Buying Coins On Ebay

As most of you know, I’ve been buying a lot of Gold and Silver coins on Ebay. I recently won a bid for a British half-sovereign. Don’t know why, but I didn’t realize that it was a half-sovereign until AFTER I had paid for it via Paypal.

I like to collect the regular sovereigns which are quite small to begain with [around the size of a nickel] so the half-sovereigns must be really tiny. Anyway, I sent the seller a email requesting him to cancel the sale and refund my money. Surprizingly he agreed and he didn’t even take me up on my offer to rebate him the listing fees [since it was my mistake].

So far my experience of buying coins on ebay has been extremely positive. But as usual, you need to be careful and make sure you don’t over pay for sometime. It nearly happened to me last week, where I overbid for something. Luckily someone else beat my bid later on and saved me!!!! [It wasn’t a big amount, but why overpay when you can get a deal?]

First Morgan Silver Dollar Arrives

I got my first Morgan Silver Dollar today. Morgans are beautiful, large and allegedly the most popular collectible coin in the US today. This particular specimen was minted in 1896 making around a 110 years old. Its in pretty good condition for a coin of that age. Considering I only paid $21 for it, I’d say its a great deal too!

It has the liberty face on one side and an eagle on the other. Because of the eagles’ somewhat scrawny appearance, they used to be called buzzards! Its called the Morgan after the dude who designed the coin.

Gold At $100 Off Its 2006 Highs

Lunar Gold DogGold has retreated quite a bit since its high of $730 on May 11th 2006. Its currently trading around $630/oz. I see this as a good buying opportunity. While I’m against dollar cost averaging, I think gold is in the beginning of a bull cycle and this justifies buying on dips.

Lunar Silver Dog

I recently bought another Australian Lunar Series coin. This time I got the Dog. Also got it in the Silver coin and surprizing the species of dog is different on both of them.

british gold sovereign
Anyway, I also bought some gold British Sovereigns [around 100+ years old], some French and Swiss francs and an 1873 Danish “Mermaid” Coin.
danish mermaid 20 kroners
I also bought a 200 yr old gold coin of Napolean Boneparte! [Ok maybe I’m going nuts with this gold coin stuff, but its hard to stop buying those damn things now!] Better stop now before the wife gets upset!

I also got a bunch of Silver Eagles. Funny how the price of silver is so low considering that its used in electronics as well as jewellery. Compared to Gold [which in my mind is inherently useless] it hasn’t gone up as much. Anyway I’ll post pictures of them later.

Why Kiyosaki Is Buying Gold.

Robert Kiyosaki has a column on why he’s buying in gold. I don’t know why it has tomorrow’s date on it, but its pretty interesting nonetheless.

Bet on Gold, Not on Funny Money
by Robert KiyosakiTuesday, July 25, 2006

Gold recently dropped more than $100, or 14 percent, after hitting a 26-year high of $730 in mid-May. With that drop in price, I became a buyer of gold once again.

Can the price of gold go lower? Absolutely. If it drops to $500 an ounce, I’ll buy more. Let me tell you why.

But first, to give you some background, I’ve been in the gold market since 1971, when then-President Nixon took the U.S. dollar off the gold standard. Back then, gold was pegged at $35 an ounce, and ran to a high of $850 an ounce by January 1980. In the same period, silver hit approximately $40 an ounce.

Today, as I write, silver is around $13 an ounce. So I’ve seen the price of precious metals go up and down.

Mining a Hunch

In 1996, I founded a gold mining company in China and a silver mining company in South America. Both companies eventually became publicly traded on the Canadian Exchanges.

I formed gold and silver mining companies then because I believed that gold and silver were at “lows” and were set to come back up. At the time, gold was around $275 an ounce and silver was around $5 an ounce. If I’d been wrong, I would have lost the mines.

I was confident about gold and silver because I wasn’t betting on them. Rather, I was betting against the dollar and oil. In 1996, oil was about $10 a barrel, and that seemed low. My suspicions were that the dollar was strong, and I believed it would drop when oil went higher. I felt the conditions were right for a massive change in the markets. So far, I’ve been pretty accurate.

I’m confident that those conditions haven’t changed. With the current national debt, balance of trade, and ongoing war in Iraq, the dollar is growing weaker and oil is going higher. That’s why I recently bought more gold as well as more silver — to bet against the dollar and oil yet again.

Inflation or Recession?

In many ways, the conditions are far worse now than they were in 1996. Today, we have a slowing demand for the dollar. At the same time, it appears that the Federal Reserve is increasing the supply of dollars.

