals IRA’s. Some dealers encourage their customers to buy certain IRA eligible mint and proof sets using the logic that these will appreciate more than the actual gold or silver.  While a small percentage of modern coins become truly collectible, most do not, and the high premiums usually charged for such coins can make them losers, even if metals prices push upwards. For this reason among others, I usually recommend that only gold and silver American eagles be used for IRA’s.

If a dealer pushes too hard, or is unable or unwilling to address these concerns, they may be thinking more about their commission than about your welfare. In such cases, find another dealer.  

Lawrence D. Goldberg is the author of What Color Are Your Assets? An Insider’s Guide to Rare Coins and Precious Metals (Zyrus Press) and CEO of Customized Numismatic Portfolios, Inc. (cnpcoins.com) Sign up for the complimentary print version of the Rare Coin Report, published three times a year and delivered to your home or office. Cnpcoins.com/contact.html

It's A Buyers Market for Rare Coins and Precious Metals

I’ve just come off the road, having attended four coin shows (Long Beach, Las Vegas, Santa Clara and Santa Rosa) in as many weeks.  Coin shows present an outstanding opportunity to gauge the mood of the public, and to exchange information, observations and experiences with other rare coin dealers.

What makes this four week period exceptionally fascinating is that it corresponded with approximately a 10% drop in the price of precious metals: about $100 per ounce in the price of gold, and about $2 per ounce in silver.

Coin show attendance by the public was also sparse. It is impossible to know for sure if the drop in metals prices caused the lack of public patronage, but that seems likely. Some dealers speculated that it had to do with general public disgust with the state of affairs in the US and the ineffectiveness of US foreign policy, or a feeling of uncertainty about economic conditions in general, including fears of a stock market crash, or even the upcoming election.

And yet, some dealers reported strong on line purchasing by their customers. Whatever the case, the drop in precious metals prices presents an excellent buying opportunity.

One patron at the Las Vegas show – who bought up all the junk silver and close to bullion price BU rolls of quarters and dimes he could find - told me that he was shocked that there were not more buyers. Logically, that is surprising, but psychologically, it is not. Time and time again, I notice that when metals (or coin – or stock or real estate) prices are soft, people hold off buying. However, rising prices seem to bring out the buying public in force.

Maybe the public is simply afraid of missing out on a rising tide?

That attitude comes from short term thinking, where the goal is to generate maximum short term profits. The physical rare coin and precious metals markets are not typically short term markets. Thus, for long term accumulators, the best long term results are generally achieved by purchasing when markets are soft and prices are low.

Take a look at your long term plan. What do you want to have in your vault 10 or 20 years from now? If you are short of your goal, take advantage of the price drop to stock up. This is especially true for precious metals, but it is also true for rare coins.

Contrarian thinking is a true benefit in this kind of market.

P.S. My article on Rare Coins and Investment was featured in the September issue of the Las Vegas Coin Journal. These journals are a great way to build your knowledge base about Rare Coins. Please let me know if you would like a copy of the article

Learn About Hard Assets at the Las Vegas Coin Show, Friday, Sept. 14, 2014

Understanding how Hard Assets work in your portfolio or IRA helps to build value over time. I'll be speaking on the topic at the Las Vegas Numismatic Society Coin Show at the Palace Hotel and Casino in Las Vegas on Friday, September 12, 2014 at 10:30 am. I hope you will stop by my booth, Customized Numismatic Portfolios, Inc. (CNP Coins) or meet me after my talk. The more you know about Rare Coins, the better your investmennt decisions. See you at the show!!

