Numismatic Coins vs. Precious Metals

Numismatic coins, valued for their rarity, beauty, and the perceived value of those that seek them, do not equate to the security of bullion; pure precious metals like gold, platinum, and silver.

Precious metals all have more than one function, the first being as an instrument in trade as ‘money’.  Metals have specific characteristics that allow them to function as money, which you are welcome to review with Mike Maloney at this link.  They also have characteristics that allow them to function with specialized purpose for industrial applications.  Platinum is used in the process of reducing carbon emissions and toxic gas from internal combustion engines as employed in catalytic converters on automobile exhaust.  Silver is unique in that nothing conducts electricity and heat better than every other metal except gold.  It is also a biocide as bacteria do not survive in its presence.  Gold is used less in industrial applications because of its density as a store of value.  The point here is that these metals as commodities have additional demands on their availability over and above their monetary value which can serve to drive their values higher in a tight market.

With a worldwide currency crises looming just over the horizon, having a tangible asset free of third-party risk in your hand is one of the safest means of protecting your wealth in an uncertain financial atmosphere.  Third party risk assumes that you have to petition or request that an organization or agency ‘deliver’ your value to you after they exchange, convert, discount, and transfer it on your behalf.  That process can be met with resistance or refusal at any step.  “Sorry, the market is closed until further notice”  or “The government has declared a ‘bank holiday’ on grounds of a national emergency.”  are phrases that have bear historical significance because they’ve already happened, and on more than one occasion.  The US Government has been acting in a state of emergency since September 11, 2001 and this status has been updated each year by each sitting US President since that time.  We’re one phone call from locking the doors on the banks, a view shared by James Rickards in a recent interview at mises.org.

You might also consider that crypto-currencies, such as Bitcoin, depend upon a high tech communication network in which to trade them, and this currency can never be ‘held in your hand’.  Again, an example of third-party risk.  One of the most prolific ideas in defense currently is that kinetic attacks will be replaced by technological attacks.  If the networks go down, crypto-currency could be instantly useless.

In a cash crisis, you may need to barter quickly for needed items like additional food, fuel, or safe passage.  Debating over the ‘perceived value’ of a shiny, pretty, historically significant coin defeats the purpose of ‘having a money with intrinsic value in your hand’.  Under duress, finding someone that values a special coin to the degree that you do will be difficult if not impossible.  You will have paid a premium (a very high premium) to purchase the special coin and won’t be able to redeem the perceived value, and might need to settle for the ‘melt value’ when you need the monetary value most, likely taking a large loss.

By comparison, purchasing bullion in forms that are small enough to act in trade and ‘make change’ such as one-ounce or partial-ounce rounds or bars and 90% silver coinage minted prior to 1965 (junk silver) gives you the ability to trade in ‘money’ rather than a disenfranchised currency.  Bullion has a melt value and can be purchased at a significant discount at times when the precious metals market and reasoning behind their ownership is suspect and not ‘in demand’.  That happens quite often as does manipulation of the precious metals markets through paper contracts on the exchanges.  In a crisis, the melt value can skyrocket with widespread demand for a form of money usable in trade without any third-party risk.

These thoughts on the state of this subject were published in response to a recent article which can be found here:

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