As you know, low demand and high supply means a drop in value of anything, including the dollar. And in order to save the dollar’s purchasing power, Ben Bernanke, the new Federal Reserve chairman, may be forced to raise real interest rates. By “real,” I mean an interest rate that’s higher than the rate of inflation.

(For example, if inflation is at 5 percent and interest rates are at 5 percent, the real interest rate is 0 percent. So, in this example, to increase demand for the dollar, the Federal Reserve would have to raise interest rates above 5 percent, to, say, 8 percent. That would means investors would receive a net 3 percent return on their money.)

So Bernanke has a tough choice to make: If he prints more money to bolster the dollar, inflation increases and the dollar may collapse. If he raises interest rates to slow inflation, the economy may go into recession.

The Oil Problem

Granted, if Bernanke moves to save the dollar by raising interest rates the price of gold and silver will probably decline — but so will our economy. If the economy begins to slow, the stock market often slows or turns into a bear market.

Personally, I suspect he’s more afraid of deflation than inflation. So for now, I’m betting that he’ll continue to increase the supply of dollars, which may be why the U.S. stopped reporting M3 in March of this year. (M3 measures how many dollars are in the system, and not reporting it is akin to not opening your credit card statement and pretending you’re not in debt.)

But oil adds another wrinkle. Oil producers are seemingly less and less willing to accept dollars because the purchasing power of the dollar keeps falling, precisely because we continue to print more money.

To compound the problem, we’re running out of easy-to-produce light, sweet crude. While there’s still a lot of oil to be extracted, it’ll be more expensive to produce, which makes $100-a-barrel oil very possible in the future. This, in turn, makes inflation more possible.

Historically, one barrel of oil has been worth about 2.2 grams of gold. Even when the dollar dropped in value, the ratio between gold and a barrel of oil remained pretty fixed. But recently, it has taken 3.4 grams of gold to buy a barrel of oil, which means either oil is expensive or gold is cheap.

I’m betting that gold is cheap, and that it’ll correct as oil goes higher and countries such as Russia, Venezuela, the Arab states, and Africa become more reluctant to accept the U.S. dollar. For a while now, we’ve been allowed to pay for the goods and services from other countries with funny money, but the world appears to be less and less willing to take it as payment.

Good Money Before Bad

Which way will the new Fed chairman take us? Will he be inflationary, which means printing more money, or deflationary, which means raising interest rates and tightening the flow of money? Does he save the dollar, or save the economy? Does he increase the money supply, or increase demand for the dollar?

My strategy remains the same as it’s been for years: I bet on real money, which is gold and silver. I also continue to borrow funny money to buy real estate. Since oil and gas are in high demand globally and appear to be going up in price, I also invest in oil and gas production.

Again, I’m not really betting on these assets — I’m primarily betting against the dollar, and the leaders who manage the U.S. economy.

Now you know why I buy more gold and silver every time they drop in value in the current economic environment. What smart investor wouldn’t gladly spend funny money to buy real money?

Another Gold Investing Update

Regular readers will know that I’ve been investing in gold since gold was in $500/Oz. I advised some readers not to jump in at $720 but wait for a pull-back. Well it pulled back from $720 to around $570 and then jumped up a bit. Today it settled around $620 and I bought a little bit more. As I previously mentioned, I like the perth mint Lunar series for the 1 Oz Gold as well as the 1 Oz Silver coins.

This time however, I bought the US mint $50 1 Oz Buffalo Coins. Its the first time the US Mint has made 99.99% pure 24K 1 Oz gold coins. I bought them already certified by PCGS as “First Strike MS-69”.

PCGS is perhaps the most popular independent third party coin grading & certification service today. The grading scale goes from 0 to a maximum of 70. For example a grade of 10 would be a very poor condition. A grade of PF-60 (or MS-60) or above would be an uncirculated coin. PF-70 would be absolute “perfection”. Some experts say there is no such thing as a “perfect” coin. In fact, some grading services will not place a grade on any coin above MS-69 or PF-69.[PF or PR means its a Proof coin, where by the background has a mirror like finish and the fine details of the coin are more pronounced.]

A coin that was made within the first 30 days of issue are called First Strikes. These are the initial production coins and sometimes these become more valuable. Today was the last day that PCGS was grading coins as “First Strike” so I decided to get them.

GoldLine was selling these same coins today for a whopping $1044, but I got them from American Precious Metals Exchange for only $667. These same coins are already selling on Ebay for atleast $735 so at $667, it doesn’t seem like there’s much downside.

