Coin Show and Demand for Physical Gold

I recently had the chance to go to a coin show.  If you have never been to one, I would highly recommend it.  Most big cities will typically have one at least once a year.  You may even find smaller coin shows in smaller cities.  Even if you are not interested in buying or selling, it is always fun to walk around and talk to the coin dealers.  It is a great place to hear subjects being discussed that you normally wouldn’t hear elsewhere.

Most coin dealers will talk to you about issues such as the Fed, the banking system, inflation, and oftentimes government in general.  I am not saying that all of them are right in everything they say, but you will definitely get some interesting points of view.

If you are looking to buy or sell precious metals, then a coin show is an excellent place to go.  You can go around and ask for prices (buy or sell) on particular things.  There is a lot of competition in the room, so you will typically find that you are getting something around a fair market price.  If silver coins are going for 4 or 5 dollars above spot price (which they seem to be), then you will probably find most dealers quoting that.  Just remember that some coins demand a higher premium than others and that a good price will typically be higher than the spot price of the metal.

The most interesting thing about this particular coin show was when I asked several dealers about one-tenth of an ounce gold eagles.  I only found one out of everyone I asked and that was for a proof coin going for a high price.  One person I asked said that there were 3 people before me who asked the same question.  He figured that this is all people can afford.  There might be something to that.  Some 25 year old who has a low paying job out of college probably does not have over $1,400 to drop on one ounce of gold.  So they go after a tenth of an ounce.

One interesting note though is that there were still a lot of one ounce silver eagles to be had, which were typically going for around 27 or 28 dollars each.  So for all of those silver bulls out there who are constantly claiming that there is a major shortage of silver in the world, it didn’t seem to be the case at this coin show.  It was gold that was harder to find.

After the big drop in the gold price back in mid-April, I have been seeing stories about high demand for physical gold.  A lot of gold bugs have been claiming some kind of a conspiracy or manipulation that led to the big fall in the gold price.  While I don’t know if that is true, I know that the paper market in gold can only be manipulated for so long if there is enough demand for physical gold.  There can only be a major disconnect for so long.  If enough people take delivery, then the price will go up.

So while attending this coin show is not any kind of a valid statistical sample, the indications I saw were consistent with the stories talking about the high demand for gold.  Apparently one-tenth of an ounce eagles are the most popular.  There were other gold eagles there, although not nearly as many as you would expect.  Most coins being sold were foreign currency and rare coins.

The one-tenth ounce gold eagles carry a big premium, at least in percentage terms, even compared to other gold eagle coins.  You will typically pay over 10% above spot price.  If gold is $1,400 per ounce, you should expect to buy a one-tenth gold eagle for more than $14 (10% of $140) above spot.  Right now, you would probably actually pay 15% above the spot price.  Meanwhile, the percentage premium on a one ounce gold eagle would be far less.

So either these coin dealers did not have any one-tenth of an ounce eagles to sell or else they did not want to get rid of them.  Either way, this is a signal that there is a high demand for these coins.

I don’t know if this will translate into a high demand for all gold coins, but it is definitely one sign that there is a potential for a big run in the price of gold coming.

5 thoughts on “Coin Show and Demand for Physical Gold”

  1. Geoff,

    I’m in Grand Rapids, Michigan. I split my investment/savings money evenly into three categories every month: 1. Precious Metals; 2. 401k and 3. cash. I have been buying precious metals every month for four years now. I have missed ONE show in those four years. I have never seen a shortage of silver. Ever. My dealer’s box is always filled with 1 oz generic rounds, ASE’s, Maples, Libertads, 10 oz bars, etc., whether silver is $15 oz or $45 oz. I know my dealer and his partner well. They let me sit around and watch and listen at their table. Most who come up are buying silver. Very few buy gold. And when they do, it is usually fractional. I think the reason for this is that working class people don’t have the money to get into the stock market, or physical gold, so they buy silver instead. People with money are buying stocks. Working people are buying silver and fractional gold. I would also note that 75% of the people buying precious metals are 60+ years in age. I think this is because younger working class people are just trying to stay alive and can’t even buy silver……..

  2. Geoff,

    I forgot to add: There isn’t much gold available at the show. Some bullion and some double eagles. That’s about it. My dealer said he sells 100 oz of silver for every Oz. of gold. Love you blog. Thanks for the effort.

  3. Thanks for your comments. That gives me some more confirmation for what I saw. I think you are right that most middle class people simply cannot afford to buy gold, unless it is in fractional amounts.

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