Stamps & Coins: Coins worth a pretty penny

The legions of print and broadcast advertisers begging to buy your gold coins and "unwanted jewelry" are all but incessant. Even during the gold boom of the early 1980s, dealers didn't promote the purchase of gold as much as now. But that's understandable.

The economic climate back then wasn't as dire. Personal finances now are such that many individuals might be considering parting with heirlooms or coins. But what might you be selling? As regular readers know, my eternal mantra has been, "Knowledge is both power and profit." Since almost the beginning of coins being minted, gold has been considered the premium medium. Most modern gold coins are not and will never be rare.

Conversely, older coins with low mintages, rare dates or mint marks command substantial premiums well above their gold content.

Happily, most coin dealers are reputable and will readily identify a rare variety if you happen to own one. Still, it's best to know before you go.

Dozens of books are available from dealers or libraries that call out scarce coins. Insofar as those struck from gold, one of the best is "Gold Coins of the World," considered the definitive encyclopedia. The 800-page tome lists 21,000 coins dating as far back as 600 B.C. Accompanying each are detailed descriptions, prices and weights, along with 8,000 photos, some of which are otherwise available only in out-of-print books.

Published by the Coin & Currency Institute, the price is $89.95, $79.95 on CD. It's not inexpensive, but it could be considered a bargain if it helps potential sellers increase the amount they realize on their coins by hundreds or thousands of dollars.

Now for the flip side of the coin. What if you're not fortunate enough to own gold? Instead, you may have a collection of lowly pennies you collected as a youngster or were given by a relative.

When the price of copper skyrocketed a few years ago, the government made it illegal to melt pennies for their metallic content. So, a penny is just a penny, right? Not so fast.

Depending on your age, you may recall sorting through change to find the elusive Flying Eagle or Indian Head cents produced between 1856 and 1909. As recently as the 1940s and '50s, many of them circulated regularly along with the more modern Lincoln pennies. That allowed kids and adults to extract and collect them. A goodly number of those collections surely still sit on dusty shelves or stuffed in boxes on the assumption that their worth is minimal at best.

In truth, the least that dealers will pay for Flying Eagle cents in only "good" condition (which really isn't visually appealing) is $20 apiece. For an 1856 Flying Eagle penny, the value ranges from a low of $4,000 to more than $45,000.

Even common-date Indian Head pennies in average condition bring a minimum of $1 each. Of course, the higher the grade, the higher the price.

And those that are more scarce – minted between 1858 and 1878 – have substantial value, from $4 to $600 in average condition to hundreds or thousands of dollars if they are in mint condition (uncirculated).

So in reality, that paltry penny could very well be worth more than a hefty gold coin. Moreover, one of those once-plentiful cents once used to purchase a newspaper or candy bar might now have enough collector value to fill up a gas tank or even buy a new car.

Because of prices and opportunities such as these, a new edition of the book "A Guide Book of Flying Eagle and Indian Head Cents" has just been released. The full-color, 288-page guide includes updated pricing, market data and photographs. It also includes expert advice on collecting and interesting background information.

Source: sacbee.com

Mint Considers Starting Coin Reserve

Coins are in surplus now but the Mint is thinking about a reserve of coins to provide a buffer supply in times of high demand, or unexpected disruption, Mint Director Edmund C. Moy said in an interview with Coin Chat Radio May 20.

Right now the Mint produces coins month to month to match orders from the Federal Reserve System, which oversees the banking system's supply of coins and paper currency. It has no extra supply in on hand.

"It would be nice to have a bank of coins to draw on," he said.

During some recent months the orders for coins exceeded the Mint's capacity to produce them, Moy pointed out. A reserve of coins would allow the Mint to meet comfortably this higher demand.

"We've decided that the strategic reserve was a good idea to explore," Moy explained.

"If this costs a lot of money and it's cheaper for us to find other ways to meet the demand, that's where we're going to go."

Why examine this possibility in a year when coin demand and production is expected to drop by 70 percent from the 10 billion coin level of 2008?

Moy said it is a question that first came up two years ago when the Mint's distribution center was hit by a tornado.

With Washington intervening with the automobile manufacturers in Detroit, is a coin reserve some way to keep blank and strip suppliers to the Mint in business?

Moy said at this point suppliers have not officially been part of the discussion, but he noted that if one of them is acquired by another firm or goes out of business, it could create difficulties for the Mint.

How big a stock of coins would be needed?

Moy said that is something that is under consideration and a specific target is not yet defined.

"We were created to create coins for use in commerce. The worst thing that can happen is that we have a shortage of coins," Moy said. "It's better to have a little bit extra."

To that end, "We're studying all the past trends," he said.

Because coin demand began falling even before the current recession, has there been a paradigm shift such that future demand for coins would be lower than what used to be the case?

