Palladium…an interesting metal
Today, palladium trades for less than a third of platinum, but is that fair?
Palladium is one of the PGMs (Platinum Group Metals). These metals are elements (remember the periodic chart) and share similar chemical properties. In addition to palladium and platinum, PGMs contain rhodium, ruthenium, iridium and osmium.
Interestingly, these metals rarely occur around the world, but they can be found near each other. Nevertheless, their ore can be difficult to mine.
Per the International Platinum Group Metals Association, one in four goods manufactured today either contains PGMs or had PGMs play an important role in their manufacture. Furthermore, PGMs play important roles in automotive, industrial, environmental, medical, technological, jewelry and other miscellaneous applications.
Thinking of the economic rules of supply (difficult to mine) and demand (lots of uses), why is palladium much less than platinum?
This article, Platinum-palladium price gap will narrow further – Stillwater, claims one of the reasons platinum prices remain higher is due to the dominant role South African mines play in the production of PGMs. “This is because the market price for platinum, which accounts for most South African PGM production, will need to be high enough to incentivise miners in the country to bring on new capacity to meet global requirements for the metals.”
Interesting…
But, per the article, the Stillwater mines in Montana produce more palladium than platinum.
Plus, palladium and platinum are interchangeable in some applications such as catalytic converters for cars.
If the same amount of metal at 1/3 of the price (for now) can be used, wouldn’t it make economic sense to use palladium?
Logically, that means the demand for palladium increases. Back to the rules of supply and demand. The demand increases, the supply remains difficult to obtain and the prices should go up.
This article substantiates the increase in demand, but with only a small increase in price. (Demand for PGMs to rise, prices steady) China became one of the biggest consumers of PGMs goods in 2009. This year with emissions rules for their vehicles, they should see an increase in automotive PGMs (e.g., palladium).
Frank McAllister, CEO of Stillwater Mining, thinks the price of palladium will rise to half that of platinum, however he cautions that price will be determined by the market and the speculators.
The disparity in PGMs, in particular platinum and palladium, remains odd and bears watching.
Bait and Switch
Normally, you hear about bait and switch tactics being used by merchants. However, in the coin collecting world, bait and switch can be used by customers as well.
What is bait and switch?
In general terms, bait and switch occurs when a merchant advertises a great deal on one or more products to interest buyers. When customers attempt to purchase this great deal, the merchant is out of the special but has an alternative you can buy. The alternative may be more expensive or it can be lesser quality, either way, the merchant gains a bigger profit margin.
The “baiting” grabs your interest; the “switching” provides greater benefit to the seller.
Now, you’re thinking, “How does this work with the customer doing the baiting and switching?”
Well, it’s simple really, and it’s frustrating, too, for the sellers.
Let’s look at an example between Dealer Jim and Numismatist Bill. Jim can be a large dealer with a store and staff, or he can be an individual seller on eBay. Bill, the buyer, can be another coin dealer buying long distance from Jim, or he can be an indivdual collector.
Either through the internet or other marketing vehicle; for example, cable TV shows or coin magazine ads; Bill buys a coin from Jim. Per the agreement, Jim ships the coin to Bill.
Time passes, Bill decides he is unhappy with the coin and returns it to Jim. Upon receipt of the coin, Jim notices the packaging is different from what he sent Bill. Looking more closely, he notices the coin is not the same coin.
In some cases, Jim confronts Bill with the fact that the returned coin is not the same as the one sent. In other cases, he puts Bill on the “do not sell to this person” list. And, in still other instances, Jim takes the fight public (in chat rooms and forums) to alert others to Bill’s perfidy.
Jim’s actions depend on the situation. Is the dollar value lost worth the cost of the time to fight the issue? The Bills of the world gamble that the Jims will just let it go. But, sometimes, the Jims of the world get fed up with the Bills and fight the good fight to get either their coin or their money back.
If you are a buyer and do this bait and switch with coins, shame on you. Remember the adage, “What goes around comes around.”
