Concerning the recent boom and decline of gold and silver, I believe we are either in the calm before the storm or a period of prolonged inactivity. That’s a roundabout way of saying I don‘t have a clue about what may happen next – up, down or stagnant. I take solace in that no one else knows either.
Regular readers may recall my evoking memories of the early 1980s when precious metals prices first exploded. In 1979, as gold passed $500, $600 and then $800 an ounce, unwitting prognosticators predicted it “soon passing $3,000.” Then, $4,000 and $5,000. All were so convincing. And, wrong. The difference between now and then is that financial institutions are actually weighing in with price guesses.
Naturally, they rarely agree. Some are calling for gold and silver to settle at $3,000 and $50 respectively. Another I saw was incredulously predicting gold exceeding $15,000 and even $20,000 with silver well over $200 on ounce. At those prices, gold wedding rings and gifts of silver bowls would become a thing of the past. It’s not a pretty thought. Even gold tooth fillings would be out....
For collectors, there are several notable consequences of the radical price swings. I first became aware of them when I saw an online promotion by the US Mint for new silver and gold coins for the semiquincentennial.
The ad encouraged people to “be sure to add some of the new 250th anniversary coins to your collection.” The price of the coins was about $200 for the silver and more than $6,000 for the gold. A set of four gold coins was $11,000. Those numbers made me wonder to whom they were speaking. In the circle of folks I know, if someone has a collection of pretty much anything, then a new addition might cost $100 or $200. But, $11,000? Whoa.
In fairness, the items the US Mint are selling have historically been in demand. If they are in exceptional condition, can eventually command a numismatic premium. So, over time, even seemingly high-priced collectibles have a chance of appreciation.
An ideal case-in-point of that would be the many commemorative half dollars first released just before 1900. Throughout the 1920s through the 1950s, the Mint produced dozens of different types of commemoratives. When the government introduced those specially minted collectible coins the price was $1 for a 50-cent coin. Many people laughed. Why pay double the face value for any coin? It seemed foolish. Or not. Today, most of those half dollars in excellent condition have a numismatic collector value of hundreds or even thousands of dollars. Time will tell.
On the flip side, one thing time won’t help are some contrived “collectibles” now being promoted on TV. One evening a few weeks ago, as I was scanning channels, I happened on one of those programs where a person hawks items to potential buyers as a clock counts down. From razors to skin creams, blenders to home cleaners, the on-air hosts make the items sound magical, extolling every benefit (real or exaggerated) while making the selling price sound like the deal of the century.
That evening, the on-air host was selling rectangular silver bars. Each weighed one-ounce of pure .999 silver. All were shiny with the image of a colorful flower emblazoned on one side. They were very nice – just as are any of the thousands of small silver bars redeemed daily at coin dealers nationwide.
What wasn’t nice was the price. The salesperson underscored how buyers wouldn’t pay $299, or $289, $279 or even $269. No! For a limited time, patrons could buy one for just $239.
I thought I had misheard. Surely, that amount had to be for two bars. Nope. It was for just one bar.
I had a hard time fathoming the “deal.” On that particular day, most every dealer I knew of was selling similar one-ounce silver bars for between $80 and $90 each. Last week, when silver dropped to $75 an ounce, dealers were selling one-ounce bars for below $80 apiece.
I’m not saying silver won’t eventually exceed $200 an ounce. Someday, it may. We don’t know. Heck, in a week or so, the earth may reverse direction and the sun could burn out. I suppose anything’s possible.
In the meantime, the one thing I do know is that it is sad/foolish/unfortunate/devastating (pick your preferred adjective) to pay over double the prevailing value for anything. As I’ve said many times, it’s always most wise to check with a local dealer or two before making any such purchase.
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