Gold is in a long term bull market so I really don’t think I’ll lose any money on these coins. However Silver might be a better play with more upside potential, but then who knows what will happen. I’d buy both but my wife inherited about 5 kilos [about 155 Ounces] of Silver a few years ago so I guess were done hedging with silver.[But I still bought a few Silver 1 Oz coins off Ebay. I’ll post the pictures once I get them]

Oh, and 5 kg of Silver is less than $2,000 worth!

1 Ounce Silver Dragon

[1 Ounce Perth Mint Lunar Series Silver Dragon]
Bought a 1 ounce silver dragon coin on Ebay. Its a beautiful coin, minted by the Perth Mint in Australia. [As I mentioned in a previous post, I’m a big fan of the Perth Mint’s Golden Lunar Series.]

Don’t know why I bought it. Maybe its because I like shiny things. I think silver prices might jump 50% over the next 3 years but the 1 ounce silver is current worth about $9.25 and the coin was just under $20 with shipping and insurance. I definitely won’t make my fortune with a $20 coin. But I guess its better than blowing money a DVD. Or is it??

Anyone else out there who likes collecting coins?

Gold Play: Great Time To Invest

As I’ve mentioned before I think the US is going to enter a period of inflation and recession brought on by the trade & budget deficit and precipitated by the devaluing dollar.

Both Oil and Gold have been in a slow and quiet bull market for the past few years. Historically both of them have been rising & falling in tandem and I believe that both of them have quite a bit further to go. I know that people [Iran’s oil minister, a few economists and the all-knowing Steve Forbes] have been bearish on the price of oil for the past year now but it keeps going up. I think both oil and gold have a lot of room for further appreciation especially if the US Dollar devalues. It may be showing current strength, but I think thats just a short-term spike.

Compared to historic prices, both commodities are still quite low. On top of that, there’s a renewed demand from both India and China. In the last quarter, India consumed 30% of the global gold supply, up 47% from a year before. Plus the booming economies of the world’s most populous countries will just “fuel” the demand for oil.

So how to play these two markets? One way is to buy an oil well, the feasibility of which I’m currently looking into. I’d recommend buying a gold mine, but thats probably not going to happen. Gold mining companies are thinly capitalized and never seem to make any decent amount of money. But their shares seem to be doing well. So either buy gold shares or buy gold bullion. Stay away from rare numismatic gold coins unless you really know what you’re doing.

In many parts of the world holding gold is considered auspicious and brings good luck, so I think I’ll buy some gold coins. I’ve settled on the Perth Mint Lunar gold coin series. The mint brings out a new Chinese Lunar coin every year. Its considered bullion grade and the Snake 1 ounce gold coins sell for near their intrinsic value, which is currently around $547. [the current spot price of gold is around $508 and there’s always a bit of slippage involved.] As a comparison, the bullion grade American Eagle sells for the same price. The horse, goat and other coins in the series sell for about $557. These coins are a good alternative to the Canadian Maple leaf coins that have the same amount of gold at the same quality but are not protected in individual plastic cases.

[Perth Mint Lunar Series Gold Dragon 1 Ounce coin]

There is a limited production of 30,000 1 ounce gold coins of each animal in the Lunar series. Since the Dragon coin in the lunar series has become a collectors item and is now begin sold for nearly $900, there is a possibility that the other coins will also rise in value over their intrisic value.

You usually have to wire funds into the dealers account, which costs $30 and there’s a $15-25 dollar shipping charge per order, so there’s some considerable cost over the spot price gold per ounce. [ $508 versus $547+ $30 + $20 ]. Although if you buy at least 5 coins the dealers normally give you a slight discount per coin ($5-10) and over 10 coins, the shipping is free too.

But be careful with whom you deal with. I spoke to 3 dealers. One of them was very nice. Another was very expensive, $609 for the Snake coin, and a third told me they were completely useless and I should buy some weird gold coin that was a third of an ounce. Stay away from all coins that are not 1, 1/2, 1/4, 1/10 or 1/20 ounce. Selling them is always a hassle.

Incidentally I bought a 1/4 ounce Dragon coin on ebay over the weekend. Its probably not going to appreciate like the 1 ounce Dragon because there are twice as many minted, but its a cool looking coin and it only cost $142.50.

I called to ask my Mom what she thought about the whole and she thought it was a great idea. She strongly encouraged me to buy as many 1 ounce coins as I could. Funny how everyone suddenly thinks you’re loaded just because the bank was stupid enough to lend you a million dollars!!!