Archive for Sunday, July 25, 2010

The new rush for silver and gold

Buyers staking claims to coins

Working the crowd with a Morgan silver dollar in his hand, Richard Anderson, of Baldwin City, helped auctioneer Mark Elston, left, go through a sale of old coins at the Douglas County Fairgrounds.

Working the crowd with a Morgan silver dollar in his hand, Richard Anderson, of Baldwin City, helped auctioneer Mark Elston, left, go through a sale of old coins at the Douglas County Fairgrounds.

July 25, 2010


Two Morgan Silver Dollars were just a few of the coins that were auctioned off recently at the Douglas County Fairgrounds.

Two Morgan Silver Dollars were just a few of the coins that were auctioned off recently at the Douglas County Fairgrounds.

Collecting coins

Auctioneer Mark Elston at the July 18 coin show at the Douglas County Fairgrounds discusses the ins and outs of coin collecting. Enlarge video

A boom town this is not.

Coin investments on the rise

With the state of the economy on the downward slide, more people are investing in things that have stood the test of time, such as precious metals. A local coin shop has been doing well thanks to collectors and investors alike. Enlarge video

As a crowd files into an auction at the Douglas County Fairgrounds on a sweltering Sunday morning, the most excitement here is over a broken water line — a break that caused the auction to be moved into an air-conditioned building of the fairgrounds.

As pickers sift through an assortment of oddities stacked on sawhorse tables, the most raucousness comes from a plastic fish that sings Sinatra.

But indeed this is the place to get at least a peek at America’s newest boom. At the front of the room, right near the big hats that run this ring, men and women squat on their heels and nearly press their noses against the shined glass of a display case.

America’s newest prospectors at work.

It isn’t quite 1849 all over again, but in case you haven’t watched the financial pages, there is a fever spreading through the precious metals market. Gold has increased in price by about 180 percent in the last five years. Although more quietly, silver has soared, too, up about 155 percent in the same time period.

But these days, a gold pan or a heavy hammer isn’t needed to stake a claim to valuable ore. Gold and silver coins fit so nicely into a person’s pocket. Here, all you need is a bidding strategy and an eye for a bargain.

“I do feel a bit like a prospector,” said Cindy Williams. “I mean, I just bought a coin for $50 that a book says is worth $450.”

Here’s hoping that book — from Hobby Lobby — is right.

• • •

It has been a pretty fair minute for auctioneer Mark Elston. Thus far he’s selling at a pace of about $100 every 60 seconds. That goes on for a few minutes until he gets into a batch of coins that to the lay person looks a lot like the previous batch, except shinier. Then the pace picks up to about $200 a minute.

Elston sold coins for an hour and fifteen minutes on this Sunday.

Silver dollars were the main movers, and many went for somewhere near $20 to $35, but some easily doubled that.

“I haven’t seen it like this in a long time,” said Elston, a veteran Lawrence auctioneer. “Everybody is selling coins now.”

Coin auctions certainly are becoming easier to find. An auction house just south of Topeka has started running a monthly coin auction, and fairgrounds, small-town libraries and lots of other normally sleepy venues are coming alive with coin auctions more often.

“I would think they would get to the point that they would flood the market, but that hasn’t happened yet,” Elston said.

Instead — in this day where stock values have been about as solid as the paper they are printed upon — a growing group is buying into a motto long used by old real estate auctioneers — they ain’t making any more of this.

“You can’t reproduce an 1800 coin, not an authentic one,” Elston said. “I think most people believe the real coins are going to at least hold their value.”

Many were more optimistic than that on Sunday. One buyer, who asked not to be identified, purchased “over $400” that day. How much over likely was the more pertinent question since he was seen sliding about $200 worth of silver into his pocket during about the first 10 minutes of the auction.

“I came here to buy silver dollars today,” he said. “Every indication is that prices are going to continue to go up. In this economy I think there will continue to be a demand for metals and things that have an intrinsic value.”

• • •

To enter the Kansas Coin Connection, 846 Ill., you push a doorbell and wait for the owner to peer through the shop’s window and open an electronic lock. When you enter, you may be in the only retail establishment in Lawrence where the proprietor openly wears a pistol on his hip for all to see.

That’s the way it works when your display cases glitter with gold that now sells for about $1,200 per ounce. Being robbed earlier in the year also serves as an incentive.