Economics 101: The Business End of Your Rare Coin Collection

In my 30+ years in the rare coin industry, I’m often asked the same questions by coin enthusiasts just beginning their journey into the fascinating world of numismatics. Yes, I know I said fascinating; for if you love the origins of something tangible or history or just love money, there is many a tall tale to be told around some coins. Understanding how some coins become valuable and why some do not is simply a question of Economics 101: The Law of Supply and Demand. In other markets, such as food and energy, demand is relatively constant, and therefore price changes are driven mainly by the quantity of available supply. If supply is plentiful, producers will drop the price to drive sales. Conversely, if supply is scarce, producers raise prices to insure the ability to obtain new supplies. What makes gold and silver different is that supply is limited compared with most other elements. If demand increases beyond supply capabilities, prices will rise because producing additional supply is much more difficult and time consuming than it is for most other products. Eventually, prices increase sufficiently to discourage demand, and encourage the creation of more supply, either from production or from people selling gold and silver back into the market (often taking profit on the price increase) causing the price to drop until supply and demand are equalized. Price is the measure and the regulator of the balance between supply and demand. In the case of a rare coin, what you see is what you can get. Supply is limited, so prices are driven by demand. So whether you need one more coin for a collection or love the story behind a particular coin, do your economics homework and pick a coin that has a future in the marketplace.

MS-66 Generic $20 St. Gaudens - Gold of Choice

Want to bridge the gap between gold bullion and numismatic gold? Consider the $20 St. Gaudens in MS-66. Combined NGC and PCGS populations for St. Gaudens in MS-66 total less than 40,000. In compari-son, there are about 200,000 Saints in MS-65. Yet, the price of the MS-66 is only about 20% higher. Interestingly, the MS-67 is nearly three times the cost of the MS-66. While far more rare - making it strictly numismatic - the huge price gap portends dis-proportionate price increases for the MS-66 in the future. For the investment minded accumulator, now is the perfect time to take advantage of the relatively low price and excellent spreads with outstanding upside po-tential by loading up on MS-66 St. Gaudens gold. Need more information? Contact me through our website Customized Numismatic Portfolios, Inc.

 

Rare Coins and the Economy

In September, I gave myself the gift of a vacation, and spent about two weeks without reading email, looking at television news or reading the newspapers.  While this was mainly very relaxing, it had the added benefit of enabling me to return with a fresh and open mind when it came to analyzing recent developments.

My conclusion after this break is that the path our country is taking from a standpoint of monetary policy has not changed and likely will not change, regardless of the results of the presidential election.  Should Obama win, increased federal spending and increased federal debt coupled with almost certain economic stagnation will require more money printing, which is inflationary.  Should Romney win, the likely increase in economic activity will turn recessionary price deflation into price inflation, which, coupled with already strong monetary inflation will send inflation soaring.  For even under a Romney administration, the debt will increase as will money printing.  Like it or not, the Federal Government is heading toward a debt of $20 Trillion.

In other words, inflation is in our future.

The one big change while I was on vacation was QE3, or Quantitative Easing, where the Fed has committed to $40 Billion per month to buy mortgage securities.  While this amounts to as much as half a Trillion dollars a year, the amount of money was perhaps not as significant as the fact that that Fed tied its new bailout not to inflation, but rather to employment. 

The impact on precious metals was obvious and immediate: an increase of about five per cent in the prices of gold and silver.  Few individuals are selling their precious metals.  In fact, the vast majority of purchases I have made have come from people with a monetary need, or from more elderly individuals whose personal needs now make it fortuitous to sell.  In contrast, more people are adding to their accumulations, indicating a continued upside to the metals.   Expect this to continue. 

Demand in rare coins also continues steady, with collectors actively looking for those tough to find key dates.  Expect this to continue as more and more people begin to understand the implications of current economic policy and conditions.  Furthermore, while many collectors are finding the coins they desire, many are not, indicating we may soon start to see shortages in supply.

While for collectors I strongly recommend the purchase now of better date and high grade type coins, key date silver dollars, and stalwart collectables like the Fugio Cent (that’s the one with the best motto ever put on a coin:  “Mind Your Business.”) my strongest recommendation now is to buy $20 gold coins.

Here’s why:  almost every $20 gold coin now has one of the lowest numismatic premiums compared to gold in history.   That applies to all grades, from jewelry grade up to MS-64 for $20 Liberties, and MS-66’s for $20 St. Gaudens.  Not only is the spread small when compared to the price of gold, it is also small when compared to other grades.  For example, at this time, the price spread between MS-60 and MS-64 $20 Liberties is less than $500.   That is one reason I so strongly recommend $20 Liberties in MS-64 – they give you a much enhanced upside potential with very little additional cost.