If you are a seller, technology helps you especially with small quantities. Yes, the effort adds time to the process, and whether you do it or not depends on your risk tolerance and how much you’ve lost in the past.
What technology? The digital camera.
Before Jim sends the coin to Bill, he takes pictures of the coin, obverse and reverse, and of the box and certificates. He copies the photos to his computer and names the files with identifiers pertinent to Bill, the coin and the date. He can include these pictures with the coin in the shipment to Bill, he can send Bill the pictures via email, or he can note the filenames along with a short description of the pictures on the packing slip to Bill. In all cases, Bill is aware that Jim has photos of the coin.
The deceit of the Bills of the world exists. Sometimes the extra effort to stop them, either before or after they try their dishonest tricks, just isn’t worth it. Other times, the extra time and effort of preventative measures can save you from a large loss.
Grandpa’s Coins
Grandpa passed away a few years ago. When he was gone, he wanted you to have his coin collection.
Knowing his family did not share his passion for coin collecting, Grandpa sold a lot of the less valuable coins in his collection. But, a few, favorite coins he just couldn’t sell. You see, Grandpa’s collecting gene was strong.
Now, you face tough economic times. You lost your job. You found another, intermediate position, but it does not pay nearly as well. You have bills to pay and a family to support.
You know Grandpa wanted you to have his coins for a “rainy day.” Getting deeper in debt and with bill collectors calling, you decide the “rainy day” has arrived.
You pull the coins out to look at them. You fondly remember being small and standing at Grandpa’s knee while he told you about the coins, their history and what made them valuable. With a hint of sadness, you regret not spending more time with Grandpa and his collectible stories as you got older.
Now, you look at what’s left of Grandpa’s collection and do not know any of the details about the coins. They shine with gold and silver brilliance in their protective holders, but what is their value?
You’ve seen and heard the “mail your gold to us” ads on TV. You’ve seen the billboards and the bus stop signs with “we buy gold” messages. Banners hang from jewelry stores and pawn shops saying, “buying gold.”
It’s confusing – where should you go to get the best price for your Grandpa’s coins? And, what about the silver coins?
Very simply, do not send or take your coins to one of the “we buy gold” places.
Your best alternative for selling coins is a coin dealer.
The “we buy gold” people consider the value of the gold. Unless they are also a coin dealer or collector, they do not take into account the value of the coins. In many cases a coin’s value can be significantly higher than the value of its metal content.
Depending on the quantity and the rarity of the coins, you could lose hundreds or thousands of dollars by selling your coins to the wrong place.
Look for coin dealers, either in coin shops or at coin shows. Keep in mind that most coin dealers are generalists, but they also have specific areas of interest and expertise. Additionally, coin dealers operate under different business costs and profit margins – meaning some dealers pay stronger than others.
Ask several dealers for their best offer on your collection and deal with the one you feel most comfortable with their expertise and offer.
A Fistful of Obols?
Since Greece has been in the news and since the below comment in a National Geographic Traveler (Nov/Dec 2009) caught my eye, let’s talk about obols and drachmas.
“The name for the old Greek drachma coin comes from the verb meaning ‘to grasp.’ Originally, a drachma equaled a fistful of silver coins called obols, each worth a sixth of a drachma.”
Not being an ancient coin or a foreign coin aficionado, this, nevertheless, peaked my interest.
Other than Greek coinage, what the heck is an obol and what is a drachma?
As a quick reference, Wikipedia provides good information (though several sources should be used if you need absolute accuracy – they offer cautions about obtaining additional references). Wikipedia’s section on Greek Drachmas explains the overall background of the obol and the drachma.
Similar to the note in the Traveler magazine, Wikipedia says, “Initially a drachma was a fistful (a ‘grasp’) of six oboloi (metal sticks), which were used as a form of currency as early as 1100 BC. It was the standard unit of silver coinage at most ancient Greek and Roman mints, and the name ‘obol’ was used to describe a coin that was one-sixth of a drachma.”
