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A Bird The Emu Can't Fly
As A Palladium Coin Will It Fly Any Better?
Like previous Australian coins minted at the Perth Mint, the coin is well done. Perth Mint has a long history of quality and success. The Mint has dealt in precious metals for nearly 100 years and minted legal tender coinage since 1899 - including precious metal coins for the Australian Government since 1987.
The Emu Coin's first minting sported a design of a male emu guarding a clutch of eggs. Flightless and as tall as a man, the bird is similar to an ostrich. The coins, both proof and bullion, are one troy ounce of 99.95% pure palladium with a face value $A40. The first limited bullion version sold 10 percent over the prevailing palladium price. Australia marketed the first proof or collector version at $A350 - the number of proofs minted 2,500.
The Australian Emu is palladium, one of the platinum group metals (PGMs). Palladium is used in jewelry, electronics, dental amalgams, and pollution combating autocatalysts - and coins. Most of the world's palladium, about 70 percent, is a by-product of Russia's massive nickel mines.
Bearish factors that could effect PGMs include ample supplies, sluggish world economies, and stagnate investor demand. An economic recession, particularly in Western Europe and the emerging areas of Asia would devastate the price of platinum and palladium; as would the development of a cheap substitute for the metals as a catalytic agent.
Bullish factors revolve around the limited sources of PGM supply. Disaster, natural or man made, could quickly end the supply of newly mined PGMs. Most of the world's supply of platinum and palladium comes from the Republic of South Africa and the former Soviet Union. Political and financial uncertainty in both countries makes the source vulnerable to a full-blown revolution. The limited number of producing mines also makes the source vulnerable to a natural disaster.
Any disaster affecting Russian or South African production of PGMs will send platinum and palladium prices to spectacular new highs. This price aberration could be of limited duration. Most PGM consumption is not essential: Clean air laws can be changed and catalytic converters put on hold. Gold or silver can replace PGM uses in jewelry. And all investment demand eventually turns to profit taking.
Although not considered the most exciting of the PGMs, palladium has had its moments. During the late 1960s and early 1970s, palladium traded below $50 per ounce. In 1981 the metal peaked at $317 and ended the year with an average price of $198. By 1982, the average yearly price had dropped to $66. A year later, 1983, the average yearly price more than doubled. As the 1990s came to an end the price of palladium passed platinum.
Yearly changes in demand and production add volatility to the palladium market, as do various political and financial rumors. One such period was in 1989, palladium went from a 1988 low of $114 to a high of $180 in 1989. Claims of cold fusion using palladium hit the news and drove the metal's price higher. Unable to reproduce the experiments on demand, the hopes for low-temperature nuclear fusion and investor demand for palladium dropped. During the mid- 1990s palladium traded in the low to mid 100 dollar range - then surpassed 300 dollars per ounce.
Palladium entered the new millennium reaching for $800 dollars and ounce, far outstripping the price for gold and platinum. And back down again, averaging $263 in 2009.
The PGM market is highly volatile. The rewards for investing in palladium can be exceptional, but the risks are high. As a bird, the emu is silly but charming. As a palladium coin, the emu is both interesting and beautiful. But, will it prove to be a silly purchase or a prudent investment? That depends on the price of palladium.
_______ Michael E. Odell
__AVERAGE PALLADIUM PRICE__
2000 $681 -- 2001 $604 -- 2002 $338 -- 2003 $200 -- 2004 $229 -- 2005 $201 -- 2006 $320 2007 $355 -- 2008 $352 -- 2009 $263
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I don't know who first said it, but it is excellent advice.
More than likely you will deal with more than one dealer. There are some dealers, however, whose market knowledge is limited. So you will need to locate a reliable adviser or dealer. You will need to find a well informed full-time professional with market knowledge. The dealer's location or the size of his operation are of less importance than his or her reputation and experience - two qualities that only come with time.
Your advisor-dealer should be involved personally and financially in the market. The rare or bullion coin market, like other markets, has its ups and downs. And no one buys at the very bottom and sells at the very top. The wise coin investor, however, who correctly invests will be rewarded with an investment to enjoy over the years and to profit from as well.
In the rare coin market, the wholesale spread ( the difference the dealer may pay or be paid by another dealer) may vary, as much as 5 to 20 percent; depending on the market and the risk the dealer must take. A dishonorable dealer may mark up the retail price another 100 to 200 percent, or whatever he or she can get away with. So know your dealer. The reputable dealer (and most are) adds enough to cover his expenses and still be competitive - and hopefully make a profit.
Also buy and sell on a cash and carry basis when possible. And don't let a coin or bullion dealer talk you into storing your coins or bullion. Too many dealer doors have closed, leaving the investor without money, goods, or recourse. So let me say again: "Know your dealer." The dealer's size or location is not important; but reputation, experience, and character are.
Here are two preliminary questions you can ask when first meeting a potential advisor-dealer
."Can I make a lot of money quickly?" If he or she answers in the affirmative, put your hand over your wallet and back away as quick as possible.
"I have $30,000 to invest, how much of that should I put into rare coins?" The answer is somewhat subjective, somewhere between 5 to 20 percent. If the answer is more than that, proceed with caution.
To get your business, some dealers offer a buy-back guarantee. This may not be possible in a down market, no matter how well-intentioned the dealer might be. If everyone is selling, the dealer will not have the funds for buying.
You will not need a buy-back guarantee, however, if you bought your coins from a reputable dealer, and the coins properly graded and fairly priced. _______ M.E. Odell
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Like other markets, the rare coin market has its ups and downs; but no one buys at the very bottom and sells at the very top.