The same is true for better date MS-63 $20 Liberties and MS-66 $20 St. Gaudens, along with all rare date $20’s, especially from the Carson City and New Orleans mints. 

Even lower grade $20 gold coins are so close to the price of gold, they represent a terrific way to get some numismatic potential with very little premium above the actual gold value – a possible boon to those who are mainly bullion buyers, but want to make a foray into the numismatic arena. 

With $20 gold coins, it becomes very easy to adjust your gold bullion content and numismatic potential.   The higher the grade, the more numismatic upside potential.  Additionally, the higher the grade, the more value these coins should retain should gold prices move in the opposite direction.  Some people select a variety of grades for added diversification.

We have ample supplies of $20 gold coins in all grades – at least for now.  Call me if you have any questions.

Now is also a great time to consider trading massive low end accumulations not needed by your portfolio for their gold or silver content for these much harder to find coins.

On a personal note, the Rare Coin Report Newsletter, which normally comes out in September will come out sometime around the middle of October.  Part of the reason for this delay was my vacation, but I was also waiting for some very exciting news, and it now appears I will be able to share that in the October Rare Coin Report, so look to your mail box.

Also, expect to see the “Rare Coins and the Economy” column published in the CNP blog on a monthly basis, as it appears that as time goes on, the economic picture will even more strongly affect the opportunities we expect will continue to materialize in the rare coins and precious metals market.

As always, if you are unsure of what move might be the best for you, whether you are interested in buying or selling, always feel free to call me.  That being said, we are now strong buyers of all coins, so if has come time for you to sell, please call.  I’ll make you an offer you won’t want to refuse.

How Strong Is The Dollar?

NOTE:   World Fair of Money, August 5-9, LOS ANGELES Convention Center.  One of the biggest coin shows in the country, run by the American Numismatic Association.  If you are in the Los Angeles area, please come visit my booth – Customized Numismatic Portfolios, get your free “Pocket Constitution,” and learn how to get a free 6-month trial membership to the ANA. Los Angeles Convention Center

A couple of weeks ago, when oil prices dropped, some in the media suggested that Recession and the current glut of oil supply could drop prices below $40 a barrel before the end of the year.   Since gold so often “walks with” oil, this created a possibility for a dip in gold prices and a great buying opportunity for gold and gold coins. 

The gold price dipped to about $900 for a short time, but quickly rebounded to the $950 level.  Interestingly enough, stocks also rose, reacting to improved corporate earnings, and despite increasingly negative news on employment and a potential bubble bursting in commercial real estate. 

When stocks and gold rise together, what you are almost certainly looking at is a weaker dollar.

It is no surprise then that demand in the coin market continues strong.   There is a good balance between buyers and sellers, with slightly more demand than supply, as it has for several years now.   As a result, rare coin values have held, and are trending slightly to the upside.   This trend is reminiscent of the Great Depression, during which time rare coins increased strongly in value.

Massive and increasing Government debt levels, increases in the money supply, a pending collapse of commercial real estate values, and tremendous uncertainty about future governmental policies of the Obama Administration (Health Insurance Bills, Cap and Trade, etc.) have led to a huge and truly amazing build up of American’s cash accounts. 

Unsure about the future, investors have not been investing, and consumers have not been consuming.  Instead, they have been saving. 

The savings rate is now 6.9%, one of the highest savings rates in US history.  As a result, last month alone, over $800 Billion (4/5 of a Trillion) was slugged away into savings accounts.  No wonder bank profits are up!  There is now over $9 Trillion Dollars in US cash accounts, and that number is climbing daily and rapidly.  If current trends continue, cash in savings accounts will increase by nearly One Trillion Dollars per month!

This represents a reservoir of “liquid” cash earning low interest.  Thus, as soon as it becomes clear to the population at large that their dollars are losing value they will be quick to unleash that buying power. So great is this reservoir of cash, it could easily propel hyperinflation, which will be a bonanza for rare coin and gold prices. 

