Since entering this business in 1973, I have witnessed the end of the gold standard, the move of silver and gold to frothy peaks in 1980, the subsequent period of interest rate returns of 18% p.a., the crash of 1982, 1987, 1992, 2000, and 2008; the period between 1992 and 2002, when metals virtually did not move and the move from 2003 to present.
As I have celebrated my 60th birthday, I thought it would be interesting to take a retrospective on the markets, but more specifically to see what if anything has changed in the minds of metals buyers over this period.
This muse is not intended to develop a theory as to where metal prices are going, but is focused on the buyers perception, on not if they should buy, but what. The “what” is determined almost entirely by personal psychology.
There are a few more vehicles available to today’s metals buyers that were not around in 1980, but a full 95% of products that are available in today’s market were accessible to the average buyer in 1980.
The doomsday prophets were abundant in 1980; in fact some are still around today. Their credo, buy metal, build a bunker, get six months of food and buy a gun.
The conspiracy group also existed. There are no metals there to back up your position. The market is being manipulated.
Government seizure of gold and moving your assets to another country were also popular themes in the 1980 era.
Hyper-inflation is around the corner.
Buy metals which will be the only barter tool available when the financial system implodes.
All of these dire threats are heard on the street today. I am not disputing the reality, that any of these events are real, but the point is that for each scenario you need to consider the right way to own metals.
It is to these approaches and psychological sub-groups that this article speaks.
The Gift Giver:
I want to buy that shiny thing in the window. Giving precious metals as gifts, be it for religious milestones, births, weddings, graduations etc. has been around since the first gold coin was struck. The psychology of the buyer here is that the product needs to be in uncirculated condition and sometimes even represents the event, i.e. a picture of a baby on it. The premiums on these items are outrageous for the most part because the production lots are extremely small. Many coin dealers carry these products, most bullion dealers do not. The large premiums are inconsistent with the business of an industry bullion dealer. I suggest, visiting a local coin dealer directly. You then can make an informed decision and pick out the piece that matches your criteria. Again these items should be viewed as gifts and not as vehicles to participate in the metals market.
Have you ever bought a diamond ring? You may pay $1,000 for the piece, the appraisal comes in at $2,000 and the insurance company actually insures it at appraisal cost. Sounds like a great deal. Take that same ring on the same day to another jeweler and ask what they will pay for it. You’ll be lucky to get 50% of the value that you just paid for it. In my 40 years in the business, that has been the general rule for collectible coins and medals. One dealer says it is extra fine when he sells it and the buying dealer sees it as very fine when he buys it. Perception or reality? The difference may cost you as much as 50%, depending on the piece. The odds of making money on a collectible are about the same as buying penny mining stocks, about 1 in 99. Liquidity is almost non-existent and the value generally rests in the eye of the beholder, which when you are selling always seems to be less focused than your perception.