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Sunday, March 27, 2016

How To Buy Coins and Medals Part III


First: Why buy "Rare" Gold coins and medals?

Gold coins and medals can be subdivided into many categorizes.  The first and most obvious division is bullion gold and "Rare" gold.  Bullion gold moves with the price of bullion.  "Rare" gold has a correlation to bullion, but one that is far less obvious and less quantifiable.  It moves with what Marx called the "Fetish Value" of gold. 

The bullion price of gold trades in an open global market.  Open, in that anyone with money can participate but not "free" in that no market on earth is truly free.  All markets are rigged by their governing bodies who are owned by the largest trading houses and banks, which, by virtue of leverage, necessarily dominate the markets. 

Think about Poker.  If you have ten chips and you're playing against five guys with a million chips each, eventually they'll get your ten chips, no matter how good a player you might be.  Now add in the fact that those five guys have levered the game with a bunch of arcane rules that benefit players with more chips and you get the idea of how markets work.

What this means is that markets always eventually reach a value that reflects underlying conditions but the time frame is unpredictable, because the markets are rigged.

So what does this have to do with Rare Gold Coins?

Well, since "Rare" gold coins trade in correlation to the Fetish Value of gold, it's important to realize that the bullion price may be at a certain level for a certain amount of time, yet the Fetish Value of gold can reflect a completely different dynamic. 

People become increasingly interested in gold the more they lose Trust in their Government, their Currency, and their Financial Institutions. 

For many the answer is simply bullion.  The problem some see with bullion is the possibility that the very Institutions one seeks to protect oneself against, will eventually rig the bullion market in ways that make it impossible for anyone but them to benefit from it.  This may or may not happen.

The hedge against this eventuality is Rare coins. 

This is a hedge because and while Size is beneficial, supply is completely decentralized, so that it is difficult for large players to take advantage of their leverage.

Information is also largely decentralized, in spite of the internet.  And the rare coins market is a tremendously information intensive market.  It is easy to find out auction prices over the last fifteen years.  But this is like understanding stock market prices over the last fifteen years.  It tells you very little about anything but the very short term.  And when you move back in time farther than a couple of hundred years, there are no population reports, few mintage records, and most written records are out of print and difficult to locate.

This levels the playing field in the rare coin market.  Goldman Sachs does not deal in rare coins.  And not simply because the market is too small.  They'd be there in a heart beat if they had a real edge, to just take whatever was available.  But they don't have an edge.

So if you're willing to put in the time to learn you can have an edge.

This is the Why of Rare coins.

Part IV: how to buy Rare coins


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