“It definitely takes more money to be in this business now,” said Steve Neher, who owns the shop with his wife.

But business has been busy. And, Neher says, it also has been different. Neher has seen spikes in gold and silver prices before, but those often have been based on individuals trying to corner a market or because of other technical factors, he said. But now there seems to be a wider group of people buying metals for a more fundamental reason.

“Most people think this is backed by the U.S. government,” Neher says as he pulls a hundred dollar bill from his wallet and snaps it tight. “It’s not.”

Neher is directly speaking to the fact that currency in the United States is issued by Federal Reserve Banks and is the obligation of those banks.

But in a broader sense he’s referring to an old phrase once only uttered by currency geeks: Fiat money. Ever since the U.S. government decided in 1971 to no longer back its currency with gold reserves, there has been a sector of the population concerned that paper money is subject to a major loss in value under the right circumstances.

Some believe those circumstances are inching nearer, Neher said. As concerns grow whether China will continue to purchase U.S. bonds in the same quantities, that leads to inflation fears. As India purchases more gold for its reserves, that adds fuel to people concerned about the value of paper money. But Neher said perhaps the biggest factor is that the most recent financial crisis and the resulting recovery programs have led more people to understand how easily the U.S. can print money.

“People are starting to realize that the U.S. dollar isn’t worth what it once was,” Neher said. “As long as they keep printing money at the rate they are, it will continue to dilute and devalue the dollar.”

• • •

Jim Denney also takes comfort in a coin. He has for the better part of his life. Like many coin collectors, he started as a kid, gave it up for a while and then came back to it as a more mature mind contemplated the meaning behind it all.

“You pick up a coin from the 1800s, and you just can’t help but wonder where that coin has been,” Denney said. “I hope that is what comes out of all this. I hope we cultivate more real collectors and not just people who are chasing the dollars, because the real joy in this is the knowledge and the history you gain.”

When Denney talks about investing in coins, he always puts the word in quotation marks. For him, this isn’t about trying to figure out monetary policy and trends.

“There are experts who say inflation is the great threat,” Denney said. “There are experts who say deflation is the great threat. You can find an expert to tell you whatever you want.”

Instead, Denney spends his time trying to figure out what he has. Every coin he gets during the course of a day goes into a big jar. Then he eventually puts each coin under a microscope to see if it is something special.

“I don’t spend them before I look at them,” Denney said. “I just don’t do that.”

Silly? Maybe, maybe not. A little difference in a fairly ordinary-looking coin can mean a lot. For example, a 1998 “proof” penny — a proof is a coin minted to a higher standard for collectors but often ends up in general circulation — is worth more than a cent. If you find one in your pocket, it is worth about 60 cents to a dollar at a coin shop. But if you find a 1998 proof penny that happens to have the “A” and the “M” of America close together, you’ve done quite a bit better. It is worth about $3,000 retail.

“There are people every day who spend coins that are worth more than they think,” Denney said.

So, there you go. Pocket prospecting. A claim you can easily stake.


Keith 5 years, 4 months ago

“Most people think this is backed by the U.S. government,” Neher says as he pulls a hundred dollar bill from his wallet and snaps it tight. “It’s not.”

And yet, it's what he'll take as payment when you buy his gold. Who is this fool here?

Ron Holzwarth 5 years, 4 months ago

$20 to $35 for a silver dollar, and some double that? That's amazing!

Just a few months ago a coin dealer in Topeka told me that most such coins are usually "junk silver" and are only worth about 6 times face value. He also told me that Indian head pennies are worth only one dollar each, and that most proof sets are worth practially no more than face value.

I suppose before selling any coins, you should be sure to educate yourself on what you have.

dontcallmedan 5 years, 4 months ago

Junk silver, or 90% silver pre-1965 coins, are currently worth about 12 times the face value of the coins. The dealer was trying to double his investment. By all means, educate yourself before you buy or sell coins. And a good rule of thumb--don't buy anything of the coin collecting nature from an ad on TV.

Ron Holzwarth 5 years, 4 months ago

He also told us that collectible paper money from the 1930s is worth barely more than face value - although he seemed quite interested in buying some.

