Thirty years ago gold bullion was the must have mania asset. Supposedly smart Wall Street banks sat on the sidelines as the yellow metal surged to $850 per Troy Ounce. Up from $42 in 1972 when the United States unilaterally defaulted upon the Breton Woods agreements.
This represented a respectable 1,923% return over seven years, making a $1,000 investment in gold upon default being worth more than $19,000 at its peak. Over the same time period, $1,000 invested into a basket of numismatic coins called the CU 3000 was worth over $40,000. Additionally where as the gold bubble burst almost immediately and gave up around 50% over the next six months numismatics continued up.The numismatic bubble finally deflated ten years later in 1989. Then your $1,000 investment in 1972 would have been worth a staggering $180,000.
That is equal to a 20-year return of 180,000 per cent.
To be sure, after the bubble burst in 1989 numismatics also gave up more than 50% of their return. Your $1,000 invested in 1970 would still have been worth $50,000 at the market bottom.
As for the mystical yellow metal, it had continued to fall from 1979 to 1989 and traded around $360 in 1989, and continued to fall for the next ten years, finally bottoming in 1999/ 2000 at a little over $250 per ounce.
And what of Numismatics? After 1989 coins were sidelined as stocks boomed, yet according to the CU 3000 coins have provided an average annual rate of return since 1970 of 13.6%.
Now I know that there are very few investments that can illicit the passion, irrationality, and frenzied buying that gold does. Perhaps the reason is that the yellow metal comes into its own when faith in governments are at lows. When fear and panic stalk the world it makes investors cast aside rational thought.
Still, according to the gold bugs it is “always” a good time to buy the metal. But I do wonder; how many of gold’s advocates that were wise enough to buy the yellow metal at $250 ten years ago are still buying it today at $1,200?
I mean, as coin dealers we do have a wondrous maybe even mystical respect for the yellow metal. After all it’s properties are unmatched, and having handled coins 200 years old that have sat untouched thousands of feet below the ocean, or coins that have buried in tombs for 2000 years it is impossible not to be in awe at their untarnished condition.
Gold coins will appear today as they did to the Pharaohs, Romans and seafarers that set out in centuries past. This excites me. I will gladly pay £50,000 for a Mint State gold coin, with seven grams of gold. However, I would never pay £50,000 for a 100-ounce gold bar- let alone the £70,000 currently being asked.
After all, my £50,000 coin is one of only a handful that exists anywhere in the world. Where as my 100 ounce bar is just another lump of the yellow metal, identical in every way to the other 150,000 tonnes estimated to exist.
Now 30 years after the last panic gold is rising again. Yet if you had held since 1972 you would have a little over $28,000 today.
Where as your numismatics would be a little over $68,000.
That is why I Hate gold!
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