There is a possibility that to fight inflation, the Fed will suck money out of the money supply.  However, doing so would choke off economic growth, hamper bank liquidity to deal with the coming commercial real estate bubble burst, and more importantly, dramatically increase the Federal Government’s annual debt payments well beyond the current $400 Billion annually – not to mention what it would to do debt owned by States.   Plus, the Fed has basically announced that they expect interest rates to remain low for “some time to come.”

For collectors, this is a green light to buy those special coins you have been wanting all along.  High quality Key Dates, Rare Date Dollars, MS-65 St. Gaudens, are rising but still at levels that make them very attractive.  Many coins now available in this balanced coin market will likely not be available as demand increase beyond supply, pushing prices up.  Considering the amount of cash and government debt, buying rare coins now might, in retrospect, rank as one of the best investments you have ever made.

For investors, recognize the future is uncertain, but high inflation remains a high probability.  Along with rare coins, you might want to divert some assets in your Individual Retirement Account (IRA) into gold and or silver bullion.  This can be done effectively and inexpensively. 
Feel free to contact my office for details. You can email me at: [email protected]

Smile: It’s a Mid-Summer Lull – And Happy Independence Day

Maybe it’s summer or that I just returned from a well deserved vacation in Southern France, but it seems to me the Economy is in an interesting lull. 

Economic statistics are flat.  Prices of gold, stocks, residential real estate, interest rates, and pretty much everything except gasoline are fluctuating within narrow price ranges. 

The same is true for coins, where trading remains active, but prices, which have been rising steadily for the last several years – at least for the moment – are relatively flat.

This is not a bad thing.  Just like people, markets need “breathers” after periods of great activity. The roller coaster ride of the last twelve months has been excessively stressful.  The market implosion and financial crisis have been exacerbated by massive federal spending and unprecedented governmental intervention in business and financial markets.   This has created a “throw your hands in the air” uncertainty for investors and consumers, who, instead of investing and spending, have been slugging money into cash accounts at the unprecedented savings rate (for the US) of around 6%.

As a result, over $8 Trillion investor money sits inactive in cash accounts, generating next to zero interest, and waiting for a place to go.

It strikes me odd that despite such a reserve of cash, credit should still be so tight.  Yet, that is the situation in which we now find ourselves.  I believe this underscores the weakness of assets held by banks and uncertainty about just how far the government takeover of the economy and excessive government spending is going to go.  It likely also reflects a potential disaster in commercial real estate, which would likely trigger yet another Federal Government bailout.

The Federal Government can borrow almost unlimited sums of money - not surprising because of the cozy relationship between the Federal Government and the Federal Reserve which basically allows money to be created from nothing, especially now since the Federal Reserve is buying its own paper. This creation of cash combined with over the top Federal Government “borrowing and spending” has created a potential perfect storm for inflation.

When that storm begins, the $8 Trillion in US cash accounts will furiously compete for assets to hold value against the falling dollar, flooding financial markets with liquidity.  The resulting inundation could bring the dollar down as much as 70% from its current level, and trigger explosive demand for hard assets.

But we still don’t know when.  It might now be a summer lull, but just like the squirrel gathers nuts in summer, now is the time to gather up gold, silver and rare coins to position yourself for the upcoming inflation storm, for whether it arrives this month or next, this winter or next, this year or next, arrive it surely will.   

A Small River in Provence

Gordes...also a small town in Provence

Lavender fields

The calm before the.....

The coin market is active, yet calm.  Increased media attention to the possibility of massive future inflation has driven attention toward gold, silver and gold coins like the investment worthy $20 St. Gaudens in MS-65.   Currently, there is a good balance between buyers and sellers in all areas.   As a result, premiums on gold and silver bullion have narrowed a bit, and for the moment, there is good supply of most numismatic items.

