GOLD COINS AND MEDALS AND FUTURE VALUE

 

Future Value should be the main consideration of any financial decision.  The future, of course, is unknowable.  So we look to the past as prologue in figuring future value.

Most people in determining a fair price for a gold coin or medal look up the prices at auctions in the recent past for similar items.  And then try to pay a little less.  A good deal.  Right?

This is the same strategy most people use for buying a house, or a common stock, or corporate bond for example.  The distinction is that these are most often mass market and units are fungible.

The problem in employing this strategy in the Rare Hard Asset Market is that, when an item is rare any given auction may provide faulty information.  For example, if 2 billionaires both want an item it could go for 20 times the price it would go for in an auction where no billionaires are bidding.  I've seen it happen.

Conversely, an item that is poorly represented in an auciton, or is rare for reasons many are unaware, might go for a pittance of its future value in a given auction.  But when auctioned differently at an auction house used to handling this type of material for an educated clientelle, the same item might go for 20 times the value.

And finally the market is moving so quickly you might look up the value of item auctioned six months ago and plan to bid around that much, and it goes for twice as much six months later.

So what's the answer?  

Future Value.

You must become an expert at  estimating future value

What are the variables for gold coins and medals?:

Rarity,  Beauty,  Historical Importance. Demand.  

THere are other variables, to be sure.  But a command of these is most helpful.

As for Rarity Beauty and Historical importance, nothing is a substitute for cold hard research.  And good Taste.

Obviously, Demand is easiest to determine - but it is the most volatile.  It may last a few years, or a few months or many years.  It may be driven by a narrow group of avid collectors of a wide group of interested collectors.  And it leads to momentum investing.  Never a great idea.

What you want to determine to figure out future value is Future Demand.   This is not obvious.  And to undertand this you must undertstand a key aspect of any transaction.

Here's the secret: A transaction can be viewed as BUYING AN ASSET  OR,  A transaction can by viewed as SELLING A CURRENCY.

You have to consider both views.  And to do so you must have an understanding of the present and future value of the CURRENCY - which in no small part determines the current and future value of the Asset.

What is currently going on in the world of global currency?  You'll have to research that one yourself.  And until you do it will be impossible to make really good decisions about buying Hard Assets - which necessarily move in inverse relation to the currency.  So if you know where the currency will trading be in 2 or 3 years, you also know where the hard asset will be trading.