They go on to describe ancient currency equivalents: 8 chalkoi = 1 obolus; 6 oboloi = 1 drachma, 100 drachma = 1 mina; 60 minea = 1 Talent. Minae and Talents were not minted coins, instead they were units of measure for commodities such as grain.
Hmmm…interesting…
Now, the more modern drachma enjoyed three different eras before Greece adopted the Euro coinage and currency.
The first modern drachma began when the coins were re-introduced in 1832. This first period lasted until 1944.
After Greece was liberated from Germany in 1944, the second drachma period began with an exchange rate of 50,000,000,000 to 1. (Wow, an exchange rate worse, much worse, than some of the world currencies today.) Only paper was printed for this second period.
In 1954, Greece started their third period for the drachma. This period was an attempt to halt inflation by changing the values of their money at a rate of 1000 to 1.
In March of 2002, the Greek drachma, as a currency, ceased to exist in circulation, being replaced with the Euro.
At the time of conversion, 500 drachmas, one of their denominations, exchanged into 1.47 Euros.
It’s amazing what you can learn when a simple statement in a waiting area’s magazine peaks your interest.
Of course, if you have an interest in ancient or foreign coins, the monthly coin show has dealers who specialize in those types of coins.
Say vs. Do…interesting…
In reviewing the various commentaries, this one by Greg Hunter titled “Do What Soros Does, Not What He Says” struck me as interesting.
It seems Mr. Soros claimed, “the ultimate asset bubble is gold,” yet his fund management group became the fourth largest investor in the SPDR Gold Trust. (Soros More Than Doubled Gold ETF Stake in 4th Quarter) Plus, “gold is now the single largest investment in the multi-billion dollar fund George Soros runs.”
Furthermore, Mr. Hunter found other investment authorities buying gold as well.
“Other big financial players are seeing trouble too–that’s why they are buying gold. John Paulson, the hedge fund manager who made billions shorting the housing sector just as the subprime mortgage crisis got underway, started a gold fund late last year. David Einhorn, another investment guru who made a mint shorting Lehman Brothers long before it went under, bought thousands of ounces of physical gold for his fund early last year.”
Now, let’s look at recent market information.
First, TheStreet.com talks about Gold Prices Rebounding. Gold prices fluctuated this week due in part to the IMF announcing they planned to sell 200 tonnes of gold and the Chairman of the Fed announcing an increase in the discount interest rate from 0.50 to 0.75 percent.
Similarly, The Motley Fool commented that not only Olympians can enjoy gold and silver with their article, Your Moment to Go for the Gold and Silver. Isn’t it timely that the Olympics coincide with increases in the metals markets?
Looking at a broader timeline, the commentary, Gold’s Bull Market Turns 9 Years Old, reviews gold’s performance over the years. They chart the performance of gold against major currencies and note, “Gold Remains Strong in All Currencies.”
They end their analysis with the viewpoint, “Pressure is likely to stay on gold and the metals in the weeks ahead, which means it’s time to take advantage of weakness by adding or buying new positions. Gold’s major trend remains up, indicating it’s headed higher. But for now, it will temporarily remain under downward pressure by staying below $1110.”
In conclusion of the initial commentary, Mr. Hunter says, “‘Do What Soros Does, Not What He Says,’ because he is worried about something, and you should be too.”
Now, is Mr. Soros worried? Or, is he a savvy investor who knows how to read the market and the economics of our country and the world?
I vote for the savvy investor.
Could this be the right time for a significant gold and silver investment?
Continuing the Cautionary Tale
Do you think slabbed coins – those coins from grading services in protective holders – cannot possibly be counterfeit?
Think again.
Generally, grading companies assign a identifying number to each coin they grade. Several grading companies also include a bar code and a holographic label. Grading companies design their holders to maximize viewing the coin while protecting it in a sealed environment.
Look at this link for a list of grading companies along with example pictures of their holders. Make sure you also look at pages 2 and 3 where they list out-of-business companies and do-it-yourself slabs.