The 1978-80 boom was a time of high bullion prices. The general public, driven by inflationary fears, sought refuge in hard assets - including rare coins. Money managers and financial planners discovered the coin market, and rare coins became a suitable investment. Adding to the respectability of collecting and investing in old or rare coins, the government okayed rare coins for retirement accounts. Investors put retirement funds into rare coins at record levels. Coin grading slackened and dealers expanded the list of coins they were willing to buy.
As the market peaked, favorable daily media coverage kept up interest. But the higher prices upon higher prices that fed the market had ended. The knowledgeable collector was already out of the market. A year later the general public lost interest. Prices plunged.
At Market Peaks
At the peak of the 1978-80 market, the general public packed coin shows and auctions. Still believing coins were underpriced; inexperienced buyers continued to pay ever higher prices. It was also a time of heavy dealer promotion. Television ads and numerous mass-mailings held forth enticing promises of quick wealth in the coin market. Rare coin gurus pointed the general public towards the land of promise. Rare coin and precious metal seminars abounded; the major seminars growing into annual or semi-annual investment circuses. "Getting-rich-beyond-your-wildest-dreams" newsletters proliferated. The 1978-80 boom, however, was over.
At Market Bottoms
We may not be at the bottom of the market, but most of the signs are there. The gurus are gone, at least gone from the precious metals and rare coin market. The television ads and mailings are rarer than the rare coins they promote. Precious metals and rare coin dealers are no longer the center of investment seminars.
Many of the coin dealers that flourished during the boom are now out of business. Others have moved to smaller quarters. Coin grading has tightened and so has the list of coins an individual dealer is willing to buy. The packed crowds at coin shows and auctions have given away to smaller groups of collectors and onlookers. Bankers, stockbrokers, and money managers no longer consider precious metals or rare coins a viable investment. And those who manage the daily news are no longer interested.
Like stocks, supply and demand determine price, however, coin condition also determines price. But coin grading suffers from inconsistency. And a dealer may favor one coin over another of the same grade, simply because he knows it will sell better. Both the market maker in over-the-counter stocks and the coin dealer are taking a financial risk. The coin dealer like the market maker will often own the commodity being offered; buying at one price and hoping to sell at a higher price. Unlike the market maker in stocks, the coin dealer is not limited in the amount of commission ( mark up) charged. In the rare coin market it may vary, as much as 5 to 20 percent -depending on the risk the dealer must take. In an up market the spread (what the dealer will buy or sell a coin for) narrows. With increasing prices the dealer's risk decreases, and the more popular the coin the less the risk. In a down market the spread widens. With more sellers than buyers, and with decreasing prices, the dealer's risk increases.
This may not be the bottom of the rare market, but today you can buy for cents on the dollar. So comparison shop and buy what you like. Buy rarity. Buy quality. Buy diversification. Buy long-term performance. Buy a coin priced for liquidity. And be willing to pay a fair price for a properly graded coin.
Remember, there are no bargains. Be patient. ___ Michael Odell
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"With a knowledge of the name comes a distinctive recognition of knowledge of the thing." ______ Thoreau
Grade indicates the degree of wear present on
a coin: Circulated coins (those showing any trace of wear) graded
1 to 59. Uncirculated coins (those showing no trace of wear) graded 60 to 70. Special
minted proof coins also follow the same basic numerical system, such as Proof-63
Circulated Coins 1 to 59:
1-3 = About Good (AG) = The details are barely visible.
4-7 = Good (G) = The primary designs are visible.
8-11 = Very Good (VG) = Some details are visible.
12-19 = Fine (F) = Considerable wearing, but details visible.
20-39 = Very Fine (VF) = Moderate wearing with major design clear.
40-49 = Extremely Fine (EF) = Some mint luster visible.
50-59 = Almost Uncirculated (AU) = Slight hint of wear.
Uncirculated Coins 60 to 70: Designated as MS coins or Mint State, these coins show no trace of wear or circulation.
MS-60 = May have noticeable abrasions.
MS-63 = Nice, but too many marks to be a MS-65.
MS-65 = Few marks visible to the naked eye.
MS-67 = The almost perfect coin.
MS-70 = The perfect coin. No marks and may not exist.
BAGMARKS Thrown into bags for storage and transportation, the coins banged and rubbed together. The resulting abrasions are referred to as bagmarks.
BU Brilliant Uncirculated refers to uncirculated coins still in mint condition (MS60-62).
CHOICE BU Shows fewer abrasions then usual and above average mint luster (MS63-64).
GEM BU Superior luster and with minimum of abrasions (MS65-and higher).
LUSTER Refers to the coin s brilliance as an indicator of condition.
MINT MARKS: As an example, the 1894-O silver dollar was minted in 1894, in New Orleans. The coin has the letter O (the mint mark) stamped on the reverse of the coin. Mint marks are small letters identifying the coin s place of minting. If your old silver dollar lacks a mint mark, it was minted at the Philadelphia mint.
All dies (metallic stamp) for United State coins are made at the Philadelphia mint. Dies shipped to branch mints are first hand stamped with the correct letter (mint mark). Mint marks vary in size; from the almost microscopic to those you can see with normal vision.
The mint mark began appearing on U.S. coins during the mid-1800s. Marks of interest are as follows: CC - Carson City, Nevada D - Denver, Colorado, O - New Orleans, Louisiana S - San Francisco, California.
"Two things only the people anxiously
bread and circus games." ________ Juvenal
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