American Hard Assets - Coins: Raising the Bar by Magazines

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APMEX

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Audi

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2014 Lunar Series Preview The 2014 lunar coins stampede into American Hard Assets as we highlight the horse series.

World News

HARD ASSETS

11 Gold/Silver Ratio NUMISMATICS

14 Simplfying Spot 20 Coins & Inheritances 28 Lunar Horse Coins

Modern World Coins Louis Golino takes you through the modern coins that are now available around the world.

32 Modern World Coins 38 Gold with an Extra Measure of Demand

45 $20 Graded Gold LIFE STYLE AND LUXURY

51 Beverly Hills Pawn

How to Find Gold With Extra Demand Looking for a piece of gold with a high premium? Michael Haynes digs in to help understand how to find that numismatic piece with extra demand.

Beverly Hills Pawn

56 European Wine Tours 58 America’s Most Expensive Real Estate

61 State of American Watches 68 Presidents, Central Bankers and Bond Villans AUCTION, COLLECTIBLES AND DIVERSIFICATION

72 Baseball Cards 79 To Clean or Not to Clean

AHA sat down with Jordan TabachBank of Beverly Loan Company to find out what 90210’s highest-end collateralized lenders actually do.

80 War Nickels 81 The Four D’s of Selling MINING & MINERALS

84 Mining News

Childhood Investments Everyone collected them as a kid, but for those who kept up with the market and their baseball cards, their collection could be a valuable investment.

REFERENCE

90 Preferred Dealers 94 Events 96 HindSight

EDITOR’S NOTE

Bullion or Numismatics? One of the first questions I hear from people that are interested in jumping into the gold, silver and precious metals markets is: should we be buying bullion pieces, or are the collectible coins and numismatic pieces the safer play? I think it’s about time that we jump into the numismatic field and really investigate what it’s about. But B first we start out with a piece by Tom Genot on the tax implications when buying or selling gold or numismatics. Next, and perhaps the most important part of the whole process, Mark O’Byrne explains what spot price actually is, and how it pertains to buillion pieces, numismatics and even rarities. Because who wouldn’t want to know how much their investments are actually worth? From there, we jump into how to go through those coins you inherit from a loved one to the newest versions of the lunar series, before analyzing the current modern world coins.

PRESENTED BY: AHA Metals, LLC MANAGING EDITOR: Ryan Kasmiersky EDITORIAL SUPPORT: Aaron Solomon ADVERTISING SALES: Sarah Kaiser SUBSCRIPTIONS: Leigh Chamberlain CIRCULATION MANAGER: Jennifer Cunningham GRAPHIC DESIGN: Open Look Creative Design www.open-look.com GENERAL MANAGER: Josh Eells DIRECTOR OF OPERATIONS: Mike Boniol CUSTOMER SERVICE: Sandi Heuerman FRONT COVER: Photo Courtesy of APMEX FEATURE WRITERS: Fred Reed, Nic Forrest, Ed Estlow, Mark O’Byrne, Michael Haynes, Gabriel Benson, Eavan Moore, Jonathan Kosares, Louis Golino, Scott Wayne CONTRIBUTORS: Grierson, Greg Canavan, The Bullion Baron, Hector Cantu, Alistair Bailey, Mike Woodcock, Daryl Middleton, Michael Moore, Christy Stewart, Jonathan Kosares, Tom Genot

Jonathan Kosares then analyzes why you may want to take a step back from numismatics in a rising market and Jordan Tabach-Bank runs up to the stage and explains the world of collateralized lending. Ever wonder why so many of the greatest watches in the world aren’t made in the United States? Ed Estlow explains exactly why the fall of American watch makers came to fruition.

DISCLAIMER: American Hard Assets is 100% American owned. All contents of American Hard Assets (AHA) are for information purposes only. AHA does not guarantee the accuracy, completeness or timeliness of the contents. None of the information contained herein constitutes a solicitation, offer, opinion, or reccomendation by AHA to buy or sell any security or commodity, nor legal, tax, accounting, or investment advice or

The lifestyle and luxury section features some great wines and the most expensive, yet beautiful housing markets in the US and Gabe Benson returns to explain how those childhood collections could become great investments .

services regarding the profitability or suitability of any security, commodity or investment. All commentary and advice in this publication is of a general nature only, and doesn’t consider your individual circumstances or financial

Don’t forget to visit our www.ahametals.com for the most up-to-date information and all of your gold, silver, auctions, collectibles and other precious metals news as well as some of the best price charts in the business.

your personal investment advice. Please do your own research.

Happy Investing!

Ryan Kasmiersky Managing Editor American Hard Assets

objectives. You should always consult a licensed financial advisor for

Publisher Inquiries: rkasmiersky@ahametals.com Advertising Inquiries: media@ahametals.com

SUBSCRIPTIONS www.ahametals.com 1.877.695.1258 P.O. Box 835433 Richardson, Texas 75083-5433 American Hard Assets is a bi-monthly publication and subscriptions are available for one year at $29.99.

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H A R D A S S E T U P D A T E S | World News

Rare Coin Fetches

$2.5 Million

An 1880 uncirculated gold coin known as one of the “white whales” in the coin-collecting world was sold for $2.75 million at Bonham’s Auction House in Los Angeles.

The sale of the 1880 Coiled Hair Stella from the “Tacasyl Collection of Magnificent United States Proof Gold Coins” places the coin among the top 10 most valuable U.S coins sold at auction.

Famed engraver George T. Morgan designed the coin when there was a push in the United States for its own international coinage to enable easier trade with Europe. A handful were minted before Congress rejected the proposal.

In January, a 1794 silver dollar called The Flowing Hair Silver Dollar sold for a total of $17.2 million. That coin is known as the first U.S. dollar struck and the finest known, Reuters reported.

The precise number minted cannot be found, however it is widely believed that no more than 15 exist. This particular coin that was sold is considered to be the finest certified piece ever auctioned. “They are so rare, they come on the market maybe once or twice, at most, every decade…That particular gold coin, there’s only 10 or 12 now, and most of these are in public institutions or private collections,” Paul Song, the director of rare coins at Bonhams told Reuters. Placing its rarity aside, the coin was graded Cameo PF-67 by Numismatic Guaranty Corporation , which is the top rating available.

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The Coiled Hair Stella, which is six grams of pure gold, features an image of Lady Liberty facing to her right with her hair coiled on the top of her head. One the back of the coin, an inscription reads, “ONE STELLA” and “400 CENTS.” “The braided plait on top of Liberty’s head is delicately and intricately engraved, and the portrait of Liberty is fully modeled and has a distinct individual personality,” Scott reportedly said. Among other sales from the Tacasyl Collection included an 1879 Coiled Hair Stella that fetched $1,041,300 and an 1855 Type 2 gold dollar that brought in $397,800.

World News | H A R D A S S E T U P D A T E S

The last 36-48 months have seen a strong growth of more than 30%50% per year in consumer off-take sales of platinum jewelry in India, says trade body Platinum Guild International (PGI). According to government import figures, India consumed nearly 4 tonnes of platinum jewelry last year. This has made India the world’s fourth largest consumer of platinum jewelry after China, Japan and the U.S. According to PGI, platinum is getting prominence among the young Indian crowd. A recently conducted survey revealed that the 18-35 year old age group is increasingly interested in plain platinum jewelry in the form of chains, bands and bracelets. There is a growing trend among young brides seeking to include platinum jewelry as a part of their wedding trousseau. The platinum market in the country has achieved a growth momentum and the real potential has yet to be released, says Nicholas Graham Smith, COO-PGI. The retail presence for platinum jewelry has grown significantly across more than 800 stores in the country.

The trade body expects the growing trend to continue as the demand for platinum keeps rising. Platinum has gained a strong foothold in India within a decade of making its debut in a country heavily obsessed by gold. Without a doubt, platinum has high growth potential in India.

Silver Demand Continues to Grow, U.S. Mint, Royal Canadian Mint Continue to Receive Record Numbers of Orders A lackluster U.S. economy means that a slowdown in industrial demand for silver will soon be upon us. Nevertheless, the remonetization of silver would more than take care of any such slump in demand.

Also, according to a spokesperson for the Mint, “the Northern Hemisphere summer is traditionally a slow time for coin and metal sales, but that’s not the case this year… when prices drop in the market, investors see it as a buying opportunity.”

Even if new supplies of silver are tapped, there is still a considerable premium associated with finding, buying back, smelting and refining the precious metal. Essentially, the physical market for silver would go completely off-exchange.

India’s Silver Imports Highest in Five Years

Continuing strong investment demand in the face of falling prices practically ensures that this increasing component of the demand profile for silver will be like nothing anyone alive has ever seen.

Royal Canadian Mint Also Reports Record Volume for Silver Maple Leafs In addition to the record numbers the U.S. Mint has seen this year, The Royal Canadian Mint stated in late August that, “year-to-date, we’ve had record volume for silver Maple Leafs, the greatest we’ve had in the over 25 years that we’ve produced them.”

In India, silver imports grew an incredible 258.6% during the April through July period of this year. This represents the highest level for this four-month period this decade. In fact, India’s silver imports for July alone were the second highest of any month observed over the last five years. While it may well be that Indians are turning to silver and other precious metals in increasing numbers because of the government’s continual efforts to thwart gold buying and as an alternative to its notably depreciating currency the rupee, these silver import increases are still staggering.

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H A R D A S S E T U P D A T E S | World News

CHINA ON COURSE TO BEST INDIA AS NO. 1 GOLD BUYER

China seems to be on its way to becoming the No. 1 gold buying country in the world. Traditionally the largest market for buying gold, “[India] this year it looks very likely to be eclipsed by Chinese demand,” writes SocGen analyst Robin Bhar in a new note, “possibly by as much as 100 tonnes when all areas of fabrication (and hoarding) are taken into account. “Part of the reason for this is the explosion in Chinese demand.” Gold consumers bargain-buying in current world No.1 India should encourage fresh imports, Commerzbank reckons, after a virtual shutdown over the summer. “The festival and wedding season is just around the corner. [This peak for gold demand] should be even more buoyant this year thanks to a good monsoon [and] preclude any continued slide in the price of gold.” Neighboring Dubai however – through which 25% of the world’s annual gold flows pass, according to Reuters – has seen trade decline by three-fifths as a result of India’s strict anti-import measures taken in 2013, local dealers report. 8 | American Hard Assets www.ahametals.com

“Even once [India’s] imports have re-started,” the newswire quotes a trading house executive, “we will not see the same kind of volumes that we used to see earlier,” when the first-half of 2013 saw flows to India rise 10% from the same period last year. Thanks to confusion over India’s new import rules – under which 20% of new gold shipments must be set aside for re-export – lack of material saw the value of India’s gold jewelry exports drop almost 60% over the last 5 months vs. April-to-August 2012, the Gems & Jewellery Export Promotion Council (GJEPC) said today. The world’s largest gold jewelry exporter, India saw a slight uptick in August’s sales from July. But right now, the “issue is getting the raw material even if they have export orders,” Reuters quotes Colin Shah at Mumbai-based exporter Kama Schachter. Back in China, “Most jewelers have already stocked up in anticipation of Golden Week,” Bloomberg today quotes Wang Xiaoli at CITICS Futures Co., part of the country’s largest brokerage. But “physical purchases are steady when prices fall.”

World News | H A R D A S S E T U P D A T E S

$1.6M in Gold Bars Stolen from Air France Flight Thieves have taken $1.6M worth of gold bars from an Air France plane leading to accusations of an inside job.The solid gold ingots were part of a multi-million pound cargo of nine cases containing 300 kilograms of gold. Detectives said that 44 kilos of gold ingots were taken from a plane travelling from the French capital to Zurich last Thursday.

The record-breaking 1.3 tonne haul was packed into 30 separate suitcases and all originated in Caracas, the capital of Venezuela. All had been registered to passengers who did not exist and were not registered on the flight. Six members of an international drug gang, including three Britons, were arrested following the discovery on September 11th.

They were being handled by the American Brink’s secure transportation company, which regularly transfers valuables on the same route.

The other three are Italian and are thought to have connections to the country’s infamous Mafia.

Nine cases of the precious metal set off from Charles de Gaulle airport but only seven cases reached the tarmac on the other side, police said.

Three Venezuelan soldiers, a first sergeant, a second sergeant and a first lieutenant, were arrested on Sunday and will be charged, the country’s prosecutor’s office said.

‘We are investigating the matter, and especially the possibility that this was an inside job,’ said an investigating source.

According to Venezuela’s Justice and Interior Minister, Miguel Rodriguez, it is ‘almost certain’ there were accomplices working within Air France.

The news comes just two weeks after $272 million worth of pure cocaine was found being shipped from South America to Paris on board another Air France aircraft. www.ahametals.com American Hard Assets | 9

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H A R D A S S E T S | Tax Implications for Precious Metal Investments

Gold/Silver Ratio A Tale of Two Precious Metals

By Mike Woodcock

he investment community purchases gold and silver for different reasons. Typically they act as a hedge or protection from concerns over inflation or times of economic instability and uncertainty. They are valued in terms of currency, so periods of dollar or other currency weakness helps to support their value. For example, several years ago, the lack of faith in paper and ink has put further pressure on the U.S. dollar and has pushed gold and silver to new record highs. Also, a prudent investor will expose their equity to a range of asset classes including precious metals as part of a diversified and balanced portfolio. Then there is the natural allure of silver and especially gold, to have in one’s possession for security and in some cases pleasure. Regardless of why an investor buys, holds or is thinking of purchasing gold or silver their strategy is the same – “buy and hold”. An old Wall Street saying, “Always keep ten

percent of your portfolio in precious metals, and hope that you’re wrong.” The gold/silver ratio by definition is how many ounces of silver one could exchange for one ounce of gold. For the more active investor, the essence of the gold-silver ratio is to switch holdings when the ratio swings to the extreme historical levels. An example would be when an investor holds one ounce of gold, and the ratio widens to say 100:1, the investor would sell their ounce of gold for 100 ounces of silver. Conversely, if the ratio contracted or narrowed to say 32:1, the trader would sell their 100 ounces of silver for at least two ounces of gold. There is no dollar value when making this trade; rather it is the relative value of the metals to each other that is important. The trading community, on the other hand, trades gold and silver for different reasons. Typically, a trader would “take a view” on the price of either metal that it will move up or down in price within a pre-determined www.ahametals.com American Hard Assets | 11

H A R D A S S E T S | Gold/Silver Ratio

“By using a spread we greatly reduce much of this volatility and do not need a profound view on the outright direction of either metal”

Rare Opportunity – Neither Bullish nor Bearish The word “crisis” in Chinese is composed of two characters: the first, the symbol of danger; the second, opportunity This is where a spread trader seeks a trading opportunity, to profit from the price discrepancy or variation in price between the two metals. The spread trader does not necessarily need to be bullish or bearish either metal, rather the “spreader” will take a view on whether their price relationship will widen or narrow. This price relationship is referred to as the ratio between gold to silver. This ratio is a long-standing and classic trading opportunity within trading circles. In late April of 2011, the ratio was around 32:1, that is gold is 32 times the price of silver or how many ounces of silver it takes to purchase on ounce of gold. In 1980, silver screamed up to extraordinary highs of $50.36 and gold had its day in the sun reaching a high of $850.00, resulting in all-time highs for both metals. If all things stabilize on the geopolitical front, as they have in the past, and there is no major financial collapse or on-going crisis, then one should consider employing a trading strategy. There is an appropriate saying that speaks well to this opportunity, “To know where you’re going you need to know where you’ve been” During 1980, the gold/silver ratio was 30:1; in 1983 32:1, then in 1991 it was 100:1.

The Trading Strategy - Spot or Futures

and shorter (less than three months) time frame to that of an investor. Simply put they want to profit from the nearterm price activity and have no desire to buy and hold. A trader’s reason to go long or short either metal can vary. Both gold and silver have cycles or seasonal patterns which is the tendency for a particular commodity to behave (price wise) during a certain period every year. While volatility can happen at any time, gold has a seasonal tendency to peak in late January after the holiday season, as jewelery demand starts to decline. Price increases can last into the first part of February as dealers increase their inventories for Valentine’s Day. Gold tends to post seasonal bottoms in late July or early August. Silver has a tendency to make a major seasonal bottom in September and then has a seasonal peak in April. Silver tracks the price of gold and is commonly referred to as the poor man’s gold. The prices of both metals are subject to spikes in demand from the investment community, which uses them as a hedge or protection. In general, both metals move in the same price direction but sometimes at varying rates of change.