From what you're telling me now, he sure sounds like a ripoff artist! Fortunately, my friend decided to keep his small collection since he was only offered $50 for it, and walked out.

bondmen 5 years, 4 months ago

Yes, it is a medium of exchange but Federal Reserve Notes fail the money definition test in that they're not a store of value! FRN's have continually depreciated in value since they first began to circulate. It is a gradual diminution in value and sadly not easily perceptible to most folks. It is a deliberate stealing of wealth from America's middle class by the fiat money banksters.

Federal Reserve Notes are more easily gotten rid of as the price of the item which over time has proven a secure store of value, increases in value - namely gold.

Ask an early American if he wants to be left holding a bag of Continentals or a Civil War Southerner if she was happy with a purse full of Confederate currency. History shows US the folly of a currency men can print at will!

Flap Doodle 5 years, 4 months ago

Liquor and ammo will still be valuable after the End of the World as We Know It.

Ron Holzwarth 5 years, 4 months ago

Well, snap, one of the things passed down to me from my Grandmother about what to take with you when leaving "the old country" was the answer to the question:

"You had to leave just about everything behind since you couldn't take much with you. So what did you take when you left "the old country"? Clothes?"

"No! We took food!"

Jimo 5 years, 4 months ago

"$20 to $35 for a silver dollar, and some double that? That's amazing!"

How much for a tulip bulb?

Ron Holzwarth 5 years, 4 months ago

"There has been a sector of the population concerned that paper money is subject to a major loss in value."

Years ago, my grandmother used to tell me family stories about bad things that had happened in "the old country".

I wish I had paid more attention to her then - because today I don't know if she was talking about Russia as 1917 approached, or about Gemany many decades before that.

Ron Holzwarth 5 years, 4 months ago

Whoops, I left out exactly what Grandma told me - she told me that it took a wheelbarrow full of money to buy a loaf of bread! She didn't remember that herself, it was a family story from long ago.

And in more recent times, about ten years ago, an aunt on the other side of the family went to Russia to teach Engish at a high school somewhere about 400 miles south of Moscow.

When she left, she wouldn't need her roubles anymore, so she left them for the teachers that had hosted her. She said it was as though she was leaving nothing at all, but they considered it to be an incredible gift!

One of the last things she did in Russia was take photo of the money she gave them, piled high on a kitchen chair. It looked like a very large sum of money, but it wasn't much at all!

1 Russian ruble = 0.0330 US dollars

Ron Holzwarth 5 years, 4 months ago

Liberty - I've been told that won't take effect for about a year, so there will be a brief flurry of buying and selling before the law takes effect. Also, I've been told that there's a dollar limit to the reporting requirement, $600 or so, so that most $5 and $10 gold coins won't be affected.

But, the $20 coin, from the era 1877-1907 is 90% fine gold, (with a net weight of .9675 ounces of pure gold) is going to be affected for sure.

$20 to about $1,200!

That's inflation for ya!

Ron Holzwarth 5 years, 4 months ago

And that's for a coin in average condition!

Ron Holzwarth 5 years, 4 months ago

I tend to think that the selling prices, but maybe not the value, of coins less than the reporting requirment will go a bit higher, and those over it will go a bit lower. Ya think?

Actually, I'm worried - as I have already posted, I've been told way to many stories passed down through the generations of my family about the money becoming worthless in "the old country".

It makes me want to go out and finance a new car! So I can repay the note with worthless dollars!

Ron Holzwarth 5 years, 4 months ago

And the big question:

Where were these gold double eagles hidden when gold was called in, back in 1933?

Keith 5 years, 4 months ago

That section was superseded by the section on tinfoil hats.

Ron Holzwarth 5 years, 4 months ago

Gold is a MUCH better conductor than aluminum! It also has a much higher resale value!

Ron Holzwarth 5 years, 4 months ago

$20 in "old dollars" = $1,200 in "new dollars" = tinfoil hat?

Jimo 5 years, 4 months ago

I guess it depends on how you define "little known" since everyone dealing with taxes has known about this all along, ever since the Bush Treasury started pushing this loophole closer.

It has NOTHING to do with "sellers of gold" but rather applies to all commercial enterprises. (Gold sellers have squawked quite loudly about it however as I suspect they are some of the prime tax cheats taking advantage of the small but valuable nature of the goods sold.)