In all likelihood, counterfeiters buy legitimate slabbed coins and spend time copying those specific coins along with their holders and labels. Of course, if one researches the identifying number of the coin, it will be listed and in some cases even include photographs on the grading site.
What’s the saying? “The best defense is a good offense.”
Educate yourself as the start of your offensive strategy.
Make sure you know the various slabs from the variety of grading services. Go to their web sites to view their slab information. If available, read what each grading service is doing to counteract the counterfeiters and to educate numismatists about invalid copies of their graded coins.
Though not the recommended way to learn in this case, experience remains a great teacher. Read the forums, talk to other numismatists, ask coin dealers and learn from people who mistakenly bought counterfeit coins or know about the experiences of other people who did.
Both NGC and PCGS include articles and helpful tips about counterfeit slabs. Plus, on the upper right corner of the PCGS page, you can enter “counterfeit slab” in the search field. The search results contain many forum comments about counterfeit slabs.
Just think of all the information you will learn as you educate yourself against the counterfeiters!
A Cautionary Tale
Among the coin dealer community, comments occur more and more frequently about people coming into their shops presenting coins they want to sell that were purchased on eBay. Unfortunately, the coins are counterfeit.
Due to the current popularity of gold, and to a lesser degree, silver, many of the counterfeit coins replicate popular gold and silver coins. As technology advances, the counterfeit process becomes more difficult to detect at first look. Some coin copies contain the right metal, just not enough of it. Others have gold plate over a non-precious metal. Still others have minute, but telling, signs that to an expert indicate the coins are not real.
Now, this is not to say that every coin presented on eBay is counterfeit. Many ethical coin dealers use eBay as a sales channel along with many ethical numismatists.
However the anonymity of the Internet makes it much easier for counterfeiters to take advantage of the unwary and to prosper with their illegal activities. (Take a look at our article Buying Coins on the Internet.)
Another important point to remember, other countries do not have the same counterfeit laws as we do. This means the counterfeiter can legally make and sell copies of US coins on the global realm of the Internet. However, those counterfeit coins will not be valuable, and not worth what you paid for them, in the numismatic or investor market.
Regrettably, the eBay rules, identified with good intentions to protect both the buyers and the sellers on their system, make it difficult for the ethical buyers and sellers to get coin counterfeiters removed.
What can you do to protect yourself?
Well, perhaps the easiest, though not the most practical, is not to purchase any coins via eBay or the Internet. That seems drastic considering the many ethical Internet coin marketplaces. However, coin shows and coin shops offer the opportunity to view coins closely with your own eyes, and a loupe if you desire, before you purchase the coins.
The next option requires research – lots of research – to determine the reputation and ethics of the coin seller. First, you can research the internet to see what, if any, comments people have made about the seller. But, be careful here, too. The Internet allows people to make comments either true or false. That’s why you need to do lots of research.
Ask other numismatists, such as coin club members, if they have bought anything from the seller. Visit coin forums on the Internet and ask what people know about the vendor.
Check the seller’s memberships in the coin collecting community.
Determine if they are a member of any best business practice groups, especially those on the Internet.
What if you cannot find much information, and you still want to pursue the coin that interests you?
Determine your risk tolerance. Are you willing to gamble the money for the coin? It is gambling in that you don’t know if you will receive value for your money or a counterfeit.
If the value is beyond your risk comfort zone, but the coin calls to your collector gene, purchase a coin of lesser value from the seller as an experiment. This won’t prove beyond a shadow of a doubt that the seller is ethical, but it will give you an example of their wares.
Basically, the Internet offers many wonderful opportunities in the comfort of your own home. But, you need to be constantly vigilant for possible bad experiences and loss of money as well.
New scrip another collectible opportunity?
Remember a few weeks ago, we talked about how numismatics also applies to currency, not just coins.
Did you know anyone can issue currency in the United States provided it does not look like our federally printed currency? And, have you heard, several cities and communities have begun issuing their own scrip?