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In all cases, spread trading attempts to capture the price difference between two financial instruments whereby one will outpace the other. As a spread trader we might have the view or speculate that when gold and silver reach a ratio of around 32:1 the spread price is too narrow and that we anticipate it should widen out to say 38:1. We look to sell silver the “expensive” commodity (as it relates to gold) and buy gold the “cheap” commodity (as it relates to silver). To benefit financially a trader can buy gold and sell silver in equal dollar amounts, so long as the price/ratio widens out. Let’s take a close look at the spread history of long gold and short silver during early May through to the end of June. This spread trade has been profitable 87% of the time over the last 15 years, if you buy on May 8th and sell on June 30th. At the time of this report gold was $1320/oz and silver was $22/oz (60:1). If you are interested in a rare trading opportunity that features capital preservation, low costs, and prudent risk management using spreads, then consider these approaches. Scenario #1 Spot market By using a cash or spot position you can assign any dollar amount e.g. $30,000 to each leg (one long, the other short) on

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H A R D A S S E T S | Gold/Silver Ratio

whether the spread will widen or narrow. In this example, we buy $30,000 USD gold (approximately 20 ounces) and sell $30,000 USD silver (approximately 660 ounces) using a cash or spot metals dealer. There will be a holding cost to “sell” or be short the silver and to “buy” or be long the gold. We anticipate that there is a 7 week holding period (to enter and exit the trade) with holding costs per day at 5% borrowing means you will pay around $5.00 per day (not including commissions). As the individual prices (of gold and silver) move up and down over time, you will notice that one will inevitably outpace the other. The advantage here in this scenario is that you can choose the dollar amount that is within your comfort zone. This is an OTC (overthe-counter) trade that can be customized to your risk appetite and requires less than $5,000 in a trading/margin account. See your cash/ spot metals dealer for the precise costs for holding/borrowing and commissions to purchase and exit this position. Scenario #2 Futures market Another approach used to trade this spread is by using futures contracts. In this case, depending on margins, we would buy one August Gold futures (100 oz) contract and sell September Silver futures (5,000 oz) at the COMEX futures exchange and hold the spread for the same duration i.e. early May through the end of June. Futures have no holding charges, but even with a discounted spread margin of 50 – 70%, these futures contracts will require a margin of $15,000 or more. If you are more comfortable with less than there are mini futures contracts traded at the NYSE Liffe. The mini gold contract has 33 ounces and mini silver is 1,000. The margin here will be at least half (under $10,000) to that of the full size contracts. In either scenario, you will look for the price of gold to outpace the price of silver regardless of the overall market direction. Consult with your futures dealer for a precise quote and the correct contract ratio of silver to gold. After a while you note that the ratio (gold to silver price) has moved from 33:1 to 37:1; both markets have moved lower in price, for example gold is now $1300/oz and silver is $22/oz. For demonstration purposes let’s assume we assigned $30,000 to each leg (using a spot dealer and level prices for mathematical ease). The $30,000 of gold bought at $1500/oz (20 oz) is sold at $1400 amounting to a $2,000 loss; the $30,000 of silver sold at $45/oz (667 oz) can be purchased back at $38 amounting to a $4,500 profit. The net difference is (approximately) $4,500 - $2,000 = $2,500 profit. The silver outpaced the gold price. By this example you should be able to determine how much equity to put towards this trade opportunity.

History Tends to Repeat Seasonality suggests that a change in direction (gold/silver) to the upside (widens) occurs in late April or early May. The monthly spread charts tells us that the price of silver has outpaced the price of gold regardless of the outright direction of either metal during this time frame. We have seen that history itself offers an edge (with seasonal statistics) and can by itself be the sole basis for your trading decision. As long as you determine your risk before you take on the trade. You will need to establish your plan of action before undertaking this spread. You’ll need to have your profit and your loss levels determined

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before you apply either (spot or futures) trading approach. You will need to determine your risk to reward so that you remain within your comfort zone. Close examination of the last 30 years will show the seasonal tendencies for this spread to widen during the suggested time frame of early May through the end of June. The seasonal strategy calendar indicates that silver drops in value during midMay through to mid-June around 64% of time over the last 15 years. Perhaps this is further indication that silver might outpace gold.

Conclusion The outright gold and silver prices have been volatile with price spikes and over-extended price ranges. By using a spread trade we greatly reduce much of this volatility and do not need a profound view on the outright direction of either metal. In fact, we have created an entirely new trading entity by spreading gold against silver and it has a life (trading opportunity) of only 7 weeks in every year. Conversely, you might view the spread level 32:1 as a benchmark or pivotal point. That is, if the spread moves below 32:1 then it will continue to narrow. This idea is not advice or a recommendation. Rather it is awareness as to the relationship of these two metals and a rare opportunity to profit. Here we offer an opportunity to calculate, organize, review and present historical data that may inspire further thought, analysis and create a tradeable viewpoint using a sound basis.

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Simplifying Spot Prices and Bullion Coin Premiums | N U M I S M A T I C S

Simplifying Spot Prices and Bullion Coin Premiums Why One Ounce of Gold (or Silver) Costs More, or Less, Than Another... By: Mark O’Byrne

ave you ever noticed that gold and silver bullion coins, which are one ounce, can cost different amounts?

Indeed, have you ever noticed how gold, silver and platinum coins of the same weight and which contain the exact same amount of the same precious metal, often sell for a different price? For example, at the time of writing, the spot price of gold is $1,316.50 per ounce. Yet, gold dealers are quoting one ounce American Gold Eagles at a selling price between $1,356 and $1,380 per coin. Why might this be? After all, each coin is 0.9999 pure and contains exactly one ounce of gold bullion. Shouldn’t an ounce of the same precious metal, like shares of the same stock or government bond, always have one and the same price at any given time? No, is the short answer. It is not quite that simple. The fact is that an ounce of a given precious metal - such as gold, silver, platinum or palladium - can, for a variety of reasons, cost either more or less than another ounce of the same precious metal in the international market.

How can this happen? Why are there different prices for various bullion coins and bars and why do the amounts paid for Eagles, Maple Leafs and other bullion one ounce coins and bars all differ, even though each contains the same amount of gold? The reason is an important pricing issue which is called the “premium”. Gold is traded globally on a 24 hour basis. Since trading hours of gold markets around the world overlap, live gold prices are readily available at all times during the business week from Sunday evening to Friday evening. The current price is known as the spot price and is a price at which gold could be bought or sold in large volume for immediate delivery. A premium is the additional cost of a bullion coin or bar above and beyond the spot price or live market value of the precious metal commodity it contains. Bullion coin and bar prices are based on the spot price of gold plus the premium. For example, with gold at a spot price of $1,316.50 as mentioned above, an investor can expect to pay a premium of over $39.50 above the gold price to buy the one ounce American Gold Eagle.

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Unusual demand for a specific coin type can drive its premium level significantly higher than that of very similar coins in certain circumstances The series of incremental price increases applied to the coin as it passes through the distribution chain from mint or refinery to primary dealer to smaller retail dealers is a typical market mechanism present in nearly every other industry in existence, from food to auto parts, and sporting goods to machinery. And, just as market forces of “supply and demand” largely determine the value at which all goods and services can be sold in their respective markets, the level of a given coin’s availability (supply) versus its popularity (demand) also directly influences the prices at which different coins will sell for in the market place. The price differential exists despite the fact they often contain the same amount of the same precious metal.

On the other hand, at the same spot price, a buyer will pay only a $32.90 premium for a one ounce Gold Maple Leaf and a $37.60 premium for the one ounce Gold Krugerrand. In general, this additional cost over the precious metal spot price for any bullion coin stems from a number of factors. These include the manufacturing, refining, minting, stamping, distribution and administration costs incurred by the mint in making the coin, plus a very small “mark-up” representing the cost of sale and the profit for the dealer selling the coin. This “mark-up” of the coin will have to cover the dealer’s own sales costs and the realization of a small profit when selling the coin into the investor market. The bullion business is a high volume, extremely competitive business. Dealers have to be competitive or they will not be in business very long. At the same time, dealers who are uber-competitive often do not have a sustainable business model and may not last long in business. If it seems too good to be true, it often is.

In fact, occasionally and in some market conditions, the available supply of a given coin, when balanced against its market demand at any given time, can have a pronounced impact on the coin’s premium and cost. Unusual demand for a specific coin type can drive its premium level significantly higher than that of very similar coins in certain circumstances. Such a disparity occurred between the American Eagle and the Canadian Maple Leaf bullion coins at the end of 1999, when concerns over potential Y2K-related computer meltdowns created widespread fear about the stability of the US and global banking system as the new millennium approached. These genuine concerns, in turn, led to an unprecedented demand for U.S. American Eagle Silver coins, in the belief that their owners could spend these U.S. governmentguaranteed bullion coins in the post collapse economy for the food and other necessities they would require to live should the banking system fail. At the same time, the Silver Maple Leaf legal tender bullion coins, which not only contain the same amount of gold and silver, but were minted in higher purities, were left sitting in many dealers’ vaults, particularly in the U.S. Specifically, in late 1999, the premiums for the 99.9% pure (i.e. “3 nines fine”), one ounce Silver Eagle coins were at one point 300% to 400% higher than the premiums on the 99.99% pure (i.e. “4 nines fine”) one ounce silver Canadian Maple Leaf coins. Even though the price of the one ounce of silver they contained changed very little during the period. The prevailing spot price of silver averaged about $6.50 per ounce during this time. The price of the silver Maple Leaf remained in the $7.50 vicinity or at roughly a 15%

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premium. However, huge demand drove the price of the silver Eagle to more than $12.50 per coin at one point leading to a massive 92% premium over spot silver. Surprisingly, many stores of wealth or financial insurance buyers were willing to pay up to four times more in premium costs than they had to for a certain silver bullion coin in the belief that silver American Eagles would be automatically accepted as payment in whatever economy might be functioning in the post-January 1, 2000 period.

...the level of a given coin’s availability (supply) versus its popularity (demand) also directly influences the prices at which different coins will sell for in the market place. It is important to note that these inflated premiums collapsed to more rational market levels immediately after January 1, 2000, when it became clear that a ‘Mad Max’ style, banking and economic Armageddon was not going to occur. Conversely, a lack of market demand, or the outright dumping of a particular coin by market participants, has in the past created a negative premium, causing a coin to sell at a price that is actually less than the current “spot price” of its metal content. Unusually, this is what happened to the gold Krugerrand when its importation into the United States and numerous other countries was banned by many national governments in 1985. This was done to demonstrate many countries’ displeasure and unease with the former apartheid policies of South Africa, the home of the Krugerrand. Few gold buyers wanted to buy the Krugerrands that continued to trade in local markets, and dealers would only buy them at prices discounted below the prevailing “spot” price of gold. It was truly one of the few times that gold bullion coins and bars - in the form of Krugerrands -- have traded in the market below the spot price.

In fact, as noted at the outset of this article, though its premium has long since been positive, the Krugerrand continues selling at a lower premium than do the Eagles and Maple Leafs. This reflects the fact that there are a huge amount of Krugerrands minted every year and 47 million have been minted since 1967. However, there remains a certain segment of international gold buyers who remain attracted to the liquidity and competitive prices of Krugerrands. Some buyers simply want to buy gold at the cheapest price possible. Because coin premiums can vary significantly among coins and in different market conditions, they are an important aspect for buyers of bullion coins to understand today. Buyers are well advised to inquire about and compare coin premiums before making their purchase of bullion coins. As always, it is best to seek the advice of an established, reputable and trusted bullion dealer concerning any aspect of precious metals buying, delivery and storage about which one may be unsure.

N U M I S T M A T I C S | Coins & Inheritances

ARM YOURSELF WITH KNOWLEDGE BEFORE YOU LIQUIDATE By: Fred Reed

widow inherits her husband’s coin collection. They had never much discussed the money he was spending over the years on his hobby, nor the collection itself. Consequently the bereaved widow knows next to nothing about the objects her husband had cherished . . . except upon inspection to note that the silver dollars and other many other silver coins in the folders and cases were tarnished considerably. Many had dark blue hues, others were almost blacked at their edges.

It can be a scary time for anyone. A loved one has passed away, and naturally sorrow and grief abound, but if one is tasked with administering the last intentions of the deceased – and those intentions involve a numismatic or bullion collection and the heir or the administrator of the estate is not numismatic-knowledgeable – uncertainty is abundant too.

Ever the dutiful spouse Mrs. Deceased Coin Collector cleans all her husband’s silver coins one night to make them shiny and pretty for her yard sale the following day! She dutifully marked a jar of the old Morgan silver dollars “2 for $3.” I know I was there the next morning and observed her situation first hand. This was fortunate for her considering the alternatives. . . .

The deceased may have spent years, even decades acquiring the items left behind. Along the way he or she had become very knowledgeable about these items. Most collectors, even if they don’t keep extensive written records, are familiar with the circumstances and prices of their acquisitions. It’s in a collector’s DNA to recall such pertinent specifics.

20 | American Hard Assets www.ahametals.com

What to do?

Gold bullion is often set aside by investors and numismatists, alike. Knowing whether such coins are worth more to collectors or the melting pot is the responsibility of the person tasked with liquidating such numismatic treasures.

But if the collector left no trace for the heir or estate administrator to follow, that person is often in very foreign territory indeed. Whether lawyer or family member, guidance is crucial to the appropriate disposition of the numismatic objects. No one should do as the apocryphal widow did in the example above, although such circumstances are all too real. “I received a call once from a widow inquiring about how to ‘package’ her deceased husband’s silver dollars,” former Coin World editor Beth Deisher recently said in describing a real situation not far removed from the one above. “She was preparing to sell her home and move into a condo. She decided that since there were only a few hundred she would put them in her yard sale.

“She was very proud,” Deisher continued, “of the fact that she had spent the past two days using the same polish she used on her silverware to take the tarnish off of the old coins and make them shiny. Her question was whether she should put all of the same date in Ziploc bags or just put them in big box and let buyers sort through them.” The editor’s reaction was a sinking heart. Deisher factually explained “that the polishing had probably greatly diminished the numismatic value, but she seemed delighted that they were worth more than $1 each (price she had planned to charge). I explained that each was made of 90 percent silver and that based on the price of silver at the time, they were worth at least $22 each.” www.ahametals.com American Hard Assets | 21

Many coins also have bullion values, so if their numismatic premium is negligible they may be “cashed in” for their intrinsic values which is often many times “face values.”

Such circumstances are far from unique. In her more than two decades at the helm of the largest circulation coin collectors’ trade publication, Deisher says she heard from heirs with similar quandaries two to three times a week, and “three to four times a year we would receive inquiries from an attorney or firm auctioning an estate.” After her retirement in 2012, she sat down and put her extensive knowledge of the coin industry on paper to save other widows, and heirs similar unfortunate outcomes. Her book Cash In Your Coins: Selling the Rare Coins You’ve Inherited, published by Whitman this year, was the result. 22 | American Hard Assets www.ahametals.com

The editor’s experience and that of coin professionals specializing in dealing with the heirs of numismatic estates can provide guidance to the one left behind with the numismatic assets that must be liquidated for the benefit of the deceased heirs. A professional coin dealer Jeff Ambio, who has worked for several numismatic auction houses over the past 15 years including Heritage Auctions and Stack’s-Bowers, reports that dealers hear from heirs and attorneys “all the time. Heirs and attorneys for estates are among the most important clients of the major

Story Name | S E C T I O N N A M E

www.ahametals.com American Hard Assets | 23

N U M I S M A T I C S | Coins & Inheritances numismatic auction houses for which I have worked during the past 15 years.

rules and strategies can be mastered even if you are headed for a crash course in this hobby.

“Providing them with appraisals and helping them liquidate their holdings is a regular part of the services that we provide,” Ambio told this writer recently.

Like the proverbial “stranger in a strange land,” first you must survey the ground. Gather the numismatic treasures the family member or client has left behind in a safe environment to preliminarily ascertain the scope of the numismatic estate.

Take a deep breath If you ever find yourself in these circumstances of being tasked to liquidate numismatic assets that you didn’t form and are inexperienced in this field, first of all breathe deeply. Nobody can be an expert in every area of human endeavor. However, Numismatics is a stable environment with lots of history and precedence, and its

A person in this position should preserve all written documentation that the collector left behind. This may include invoices, copies of checks/stubs, auction envelopes, notes, previous inventories, correspondence relating to the collection, etc. This type of written material may provide information on acquisition costs, sources, and similar information of help to the estate administrator.

Junk or treasure? Numismatic legacies are often comprised of just miscellaneous coins, but sometimes such hoards yield numismatic treasures of significant value.

24 | American Hard Assets www.ahametals.com

Coins & Inheritances | N U M I S M A T I C S

The cardinal rule is that an amateur should NEVER, ever clean a coin to remove tarnish and make it look more shiny. Invariably, this abrades the coin surfaces reducing its value to the next collector down the line, and thus reducing the coin’s value to the estate. “Few people outside of coin collecting realize that they can damage rare and collectible coins by mishandling them and attempting to clean them,” Deisher noted. Your first task, according to both Deisher, and coin dealer Jeff Ambio, who also wrote a recent book What To Do with Granddaddy’s Coins: A Beginner’s Guide to Identifying, Valuing and Selling Old Coins, should be sorting the old coins according to metal, denominations, types, designs so that an overview of the collection can be made.

Guides to assist novice catalogers Both Ambio’s and Deisher’s books provide photos of typical U.S. coin designs helpful in identifying what coins are in the estate. They also point out premium date/mint combinations that carry significant additional value. Lots of other numismatic aids are also available, including annual price guides, and monthly periodicals such as COINS or COINage magazines, which are available at many newsstands nationwide and feature illustrated coin value sections also very helpful in determining what you are dealing with. After sorting, an inventory of the contents of the collection should be made. This should be systematic, i.e. groups of like coins listed together, and specific, i.e. denomination, date, mintmark, number of specimens, and grade (condition) as this becomes known, and purchase price (if known), and current “value” as shown in one or more of the standard, up-to-date numismatic reference works. A comprehensive inventory of inherited coin collections is a must to determine appropriate ways of liquidation, approximate values, and possible tax liabilities to the heirs.

Do not broadcast that Granddad or Uncle Ed left a valuable coin collection. Instead professionals recommend that this survey/inventory be quietly conducted in a secure location in a bank if the collectibles were stored there, or other secure area within the deceased home or office if the items are located there, for example. One’s primary desire should be to preserve the value of the collectibles. If you are unfamiliar with handling numismatic specimens, please note: they should be handled only on the edges. Using gloves and even a mask so that that skin oils and water vapor droplets will not be deposited on coin surfaces – potentially detrimentally affecting coin values – are highly recommended. So is using a soft, non-abrasive mat over which coins should be handled to preclude dings from dropping coins accidently.