Surprise! The gov't doesn't like people cheating on their taxes and now will mandate that you keep accurate records. What next? Prison terms for tax cheating? gasp

Jimo 5 years, 4 months ago


What part of large sums of money passing commercially from person to person is difficult to follow?

Gold isn't taxed. Its value and expense as it passes through commerce is. People who buy & sell gold do so for the purpose of making money. It's a business. They claim expenses. Requiring record keeping to report income, claim business expenses, etc. is hardly a shock.

Gold. Widgets. Railroad cars. Socks. Etc. Etc. The rule is straightforward: you buy $600 of anything from anyone you must report this to the IRS (and send a 1099 form). Period. Nothing difficult to understand about it. Businesses were doing this already just not quite this strictly.

Jimo 5 years, 4 months ago

Again, "gold transactions" are not being taxed.

1099's are used to report INFORMATION to the IRS. They aren't income returns.

It's no surprise that the IRS would like to know the movement of money or money equivalents when they occur in large dollar sums. Why you keep substituting "money" for the abstract concept of "income" I have no idea.

While this change isn't targeted just at coins, "Gold bugs" have been squawking about this change and you're parroting their misinformation. This is almost certainly because gold, particularly gold coins, have long been a means by which people try to move money around "under the radar" attempting to avoid scrutiny of their activities - you give me your car and I give you 2 gold coins (or for that matter 1,000 bushels of wheat). Do you report the 2 gold coins as income? Who knows? There wasn't previously any separate reporting requirement for the transaction to the IRS.

Jimo 5 years, 4 months ago

On what planet is requiring people to keep financial records (vs. keeping no records at all) = "Big Brother"?

Jimo 5 years, 4 months ago

No you just were obsessed about "being taxed" - a concept completely unrelated to tax returns! Forgive us for embarrassing you.

Jimo 5 years, 4 months ago

Obviously, it depends if "you" is podunk you or XYZ Baseball Card Co.

If "you" is XYZ, engaged in a commercial business, then it's the IRS business what you're doing. (No change, this has always been so!) But you can no longer fall back on a lack of recordkeeping as a cloak for tax fraud. Now, not only can you be fined for cheating on your taxes but you can also be fined for not keeping business records of your activity that would prove/disprove your compliance.

Where would you get an idea that you're free to engage in a commercial enterprise free of governmental taxation and the consequential regulation necessary to enforce it?

independant1 5 years, 4 months ago

We had to pass the bill so we could find out what was in it.

Ron Holzwarth 5 years, 4 months ago

History repeats itself because no one was listening the first time.

  • Anonymous

BigPrune 5 years, 4 months ago

Section 9006 of the Patient Protection and Affordable Care Act will amend the Internal Revenue Code to expand the scope of Form 1099. Currently, 1099 forms are used to track and report the miscellaneous income associated with services rendered by independent contractors or self-employed individuals. Now it will apply to gold coin sellers......nice

Thanks, dumbocrats. Covertly done, as usual.

Jimo 5 years, 4 months ago

It has nothing more to do with gold coin sellers any more than ant farm sellers. Everyone (except non-profits such as churches) is covered by the same rule. Please keep your paranoia in check.

HogJiver 5 years, 4 months ago

Get another estimate before you sell to the Kansas Coin Connection.

gl0ck0wn3r 5 years, 4 months ago

If you buy collectible coins, you are being ripped off. Buy bullion coins only or bullion. Further, I'd suggest gold is over-priced right now - buy silver, platinum or palladium and tuck it back into your safe behind your firearms.

Steve Jacob 5 years, 4 months ago

This article kinds of reminds me of an old line, when a boom is on the cover or Time magazine, it's time to sell. When EVERYONE is on the same page, that boom will soon go bust.

Ron Holzwarth 5 years, 4 months ago

That reminds me of something my father used to quote:

The old man says: When everyone else is running, walk! When everyone else is walking, run!

dontcallmedan 5 years, 4 months ago

In 1980, when the Hunt Brothers tried to corner the silver market, the price went up to $50 an ounce. And that was in 1980 dollars, so it would be about $200 an ounce in today's money. So the current $18 an ounce for silver seems pretty cheap.

Majestic42 5 years, 4 months ago

Could care less about the coins, but that picture is SWEET. From one photog to another, Mr. Gwin, well done.

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