By Kathleen Duncan – Pinnacle-Rarities

Certainly not the price. Gold hit a 13 month low this week (October 23rd). It seems obvious the government can’t continue to bail out banks to the tune of trillions without causing the dollar to decline and gold to ascend. Then why is the exact opposite happening? What’s more, why is there no physical product available? And, shouldn’t the increased demand and low supply push gold in the other direction? We have taken calls from baffled clients asking for our take on this surprising occurrence.

Historically, during times of economic uncertainty, tangible assets have provided a safe haven. In the past month, sellers have outnumbered buyers 100 to one for gold and silver bullion. The increased demand for physical product should have forced spot prices higher. However, there are some short-term events placing negative price pressure on gold and other metals.

The global market is a different animal than it was just five years ago with short selling of commodities via electronic trading funds (ETFs) playing a dominant role. The world wide credit crunch has played a role as well. Hedge funds and institutional buyers have been forced to “unwind” their long positions in commodities to pay for losses. By holding prices at lower levels through short selling, they can effectively avoid margin calls. This sell-off enables them to keep from selling positions in other market sectors that have crashed even lower.

Even as these factors have forced gold to flounder, they foretell a bright future for the king of commodities. Heavy demand and weak supply have forced premiums on bullion to rise to unprecedented levels and delivery dates to remain a mystery. With these fundamentals in place, and the inevitability that the influences holding down metal prices will eventually reverse, we remain bullish. In 2009, the price of gold will likely blow past the all time high seen earlier this year.

Doug Winter Market Report

I recently returned from the St. Louis Silver Dollar coin show and the Scotsman auction, which was held in conjunction with the show on October 17th. I wasn’t originally going to attend this event as I’m not a big fan of St. Louis and wasn’t really anxious to travel right now. But the combination of a collection of superbly pedigreed gold coins (see below) and a desire to get a handle on this confusing coin market inspired me to make last second plans to go to the City with the Large Arch.

First, let’s talk briefly about the show. The facility, in suburban St. Charles, is as nice as you are going to find for a medium-sized regional convention. The attendance, from a dealer perspective, was decent with many national firms manning tables. The public attendance was another story with a very small number of collectors in evidence.

My take on the activity at the show was that wholesale transactions were better than what I might have expected. There certainly weren’t a lot of five figure coins trading but I did see some good sized invoices being written. Yes, a lot of the coins that were selling were generics or bullion-related. But the market for reasonably interesting coins in the $1,000-10,000 price bracket doesn’t seem to be as adversely affected by the current economic slowdown as I might have expected.

The main reason I went to St. Louis was to attend the Scotsman auction. The lead consignment in this sale featured an intriguing group of 81 U.S. gold coins that had last appeared in the Eliasberg sale. For those of you that are not familiar with this collection, here’s a brief recap.

Louis Eliasberg was a Baltimore banker who, in the 1940’s and 1950’s, formed the greatest collection of United States coins ever assembled. The base of the collection was obtained from the Clapp family in 1942 and Eliasberg upgraded and filled-in holes for the next decade and a half. The U.S. gold coins from this collection were sold at auction by Bowers and Ruddy in October, 1982. That sale set countless records and is regarded as one of the most important auctions in the history of the American coin market. (more…)

If the Financial Crisis has proven anything, it’s that people seemed to have forgotten that stocks are volatile and that investing in the markets entails a degree of risk. Enough risk that you have to question the sagacity of middle-class people having the majority of their retirement funds tied-up in something as speculative as stocks.

Through all of this chaos, tangible assets such as precious metals and rare coins appear to have held up pretty well. As I mentioned in my last blog, the demand for bullion-related coins such as Liberty Head double eagles and Saints has been nothing short of incredible and after a few very slow weeks, I’ve noted on a personal level that collector coins are beginning to sell again; albeit on a scale that is certainly reduced from what I was seeing a couple of months ago.

One comment I’ve heard from a number of clients in the last few weeks is that they are looking at their collections from a much different perspective now than prior to 9/15. Before the stock market imploded, many high net worth individuals viewed their coins as a minor part of their overall portfolio and thought of numismatics as a sort of a plaything. Now, after these individuals have lost 20%, 30% or even more of their net worth, their coin collections are suddenly a much more significant portion of their assets. And I believe that this will cause them to regard coins in a more serious light than in the past.

As someone who has lived through any number of bad coin markets, this one feels like it may be different. I can recall markets where you literally could not get other dealers to look at your coins and you could literally beg clients to buy something because it “was such an incredible deal” and they would pass. At this point in time, dealers are still buying coins and serious collectors seem to still want to make purchases; just maybe not at the level they might have been before. (more…)