Please be aware, however, that the coin marketplace is a dynamic one. Prices move, i.e. change up and down, regularly, and the market values of the most valuable specimens are the most volatile. Also in assessing “current market value,” one should be aware that the annual price guides such as the “Red Book” (Guide Book of United States Coins) are published many months before their cover date to give them longer shelf lives and sense of immediacy. So the 2013 book probably has 2012 values, etc. Coins made of precious metal, i.e. gold, platinum, or silver deserve special consideration. They have intrinsic value too. This “bullion value” underlies their numismatic value, which for common dates may be negligible. However, this precious metal value is normally much more than the old coins’ “face value,” and this should be noted on your inventory too where appropriate. Many internet sources are available to determine these bullion values, which may also be determined pragmatically by multiplying the net precious metal weight listed in your reference book by the current precious metal quote (also available on line). Numismatic value not only depends on rarity, but it depends greatly on the existing condition of a coin. Grading, or evaluating

American Hard Assets www.ahametals.com | 25

N U M I S M A T I C S | Coins & Inheritances condition of numismatic specimens, is often described as an art, but grading guides with illustrations or line drawings exist for all U.S. coin series to attempt to make it more of a science. Grading can be learned, but it requires lots of tutelage and practice. The novice coin inventorian, thus, would be wise to go with the lower of two grades when estimating inheritance coins and paper money on his/her inventory. If your research shows that coins are potentially valuable (set a figure, say $100 or more), they can be submitted to one of the thirdparty grading services for an objective professional evaluation and certification of grade. Many such services have been established over the last two decades. The Professional Numismatists Guild (www.pngdealers.org), a decades-old organization of the top coin dealers in the nation, designates Numismatic Guaranty Corporation (www.ngccoin.com), and Paper Money Guaranty (www.pmgnotes.com) as its official coin and paper money grading services. Other reputable and recognized services exist including ANACS (www.anacs.com), Professional Coin

Coin trade publication editor Beth Deisher, and professional coin dealer Jeff Ambio have authored inexpensive but comprehensive guides to help take the uncertainty out of disposing of inherited numismatic estates.

Grading Service (www.pcgs.com) and Professional Currency Grading Service (www.pcgscurrency.com). Many other third party grading services exist, some of which specialize in particular series. These may be skillful and honest, but they don’t have the long histories of acceptance within the hobby that those enumerated above have. These services also have websites, and guarantees, but the shopper should be careful. Copies of the books referenced in this article may be obtained from their publishers. I have known both authors for more than 15 years, and worked with both of them, and highly recommends both books. Deisher’s book is available from Whitman Publishing at www.witman.com for $9.95. Ambio’s book is available from Zyrus Press at www.zyruspress.com for $14.95. Both books are also discounted on amazon.com. Now that you’ve inventoried the inheritance, next time out we’ll cover disposing of your inherited numismatic items.

26 | American Hard Assets www.ahametals.com

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N U M I S M A T I C S | Lunar Horse Coins

Lunar Horse Coins

By: The Bullion Baron

Bolting Out Of the Stable

n the premier issue of American Hard Assets I wrote about the

At this time there are already around half a dozen or more designs

lunar snake coins that were released to celebrate the Chinese

which have been released in the public domain, one of which (the

Lunar Calendar (2013 being Year of the Snake). While we are still

Tokelau 2014 Lunar Horse 1 oz. Silver Coin) is already in the hands of

around 6 months away from the start of the Chinese New Year (marking

collectors with several ‘unboxing’ videos making their way to YouTube

the change to Year of the Horse), which begins on January 31st

in July. This coin is the second in the Tokelau Lunar Coin Series.

2014, that hasn’t stopped dealers and mints from getting their coins

The maximum mintage is 50,000. The coin is currently listed at 37%

designed, minted and released to the public well in advance.

above spot. They are also being sold in graded packaging (from NGC and PCGS) for a higher premium.

28 | American Hard Assets www.ahametals.com

Lunar Horse Coins | N U M I S M A T I C S

silver counterparts, so for investment purposes you are best sticking with purchasing silver lunar coins unless you expect gold to significantly outperform silver in the foreseeable future.

We can also expect to see the regular international offerings of lunar series coins which will be released over the coming months and include those of Singapore Mint (Macau Series, their 5 oz. silver coin with mintage of 500 is usually quick to sell out), PAMP (lunar themed bars, due for release in late August), Royal Canadian Mint, China Mint and New Zealand Mint (who takes particular care in providing unique and high quality presentation packaging). The Perth Mint will also have their regular line-up with a mix of bullion coins and numismatic releases, including a special colored set of square coins destined for the Chinese market. On the home front, you can expect to see lunar coins and bars from some of the larger precious metals distributors, such as APMEX and Provident Metals and even mints like NTR Metals and OPM Metals. Several other designs have been publicly revealed; most so far

Half a decade ago there were only a handful of mints producing

appear to have been commissioned specifically by dealers to

lunar coins designs, but the increasing interest in physical precious

capitalize on expected popularity for lunar horse coins. They include

metals as a ‘safe haven’ asset (not always price safety, but their lack

a 5 ounce silver proof coin released by Downies in Australia (legal

of counterparty risk) has brought a larger pool of buyers to the coin

tender of Niue, struck by PAMP)

market. The perfect example to illustrate these changing dynamics

which has selective gold plating and a mintage of only 500 coins;

is looking at the demand for Perth Mint’s Lunar Series II Coins

a unique feature includes the mintage number being stamped onto

(specifically the 1 oz. bullion coins with a mintage limit of 300,000),

the reeded edge of the coin. Several additional coins available for

which started in 2008 and runs through 2019. The first couple of

preorder with legal tender status in Niue or Palau appear to have

coins in Series II weren’t particularly strong sellers (and didn’t sell

been commissioned by a German dealer and vary in size from ½

out in the year of issue, they were later minted up to their limits), but

oz. to 1 oz. with various finishes (including partially gold gilded and

after interest increased we saw the 2011 1 oz. bullion rabbit sell out

selective use of color). The continuation of these ‘first issue’ coins

in around 5 months, the 2012 dragon took only days and the 2013

into an ongoing series will likely depend on the popularity of these

snake has also seen strong sales, selling out in 2 months. I expect the

releases.

time it takes for the horse to sell out will be somewhere between that of the dragon and snake.

I have not yet seen any gold lunar coins available for preorder or sale, the lower price point of silver coins makes them a much more popular option for investors and collectors (so the number of gold coin offerings is usually much lower). Even the most popular of gold lunar coins do not appreciate in value anywhere near the rate of their

“Many of the ‘modern numismatic’ lunar coin releases will set you back a very high premium...” American Hard Assets www.ahametals.com | 29

N U M I S M A T I C S | Lunar Horse Coins

Whether you are buying lunar coins for investment or to add to your coin collection, they are well worth focusing on given the Chinese origins of their subject matter, a region which is likely to become more influential over time and with it their cultural history which is reflected in the themes of these coins. The designs for the Perth Mint lunar coins didn’t come out of The Perth Mint’s Lunar Series Coins are probably the most wellrecognized globally and their success has in a large part been the driver behind many other mints jumping onto the lunar coin bandwagon. To give an example of just how sought after the coins are, the Perth Mint received expressions of interest from dealers and wholesalers for 1.2 million of the 1 oz. lunar snake bullion coin (4x maximum mintage). Perth Mint coins have been especially popular in European countries and examples of premiums they can fetch are observable on sites like Silber-Corner or eBay Germany.

embargo until August 22nd (they were published on SilverLunar. com on that date), I think collectors and investors will be well satisfied. Of course judging the aesthetics of any coin design is subjective, but the aggressive stance of the horse (presumably representing a wild stallion), mountains and Chinese-styled clouds make for the best design in Series II so far. The design for the silver coin is also graceful with two horses standing near a river (which flows down the right hand side of the coin), one of them drinking from it. I think they will be well received by lunar coin fans .

“There is a fine line when it comes to some of the lunar products as some of them start as a bullion product...” Something that should be clear in a buyers’ mind before making a purchase of any lunar coins is whether you are buying the coin/s primarily for the purpose of investment (to make a profit over time) or just to add to your collection (for personal enjoyment of the coin itself). There is a fine line when it comes some of the lunar products as some of them start as a bullion product (when sold directly from the mint), but once sold out can quickly achieve a numismatic premium. In my opinion these are the coins best targeted by the lunar coin investor as they provide a mix of lower premium to purchase (when bought on release), but with the potential to increase in value over and above that of other bullion coin products (such as an American Silver Eagles or Canadian

Lunar Horse Coins | N U M I S M A T I C S

Maples, which are produced in far higher quantities, without limit). Even where mints produce bullion coins with a limit they are often far higher than that of the 1 oz. bullion lunar coins from Perth Mint (e.g. Chinese Panda at 8 million for 2013 or Royal Canadian Mint’s Wildlife Series which were capped at 1 million per coin).

“Something that should be clear in a buyers’ mind before making a purchase of any lunar coins... for the purpose of investment or just to add to your collection.” Many of the ‘modern numismatic’ lunar coin releases will set you back a very high premium over the content of the metal in the coin, for example most 1 oz. releases will set you back around $100 which is currently a 400% premium to spot price, so the value of the coin will move in line with demand for that specific coin (rather than track the price of silver). Bullion lunar coins are sold on release with much lower premiums (usually around $5-10 over spot, 25-50% based on current spot price) and will more closely track the price of silver, but can also achieve high premiums over time depending on the demand for the coin (for example the 2010 1 oz. silver bullion tiger from Perth Mint was widely available for $10 over spot per coin when released, but now commands a premium of $40 over spot). Some modern numismatic coins will hold their value or even increase over time, but the majority are unlikely to do. In my opinion, investors are best sticking with popular bullion lunar coins.

“Bullion lunar coins are sold on release with much lower premiums... so the value of the coin will move in line with demand for that specific coin (rather than track the price of silver).” Whether you are buying lunar coins for investment or to add to your coin collection, they are well worth focusing on given the Chinese origins of their subject matter, a region which is likely to become more influential over time and with it their cultural history which is reflected in the themes of these coins.

Bullion Baron writes at www.BullionBaron.com as well as www.SilverLunar.com (dedicated to lunar coins) and has recently launched an exciting new site where investors and collectors can upload and share pictures of their coins and bars, (www.BullionGallery.com).

American Hard Assets www.ahametals.com | 31

S E C T I O N N A M E | Modern World Coins

32 | American Hard Assets www.ahametals.com

Modern World Coins | N U M I S M A T I C S

in Modern World Coins By Louis Golino

odern world coins are in some ways like the two faces of the Roman God, Janus, pointing in two different directions. They offer the potential collector and investor both great promise and considerable peril, depending on which coins are purchased, the collecting and investing strategies followed, and how those coins’ values end up performing over time.

All fields of numismatics, and really the pursuit of all almost collectibles, are driven by motives that include aesthetic pleasure, the thrill of the hunt and the desire to buy something that will increase in value, or at least hold its current value. It is not always possible to pick a winner for sure, but no one likes seeing their coins decrease in value. In recent years high-end and very rare classic American coins have continued to soar in value, while many other classic collector coins minted here have not done so well since the start of the global economic crisis except for those with a very wide base of collectors like Morgan silver dollars. Modern world coins have had a mixed performance too in recent years, but they offer collectors and investors interesting opportunities that deserve to be examined provided one approaches the field with realistic expectations. First, it is important to understand that most world issues are not really intended to be investments per se, even though some issues do increase substantially in value.

Modern world coins fall into three main categories: •

Commemorative coins made for collectors, on which some people speculate because of their typically-low mintages, especially compared to modern U.S. commemoratives.

•

Bullion coins aimed primarily at precious metal investors, though many are also collected.

•

Coins with a bullion price issued in such low numbers that they acquire numismatic premiums as they become difficult to obtain.

If investing is your main purpose, I would recommend the third category most strongly as the coins are always worth their bullion value but may also become quite valuable over time as the market for world coins expands and more people want them as collectibles. Examples include the Lunar series I and II coins and Kookaburras from the Perth Mint, Chinese Panda coins and some others that are discussed later. Serious numismatists and coin collectors in the U.S. have historically had a tendency to scoff at modern world coins as boutique items that should only be bought because they are perceived as especially attractive or have some personal resonance for the buyer. Veteran American dealer Steve Estes summarizes the

American Hard Assets www.ahametals.com | 33

N U M I S M A T I C S | Modern World Coins right this numismatic wrong. Second, since the coin was listed as having a 10,000 piece mintage, (though only 7,500 pieces were issued in single presentation boxes) this is actually considered quite low for the event and the design, and it was inevitable that the coin would be very over-subscribed. It didn’t hurt the coin at all that the baby boy born on the 22nd July was named “George” and what a coincidence indeed!” John Winkelmann of Talisman Coins, which is a major distributor for coins from several world mints, notes that the U.S. coin market is essentially insular and focused strongly on American coins, whereas the foreign coin market, especially in Europe and Asia, is much more focused on world coins. In recent years more American collectors have become interested in world coins, and more people around the world have developed an interest in them too, but to be clear, demand for world coins is still stronger outside the U.S. The rise of the middle class in countries like China and other emerging markets has done a lot to fuel the rise of the modern world coin market, and that is expected to only increase in the coming years. Modern Chinese coins, including gold and silver Pandas, are a hotly collected series in China and around the world, with some issues selling for huge secondary market premiums.

“The U.S. Coin market is essentially insular and focused strongly on on American coins, whereas the foreign coin market, especially in Europe and Asia is much more focused on world coins.” pitfalls of collecting modern world issues this way: “The modern world coin market is very tricky. Success requires correctly guessing which country’s coinage will be collectible.” On the other hand, there are many interesting world releases not intended for circulation that have held their values and then some because of their compelling design, wide collector base and low mintage. For example, some of the low mintage Chinese Lunar year releases from the Perth Mint in Western Australia sell out instantly and immediately acquire strong premiums, though their values ebb and flow. The Royal Mint in the United Kingdom recently issued a gorgeous silver commemorative that honors the new British prince (George Alexander Louis). The coin is the first in over a century to sport the iconic image of St. George slaying the dragon that has graced British gold sovereigns for hundreds of years. It sold out at the mint within a couple days at an issue price of $100, and since then the coins have been selling on e-Bay for an average of $250. British world coin and banknote expert Michael Alexander, who heads the London Banknote and Monetary Research Centre, said: “The immense popularity of this coin was two-fold. Specifically, the iconic Benedetto Pistrucci depiction of St. George slaying the dragon had never before been used on any of the Queen’s many commemorative silver crowns during her 61+ year reign. Many die-hard collectors had waited for this definitive silver coin for Queen Elizabeth II, and this was the event chosen to finally

34 | American Hard Assets www.ahametals.com

In the U.S. the professional coin grading companies today grade far more modern world coins than they used to, and more U.S. bullion and coin dealers sell modern world collectible coins. In addition, many of the leading world mints like the Perth Mint, the Royal Canadian Mint and the Royal Mint do a huge amount of business from U.S. buyers. When very high demand issues are released by Perth at 12:00 pm Eastern standard time on release day, so many Americans and other non-Australians scoop up limited issue coins that a portion are reserved for Australian buyers and held back for about eight hours so that Australians will have a chance to purchase some coins at a time of day when they are likely to be awake. Many high demand modern world releases from mints such as the Perth Mint or the Royal Canadian Mint sell out of their small mintages very quickly, though in some cases that comes from genuine collector demand, while in others it has a lot to do with the

Modern World Coins | N U M I S M A T I C S

Many modern world coins, especially socalled non-circulating legal tender (NCLT) commemoratives are very attractive coins that are made with highly innovative minting techniques

â&#x20AC;&#x153;...there are many interesting world releases not intended for circulation that have held their values...â&#x20AC;?

The best way to avoid this pitfall, and there is no way to always do so, is to study which coins and sets have tended to hold their aftermarket premiums over time, and which ones have not. It is also critical to focus on which countries issue the coins that are typically the most widely collected and to figure out the best time in the market cycle to make your purchase, which may be when the coin is issued, or may be a little later when prices have cooled down. In general it is best to buy the coin from the issuing mint when possible. Furthermore, coins that depict themes with broad appeal like the 100th anniversary of the sinking of the Titanic, or the widely-collected Chinese Lunar year-themed coins, and first issues in a popular new series with great designs, all tend to do well.

channels and methods of distribution. For example, the Canadian Mint has a Masterâ&#x20AC;&#x2122;s Club for buyers who purchase at least $1,000 worth of coins in a year, which entitles them to advance notice of new releases and other benefits. But frequently when a hot, new issue is made available to club members, the relatively small number of coins minted is purchased very quickly by a few large coin dealers and other buyers looking to capitalize on their purchases, and sell out within as little as an hour. However, those coins are generally then available from retail dealers later, sometimes for a substantial premium, but other times for about the same amount as initial issue price, if the buyer moves quickly. This raises one of the key enduring issues that modern coin buyers need to come to terms with, which is that low mintages are sometimes deceiving. Many modern world coins, especially so-called non-circulating legal tender (NCLT) commemoratives are very attractive coins that are made with highly innovative minting techniques from multiple special finishes created using lasers and computers to colorized coins to coins that have jade, crystals, mother of pearl, or other special materials. The possibilities are virtually endless, and many of those coins have extremely low mintages from a couple hundred to a couple thousand. But the low mintages of many NCLT coins can be misleading, since if the coins are not widely sought by buyers and collectors, it does not matter how few of them exist. And the low number of coins issued, which is often a strategy by the issuing mint to increase interest, plus the fact that coin dealers often scoop up a large chunk of the mintage, can create artificial demand that is not always sustained. That can lead to a situation in which coins that are initially popular because they are seemingly scarce pop in price once sold out by the issuing Mint, but then as more of the dealers who purchased most of the coins make them available, these coins can quickly lose their high premiums because they are no longer perceived as scarce.

American Hard Assets www.ahametals.com | 35

N U M I S M A T I C S | Modern World Coins Ola Borgejordet, the owner and founder of Royal Scandinavian Mint, which is a leading U.S. coin company that specializes exclusively in modern world coins, cautions that such coins should be collected for enjoyment only: “One should enter into collecting modern world coins with a clear and limited strategy for collecting, be it by country, year, alloy, event, design, etc., and not with an intent of making money. Some issues will inevitably increase in value, based on the laws of supply and demand, but it is hard if not impossible to gauge which issues will increase in value over time as information is most often scarce and controlled by foreign governments.”

“...try to focus on those coins which have a combination of potential for increas and the lowest downside risk because their price is initially based in large part on the precious metal content.”

Another factor, which Mr. Borgejordet emphasizes, is that too many different coins are being issued by some world mints like those in Australia, Canada, France, Poland and Great Britain. Those countries do issue some terrific coins, but it is advisable to be as selective as possible and zero in on the coins one likes the most since collecting world coins is mainly about having fun. Too much focus on trying to guess which coins will have the most aftermarket premium can easily result in a lot of buyer’s remorse.