Take a look at this MSN Money article on cities printing their own cash.
Some collectors (numismatists) specialize in paper currency, and some concentrate even further on depression era scrip.
For more information on the historical, depression era scrip, visit this site. They provide more information, especially the definition and pictures of depression era scrip.
Cities printing scrip today are doing it for many of the same reasons local scrips became popular during the depression.
The MSN Money article talks about the difficulty of printing and circulating the local scrips. The major challenge stems from the local nature of the currency. When in-town businesses have to pay out-of-town suppliers, they need a currency accepted by the out-of-town businesses.
In some cases, it appears the scrip is only accepted at a few businesses. However, as the article comments, “When the Treasury prints billions to bail out banks and automakers, people look for alternatives. These folks may look nutty now, goes the quip, but wait till the dollar goes the way of the Argentine peso. Then you’ll be exchanging a wheelbarrow of cash for a bay buck, local currency boosters say.”
Note, a bay buck is one of the new scrips. Plus, they recognize their scrip can be collectible. Take a look at this site titled Collectors take Note.
But, could all of these new scrips, quite a few of them, become collectibles for the people who enjoy studying and collecting paper money?
Could their collectible value surpass their purchasing value?
If you are not into collecting paper currencies or scrips today, make sure you do your homework. As with almost any collectible, some scrips are more valuable than others. That will be true with the new scrips as well.
You could pay the current prices for the scrips and win big in a few years. On the other hand, you could pay the current price and lose money in the future.
But, life’s a risk, too. Just make sure you investigate and determine if and when you want to collect these scrips.
And, if you’re just a collector at heart, some of the scrips are nicely done and could be collected for their artistry.
Two shows this Sunday
Once again, the Greater Atlanta Coin Show and the North Atlanta Sports Collectibles Show occur on the same Sunday at the Holiday Inn Select on Chamblee Dunwoody Road. (Click here for directions.)
Of special note to those of you who like to meet sports figures, Otis Nixon will be autographing his book, Keeping It Real, on Sunday afternoon from 1 to 4.
Come early in the day to browse the coins, currency and jewelry offered by the coin dealers on the coin show bourse. Next, look at the sports collectibles offered by their vendors. Then, stay to meet Mr. Nixon and get his autograph.
Yes, it’s supposed to snow today, but Saturday’s forecast says sunny and 46 degrees. Any accumulation should melt.
The roads should not be a problem on Sunday. Come visit the Holiday Inn Select and enjoy two shows! (www.atlcoin.com)
Gold, Again…
Not only is it interesting to watch the gold charts, it’s also intriguing to read the various news and commentary on gold.
Yesterday, Ben Bernanke, Chairman of the Federal Reserve, announced interest rates would be increased in the near future. Currently, interest rates are very low at .5 percent.
Shortly thereafter, gold prices dropped – which is odd, because they normally go up on news of interest rates going up.
Per Kitco’s charts for yesterday, the New York spot bid price spiked down to the $1062 per ounce range. But, the price chose not to stay down for long. Today’s prices peaked over $1095 mid-afternoon. Will it stay in this range?
Another interesting exercise is to look at the performance charts to see where there is “support” and “resistance” on the gold prices. A good chart source is www.stockcharts.com. You can either click on the $gold consistently requested chart or type $gold into the symbol area. Either method provides a charted view into gold’s performance over time.
In the meantime, back to yesterday and today’s gold performance.
Take a look at this article on Bloomberg News: Gold Gains to One-Week High on Commodity Rally, Euro Concerns for a discussion and speculation on what gold prices will do in the near future.
One opinion stated in the article says, “I don’t see any scenario where gold will collapse.” They definitely have experience in the market, but are they right?
In an apropos quote, Rick Belluzzo, former Microsoft president, said this about embracing change as opportunity, “Life may be a roller coaster, but without the ups and downs, it wouldn’t be much of a ride.”
Gold sure forms its own roller coaster – watch it or ride it, both can be fun.