The balance is delicate and could easily be upset.  This is because the supply is essentially thin, barely meeting demand, which is why in recent months, prices on bellwether coins like the MS-65 St. Gaudens spiked upward as much as 30% in a month before giving back half of their gain, and are now stabilized and trading near a retail price of $2350.   Gold and silver bullion remain available, but in recent months they too had periods where demand suddenly wiped out all available supply, driving premiums upward, and making those coins extremely hard, if not (in some cases) impossible to find. 

When the inflation monster arrives, pure collectibles such as Pattern coins and banknotes – which are less active at the moment - stand to be big gainers.  These delightful collector favorites – along with key date coins especially type coins and Morgan Silver Dollars – are not garnering the attention of gold and silver.  Yet, their prices remain relatively firm as dealers have no desire to sell at discount today what will likely generate large profits tomorrow. 

Speaking of which, signs of pending inflation are starting to show.  Gasoline prices are up $.25 per gallon in recent weeks, and all indications are that those prices will be pushing higher in the future.  The stock market has shown a recovery of close to one-third of its loss and perhaps even more telling, many banks that received TARP money are jumping through hoops to pay that money back.  They are receiving tremendous resistance from the Federal Government in paying that money back.  Apparently, the Federal Government likes the control they can exert through their TARP loans.   All that aside, the fact that banks feel healthy enough to want to pay back those TARP funds point to a heating up of economic activity in the future, which is also a major indicator of future inflation.  That “future” may not be long from now.

The US savings rate continues high – around 6% - which means the over $8 trillion in US cash accounts continues to grow.  It also means that US consumers are keeping expenses and spending down, unquestionably due to uncertainty about what the future holds.

Those funds are earning interest in the low single digits, so the owners of those funds will be happy to move them to areas which can generate either more security or more increase in value when they are convinced that such moves are warranted.  When inflation is part of the equation, as it appears will happen, more of those funds should flow into precious metals and coins which are the best inflation hedges in an economic climate with so much uncertainty surrounding real estate, which has long been a haven against inflation. 
 
Because the precious metals and coin markets are so small by comparison in terms of total volume, even a relatively small percentage move of those dollars into metals and coins will cause massive valuation increases.  Unlike the late 1980’s when the last huge rally in coins occurred, the coin market – with certified grading and internet trading - is now well organized to effectively handle such an influx.

Inflation is not the only possible catalyst for a rising valuation in precious metals and coins.  War in the middle east, the fall of Pakistan, a severe setback in Iraq, cutting off of oil by Iran and any one of a number of international crisis could also trigger demand for precious metals.

I believe the “calm” we are now experiencing is very temporary, and could disappear at any time.  That makes now an outstanding time to take advantage of those slight discounts especially for high quality collector coins such as patterns, which, after all is said and done, will likely be the biggest gainers. 

P.S. Click on the images and you will see a larger version if you allow pop-up windows in your browser

Putting Precious Metals into your Individual Retirement Account.

    Stock market losses, uncertainty about the future and dissatisfaction with government policy have driven thousands to use this vehicle for hard asset preservation.

    This has been possible since 1986, but is just now really gaining widespread popularity. There are however serious limits and requirements to putting precious metals in your IRA.

• First, the kinds of metals you can put into an IRA are strictly limited, including gold, silver and platinum, but only using certain types of bullion bars or coins. Numismatic and PCGS/NGC certified bullion coins are not permitted for IRAs.

• Second, only self-directed IRA’s are eligible to contain precious metals. You must also have a qualified administrator and storage facility, as well as a dealer (like Customized Numismatic Portfolios) connected with certified storage facilities and qualified Administrators so that the entire process will be seamless. Each transfer is transacted according to all legal requirements, from the time you make the commitment to put precious metals into your IRA, all the way to having those metals sitting in your name at a certified storage facility.

    There is one exception to this.  If you have a self-directed 401K and you are the trustee, you can physically hold the precious metals.  Be sure to check the legal details of your IRA before you withdraw funds, as a mistake in this area could lead to potentially serious tax penalties.

    If done correctly, initial and annual costs can be minimal. 

Lawrence D. Goldberg's Tip of the Week:

"A one kilo bar, 32.15 oz. of gold (about $30,000 value) is one of the most cost effective forms of gold to put into an IRA"