“One should enter into collecting modern world coins with a clear and limited strategy for collecting, be it by country, year, alloy, event, design, etc., and not with an intent of making money.” In the U.S. market, coins from Canada and Mexico are the most popular modern world issues for historical and geographic reasons. American collectors are also strongly drawn to coins from Great Britain and Australia, which has two major mints, the one in Perth and the Royal Australian Mint. The Royal Canadian Mint has a tendency to issue an almost overwhelming range of different coins and series. Of the currently issued series the one that is likely to have the greatest appeal for American buyers is the 4-coin $20 one-ounce silver Bald Eagle series that features exceptional artwork and the use of multiple finishes to highlight different aspects of the design. The third release that depicts an eagle returning from the hunt was issued at the beginning of September. The coins in this series have a mintage limited to 7,500, and always sell out instantly at the mint but are often available from U.S. dealers a couple weeks later. 36 | American Hard Assets www.ahametals.com

My own approach is to try to focus on those coins which have a combination of potential for increase and the lowest downside risk because their price is initially based in large part on their precious metal content. These are not necessarily strictly bullion coins, but rather what I call semi-numismatic coins that have high bullion content, low mintages and a growing base of collectors. Perhaps the best example would be Mexican silver and gold Libertad coins, especially the various proof versions. Those coins are issued in very small numbers often in the hundreds, use one of the most attractive designs ever to grace any coin, and as the number of people who collect them continues to increase, so will their retail values and probably their mintages. I will cover other specific recommendations for coins in future columns, but my purpose this time was to lay out some of the broad principles and strategies to help one get the most out of the pursuit of modern world coins. Louis Golino first became interested in coins and numismatics 40 years ago. For the past four years he has applied his skills as a policy analyst and journalist to writing about a wide range of issues related to numismatics, including modern U.S. and world coins, classic U.S. coins, the coin market, the U.S. Mint and major world mints and the precious metals markets. He writes a regular column called “The Coin Analyst” for CoinWeek (www. coinweek.com), and his writings have also been published in Coin World, Numismatic News, CoinUpdate (www.coinupdate.com), and other publications.

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How to Find

Gold

With An Extra Measure Of Demand By Michael Haynes,

ceo apmex.com

ou may know about the investment properties of Gold, but you may not know how to find an extra measure of demand for your Gold investment. This extra measure of demand has provided increased investment gains over Gold of 2% to 10% through the financial crisis of 2008 into 2013, along with selective one year increases over Gold of 5% to more than 20%. Whether you now have an investment in Gold or you are considering diversifying your portfolio into Gold, this strategy, to find that extra measure of demand for your Gold investment, may be one for you to employ. The one ounce Gold American Eagle is one of the most popular methods of investing in Gold today. When you acquire Gold American Eagles, you are taking a position in physical Gold, and the movement of the price of Gold per ounce, up or down, generally reflects the movement of the value of your Gold American Eagles since each coin contains one ounce of Gold.

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How to Find Gold With An Extra Measure Of Demand | N U M I S M A T I C S

That movement in the price of Gold, like all other investment assets, is influenced by supply and demand. The demand for Gold includes manufacturing, jewelry, investments (like the Gold American Eagle) and purchases by central banks of the world. However, there are physical Gold coins also made by the United States Mint, just like the Gold American Eagle is made by the Mint, which also contain about one ounce of Gold. However, these Gold coins were struck by the Mint more than 80 years ago. These Gold coins were the currency of the United States in their day, the $20 Gold Double Eagle coin. Here lies that extra measure of demand: The pre-1933 US $20 Gold Double Eagle Coin, with about one ounce of Gold, enjoys the same demand as the Gold American Eagle plus the demand from coin collectors who buy the $20 Gold Double Eagle coin to assemble a date, grade or rare date collection providing added premiums.

According to Mint records, 103,835,171 of the $20 Liberty Gold Double Eagles were struck from 1850 to 1907 and 70,289,596 of the $20 Saint-Gaudens Gold Double Eagles were struck from 1907 to 1933. In 1933, the United States ceased production of the $20 Saint-Gaudens Gold Double Eagle, replacing the monetary unit with paper Federal Reserve Notes that were “good for all debts public and private.” In addition, the banks were ordered to return any $20 Gold Double Eagle coins to the United States Treasury, and those returned were melted into bars and reportedly stored, along with other Gold of the United States, at the depository at Fort Knox, Kentucky. There are no public records of the number of specific $20 Gold Double Eagle coins that were melted nor are there any public records of the number of surviving $20 Gold Double Eagle coins for each of the years of the original mintage. (As with other circulating coinage, each year, the dies were changed and the current year was struck onto the obverse, or front, of the $20 Gold Double Eagle coins.)

As a Gold investor, there is a strategy to take advantage of this extra measure of demand and put that demand to work for your benefit in your Gold investment.

The Other “One Ounce” Gold Coins The United States once utilized Gold coinage as a primary currency and the $20 Gold Double Eagle was the largest such coin. The first major design of the $20 Gold Double Eagle was the Liberty Head, which was struck for 58 years, from 1850 to 1907. The second major design was the Saint-Gaudens, so named after the inspiration from sculptor Augustus Saint-Gaudens, which coin was minted for 27 years, from 1907 to 1933. Each of the Liberty and Saint-Gaudens coins were made by the United States Mint to careful standards (after all, Gold was money and money was Gold in those days) and contains 90% Gold and 10% Copper with a total of about 0.9675 ounces of Gold. (The official price of Gold was $20.75 per ounce, and the Gold in the coin made the coin value $20.) www.ahametals.com American Hard Assets | 37

N U M I S M A T I C S | How to Find Gold With An Extra Measure Of Demand

“The $20 Gold Double Eagle Coin... enjoys the same demand as the Gold American Eagle plus the demand from coin collectors who buy the $20 Gold Double Eagle coin to assemble a date order collection...” Although the specific surviving number of $20 Liberty and SaintGaudens Gold Double Eagles are not known for each date of issue, some years are extremely rare and accordingly, market prices for the rare dates are much higher, 20 or more times higher, than the dated coins with very large original mintages. Those years where $20 Liberty and Saint-Gaudens Gold Double Eagles were minted in huge quantities are called “common dates,” and these coins are all priced interchangeably in the market. Notwithstanding the fact that many years are common dates, collectors still must own them to complete their sets, which makes these common dates the subject of the opportunity to add the extra measure of demand to your physical Gold investment.

In Table 1, the market value of the common date $20 Saint-Gaudens Gold Double Eagle in MS62 through MS65 is shown as of January 2013, along with the Gold value and the related premium of the specific grade over the Gold value. Table 2 shows a similar table for common date $20 Liberty Gold Double Eagle in MS61 through MS64. This chart is also as of January 2013, along with the Gold value and the related premium of the specific grade over the Gold value.

Table 1. Comparison of Market Value and Gold, January 2013, Common Date $20 Saint-Gaudens Gold Double Eagles.

MS62 MS63 MS64 MS65

$ 1,895 $ 1,930 $ 2,055 $ 2,230

$ 1,595 $ 1,595 $ 1,595 $ 1,595

19% 21% 29% 40%

27% 36% 54% 118%

Current Condition is Important Collectors of $20 Gold Double Eagle coins, like collectors of art, antiques, cars and other historical items, pay higher prices for the same item in better condition, or state of preservation. Coin conditions, or “grades” in coin terminology, have been defined and classified according to a scale with measurements from 1 to 70, with 70 being a perfect grade. Coins that have never been used as money, or have never seen circulation, are called “Mint State” as the coins are in the state as they left the minting process. Mint State coins carry a numerical grade from 60 to 70, which is shown, for example, as MS63 for “Mint State” with the numerical grade of “63.” In order to meet the grading standards, those $20 Gold Double Eagle coins that today would be evaluated as Mint State would have to have be pulled out of the banking system virtually immediately each year and carefully stored over the years. Further, the supply of, for example, common date MS62 $20 Saint-Gaudens Gold Double Eagles is larger than the supply of MS65 $20 Saint-Gaudens Gold Double Eagles since the quality of the MS65 is a higher quality and fewer coins survived in that condition. With demand for the $20 Saint-Gaudens Gold Double Eagles increasing for the higher quality (collectors generally seek the highest affordable quality), supply generally declines as the grade rises while correspondingly, demand increases. As a result, market values for common date $20 Saint-Gaudens Gold Double Eagles increase as the quality, or the grade, increases.

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$20 Saint-Gaudens Gold Double Eagle MS62

$20 Saint-Gaudens Gold Double Eagle MS65

Table 2. Comparison of Market Value and Gold, January 2013, Common Date $20 Liberty Double Eagles.

MS61 MS62 MS63 MS64

$ 1,895 $ 1,900 $ 2,150 $ 2,460

$ 1,595 $ 1,595 $ 1,595 $ 1,595

19% 19% 35% 54%

25% 30% 68% 146%

How to Find Gold With An Extra Measure Of Demand | N U M I S M A T I C S

Finding the Best $20 Gold Double Eagle Coin Opportunity

Chart 1. $20 Liberty Gold Double Eagles, Common Date MS61, Premium Over Gold Value, 2003-2013.

For the period 2003 to 2013, Gold values have been up and down while the overall economy of the United States has experienced boom in 2007 to the Great Recession in 2008 and now the recovery in its fifth year. However, because collectors of the $20 Liberty and SaintGaudens Gold Double Eagles have been demanding these coins in the marketplace in each and every year, the market values of these coins in the grades as described above have also moved as well as the premiums over the Gold value in each coin.

Average Premium. One method to analyze opportunity in the $20 Liberty and Saint-Gaudens Gold Double Eagles is to identify the coins that most often have market values and related premiums above the average premium established during the 2003-2013 period. For the $20 Liberty Double Eagles in MS61, there have been six of the eleven years where the premium in that year for this coin was above the average premium for 2003-2013, with the highest premium over the Gold value of the coin at 46% in 2008, the year of the Great Recession. In addition, there is a current opportunity in $20 Liberty Gold Double Eagles in MS61 as the current premium in January 2013 was 19% as compared to the average premium for the entire period of 25%. The results of the analysis can be seen in Chart 1. In a similar manner, for the $20 Saint-Gaudens Gold Double Eagles in MS64, there have been six of the eleven years where the premium in that year for this coin was above the average premium for 2003-2013, with the highest premium over the Gold value of the coin at 94% in 2004. In addition, there is a current opportunity in $20 Saint-Gaudens Gold Double Eagles in MS64 as the current premium in January 2013 was 29% as compared to the average premium for the entire period of 54%. The results of the analysis can be seen in Chart 2.

$20 Liberty Gold Double Eagle MS61

Chart 2. $20 Saint-Gaudens Gold Double Eagles, Common Date MS64, Premium Over Gold Value, 2003-2013.

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N U M I S M A T I C S | How to Find Gold With An Extra Measure Of Demand

$20 Saint-Gaudens Gold Double Eagle MS64

$20 Liberty Gold Double Eagle MS63

Annual Gains. Another method for analyzing opportunity in the

Financial Crisis Performance. The final method of

$20 Liberty and Saint-Gaudens Gold Double Eagles is to review the annual gain or loss over the previous year and identifying the coin series that provided the most number of years of annual gains. For the period 2003 to 2013, there were ten year over year comparisons of market value of Gold and the corresponding value of the $20 Liberty and Saint-Gaudens Gold Double Eagles, each in four grades.

analysis of the opportunity in the $20 Liberty and Saint-Gaudens Gold Double Eagles is to review the performance of the coins as compared to Gold value through the Great Recession and the recovery. The Great Recession was in 2008, and the recovery is now five years in development to 2013. This analysis compares the performance of the $20 Liberty and Saint-Gaudens Gold Double Eagles, each in four grades, with the Gold value.

The analysis demonstrated that the $20 Liberty Gold Double Eagles in MS63 had a total of six of the ten years where the annual gains in market value of the coin exceed the annual gain in the Gold value of the coin. In fact the data shows that the annual gains in the $20 Liberty Gold Double Eagles in MS63 were most significant in the most difficult investment years of 2008, 2009 and 2010, with annual gains in each of the three consecutive years of 52%, 23% and 42%, respectively. The results of this analysis are shown in Chart 3.

This analysis provided the historical evidence for the period 2007 to 2013, in which the $20 Liberty Gold Double Eagles in MS61 and the $20 Saint-Gaudens Gold Double Eagles in MS62 outperformed the Gold value when the values were compared based on an index with 2007 values set to 100. Both the $20 Liberty Gold Double Eagles in MS61 and the $20 SaintGaudens Gold Double Eagles in MS62 provided significantly improved gains through the most difficult years of 2008, 2009 and 2010, with index values of approximately 150, 180 and 215, respectively, as compared to Gold values in the same three years of 141, 141 and 187. In 2013, the index values for the $20

Chart 3. Annual Gain or Loss in Market Value from Previous Year of $20 Liberty Gold Double Eagles, Common Date MS63 and Gold Value, 2004-2013.

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A Beginnerâ&#x20AC;&#x2122;s Guide to Understanding the Graded $20 Gold Piece Market | N U M I S M A T I C S How to Find Gold With AnU.S. Extra Measure Of Demand

Liberty Gold Double Eagles, $20 Saint-Gaudens Gold Double Eagles and corresponding Gold value are 281, 273 and 271, respectively, demonstrating that the $20 Gold Double Eagle coins delivered better gains in the difficult years as well as an overall higher gain for the entire period from 2007 to 2013. The results of the analysis are found in Chart 4.

Chart 4. Indexed Comparison of Market Values of $20 Liberty Gold Double Eagles, Common Date MS61, $20 Saint-Gaudens Gold Double Eagles, Common Date MS62 and Gold Value, 2007-2013; 2007=100.

There is an extra measure of demand available to you in your Gold investment from collectors who have interests in the $20 Liberty and Saint-Gaudens Gold Double Eagles. Analysis shows that of the possible coins available for the investor, the best opportunities may be found in the common date $20 Liberty Gold Double Eagles in MS61 and the common date $20 Saint-Gaudens Gold Double Eagles in MS64, as these Gold coins have most often traded above the eleven year average and currently are underpriced relative to that average. In addition, the common date $20 Liberty Gold Double Eagles in MS63 have most often outperformed the corresponding Gold value, especially during the financial stress. Lastly, the common date $20 Liberty Gold Double Eagles in MS61 and the common date $20 Saint-Gaudens Gold Double Eagles in MS62 performed much better than the corresponding Gold value during the financial crisis and Great Recession and continue to hold those gains today. As you consider your current portfolio and the inclusion of Gold as a part of your future portfolio, you may want to consider adding this extra measure of demand in physical Gold.

About Michael Haynes

$20 Liberty Gold Double Eagle MS61

$20 Saint-Gaudens Gold Double Eagle MS62

Michael Haynes has more than 30 years of experience in the gold, precious metals and coin industries. Prior to joining APMEX, Mr. Haynes was Chief Executive Officer of Black, Starr & Frost, a privately held luxury jewelry retailer. From 2003 to 2009, he was chief executive officer and a member of the Board of Directors of Collectors Universe, Inc., a NASDAQtraded firm. He is also one of the founders of the trade association, The Industry Council for Tangible Assets.

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Understanding the Graded U.S. $20 Gold Piece Market | N U M I S M A T I C S

Understanding the Graded U.S. $20 Gold Piece Market By Jonathan Kosares

rom 1850 until 1932, the United States produced coins just shy of a full ounce of gold, denominated at $20 apiece and commonly

referred to as â&#x20AC;&#x2DC;Double Eaglesâ&#x20AC;&#x2122;. Two designs exist for these coins. One, the Liberty, was minted from 18501907, and the second, the St. Gaudens (named after famed sculptor Augustus St. Gaudens), was minted from 1907-1932. These coins carry varying degrees of rarity depending on date, mint mark and condition. At first glance, such a spectrum of coins can both intimidate and confuse the average investor. And

while picking specific numismatic options is a risky proposition that depends on the presence of a specific buyer to realize value, an entire section of this market is predictable, liquid and affordable. Our hope is that you as an investor will be able to utilize the information in this report to maximize this investment potential, while simultaneously insulating yourself against poorly timed (or unfairly priced) allocations.

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N U M I S M A T I C S | Understanding the Graded U.S. $20 Gold Piece Market

Explanation of Mint State Grading Scale and Resulting Risk/Reward Potential:

Pictured above is a brief explanation of the Mint State grading scale for semi-numismatic gold coins. As you move to the right across the scale, the condition of the coins improves and their scarcity increases (total availability decreases). The value of that scarcity is represented through the premium, or value of the coin above and beyond the value of its underlying gold content. The premium a coin carries is directly correlated to its rarity, and the more value a coin carries in its rarity, the more volatile its price changes will be. As such, moving right along the scale naturally increases risk/reward opportunities. Upside reward opportunities in these coins is divided into two categories: Premiums and the the price of gold fluctuations. By purchasing at a level where the premium is at or near an all-time low, exposure to loss of value through declining premiums is mitigated. In other words, by buying â&#x20AC;&#x2DC;rightâ&#x20AC;&#x2122; investors can enjoy all the increased upside potential inherent in these coins without adding substantially more risk to their position than that of gold itself. Conversely, if one buys when premiums are too high, he stands to see compounded losses if both gold and premiums

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Understanding the Graded U.S. $20 Gold Piece Market | N U M I S M A T I C S

should decline together, or risks abbreviated gains should gold move higher, but premiums move lower. Charted here is the USAGOLD Index of Graded $20 Gold Pieces - Premium (above) & Price (below). The Index of Graded $20 Gold Pieces contains one each Mint State (MS) 63 and MS64 United States $20 Liberty and one each MS63, MS64 and MS65 $20 St. Gaudens gold coins and combines them into a five-coin market index. This index removes the volatility possible when tracking individual coins to provide a more accurate general market snapshot for graded $20 gold pieces.

The premium as listed on the y (vertical)axis should be read as a multiplier of the gold price. In other words, a coin premium of 2 is equal to double the gold price, and a coin premium of 3 is equal to 3 times the gold price.