Moy noted that coin demand at the commercial level has been holding up and coins are used in about one-third of commercial transactions. It is the demand for checks that has been declining.

"Checking has gone down by roughly half its volume," Moy said.

He expected fundamental underlying demand for coins to continue to hold up.

The Mint is also evaluating the impact on Mint production of what Moy called coin aggregators, a term for Coinstar, which is a business that puts coin counters in commercial establishments and allows consumers to exchange coins for store credits or paper money.

This has the effect of meeting commercial demand for coins without additional new supplies being needed from the Mint.

"We hope to make some decision about this this year," Moy said.

Should the Mint decide to proceed with the concept of a strategic reserve, he said that nickels and dimes would be good denominations to strike for inclusion in it because so few of them have been struck this year and because their designs are not changing regularly as is the case for quarters and dollars.

This might be a warning to collectors who are drooling over the current relatively low mintages so far this year and the prospect that no more nickels and dimes will be produced.
Source: numismaster.com

Gold Buys Freedom

There are dozens of financial reasons why it makes sense to own gold (and silver) as insurance against the risk of declining values of paper assets such as stocks and bonds and currencies (especially the U.S. dollar). Many of my weekly essays are devoted to the financial aspects of owning precious metals.

This week, I would like to address what I consider the number one political reason to own gold - individual freedom. Although I have considered the political aspects of gold ownership ever since I bought my first gold coins in 1973, it wasn't until last week that I came across a superb articulation of this concept.

Dr. Arthur B. Robinson is president and a research professor at the Oregon Institute of Science and Medicine. Years ago, he took over publication of Access To Energy (ATE), a pro-science, pro-technology, pro-free enterprise monthly newsletter. Since energy availability is affected as often by political actions as technological issues, ATE regularly covers politics and economics. The recently released August 2008 issue of ATE contains an essay titled "Printing Capital." With Dr. Robinson's permission, here are some cogent sections related to gold:

"Most capital is stored in kind as factories, power plants, roads, buildings and other useful products of human effort. It can also be temporarily stored in smaller quantities as money - the medium of exchange ... Money is, however, not capital.

"All sorts of things have been used as money. Thousands of years of experimentation has determined, however, that the best money is silver and gold, especially gold. Gold is convenient in many ways. One important way is that it cannot be counterfeited and is costly to obtain from nature. This difficulty keeps the supply of gold approximately constant so that prices remain stable.

"The rise of the United States as a free, prosperous industrial civilization was greatly facilitated by the use of gold as money ... In addition, the great industrial productivity of the American people - a greatness that resulted from our freedom, not from our genetics - and the stability of our gold-backed currency made the U.S. dollar the world reserve currency. Throughout the world, people trusted the U.S. dollar as money.

"Then - the counterfeiting began. The U.S. government ... printed new money as a way of funding its activities. As the supply of money rose, prices rose concomitantly.

"Printing money can be used, however, as more than a mechanism of hidden taxation. It can be used as a weapon against freedom.

"Gold money has been correctly called 'coined freedom.' Even today when few Americans are old enough to remember the use of gold coins as money in the United States, the U.S. government realizes that gold provides a measure of its economic dishonesty  and works through surrogates to minimize the rising price of gold. It also taxes gold in such a way that gold cannot serve as a store of value ... because the gold itself is gradually confiscated through taxation by claiming that its price rise is 'income' or 'capital gains.'

To obtain the entire August 2008 issue of Access To Energy or for subscription information, go to their Web site at www.accesstoenergy.com.

I have concrete examples relayed to me personally how gold buys freedom.

I have met a number of Southeast Asian refugees over the years, including many who have come to my coin shop to buy gold. In almost every instance, these refugees were able to escape with their lives because they owned gold to buy their way out. The general public would be surprised how many of these refugees still want to own gold even though they might consider the United States a "safe haven."

A few years ago, I bought the surviving pieces of a hoard stored in a Dutch cookie jar. When the Germans overran The Netherlands in 1940, the gold coins were used to pay for the escape to the Western Hemisphere of many of this Jewish family's members.

So, buy gold (and silver) for all the right financial reasons. But keep in mind that some physical gold in your possession may someday save your life and freedom.
Source: numismaster.com

How Many 'Round Pounds' are Counterfeit?

What percentage of British £1 coins in circulation are counterfeit? The latest official figure released by the British Royal Mint indicates about one in 40 coins or about 2.5 percent of all "round pounds" in use are fakes. This is an increase from the number of counterfeits detected in the past, but is the figure accurate?

Not according to the British Broadcasting Corporation. In an April 8 BBC report the BBC relied on figures provided by a private British company called Willings for statistics. Willings manufactures counterfeit coin detection machines for businesses and other organizations that work with coinage.