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N U M I S M A T I C S | Understanding the Graded U.S. $20 Gold Piece Market

These coins carry varying degrees of rarity depending on date, mint mark, and condition. Take some time to study these charts closely. The premium as listed on the y (vertical)-axis should be read as a multiplier of the gold price. In other words, a coin premium of 2 is equal to double the gold price, and a coin premium of 3 is equal to 3 times the gold price. Notice the periods of premium expansion. The most notable spikes occurred in both late 2008/early 2009 and in 1999 in the lead-up to Y2K (as indicated in the chart above). Clearly, it is when gold demand is peaking that the inherently tight supply of these items is most evident. It is for this reason that numerous safe-haven oriented clientele see these items as productive components in a well-diversified gold portfolio. On one hand, they are securing pre-1933 positions, which are widely considered to be the â&#x20AC;&#x2DC;safestâ&#x20AC;&#x2122; from of gold ownership because of their ability

...the graded $20 gold piece market works well for those looking to increase the risk/reward factor in their gold holdings.

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Understanding the Graded U.S. $20 Gold Piece Market | N U M I S M A T I C S

The premium a coin carries is directly correlated to its rarity, and the more value a coin carries in its rarity, the more volatile its price changes will be. to protect/insulate against government intrusion risks. On the other, they stand positioned to capitalize most when the desire to own gold peaks - a phenomenon that typically coincides with economic turmoil and destabilized market conditions - fear of which is the primary motivation of the safe-haven gold owner.

In short, the graded $20 gold piece market works well for those looking to increase the risk/reward factor in their gold holdings. If approached carefully and prudently, investors can enjoy great success in this market. Due simply to the fact that these coins trend with the gold price rather than track it directly (as seen in the price graph above), our advice is not to utilize these coins as the sole position in oneâ&#x20AC;&#x2122;s gold holdings, but instead as a component in a balanced portfolio. We recommend a three to five year minimum holding period for these items.

...while picking specific numismatic options is a risky proposition that depends on the presence of a specific buyer to realize value, an entire section of this market is predictable, liquid, and affordable.

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he world of collateral lending is huge; there are an estimated 13,000 pawnshops in business today, but none are comparable to Beverly Loan Company (www.beverlyloan.com) in Beverly Hills or New York Loan Company (www.newyorkloan.com) in New York City. Jordan Tabach-Bank is the third generation owner/operator of these two upscale collateral lending institutions that specialize in sizeable short term pawn loans against hard assets such as Rolex watches, Van Cleef & Arpels jewelry and Andy Warhol paintings.

entertainment industry. Earlier this year, in celebration of 75 years in business, Tabach-Bank opened its East Coast counterpart.

Beverly Loan Company was founded by Tabach-Bank’s grandfather, Louis Zimmelman, in the 1930’s as an exclusive and discreet pawnshop, catering to clientele who value confidentially and security. It was not long before this Beverly Hills staple was coined the “Pawnshop to the Stars” on account of its highbrow clientele, often from the

I suppose you could say I’ve been a pawnbroker my whole life. I was a staple at Beverly Loan Company throughout my childhood, and first started working for my grandfather and my mother as a teenager. In fact, I made my first loan nearly 20 years ago at age 16. Wow, that makes me feel old. I wasn’t always sure that I’d end up as a pawnbroker though. I suppose I felt the need to make it on

We visited with America’s most elite pawnbroker at his New York City office to ask him about his niche business. What’s it like being part of a family business and did you always know that you’d be a pawnbroker?

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L U X U R Y & L I F E S T Y L E | Collateralized Lending

both state of the art security for the collateral and a confidential environment for our clientele. We looked at a lot of options, but none felt like a good fit. Then I heard about the plans to build the International Gem Tower in the heart of the “Diamond District” on 47th Street and the rest is history. Why was it important to be in New York City’s Diamond District?

my own to a certain extent and I actually had another life practicing law for several years. Unfortunately, when my mother contracted cancer, it became clear that I would have to make a choice. It turned out to be a really easy decision. I had the option of reading contracts all day or seeing some of the world’s most beautiful diamonds, jewelry, watches and artwork. More importantly, at Beverly Loan Company I had the privilege of working with our staff on a daily basis, which I’m proud to say is one of the finest groups of people you’ll find on this planet – certainly a big step up from your typical adversarial attorneys. It was truly a “no-brainer” and it felt like coming home. Why did you choose New York as your second location? After 75 years in business, we were long overdue for a second location. We have often had borrowers from the East Coast fly out to Beverly Hills to take advantage of our niche service. When we started looking at locations for a new office, New York City was the obvious choice based on demographics. But we needed a AAA location that provided 52 | American Hard Assets www.ahametals.com

While we often write loans against contemporary and modern art, as well as one-of-a-kind entertainment and sports memorabilia, the vast majority of our business is signed jewelry, fine watches and diamonds, and we wanted to be in the center of it all. Believe it or not, over 90% of the diamonds in the US come through 47th Street between 5th Avenue and 6th Avenue; it is where all the major players do business. Our proximity and relationships with those in the industry allow us to loan more than your typical pawnshop because we have a better understanding of what the asset is really worth. Your average pawnshop makes loans of $150 or so – they don’t know what to do when someone comes in with a $25,000 Patek Phillippe or a $90,000 diamond ring. As a result, they often end up being very conservative on the loan amount. It was also very important for us that the International Gem Tower was being constructed ground-up specifically for the diamond trade. It features roaming security guards, state-of-the-art video surveillance and a class 3 vault where all loan collateral is stored. Not only does it provide security for our borrowers, but also for their prized possessions. And, needless to say, we are in good company with neighbors such as the Gemological Institute of America, the very educational institution where all of my loan officers earned their gemology degrees. Are there any differences between your offices on each coast? Not really. The offices generally operate as they did under the guidance of my grandfather and my mother, who were my predecessors and mentors. Both offices provide pawn loans, will purchase goods outright, and sell jewelry to the public at “dealer” prices and we do our utmost in both locations to provide an environment that is professional and appealing. The cornerstones of the business will never change: confidentiality, security and the ability to provide cash in matter of minutes. But what has always set us apart most from all other pawnshops is the fact that we are often able to loan more than our competitors on an item and our ability to write very large loans, even 7-figure loans.

Collateralized Lending | L U X U R Y & L I F E S T Y L E

Do you ever personally visit other pawn shops? I actually love visiting pawn shops. Having sat on the Board of the National Pawnbrokers Association, I know of the important service that pawnshops provide to the unbanked and underbanked in the United States. We provide non-recourse loans to our clients, never performing so much as a credit check. That is why we are often referred to as the “people’s bank”. My good friend, Seth Gold, who stars on Hardcore Pawn on TruTV, recently visited New York Loan Company and we discussed the fact that we serve very different clientele and loan against very different collateral, but at the end of the day, we are proud to provide the same service of short term lending for those who need an immediate cash infusion.

How has the changing gold market influenced your business, if at all? Our clientele seems to be much more educated with respect to the price of precious metals than ever before. Once gold skyrocketed to nearly $2,000 an ounce, some clients decided it was time to empty the jewelry box and cash out, while other clients wanted to double down in hopes of gold continuing to appreciate. People tend to believe that high gold prices are good for the pawn business, but that is a bit of a misnomer. When gold is high our loan balance grows which is certainly a good thing; however, sales decline, since gold is no longer affordable. It’s a trade-off. We are a testament to the fact that pawnbrokers can perform in all economic climates when they treat their clients with respect and professionalism.

What does your typical client look like and why do they need loans?

What do you tell your clients to invest in?

We assist clients of all walks of life, but a large percentage of our clientele are small business owners who have short-term liquidity issues. Clients come to us for a variety of reasons, ranging from estate taxes, to investment opportunities, to attorney fees, to home renovations, to escrow closings and even for plastic surgery. The last one more so in our Beverly Hills office. There are thousands of other reasons, but we never ask, although clients will often volunteer what they plan to do with the loan proceeds.

I often suggest investing in GIA certified diamonds or signed jewelry, whether it be Cartier, Harry Winston or Tiffany & Co. Similarly limited edition complicated watches by Richard Mille, Audemars Piguet or Panerai tend to also be a very sound long-term investment. Colored diamonds, blues and pinks especially, are incredibly rare, and will only appreciate. And you can’t go wrong with artwork from artists with strong secondary markets, like Picasso or Hirst, who regularly sell at major auction houses including Sotheby’s and Christie’s. It is all about supply and demand.

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L U X U R Y & L I F E S T Y L E | Collateralized Lending What do you tell your clients not to invest in? Basically, I think tangible personal property is a sound investment if you do your research and purchase at a fair price. That said, I stay far away from depreciating assets such as automobile and electronics. Todayâ&#x20AC;&#x2122;s cutting edge TV or computer is a dinosaur in a matter of months. As they say, â&#x20AC;&#x153;a diamond is forever.â&#x20AC;? What was the largest loan you ever made? Unfortunately I cannot disclose the details of our largest loan because of confidentiality, but I can tell you that it was 7 figures against a very large certified pink diamond. Sometimes the collateral is so unique that describing it in detail would even be a violation of confidentiality and we are keenly aware of these issues. Another trait that sets us apart from your average pawnshop. Anyone famous ever frequent either shop? I know I am a bit of a tease saying this, but you would be utterly shocked by the stars who have taken advantage of our services, actors, writers, athletes, socialites and even politicians. But we have not been successful in this business for over 75 years by naming names. What is the coolest item you have ever loaned against? That is a difficult question, since we see unbelievable goods on a daily basis. I have always found awards to be very cool; we have loaned against Emmys, MTV Moonmen and even Oscars. I am also a sports fan, so I am always intrigued by Super Bowl, World Series and NBA championship rings. And, we are one of the few lenders, who will make 5 figure loans on Hermes Birkin handbags. But, at the end of the day, large certified diamonds, always demand the largest loans.

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L U X U R Y & L I F E S T Y L E | 5 European Wine

Tours That Are Anything But Stuffy

Article by Nicolle Monico

by Nicolle Monico

ine tours are a quintessential part of traveling through Europe, as its regions hold some of the most famous vineyards, brands and family-run wineries in the world. If you’re a frequent traveler to The Old World you may be looking for something a little different this next time around. Like you, we were itching for that extra twist that made a tour stand out among the rest. Below is a compilation of some of Europe’s unique wine experiences.

Become a Winemaker in Médoc, France France’s wine country is rich with a number of varietals and the little town of Médoc is no different. In the 1600’s, Dutch engineers arrived to begin draining the marshes in this area for viticulture. As the years went by, aristocrats, tycoons and large estates began to take over the land and began farming vineyards. Today the region is filled with labels like Margaux, St Julien, Pauillac, St Estéphe and Haut-Médoc. Cellar Tours offers a customizable wine tour of Médoc with a variety of one-day tours. While the tours vary according to your preferences, a sample itinerary gives a good idea of what to expect during the day. First, be chauffeured around in a Mercedes and visit cru classé wine estates in the region before heading off to vertical tasting of Margaux wines. Two hours later lunch will be served which includes a chef’s taster menu and wine pairings at a Michelin starred restaurant. After the tasting, it’s time to get more hands-on with your grapes during a wine blending master class in St Julien. During the private class at the Château Lagrange winery you will learn how winemakers select their percentage of vinified single varietal wines for their blends. Then it’s time to make your own! After finishing your product, you’ll get to savor your blend. Maybe next time, visitors will be stopping into YOUR winery. 56 | American Hard Assets www.ahametals.com

Fashion and Wine in Tuscany, Italy Tuscany Travel Experts know that good fashion and good wine fit amazingly well together, even if it means drinking a nice wine after a day of shopping. On their full-day wine tour guests will get to experience a little bit of both. Begin your day in Tuscany by shopping at the Prada outlet for your favorite styles and accessories. Then explore the area for your perfect lunch spot (not included) before visiting Il Borro winery. Any fashionista may enjoy knowing that the owners of this world-famous winery are none other than the Salvatore Ferragamo family. Afterwards, head over to the I Selvatici winery, hailed by Wine Spectator Magazine for its Super Tuscan and Vin Santo wines. Of course you should dress accordingly; you never know who you may run into on this fashioncentered journey.

From a Bird’s Eye View in Portugal

Spanish Vineyards by Horseback

For a really cool experience, instead of having a private chauffeur drive you around, how about enlisting a pilot to take you to each winery? Picked up at the cruise ship pier in Portugal, Shore Trips will send a car to take you to the helipad at the Lisbon International Airport where you will head off by helicopter to the Alentejo region. Prior to arriving to the Herdade do Esporão, one of the most emblematic wineries in Portugal, you will pass through medieval villages and lush landscapes. Sip on wines and enjoy the views until lunch where you will be hosted at the estate restaurant.

Nature enthusiasts will enjoy our next tour. Presented by Hidden Trails, the company specializes in outdoor adventures, one being a horseback riding experience through Spain’s Ribera del Duero’s vineyards. Since the 1990’s, the region has been known for producing some of the country’s finest wines on its 28 acres of land. Home to over 180 vineyards and over 8,000 wines, riders will get to explore this bountiful landscape while enjoying a number of tastings.

Guests will have the chance to taste the local olive oils and cheese paired with the wines (cheese pairings are always a great idea in our book). Next you’ll you be off again and headed towards Igrejinha to the Coelheiros Wine Estate. While in the air, take notice of the beautifully colored landscapes and small white village below. Produced in very small quantities, the exclusive wines by Tapada dos Coelheiros will be the served, full of scents from Alentejo fruits and herbs. Finally, your day will end with a flight back to the Lisbon helipad.

Portugal is for Lovers Too! Honeymooners, Portugal has just the tour for you provided by Cellar Tours. On this romantic excursion, you’ll fall in love with not only the city filled with untouched villages and landscapes, but also the exquisite wines of the country. Travel through lush vineyards with your new husband or wife from the Douro Valley to the fishing villages of the Algarve. To make your day even better, the team of organizers will plan special experiences for you throughout the afternoon.

Throughout the eight-day adventure, guests will get to venture through Hoces del Rio Duraton (which boasts great archaeological and historical sites), visit vineyards in Ribera del Duero, tour through wine museums and stop along the way to view some of Spain’s oldest castles and abbeys. Along the way you’ll also get to enjoy the region’s best cuisine like juicy lamb roasts and full flavored sheep cheese. To make things a little easier, you’ll only have to move hotels every second day so you won’t be packing each morning. How you want to explore Europe’s wine regions is up to you, and based on the above suggestions, you’ve got options. Become a winemaker in Italy, easy enough; take to the air before sipping on full-bodied reds, we love it; or simply fall deeper in love with your best friend in Portugal. Wine, the European countryside and tasty foods, sounds like a plan we will happily cheers to.

Chauffeured via Mercedes, you’ll set out on an adventure of meeting locals, Portuguese aristocrats, knowledgeable winemakers and talented chefs. This eleven day journey takes you through Lisbon, Cascais, Sintra, Óbidos, Porto and Algarve. Included in the package are accommodations for ten nights in five-star hotels, ten full breakfasts, seven lunches and tastings including a meal at a fourstar rated Michelin restaurant and two exceptional dinners. Aside from the hotel and meals, you and your loved one will be treated to a massage and spa circuit in Lisbon and an exclusive horsedrawn carriage ride in Portugal’s nature reserve. Take to the sea on a private boat tour of Algarve Coast and learn about Lisbon’s art culture on your guided walking tour; this plus a number of complimentary wines are all part of the Honeymoon package. www.ahametals.com American Hard Assets | 57

L U X U R Y & L I F E S T Y L E | America’s Most Expensive Real Estate Markets

Article by Million Dollar Listing by Million Dollar Listing

illionaires have been proving that dropping thousands for each square foot of a luxury home isn’t out of the question, with some market prices reaching record-breaking heights — like America’s most expensive home in Greenwich, Connecticut (going for $190M). Considering Greenwich is known to attract Wall Street tycoons, it’s not too surprising to see such a high-priced property up for grabs, but it did get us thinking about where in America you can find the most expensive real estate markets. According to market data collected by Coldwell Banker, California reigns supreme, with New York, Hawaii and Connecticut filling in the gaps.

California California dominates the first six slots in the report, with Los Altos ranking as the most expensive housing market in America, carrying an average listing price of $1.7M. Considering Los Altos is less than 20 minutes away from such tech giants like Google and Facebook, the high prices aren’t a big shock. Take the Vineyard Retreat shown above, which is going for $4.9M. Following directly after is Newport Beach ($1.6M), Saratoga ($1.5M), Menlo Park ($1.5M), Palo Alto ($1.4), and Los Gatos ($1.4). In case you were wondering, Los Angeles comes in at $541,629, with some neighborhoods selling properties for $40M.

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New York While New York City is certainly pricey ($517,409), Rye has proven to hold the biggest price tag with an average of $1.3M. Within commuting distance from the Big Apple, Rye borders Long Island Sound and Connecticut, making it a popular choice for anyone looking for a quieter life. One such property is a $11.9M 6,736-square-foot Colonial estate with views of Long Island Sound and Kirby Mill Pond.

Hawaii Hawaii has long been a favorite vacation destination, with its white sandy beaches and big waves, and with an average market price of $1.2M it’s also a favorite place amongst homebuyers. Kailua, found on Oahu Island and a short drive from Honolulu, has an average listing price of $1.2. The high prices might have something to do with the fact that the island only has so much land to utilize, which may drive up prices on homes that wouldn’t normally hold such high value. Of course, there are homes like the $3.7M Kona Bay Estate shown above that seems well worth the price tag.

Connecticut If you plan on buying in Greenwich, you can expect an average home cost of $1.2M — which is now looking pretty affordable compared to the rest of the areas in this article. While the $190M mansion is on everyone’s radars right now, the $32.9 Old Mill Farm is pretty impressive too, with four separate lots on over 75 acres of land.

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State of American Watch Industry |

LIFEST YLE & LUXURY

y one count, at least 139 watch companies have existed in the United States since 1809. Some lasted a year or two, some a century or more. Some lasted until the “quartz crisis” of the 1970s. Most, sadly, are companies you’ve never heard of. Others, companies like Hamilton, Bulova and Ingersoll still exist, but in name only, having been sold to foreign interests who leveraged the name to sell products. What happened? Market saturation? Bad business practices? Of course, as happens in all industries, some of these companies simply weren’t good business propositions. Any number of things may have led to a particular company’s demise, most having more to do with how they were managed, poor marketing, or stiff competition, than the mere fact that they were watch companies. But over a dozen of those companies are less than 25 years old. They’re products of the mechanical renaissance, the carefully considered and orchestrated response of the (mostly) Swiss watch industry to the quartz onslaught.

L I F E S T Y L E & L U X U R Y | State of American Watch Industry

But let’s back up. Though there are many fine quartz-based timepieces being produced today – some by historically luxury mechanical watch companies, in this article we want to focus on mechanical watches. That said, one can divide the current American watch industry roughly into two groups: those brands who make many of their own parts (both movement parts and case parts; the mix varies) and assemble their watches using those parts, and those who generate their own designs, but purchase movements (typically whole) and case parts from suppliers, and put it all together in-house. There really is no manufacturing infrastructure whatsoever in the U.S. for the watch industry. Therefore, most everyone must go to Swiss, Japanese, or Chinese manufacturers for parts, even if they rework them in-house.

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The Swiss of course, are the gold standard – and the most respected – for horological manufacture. However, movements from the Japanese companies of MIYOTA (Citizen) or Hattori (Seiko) are typically very good, and much less expensive than their Swiss counterparts. The same can be said of many movements from the Chinese.

State of American Watch Industry |

LIFEST YLE & LUXURY

Kobold Watch Company, also based in Pennsylvania, is known for its adventure watches. Mountain climber and adventurer Ranulph Fiennes was their first brand ambassador, and their current ambassador roster includes several more cut from the same cloth. Testament to a young man’s vision and ambition, the brand was founded by then-college student Michael Kobold, who had previously served an unpaid internship in the mid1990s under Gerd-R Lang at Chronoswiss (widely recognized for his role in the aforementioned mechanical renaissance).

There really is no manufacturing infrastructure whatsoever in the U.S. for the watch industry... most everyone must go to Swiss, Japanese, or Chinese manufacturers for parts, even if they rework them in-house.

Towson Watch Company was founded in 2000 by two experienced watchmakers, George Thomas and Hartwig Blake. Towson specializes in intricate engraving and handmade production of many of the parts in their movements. Their stated 11-point wrist watch mission includes development and release of several chronographs with various complications, and custom designs. Their watches have flown in space, on NASA space shuttle mission STS-99, a mission to map a large portion of the Earth’s surface.

But just who are these American brands? The list is longer than you might expect. It includes RGM Watch Company, Kobold Watch Company, Towson Watch Company, Sedona Watch Works, Bozeman Watch Company, The Montana Watch Company, Weiss Watch Company, Sedona Watch Works, Keaton Myrick, Shinola and MK II. Founded 21 years ago, Roland Murphy’s RGM Watch Company is the wizened veteran of the modern American watch industry. RGM is located in Lancaster County, PA, arguably the capital of American Watchmaking in times gone by. Hamilton was located there, and the National Association of Watch and Clock Collectors (NAWCC) is just a few miles down the road in Columbia. The Lititz Watch Technicum, which teaches the “Art of Swiss Watchmaking”, is just up the road in Lititz. RGM is geographically well situated to make watches that compete with the world’s Haute Horlogerie. Indeed, their Pennsylvania Tourbillon (MM 2) is entirely made in their Lancaster shops. And last year, RGM released their third in-house movement, the Caliber 20, in honor of their 20th anniversary.

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L I F E S T Y L E & L U X U R Y | State of American Watch Industry

Keaton Myrick graduated from the Lititz Watch Technicum in Pennsylvania in 2007. He worked at Rolex USA before striking out on his own to make his self-branded watches by hand one at a time. Myrick makes virtually every part in his watches himself, including completely custom made dials. He’ll also make a custom dial for your existing watch, or produce a display case back so you can enjoy the heretofore unseen craftsmanship hiding inside. Sedona Watch Works, also known as Geoffrey Roth Watch Engineering, produces uniquely designed watches that seem to flow. Roth, who is both an engineer and an artist (a unique combination in itself) has created a line of Southwestern inspired timepieces using Swiss internals. Case parts are his specialty, and you’ll find typical watch materials like 316L stainless steel and 18K rose gold, and also unusual Damascus steel, which makes for a one-of-a-kind case each time one is produced.

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The Swiss... are the gold standard – and the most respected – for horological manufacture. With model names like Yellowstone, Snowmaster, SmokeJumper, and Cutthroat, you’d expect the brand name to be “Bozeman Watch Company.” Bozeman has produced upwards of a dozen different limited edition timepieces since their founding in 2004. Most models are certified Chronometers by the Geneva based COSC (Controle Officiel Suisse des Chronometres). Specific models support namesake organizations such as the National Smokejumper Association, or the efforts to preserve the many sub-species of the native American Cutthroat Trout.

State of American Watch Industry |

LIFEST YLE & LUXURY

Shinola makes watches (and bicycles, interestingly) in Detroit. They’re betting on the massive manufacturing heritage of the Motor City to inform and inspire both their design and their production. Shinola makes watches (and bicycles, interestingly) in Detroit. They’re betting on the massive manufacturing heritage of the Motor City to inform and inspire both their design and their production. They’ve combined a strong blue collar work ethic with entrepreneurialism into something uniquely American. Their growing line of watches for both men and women seem almost like a dare to the international watchmaking community. More than perhaps any other domestic brand, Shinola seems to embody the attitude behind bringing back American watchmaking.

The Montana Watch Company produces timepieces anchored in the traditions and look of the American West. The watches often feature richly engraved cases of Sterling Silver, and 14K gold accents. Like many before him, founder Jeffrey Nashan began his career as a watchmaker specializing in repair and restoration of vintage pieces. Thus, the Montana Watch Company flows from the inspiration he took from the American classic watchmakers. Cameron Weiss of the Weiss Watch Company has the stated goal of returning watchmaking prestige back to the US. He says American companies once had the skill, craftsmanship and ability to produce each part of a watch right here, and he wants his eponymous brand to do its part in returning the U.S. to its former watchmaking glory.

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L I F E S T Y L E & L U X U R Y | State of American Watch Industry

The term MKII (or Mark 2) typically means second generation. Each limited edition MK II model is intended by founder Bill Yao to represent what a second generation of a classic tool watch (like the Rolex Submariner MIL-SUB or the extremely obscure Benrus Type 1, which was issued to Special Forces types in the 1960s) might be. In that respect, they’re an homage of sorts, but they’re also extreme tough-guy watches in their own right. One commentator we know described their tool status as being so complete, they should hang on a pegboard “between your hammer and socket set” when not being worn. There are numerous smaller brands too. Brands are designing their own case parts for overseas manufacture and assembly, or in some cases, for import as parts to be assembled here in the US. Some use Swiss movements, but many use Japanese or Chinese power plants. Two examples are Padron

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and Anstead. Padron’s entire operation – design, procurement, assembly, marketing, sales, etc. – is run out of an office in Minneapolis, MN. Anstead, based in Naples, FL, was founded by Tom Anstead, a former US Navy officer who decided to design and manufacture the watch he wished he’d been issued in the Navy. Some of these brands are haute horlogerie and some are not, but they all seem driven by a single ambition – to bring mechanical watchmaking back to American shores. With the efforts we’ve seen from brands like these, pushing the envelopes of their respective niches within the field of international horology, we feel the future of American watchmaking is in good shape.

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H A R D A S S E T S I N V E S T M E N T | Presidents, Central Bankers and Bond Villains

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Presidents, Central Bankers and James Bond Villains | H A R D A S S E T S I N V E S T M E N T

Presidents, Central Bankers and James Bond Villains By Dan Denning

ou can probably learn everything you need to know about how precious metals can help protect your wealth by watching a few James Bond films. Everyone from Wen Jiabao to Alan Greenspan is worried about inflation in oil prices and the cost of living, as if what is causing it is a mystery. But you don’t have to be a genius to understand loose monetary policy creates inflation. You don’t even have to be a secret agent. I recently revisited the old Bond films and my trip started with Goldfinger from 1964. Bond plays a round of golf with the villain, Auric Goldfinger. The prize for the winner is a bar of Nazi gold (keep that in mind for later). But the premise of the film is that Goldfinger has been paid by the Chinese communists to launch an attack on the United States. Ahead of his time, Goldfinger plans to blow up a Chinese nuclear bomb in Fort Knox (where America’s gold is supposedly held) and irradiate America’s money for 58 years (until 2022). It’s an unconventional attack on one of the real sources of legitimacy for the Nation State: sound money. The plot eventually fails, as it must in a Bond film. But it probably fails because Goldfinger failed to realise the era of the partial gold standard was about to be replaced by the era of the full dollar standard. It was just a matter of time (about 10 years) before America went fully fiat with money not

backed by any metal. The cost of the Vietnam War and Lyndon Johnson’s Great Society Welfare State propelled America into the era of not choosing between guns and butter. We’ll have both and charge it to the next generation. The logical consequences of the ever expanding, debt-backed Welfare/Warfare State had now arrived. But back then, it was still a fair way off. In 1967’s Bond film, You Only Live Twice, gold again made an appearance as money. The archvillain (with the collapsible draw bridge over the piranha pond) demands his clients pay him $100 million in gold bullion before he instigates a nuclear war between the United States and the Soviet Union. He doesn’t ask for dollar bills. Then in 1973 gold made another appearance in a Bond film. This time gold made its way into the title. Christopher Lee played the hired assassin Francisco Scaramanga, better known as The Man with the Golden Gun. Gold didn’t play a role as money in this story. It was used as a weapon. But keep in mind that the plot revolved around misusing a powerful solar technology. The theme was hot at the time because the energy crisis had just begun because of what Richard Nixon did to the US dollar two years earlier. On August 15, 1971, US President Richard Nixon suspended the convertibility of the US dollar

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H A R D A S S E T S I N V E S T M E N T | Presidents, Central Bankers and James Bond Villains

‘In the absence of the gold standard, there is no way to protect savings from confiscation through inflation . . .’ – Alan Greenspan, 1968

into gold. It effectively ended the Bretton Woods post-war currency regime that had brought monetary stability (and a great deal of prosperity) to the US. Foreign dollar holders who were alarmed by growing US spending and inflation had been trading paper for gold. Nixon had enough. Nixon’s explanation of the move is worth watching. Nixon was no friend of sound money or small government. In fact, though he’s commonly and rightly vilified for the Watergate breakin and coverup, Nixon probably deserves a caning for the generally anti-liberty positions he took throughout his presidency. It’s no accident Nixon went to China. He was fond of State power and had a devout belief in the power of government to do good in life through a relentless attack on personal liberty. Economically, Nixon imposed wage and price controls to try and contain the very effects of inflation he helped create. He created many new government agencies. Following Lyndon Johnson’s militaristic rhetoric (and setting the tone for government’s comprehensive attack on personal liberty) he declared ‘war’ on cancer. Johnson, of course, had declared ‘war’ on poverty. That’s modern government for you. Always at war with something. Thus the ‘Warfare State’. Nixon and the Congress shirked their constitutional responsibility by never declaring war on Vietnam. This is a precedent that cowardly politicians on both the left and right 70 | American Hard Assets www.ahametals.com

have followed ever since. They have thus avoided the constitutional check the American founders put on going to war easily. I wish we had known all this when I shook Richard Nixon’s hand as a 16 year old back in 1989. I was serving as a Congressional Page in the US House of Representatives. My boss told me to wait inside the entrance of the Cannon House Office Building at the corner of New Jersey and C Streets. Nixon was in the middle of rehabilitating his badly damaged historical reputation. He paid a visit to the Cannon Office building for nostalgia’s sake and by then he was a frail old man. But 43 years earlier, both Nixon and John F. Kennedy had their offices in the Cannon Building when they were elected as freshman Congressman in 1946. Kennedy, of course, beat Nixon in the 1960 presidential election. After Lyndon Johnson served out the end of Kennedy’s firstterm and was re-elected, Nixon finally won the presidency in 1968. Which brings us back to Alan Greenspan, who served as an advisor to Nixon’s campaign at the time. In a famous 1966 essay on gold (two years after the release of Goldfinger –and in an essay Nixon probably hadn’t read), the objectivist Greenspan (a friend of Ayn Rand) wrote the following and explained the relationship between sound money and freedom – and why those who oppose personal liberty invariably hate gold: ‘In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.’ What makes Greenspan such an unconvincing advocate for personal liberty is how he spent the rest of his public life...at the helm of a private banking cartel, running up a series of ruinous, wealth-destroying credit bubbles while all the while claiming complete ignorance of his actions. And then in early March 2011, Greenspan has the temerity to go on CNBC and tell us, ‘What the gold price is saying is that essentially there are elements in the market place which feel very uncomfortable with respect to what is going on generally.’ What is going on generally? You mean the State-sponsored inflation, which is gradually destroying standards of living in the Western world?

Presidents, Central Bankers and James Bond Villains | H A R D A S S E T S I N V E S T M E N T

Former Chairman Greenspan continues: ‘And it’s not an accident that central banks are going in to buy gold. And one of the reasons is that gold historically is one of the very rare media of exchange which doesn’t require any collateral, or backing, [or] counter signatures.’ Translation: gold is not a covered bond, a residential mortgage-backed security, or a promise to pay. It’s money. ‘Gold,’ Greenspan continues, ‘Is universally acceptable as a means of payment. And for example, during World War Two, the Germans couldn’t import anything in 1944 unless they paid in gold. And the history of that is important.’ Yes it is. The modern ‘Welfare/Warfare State’ can only expand through the perpetual issuance of new debt. In times of war, when you can’t sell debt to investors, you have to pay with real money. Under a gold standard, war was prohibitively expensive. That’s why the gold standard (the convertibility of paper money into gold) was suspended temporarily and then permanently (to make World War One and Two possible – and now lately, the State’s war against everything). If gold had an enemies list, Nixon would be on it. Greenspan would be right at the top. And there would be many more. But gold doesn’t hold grudges. It just holds value.

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A U C T I O N S , C O L L E C T I B L E S A N D D I V E R S I F I C A T I O N | Baseball Cards

Childhood Dreams Can Be A Strong Investment By Gabriel Benson

uick. Run up to your parent’s attic and look for the box of gold that you bought in your childhood and now forgot about. Wait. You don’t remember buying gold as a kid? Well, the truth is you probably didn’t buy gold. But you did buy baseball cards. Unfortunately the stockpiles of random baseball cards in that old musty box probably aren’t worth all that much even today, but smart investors have proven that baseball cards are a legitimate and reliable source of investing. Anyone who enjoyed baseball cards growing up, especially anyone who enjoyed the hobby prior to the eighties, can tell you about the joy of searching the wax packs for the cards of your favorite players and the intricate trading scenarios worked out with your friends for cards that had more perceived value. But then a funny thing happened, people started to realize that the cards had actual value. That created a rush among speculators for rookie cards, sets, and cases in hopes of players that would eventually become famous. At one point, with print runs being relatively low, these cards could

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maintain value, but then as with most run-ups to a bubble the supply simply became so high that the demand for cards even of worthy players cratered the value and the bubble burst. In the early to mid-1990s there were approximately 10,000 card shops in the US, and revenues were approximately $1.2 billion. Today, there are approximately 200 card shops still in business, and sports card spending has fallen to around $200 million. However, this isn’t to say that there isn’t value in baseball cards if you follow many of the same rules as you would in any investment. Search out the product with the highest quality and demand, buy low and search for trends.

Scarcity versus Supply As with most investments, the scarcer an item is the more value it holds. For investment purposes this means that investors have been searching for value in one of two areas. The first is in cards

Baseball Cards | A U C T I O N S , C O L L E C T I B L E S A N D D I V E R S I F I C A T I O N

â&#x20AC;&#x153;There was a rush among speculators for rookie cards of famous players and for players that others hoped would eventually become famous.â&#x20AC;? prior to the age of modern baseball card investing. The second are newer cards that come from rare sets that have been graded by a third party grading source for quality. A grading service can make even a rare card even more valuable by certifying that its current condition is superior to the same card with flaws. Card grading can also make seemingly mundane cards worth astronomical sums, because of their rarity in high grade.

T206 Between 1909 and 1911 the American Tobacco Company produced a set of 523 cards that has become known as the legendary T206, by Jefferson Burdick in his book The American

Card Catalog. This set contains many Hall of Famers including Ty Cobb, Walter Johnson, Cy Young, Christy Mathewson and most notably Honus Wagner. With estimates of only 60-70 copies known to still exist, the Honus Wagner card has become the one of the most valuable and certainly most sought after cards ever made. A high quality Wagner card sold in 2008 for $2,800,000, and even the lowest quality versions have sold in the low six figures. In April of 2012, a copy graded a 5 (on a 10 scale) fetched $2.1 million at auction. The Wagner is one of those rare cards (and investments) that has increased in value with every sale. Each successive sale prices continue to astonish even the most bullish buyers. Noted owners of a Wagner have included Wayne Gretzky and L.A Kings former owner Bruce McNall, Diamondbacks owner Ken Kendrick, Charlie Sheen, and other lessor known bigtime investors.

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A U C T I O N S , C O L L E C T I B L E S A N D D I V E R S I F I C A T I O N | Baseball Cards

“As with any investment, the scarcer an item is the more value it holds.” While Wagner has become known as the Holy Grail of cards, there are other cards such as the 1910 Shoeless Joe Jackson card that recently sold for just under $200,000. Babe Ruth’s first card from 1914 sold for $575,000. And that card only graded a PSA 2 (on a 10 scale). Imagine if perhaps a 5 or a 6 are discovered! And the 1952 Topps Mickey Mantle rookie card that has brought in as much as $282,000 in mint condition. Lessor condition copies of “The Mick” sell almost weekly in the mid to high 5 figures.

Services and Professional Sports Authenticator. Each company came up with their own proprietary grading system that took into consideration wear and tear on the card, quality of printing, and how the card is centered on the page.