The BRM inspects a random sample of circulating coinage twice a year. During the last quarter of 2008 the mint removed 270,000 bogus £1 coins from circulation. Only 97,000 coins of this denomination were removed from circulation during all of 2007.

These statistics may be troubling, but if the BBC and Willings statistics are reliable the mint has underestimated how many bad £1 coins are actually in circulation. Willings spokesman Andy Brown told the BBC the company study indicates one in 20 coins, or five percent of the £1 coins the company tests have proved to be fakes.

Brown did not elaborate on why the company's study should be considered to be more accurate than is the study done by the BRM. Brown did not present anything through the BBC report that indicated the Willings survey was a balanced national survey similar in scope to that done by the BRM, or if the Willings survey concentrates more in specific areas of coin intensive commercial activity than does the semi-annual mint survey.

Not to be overly critical of the BBC report and of Willings, but there was also no indication in the April 8 BBC report regarding if Willings counterfeit detection devices took normal differences in tolerance in genuine British £1 coins into consideration.

Brown did indicate coins checked by Willings were sent to the company from "car parking firms, vending machine operators, local councils, and even banks."

Brown said of the Willis findings, "We would estimate as many as five percent of coins we test are fakes. We've been collating them for the past four months or so, and already have a collection of several hundred."

Brown then added, "The figures quoted by the Royal Mint were wide of the mark."

The BBC report also quoted former Queen's Assay Master Robert Matthews as saying, "The mint is really trying to play down the problem and keep it as low key as possible. They've not produced any publicity material for banks etcetera to tell us how to differentiate between real and fake coins. They don't want to undermine public confidence in the coins; you might get people refusing to take them."

In fact, the BRM works with banks, the postal service, the vending machine industry, and law enforcement agencies to limit the number of bogus £1 coins in circulation.

Matthews continued, "There's a whole raft of organizations who should have been tackling this who haven't been tackling it. It's like a game of pass the parcel. In the final analysis it's the Treasury who should be dealing with this  and checking the work of the cash centers."

Brown did make some valid points in the BBC article. If a coin is identified as a fake while in circulation the person who owned it last loses, since the coin is then confiscated. Brown said, "Provided the coins are just being accepted and passed through the system nobody cares. It's only when people start rejection the coins that people come to us."

Brown added, "We can manage a 50 to 60 percent detection rate while the machines being used by the Royal Mint can only pick up around 30 to 40 percent. That means even when fake coins do pass through security checks at accredited cash centers, two thirds will come right back into circulation."

You have to admit it sounded like a sales pitch when Brown continued, saying: "Their [British Royal Mint] percentage will go up as they get better at detecting fakes."

I guess the Willings firm must have more experience with assaying coins than does the 1,000 year old plus mint. I'm not saying the Willings company couldn't have something better to offer, but until somebody comes forward to prove their sampling is similar to the sampling made by the BRM how does anyone know for certain if the number of counterfeit coins in circulation is truly understated by the mint or if we are comparing two totally different sample markets.

Perhaps since the De La Rue printing company doesn't plan to make a bid for the BRM perhaps Willings would like to purchase the mint? A discredited mint should sell for a bargain price.
Source: numismaster.com

Gold investment continues to be attractive

Fears of future inflation and ongoing financial uncertainty led investors to continue to flock to gold in the first three months of 2009.

Total demand for gold in the first quarter of 2009 went up by 38 per cent (year-on-year) to 1,016 tonnes, a 36 per cent rise in value terms to $29.7 billion.

However, in India, traditionally the world’s largest gold market, demand declined significantly under pressure from record rupee prices and a major deterioration in the domestic economy. Demand fell 83 per cent.

According to figures published by World Gold Council (WGC), investment demand for gold, which includes exchange traded funds (ETFs), bars and coins, was the major source of growth in the quarter, reaching 596 tonnes, up 248 per cent.

A record level of investment was witnessed in ETFs.

Similarly, net retail investment (total bar and coin demand) remained highly robust. Germany was the single biggest bar and coin market in the first three months of the year, while Switzerland came second followed by the U.S.

However, the impact of recession on consumer discretionary spending continued to take its toll on both jewellery and industrial demand. Gold jewellery demand was down 24 per cent from the earlier year levels, with most countries suffering a decline as consumers responded to the high and volatile gold price, which reached record levels in some countries.

According to World Gold Council CEO Aram Shishmanian, “There has been a seismic shift away from capital appreciation towards wealth preservation and we believe this trend will define the investment behaviour in the next decade. Gold, as one of the few assets that has held its value during the current economic crisis, has been sought after by investors who are drawn to its proven protective attributes as well as safeguarding themselves from the erosive effects of future inflation”.

Source: hindu.com