GRADING

“Grading definitely changed the way collectors looked at baseball cards - in fact grading allowed expensive cards to be purchased (over the Internet) sight unseen,” said Dr. James Beckett III founder of Beckett Publications. “Grading also helped collectors buy cards with the assurance that a trusted third party had verified that the card was authentic, had not been trimmed or otherwise altered, not easily ascertained by the average collector.”

But as the modern collector began searching for these rare and valuable cards there became a need for there to be a third party with the experience necessary to create criteria that allowed for an honest valuation of cards. This need was met by Beckett Grading

In addition to helping value the older cards, grading also changed the landscape for the modern collector. Suddenly cards, even those with high print runs, could become rare if you are looking for a high quality, highly graded card.

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“Grading definitely changed the way collectors looked at baseball cards - in fact grading allowed expensive cards to be purchased (over the Internet) sight unseen,”

Collecting The Modern Era Player Unlike the famous Wagner cards from T206, the problem with most baseball cards from the late eighties through early nineties is the print runs were so high, that even the rookie cards of Hall of Fame players are not scarce enough for demand to outstrip supply. One of the best pitchers of this generation, Tom Glavine, was caught up in that glut of production. While most pitchers with his accomplishments have rookie cards that range in the few hundreds to few thousand dollars, his 1989 Topps is readily available in the $5 range. Since the baseball card bubble exploded in the mid-90s baseball card companies have limited print runs artificially. This has allowed certain cards to be truly rare, and as such they have been able to not only retain, but even grow in value. Of course just like stocks, the trick is to find the right card at the right price and not overpay expecting the card will continue to go up in value just because of low production. As with any era, chasing rookie cards is the key, especially rookie cards from limited edition products. But once you find the right card, the trick is then properly valuing the card, evaluating the condition, and just like coins, holding it for the right length of time. For example, if you happen to find a Mike Trout Rookie Card from a rare set you should consider yourself lucky. His first two seasons have rivaled many of the Hall of Fame’s best players. You can easily envision that card becoming more and more valuable as he rises through the record books towards the Hall of Fame. As with any speculative investment there are some lessons from the past that should serve as a cautionary tale. Jose Canseco, Darryl Strawberry and Eric Davis were all “can’t miss” young stars in the mid-80s. Each had started their career like surefire Hall Of Famers with their early cards rising in value almost every day. However, like stocks those players for whatever reason never quite lived up to their hype, and those cards today are worth less than they were the year they were issued. So, the bottom line is search for the cards that you think will go up in value, but like a stock there are many reasons why that value will go up and down.

On the positive side, there are plenty of examples of finding the right card for the right player and holding onto it for the right amount of time. For example, a Derek Jeter rookie card available in a set for a little over $25 in 1993 is now worth approximately $150. But what if that $150 card is actually worth many times more? The same reason the Honus Wagner cards can range from the hundreds of thousands to the millions, modern day cards can have huge fluxuations based on their quality. Two companies, Beckett Grading Services (BGS) and Professional Sports Authenticator (PSA) have taken the lead in grading baseball cards for maximum value. Much like PCGS and NGC in coins, wise collectors won’t buy a key card unless it is certified. For example, that same Derek Jeter card worth $150 if graded to a near mint condition has sold as high as several thousand dollars.

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“the trick is to find the right card at the right price and not overpay expecting the card will continue to go up in value” But What Is it Really Worth? When we were kids the baseball cards were worth what we thought they were worth. If your favorite player was on it, it didn’t really matter what you could sell it for. And besides, we didn’t worry about things like bent edges and centering like the grading services do. Now with the advent of eBay, Beckett.com, checkoutmycards.com and other online auction sites you can find out almost immediately what your card is worth and actually realize that value by selling it quickly and easily if someone is willing to meet that price. So while it is popular to think that baseball cards are a thing of the past, the evidence suggests that baseball and all sports are still as popular as ever. Auction houses like Rober Edward, and Heritage regularly report auction results in the $5 to $10 million range, per auction! With patience and some of the right decisions, if you can find the right card it just might be the right investment.

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Story Name | S E C T I O N N A M E

Business Jet

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S E C T I O N N A M E | Story Name

To Clean or Not to Clean | A U C T I O N S , C O L L E C T I B L E S A N D D I V E R S I F I C A T I O N

Julian Onderdonk’s Bluebonnets at Sunrise, 1917, sold for $107,550 in May 2010. Note that the yellow sky in first image (left) appears much clearer after cleaning.

TO CLEAN OR NOT TO CLEAN

By Meredith Meuwly

HEN APPRAISING ARTWORK, vintage collectibles and other treasures, condition is one of the five main factors of value, with the other four being provenance, rarity, quality and fashion. In some categories, condition has a direct impact on the value. For example, the higher the grade of coins, comics and sportscards, the higher the value. Often, condition has a minor role in valuing property. Collectors tend to be more forgiving of scratches, wear and minor repairs in antique furniture or historical manuscripts given the age and use of the pieces. In antique paintings, the most common condition problem is that the top varnish layer is dirty and has turned from a clear glaze to a yellowed glaze. In the past, artists used linseed oil as a varnish to protect the paint layer and provide a “sheen” to the overall piece. As this varnish reacts differently to the environment than the paint layer, the varnish can crack and yellow as it collects dust, dander and smoke. Yellowed varnish can turn bright colors dark, and white areas yellow. In antiques, paintings or otherwise, the usual rule-of-thumb is not to alter the artwork from its original condition. Altering the original finish most often decreases the value of the overall piece, but sometimes a light cleaning by a professional conservator can bring back the vivid colors and bright whites that the artist originally intended for the work. If the painting is yours and not intended for resale, then it’s your

choice on whether you would like to have your painting cleaned. If you intend to sell a painting that has old, yellowed varnish, ask a professional art consultant, auction house specialist, or dealer whether or not you should have your painting cleaned. They will be able to advise you if the market for your work will improve or not with conservation. For example, the Julian Onderdonk bluebonnet landscape illustrated here arrived at Heritage Auctions with a dingy yellow sky and dirty surface. With the old varnish, the colors were dull and relatively unattractive. The experts at Heritage recommended a light cleaning before the sale to restore the original colors … and what a difference it made! This stunningly beautiful work caught the eye of many more clients with its fresh (but not overdone) look and soared to a final selling price of $107,550. The condition of an item matters because it can dramatically impact the value of the piece. In some collecting categories, the more pristine a piece, the more value it retains. In other areas, a few issues or repairs may not affect the overall value of the piece at all. And in some cases, a little cleaning will enhance the piece to sell for a higher price than expected. Meredith Meuwly is an appraiser on “Antiques Roadshow” on PBS and manages Heritage Auctions’ Appraisal Services department. This story originally appeared in The Intelligent Collector magazine (www.IntelligentCollector.com). © Heritage Auctioneers & Galleries Inc.

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A U C T I O N S , C O L L E C T I B L E S A N D D I V E R S I F I C A T I O N | War Nickels

WAR NICKELS

By Mark Borckardt

DURING WORLD WAR II, COPPER AND NICKEL WERE USED IN COINAGE, BUT WERE ALSO IDENTIFIED AS STRATEGIC METALS IMPORTANT TO THE WAR EFFORT.

opper was used for bullets and other ammunition. Nickel was even more important. The metal had important properties including strength, hardness and resistance to corrosion. As an alloy, nickel transferred those properties to other metals, and the resulting alloys were used for ships, planes, tanks, guns and other weapons. The U.S. Mint began using nickel in its five-cent pieces in 1866, 75 years before World War II. Before the war, nickels were 75 percent copper and 25 percent nickel. Once the war was under way, a substitute had to be found. The answer was an alloy of 56 percent copper, 35 percent silver and 9 percent manganese. The savings was dramatic. The new “War nickels” were issued from October 1942 through the end of 1945. During this period, the mints at Philadelphia, Denver and San Francisco produced 870 million of these coins. The new alloy eliminated nickel in its entirety, saving more than 2.4 million pounds of the metal for use in the war effort during the coin’s four years of production. The new alloy also saved 1.9 million pounds of copper. In 1942 at the Philadelphia Mint, the pre-war alloy was used from January through September. The new War nickel alloy was first produced on Oct. 8, 1942. Fortunately for collectors today, a degree in metallurgy is unnecessary to distinguish between the pre-war nickels and the new alloy coins. All of the War nickels had their mintmark placed over the dome of Monticello in a large, easy-to-read size. In Philadelphia, a large P was used, the first time in our nation’s history that Philadelphia Mint coins had an identifying mintmark. All of the War nickels had their mintmark placed over the dome of Monticello in a large, easy-to-read size. A large “P” identified coins struck at the Philadelphia Mint.

A complete set of War nickels issued from 1942 to 1945 consists of 11 coins. They are still plentiful and can be found in nearly all grades. Proofs of the 1942-P nickels were also produced, and they, too, can be found without difficulty. These historic nickels can be acquired today with minimal cost. A Gem PR65 1942-P War nickel costs less than $100. The collector who seeks the challenge of a complete set of all 11 War nickels should be able to complete the set in certified MS66 grade for under $300. Such a collection is ideal for the younger numismatist, who will find that individual coins are available in the $20 to $30 range. The World War II use of nickel won’t be discussed in history classes, yet it was one of the most important strategic metals throughout the war effort. Mark Borckardt is a senior cataloger and senior numismatist at Heritage Auctions. This story originally appeared in The Intelligent Collector magazine (www.IntelligentCollector.com). © Heritage Auctioneers & Galleries Inc.

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The

FOUR D’s of

SELLING By Mark Prendergast

he reasons people sell their collections vary throughout the course of life. When a $1 million comic book or a record-setting painting sells at auction, people always ask why the owner chose or needed to sell. While death, divorce and debt are not always in our complete control, choosing to sell because of a specific desire is probably the least easily recognized, yet ever-present, motive for collections to come to the auction market.

Death: The most finite reason to sell. Estate situations often require that tangible assets of a decedent’s estate are sold to pay taxes, fairly distribute value or to just cash out due to lack of interest in the collection by the heirs. While sometimes property can be evenly distributed based on estate tax or liquidation appraisals, selling the items and then dividing the funds is often a cleaner and simpler means of equitable distribution. Heirs have negotiated for years and generations over inheritance, and when tangible property is involved it can become an even more personal affair. You can’t cut a painting in half and expect it to retain its value. Although partial gifting or percentage ownerships are sometimes the wishes of the deceased, it can become quite complicated, especially when multiple parties are involved. There are even situations where paintings are shared between heirs – each maintaining possession for a period

of the year. Even in charitable donations where percentage gifts are bequeathed, the item/collection has to exist in a state of joint custody until the total gift is completed. Debt: The need for cash or liquid funds brings many items to market. Financial overextension and losses in stock and commodity markets can create the need for collectors to sell their collection. High-value items or niche areas of collecting require finding the best appropriate venue for the sale in order to maximize value. In art, coins and collectibles, specialty auction houses are often just that market. Court-ordered liquidation sales of Ponzi scheme defendants have recently been in the news, garnering attention as their personal items hit the auction block. Bernie Madoff’s baubles were sold with some fanfare and achieved prices well above the intrinsic values – thus contributing to satisfy the debt to his victims. Divorce: A hard fact of life that many couples may face is divorce. The dream of building a lifelong collection together is shattered and the jointly held tangible assets must be divided. If equal distribution is not possible, selling part or all of the joint property is the only means to equitably split assets – including art, coins or other collectibles.

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A U C T I O N S , C O L L E C T I B L E S A N D D I V E R S I F I C A T I O N | The Four D’s of Selling A proper fair-market value appraisal for divorce distribution is crucial to determining the true values of jointly collected material. Purchase receipts or assumptions of appreciation should be discounted for the most part. Multiple appraisals may be necessary so that a consensus valuation can be determined and duly accepted. Unbiased and independent auction houses, dealers or appraisers can be a critical link to both parties feeling that joint property has been correctly valued and their interests have been fairly represented during the course of a divorce. Desire: The reason to sell is the desire to take advantage of hot markets – and profit from the strong sale prices. This motivation saw a resurgence in the heady markets of the tech-boom of 1999/2000 and the art boom of 2006/2007. The Russian buying influence in the art market a few years ago saw a few Fabergé eggs and Czarist paintings come to market that had never before been available. Desire to sell can take other forms as well: Desire to oversee the end results of years of collecting. Dedicated auction catalogs praising a collector’s eye and importance make a nice conclusion to a long-collected passion. Desire to weed out part of a collection in order to make room and free up money to buy better quality material. Early purchases, unfortunate mistakes and pieces that just don’t fit in the collection anymore need to be cleared out from time to time. Desire to raise money for other expenditures – such as vacations, home or business needs. There may be no real need to sell other than a better use of funds. The collection is viewed as an investment and asset that has served its purpose and it is now time to put the proceeds to other uses.

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No matter the impetus for selling, the majority of collectors reach a point in their lives when they are faced with the decision, or necessity, to sell their beloved collection. If they do not, their executors or heirs will be charged with the task. The experience can be quite pleasant and profitable. Reputable auction houses and dealers are always willing to explain the process and present proposals on how they can meet the collector’s sales objective. The public nature of auctions makes it a very straightforward and transparent means of selling with the added attraction of major auction houses working for the seller on a percentage basis of the sale price. This means that you both have the same desire – to sell your items or collection for the highest values possible. Mark Prendergast is director of Trusts & Estates at Heritage Auctions. This story originally appeared in The Intelligent Collector magazine (www.IntelligentCollector.com). © Heritage Auctioneers & Galleries Inc.

Story Name | S E C T I O N N A M E

William Noble

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M I N I N G & M I N E R A L S | Mining News

MINING NEWS

By Eavan Moore

ANGLO AMERICAN QUITS PEBBLE MINE

he proposed Pebble mine in Alaska, which is estimated to contain $300 billion worth of copper, gold and molybdenum, suffered a setback in August when Anglo American (LON: AAL) withdrew from the project. Its former partner, Northern Dynasty Minerals (TSX: NDM), will now take full control. In a statement, Anglo American CEO Mark Cutifani cited risk as the reason for the withdrawal. “Despite our belief that Pebble is a deposit of rare magnitude and quality, we have taken the decision to withdraw following a thorough assessment of Anglo American’s extensive pipeline of long-dated project options,” he said. “Our focus has been to prioritize capital to projects with the highest value and lowest risks within our portfolio, and reduce the capital required to sustain such projects during the pre-approval phases of development as part of a more effective, value-driven capital allocation model.” Anglo American had invested $541 million into the project about 300 miles southwest of Anchorage. At 55 billion lbs. copper, 66.9 million oz. gold and 3.3 billion lbs. molybdenum, the Pebble mine has one of the largest copper deposits in the world. Former CEO Cynthia Carroll extolled the low-cost, large resource when Anglo American formed the Pebble Partnership with Northern Dynasty Minerals in 2007. But this year Cutifani is charged with lowering the company’s costs and making more cautious choices, and the Pebble project is highly controversial. Its proximity to the Bristol Bay salmon fishery and the encroachment of mining development on untouched land galvanized organized opposition from fishermen, Native Americans, environmental groups and others concerned by the potential impacts of open-pit mining. Polls show a majority of Alaskans oppose the Pebble development. 84 | American Hard Assets www.ahametals.com

Opponents have urged the Environmental Protection Agency to block the mine using section 404(c) of the Clean Water Act, which gives it veto power over discharge sites it deems harmful. The EPA is expected to issue a report on the project in 2013. A long, expensive fight will likely continue long past this year; it includes a public campaign by gold retailers and buyers and a proposed ballot initiative requiring legislative approval of any major mining projects in Bristol Bay. Northern Dynasty CEO Ron Thiessen put a positive spin on the development, remarking that Northern Dynasty had the “expertise and resources necessary to advance the Pebble Project,” as well as “the benefit of $541 million worth of expenditures.” Thiessen said the withdrawal would take effect in midNovember, after a 60-day notification period, and that the costs would be “not material to Anglo.” The project has not yet been issued with an Environmental Impact Statement, the prerequisite to securing permits. The partnership spent seven years and $150 million producing a 27,000 page Environmental Baseline Document released in 2012. Diversified giant Rio Tinto (NYSE: RIO) has a 19% share in Northern Dynasty. It is not clear whether it will take an interest in acquiring more of the Pebble project or what other partners Northern Dynasty will find. On the day the withdrawal was announced, Northern Dynasty shares closed at $C1.54, a drop of 34%.

Story Name | S E C T I O N N A M E

Cambridge House

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M I N I N G & M I N E R A L S | Mining News

Newcrest Report Faults Analysts

report commissioned by Newcrest Mining (ASX: NCM) in response to allegations it selectively informed certain shareholders earlier this year found little fault with the company’s approach to informing analysts. Maurice Newman, former chairman of the Australian Securities Exchange, found that Newcrest operated consistently with its internal policies. On June 7, Newcrest announced the falling price of gold had burdened it with an anticipated several billion dollar impairment charge and forced it to scale down its operations, cutting jobs and reducing expenses by 20%. It also suspended dividends. In the days immediately before the announcement, several major investment banks downgraded their forecasts and sent Newcrest shares down almost 15%. Newcrest was accused of briefing them in advance. Newman was asked to review published materials and interview company employees, analysts and other sources to judge whether Newcrest had improperly communicated with shareholders. He came to a conclusion in September, writing: “My sense is that the Company takes its continuous disclosure obligations very seriously and, by and large, has in place processes to reinforce this. It provides ample information on a regular basis. However, this information does not always appear to have been understood in the marketplace.” Newman said that analysts and investors had been slow to recognize that the drop in gold prices would have to force changes at Newcrest. He wrote: “After sixteen months of sideways movement, in January 2013, the gold price began its historic slide. It seems clear that this caught many sell-side analysts by surprise. The fall ran counter to the consensus bullish outlook. Rather than concentrate on the falling gold price and its implication for earnings, production, and other factors, most analysts seemed to be slow to adjust their research to the changed conditions presumably on the assumption the slump would be temporary…. However, perhaps indicating a delayed 86 | American Hard Assets www.ahametals.com

reaction to the March Quarterly Report and Analyst Meetings, there was… a flurry of published reports immediately preceding the Company’s 7 June ASX announcement, with most still deciding the reason to sell had passed.” Newman found to his satisfaction that Newcrests’s manager - investor relations could not have known the content of the June 7 release when he met with analysts, and called the flurry of downgrades a “coincidence of timing.” Instead, Newman criticized the institutional culture among Australian financial analysts, saying he learned that “due to cost cutting, analysts have to cover more companies and so have to spread their time more thinly. There is a view that Australia is over-brokered and that analysts are generally less experienced than before the Global Financial Crisis….Perhaps in recognition of this thinning of talent, there is a tendency for many firms and analysts to be followers and to stay within consensus rather than be outliers.” The Australian Securities and Investments Commission is conducting a separate, longer-term investigation of Newcrest’s shareholder information practices. It will not release its report until next year. Australasia-focused Newcrest is known for pioneering operational innovations at its Cadia Valley, Telfer and Lihir mines, but it has struggled with very high costs. The restructure reflected a need to dig deeper into sources of savings; Newcrest plans to reduce exploration activities and cut its capital expenditure for the next fiscal year by one-third. Its fiscal year 2012-2013 resulted in a loss of A$5.78 billion, compared to a profit of A$1.12 billion the year before. The loss included A$5.56 billion in impairments, write-downs of A$622 million and restructuring costs of A$51 million. Gold sales were 2.05 million oz., compared to 2.33 million the year before.

Mining News | M I N I N G & M I N E R A L S

Barrick Sells Australian Mines to Gold Fields

arrick Gold (NYSE: ABX) began dropping assets in August as part of its cost-cutting program. The company has agreed to sell its Yilgarn South gold properties in Australia to South Africa-based Gold Fields (NYSE: GFI) for a total of about $300 million, and plans to sell at least two more. Barrick sold its Yilgarn South assets, comprising the Darlot, Granny Smith and Lawler mines. Together, they produced 452,000 oz. of gold in 2012, at all-in sustaining costs of $1,137/oz.

Writedowns, Synergies at Glencore Xstrata

lencore Xstrata (LON: GLEN) estimates at least $2 billion of synergies in 2014 as a result of its merger, according to presentations made to investors in September. The estimate breaks down into $450 million from marketing synergies, $175 million from financing synergies, and $1.4 billion through cost savings. However, Glencore also reported a loss of $8.9 billion in the first half of 2013, owing in large part to a $7.7 billion impairment charge on Xstrata’s assets. Based on the May share price, Glencore had valued Xstrata’s assets at $44 billion. Its half-year valuation sank to $37 billion. Glencore attributed this partly to Xstrata’s greenfields projects, which now seem less likely to go to development. Cutting greenfields commitments is part of a plan to reduce the company’s capital expenditure by $3.5 billion between 2013 and 2015.

The company’s new strategy is to focus on five lower-cost mines in the Americas. A September presentation predicted that sixty percent of its production will come from Cortez and Goldstrike in Nevada, Veladero in Argentina, Lagunas Norte in Peru and Pueblo Viejo in the Dominican Republic. Barrick estimates that these mines, taken together, will have an estimated all-in sustaining cost of $700/oz. in 2013. As of the end of September, Barrick’s 2013 gold production guidance was 7.0 to 7.4 million oz. at $900-$975/oz. in all-in sustaining costs, putting it among the producers and, according to Barrick, making it the lowest-cost in its senior peer group. Barrick also sold off its energy unit for about C$455 million this summer, to Canadian Natural Resources Ltd. (TSX: CNQ), Venturion Oil Ltd., and Whitecap Resource Inc. (TSX: WCP). Barrick Energy was a C$410 acquisition in 2008. The Wall Street Journal reported in September that unnamed sources expected Barrick to sell additional Australian mines, Kanowna Belle and Plutonic in Western Australia.

Glencore also announced its application to the Johannesburg Stock Exchange for a secondary listing. While followers of the turmoil in South Africa’s mining industry might be surprised, Glencore Xstrata said in a statement that “Africa is an important and growing market for the group and South Africa has a strong institutional investor base.” Anglo American (LON: AAL), Gold Fields (NYSE: GFI) and Sasol (NYSE: SSL) also have secondary listings on the JSE.

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M I N I N G & M I N E R A L S | Mining News For Gold Fields, the deal with Barrick is part of a refocusing of its own. 42% of GFI’s production is now expected to originate in Australia. South African production comes to only 11% following the 2012 unbundling of several high-cost operations into Sibanye Gold Inc. (NYSE: SBGL). CEO Nick Holland explained Gold Fields’ reasoning in a statement. “The acquired assets are located in a preferred jurisdiction that we know well and where we have significant operational and management experience and infrastructure to maximize the value of the acquired assets,” he said. “This acquisition further repositions Gold Fields as an international gold producer with a well-balanced global footprint, which should enhance our risk profile and global credit rating.” Holland added: “In particular, we see considerable opportunity for cost synergies between Lawlers and the adjacent Agnew, one of the lowest cost producers in Australia. We plan to immediately consolidate these two operations and rationalize its processing infrastructure and on-site general & administrative expenses as well as capital. In addition to realizing the obvious short-term operating synergies between these assets, we believe the consolidation of the Lawlers/Agnew operations within the Yilgarn belt will provide significant long-term benefits allowing for the considerable potential of this gold district to be maximized under one owner. As such, most of the consideration valuation is imputed to the Lawlers/Agnew camp.” He estimated that the full benefits would take 6 to 12 months to realize.

The Ontario government has plugged the Ring of Fire as a potential world-class mining district and economic engine for the province. De Beers’ initial copper and zinc discovery in 2002 led to a rush of exploration that uncovered chromite, nickel, gold, vanadium, iron and platinum group elements. But the complete absence of infrastructure and difficulty securing support from local First Nations tested most companies’ patience to destruction. While several continue limited exploration programs, Cliffs was one of only two firms with mines in development, and the only one that had secured promises of provincial support. Noront Resources (TSX-V: NOT) has contingency plans for its smaller Eagle’s Nest nickel project, but an exit by Cliffs would mean that Ontario would need to offer substantial financial help. Cliffs issued a press release calling the decision “disappointing.” Bill Boor, Senior Vice-President Global Alloys, said: “Without access to the surface lands to develop the needed infrastructure, there is no project. Our proposed development has the scale needed to develop the road access and is therefore a catalyst for other smaller mining opportunities in the Ring of Fire. Cliffs is very disappointed in this decision, but beyond our project, it is clearly an issue for anyone interested in seeing these opportunities in the Ring of Fire becoming realities.”

BLACK NEWS FOR BLACK THOR

September decision by the Ontario Mining and Lands Commissioner dimmed the likelihood that Cliffs Natural Resources (NYSE: CLF) will build its proposed $3.3 billion Black Thor chromite project in Northern Ontario. Plans for Black Thor, the flagship project in Ontario’s highly prospective Ring of Fire region, relied upon a proposed all-weather road that would have to cross land already staked by KWG Resources (TSX-V: KWG). In denying Cliffs’ application for an easement, the Commission has likely forced a significant reworking of plans for the Ring of Fire. 88 | American Hard Assets www.ahametals.com

Cliffs had paused its work in the Ring of Fire earlier this summer while the easement request and other issues were resolved. Boor said at the time that the company did not have a Plan B. Following September’s decision, company spokesperson Patricia Persico said an appeal was possible. The area in dispute is a rare stretch of dry land in an otherwise boggy landscape. KWG Resources intends to use it to build a railway to the Ring of Fire; Cliffs argued that the railway could coexist with a highway, but Commissioner Linda Kamerman was unconvinced. Kamerman also noted that Cliffs’ argument that the road was in the public interest had not been supported by provincial testimony. Stakeholders eager to see development in the Ring of Fire have previously criticized the province of Ontario for a lack of financial commitment and leadership, despite enthusiasm from the Ministry of Natural Resources. Cliffs shares fell the day after the decision was released, from $23.79 to $23.64.

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NTR

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H A R D A S S E T S I N F O R M A T I O N | Preferred Dealers

Preferred Dealers Look for American Hard Assets at these locations! To become a Preferred Dealer, contact 1-877-695-1258

2801 John Hawkins Pkwy | Suite 117E Hoover, AL 35244 (205) 637-7033 4710 University Drive NW | Suite 17-A Huntsville, AL 35816 (256) 722-1550

ALABAMA Southern Bullion

6850 US Highway 90 | Suite 6 Daphne, AL 36526 (251) 625-1818 1605 Beltline Hwy (Highway 67) D-8 Decatur, AL 35601 (256) 686-2220 245 Cox Creek Parkway | Unit A Florence, AL 35630 (256) 349-2782

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3698 B Airport Blvd Mobile, AL 36608

(251) 287-6565

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(334) 356-5116

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(205) 469-9079

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(256) 241-0131

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1963-B Cobbs Ford Road Prattville, AL 36006

(334) 356-0741

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CALIFORNIA London Coin Galleries

27 The Shops at Mission Viejo Mission Viejo, CA 92691 (949) 364-0990

A Coin Exchange 18631 Ventura Blvd. Tarzana, CA 91356

(916) 967-2646

COLORADO

3145 Peachtree Road Atlanta, GA 30305

404.460.2783

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(706) 221-4974

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(706) 278-6272

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(706) 891-2646

Aikahi Aloha Coin Stamps Jewelry and Collectibles 25 Kaneohe Bay Drv.#109 Kailua, HI 96734

IDAHO

Chamberlain Coins & Collectibles LLC 385 Main St. Longmont, CO 80501

Southern Bullion

HAWAII

Wild West Coin Company 6723 Winding Way Fair Oaks, CA 95628

GEORGIA

(303) 774-9661

Infinity Coins

545 Shoup Ave Suite 108-A Idaho Falls, ID 83402

(208) 201-5007

FLORIDA

ILLINOIS

Coin & Bullion Reserves

Dallas Gold & Silver Exchange

2621 East 15th St.

Panama City, FL 32405

(850)785-9546

David Reynolds Jewelry and Coin 4009 Central Avenue Saint Petersburg, FL 33713

(727) 327-2646

A Coin and Stamp Gallery Inc. 6217 St Augustine Rd Jacksonville, FL 32217

(904) 733-1302

1831 St Johns Ave Highland Park, IL 60035

847-780-006

MISSOURI Crystal Coin & Jewelers 521 Bailey Rd. Crystal City, MO 63019

636-937-5017

NORTH CAROLINA Triangle Gold

Southern Bullion

16055 Emerald Coast Pkwy | Suite 105 Destin, FL 32541 (850) 424-7627

3 Glenmore Drive Durham, NC 27707

4771-6 Bayou Blvd Pensacola, FL 32503

Southern Bullion (850) 912-6557

(919) 403-0143

1636 Hendersonville Rd | Suite 100 Asheville, NC 28803 (828) 575-2134

NEW HAMPSHIRE Seacoast Coin & Jewelry 725 Lafayette Rd Ste 1 Hampton, NH 3842

(603) 926-7771

NEW YORK LI Coins and Jewelry 1846 Grand Ave North Baldwin, NY 11510

(516) 223-1212

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H A R D A S S E T S I N F O R M A T I O N | Preferred Dealers

OHIO

Halex International/Extraordinary Jewels

HCC Rare Coins

7151 Spring Meadow Dr. West Holland, OH 43528 (419) 865-8461

12900 Preston Rd. Suite 1112 Dallas, TX 75230 (469) 774-8951

DGSE

190 East Stacy Road The Village at Allen Allen, TX 75002 972-481-3870 13534 Preston Road Dallas, TX 75240

972-481-3850

6174 Sherry Lane Dalla s, TX 75225

972-481-3800

11311 Reeder Road Dallas, TX 75229

972-484-3662

200 N. Kimball Ave. #205 Southlake, TX 76092

817-722-0075

1201 Airport Freeway Euless, TX 76040

817-283-4469

1175 Woods Crossing Road | Suite 2A Greenville, SC 29607 (864) 288-6544

1109 West I-20 Arlington, TX 76017

817-505-1005

TENNESSEE

6115 Camp Bowie Blvd. Fort Worth, TX 76116

817-840-1546

SOUTH CAROLINA Southern Bullion

120 Commons Parkway Anderson, SC 29621

(864) 226-0010

Nashville Coin & Currency PO Box 3361 Brentwood, TN 37024

(615) 377-4949

Southern Bullion

4521 Brainerd Rd. Chattanooga, TN 37411

(423) 622-1298

843 Keith St. NW Cleveland, TN 37311

(423) 479-2646

2244 North Roan Street | Suite 103 Johnson City, TN 37601 (423) 434-0400

WEST VIRGINIA Bronze Element

311 Mercer St. Princeton, WV 24740

TEXAS C S B Williams Inc

711 W Bay Area Blvd #100 Webster, TX 77598

92 | American Hard Assets www.ahametals.com

(304) 920-2081

Story Name | S E C T I O N N A M E

DGSE

American Hard Assets www.ahametals.com | 91

H A R D A S S E T S I N F O R M A T I O N | Events

Events November 4-6 Europe Precious Metals Summit Park Hyatt, Zurich Switzerland www.precioussummit.com

April 6-7, 2014 Dubai Precious Metals Conference 2014 Dubai, UAE www.dpmc.ae

November 14 RBC Gold Conference London, England www.rbccm.com/about/cid-202541.html

April 8-11, 2014 Denver Gold European Gold Forum 2014 Zurich, Switzerland www.europeangoldforum.org/egf13

November 18-20 Mongolia Investment Summit 2013 Hong Kong http://mongolianinvestmentsummit.com/hongkong/

April 27-30 Milken Institute Global Conference Los Angeles, California www.globalconference.org

Decemeber 1-5 Mines and Money 2013 London, England www.minesandmoney.com

April 29-May 1, 2014 Mongolia Investment Summit 2014 London, England http://mongoliainvestmentsummit.com/london

December 5-7 8th China Gold & Precious Metals Summit Shanghai, China www.chinagoldsummit.com

May 12-13, 2014 Metals & Minerals Conference New York, New York www.metalsandminerals.com/ny

January 19-20, 2014 Vancouver Resource Investment Conference Vancouver, BC, Canada

May 19-23, 2014 LPPM Platinum Week London, England

www.cambridgehouse.com/event/vancouver-resource-investment-conference-2014

February 7-8, 2014 California Investment Conference Indian Wells, Calfornia www.cambridgehouse.com/event/california-investment-conference-2014

February 7-9, 2014 World Money Fair Berlin, Germany www.worldmoneyfair.ch/wmf/english March 2-5, 2014 PDAC 2014 Toronto, Ontario, Canada www.convention.pdac.ca/pdac/conv/ March 24-28, 2014 Mines and Money 2014 Hong Kong www.minesandmoney.com/hongkong/ March 27-28 Calgary Investment Conference Calgary, AB, Canada www.cambridgehouse.com/events/calgary-investment-conference-2014

94 | American Hard Assets www.ahametals.com

May 29-30, 2014 Precious Metals Summit Hong Kong www.precioussummit.com June 1-2, 2014 World Resource Investment Conference Vancouver, BC, Canada http://cambridgehouse.com/event/world-resource-investment-conference-2014

June 7-10 IPMI 38th Conference Orlando, Florida www.ipmi.org/seminars/conf_detail.cfm?id=35 September 14-17 Denver Gold Forum 2014 Denver, Colorado www.denvergold.org/gold-forums/ October 20-23, 2014 LME Week London, England www.lme.com/lmeweek.asp

American Hard Assets www.ahametals.com | 93

L AS T WORD

Fed Chair: Who Cares? By John W. Garibald

Determining the most financially powerful person in the free world may sound easy, but…

here has been an awful lot of hoopla of late regarding the choice by Larry Summers to withdraw his name from the race for Chairman of the Federal Reserve. Though indisputably intelligent and a longstanding insider in Washington with several tours of duty for Democratic presidents, Summers is thought to be hostile to differing opinions and generally difficult to work with. Many market participants breathed a sigh of relief upon news of his removal from the vetting process. Of course all of this begs the question; why does it matter? For information on the structure of the fed and its various committees, look it up on Wikipedia or ask an economist near you. You will recognize him by the diminutive stature, generally sullen disposition and a Keynes or Hayek tattoo. Go ahead, look into it, I’ll wait. Up to speed on history and structure? Good. According to its creation in the Federal Reserve Act of 1914, The Fed has three objectives: 1. Maximum employment 2. Stable prices 3. Moderate long term rates. The first two are referred to as the Dual Mandate and are generally considered superior to the third. The dichotomy of these priorities gives the Fed some flexibility and every Fed member will have their own biases. Alan Greenspan, for one, was famously (and perhaps infamously) fond of low interest rates, espoused free market capitalism and generally tried to be popular with all the bankers on Wall Street.

96 | American Hard Assets www.ahametals.com

While the Chair of the Fed and Fed Open Market Committee (FOMC) is just one part of the voting committee, he (or she!) is generally considered to have a firm hand in steering the group towards one outcome or another. The potential fear that an ornery and often, sleepy, Larry Summers would take his doubts of QE efficacy into the closed FOMC room rightly spooked traders across asset classes. Under his influence, monthly bond purchases would likely come down precipitously and potentially drive interest rates higher. To say this would be a significant departure from the previous 8 years under Mr. Bernanke would be like comparing the approaches Messrs. Chamberlain and Churchill. For continuity, many traders are hopeful that the President will nominate Janet Yellen, current Fed Vice- Chair, President of the Fed Bank in San Francisco and all-around QE-enthusiast. Yellen is seen as a logical follow-up to Mr. Bernanke’s bearded reign and is a bit of a dove when it comes to interest rates. She is widely respected for her economic insight and ability to comprehend the complex world of modern finance. We will ignore the fact that she dismissed early indications of the financial crisis. At the end of the day, much of the decision will come down to who can be the most dovish and who will be the most easily confirmed in Congress. Politically, Obama has enough on his plate right now and does not seem to want another fight. It’s a sorry way to choose the most financially influential person in the world, but at this point we will take it. We have had the stimulus for too long now and are severely addicted. We crave the QE drug. Whoever you are, Mister/Madam Chairman, please don’t cut us off too soon.