Viewpoint: Got Gold? Coins? What About a Job?

This article was originally printed in Numismatic News.

October 28, 2010
Numismatic News
By V. Kurt Bellman,

For those subscribers to Numismatic News who read Viewpoint regularly, this is my third submission for the year.

In April, I discussed why gold and silver are no longer money in the modern sense, and we should not lie to ourselves that they are. In July, I offered that a uniform worldwide currency exchange market made commodity-backed currencies superfluous, because convertibility (a key need of currencies) was taken into that market-based mechanism and away from metal content or representation.

This time, I will discuss the dire societal and economic consequences of seriously considering returning to a commodity-backed (gold-backed) currency scheme. Yes, I understand the benefits to some people of holding large amounts of bullion, beyond numismatic interests. I even understand the philosophical underpinnings of the desire for a gold-backed currency. I understand its historical tradition and its emotional appeal. I don’t need to read any 200-year-old, or even 2,000 year old historical references as counter-arguments. That was then, this is now.

The gold bugs have written here about a gold-backed currency’s virtue of preventing inflation, the “cruelest tax.” You know what? They’re mostly right. Two problems remain, one technical and one substantive.

First, if any currency, even the dollar, is tied to the value of any commodity, even gold, then by definition that commodity can never change in value or price. It’s an insane notion to artificially say by policy that gold has value X in dollars and it cannot change. It’s nonsense. Every commodity must be allowed to have a floating value.

How does it make sense to ever tie any economy’s money supply or value, for example the U.S. money supply, to worldwide supply and demand dynamics for gold? Why should a spike in demand for gold by brides in India raise the value of the U.S. dollar? Do not all commodities have an intrinsic right to variability in their price due to supply and demand changes?

That’s a free market, not clinging to 2,000-year-old traditions on notions of money. Stable constant money supplies made sense when population levels were stable and economies were largely static. Constantly growing and changing economic activity requires a constantly growing and changing money supply or transactions bog down.

Second, while a gold-backed currency might prevent inflation well, moderate inflation is an intentional worldwide policy choice for almost all major central banks and currency-issuing authorities. Inflation is intentional, not accidental or incidental. And they’re not doing it to devalue your money market account balance, either. Money supplies are regulated not to preserve the value of anyone’s monetary holdings (or store of value), but to serve as a lubricant for economic activity and investment. Money supply regulation is not about wealth maintenance for those holding wealth; it’s about encouraging economic activity and employment.

It’s possible to find a Ph.D.-holding economist to write in support of nearly anything, no matter how bizarre. But there still is such a thing as mainstream economic thought versus fringe-tinged economic thought, and the field of numismatics is loaded with fringe thinkers way out where the bell curve of professional economic thought gets really skinny. It is their unique view of the nature of money that perhaps even creates many numismatists.

Gold bugs are just not in touch with mainstream political economic theory. Simply put, they’re a breed apart. They operate in an alternate frame of reference. Sometimes the most profound self-awareness is to be aware of, and be OK with, one’s own weirdness. Ron Paul has been on the losing side of more 434-1 votes than anyone in congressional history. I doubt he minds having that distinction. It’s a brave man who can think, “everyone else is wrong but me.”

So why is inflation a matter of nearly uniform policy? Simply, because deflation, the expectation that general price levels will fall over time, cannot be tolerated by any modern economy.

Deflation causes an economic death spiral. This is because we have no known tools to deal with a deflationary spiral. So the best way to prevent deflation is to cause inflation intentionally. A stringent gold standard leaves us unable to do that. All it does is allow the wealthy to maintain their wealth. That may be good enough for you as an individual, but there are more people involved than just you.

Deflation incentivizes people with financial resources to keep them on the sidelines and not invest in economic activity. It you’d like to see soup lines and uncontrollable riots return very quickly, keep insisting that policy makers attempt to abolish inflation. If prices are steady or downward trending generally, and interest rates are positive, so that you get your “store of value” and it actually increases over time while doing nothing to put that wealth to productive use, you’ve lost whatever small incentive that still exists to innovate and invest and take risk and create jobs. You think the economy’s bad now? Just wait and see.

Ultimately, real economic security lies not in hoarding a yellow metal, but in promoting an economic system where your neighbor’s labor can still feed his family and put a roof over their heads. Because if your neighbor can’t feed and shelter himself, your economic disaster plan had better include more than gold and silver, like high fences, mean dogs, and big weapons. All the gold holdings in the world won’t buy you the ability to sleep with your eyes open.

Accumulating gold because you truly believe an economic calamity is coming is a prudent choice. But when we morph into actually promoting the idea of such a collapse, we are wandering into very scary and irresponsible territory. Economics is a field awash in self-fulfilling prophesies.

To me, gold bugs, or “store of value” ideologues, are motivated by an “I’ve got mine, you’re on your own” mind set that is societally dangerous. Worse yet, by advocating a gold standard to policy makers, if they carry the day they may be unwittingly sowing the seeds of the very economic calamity from which they seek to insulate themselves.

Advocate for an economy where nearly everyone can have a viable income level and you can save yourself a lot of heartache and spending on gold and guns. Of course, if you’re motivated by the art, science and history surrounding coinage, rather than a single-minded pursuit of “hard money” for the supposedly coming economic apocalypse, you are largely blameless.

I’m quite alright with being an outlier among numismatists on the gold standard or even silver standard issue. Heck, I even believe there are nice U.S. coins to collect minted since 1965. That’s how weird I am. There isn’t a gap in the Washington Quarter set between 1964 and the 1992-S silver, you know. Have you checked the prices on MS-65 pieces from 1982 and 1983? Huh. All that, and no bullion value? Go figure.
This Viewpoint was written by V. Kurt Bellman, hobbyist from Harrisburg, Pa.

Comments:

On October 29, 2010 Christopher Neal Wyatt said:

Mr. Bellman,
    I couldn't disagree more with Your analysis. You talk about deflation as if it is virtually inevitable- a force of economic nature, if you will-- and then proscribe inflation as the only possible cure. You even describe this tug-of-war between inflation and deflation as an almost natural part of the business cycle, when you write that "Constantly growing and changing economic activity requires a constantly growing and changing money supply or transactions bog down".  Sir, you may be agreeing with "mainstream" economic theory as is currently taught in the nation's leading schools, but such talk is still "fringe" when compared with the sane lessons of economic history that we have learned over 5,000 years of using Gold and Silver as money. The reason we are currently caught in a tug-of-war between Inflation and Deflation is not because this is a natural part of any rational business cycle; rather, it is simply the result of all real wealth being drained out of our economy through the unsustainable practice of Usury. The reason why we currently see asset price Deflation is because as bankers take an exponentially growing share of our money through interest, there is less and less actual wealth available to the population at large to purchase these assets. At the same time, Governments now have no choice but to introduce massive monetary Inflation, just to "lubricate" the economy (as you point out)- which results in steadily higher prices for virtually all commodities (including food, fuel and water).  If we were to instead simply end the practice of usury (i.e., by abolishing the Fed), and return the nation to a Gold and Silver standard, then we would have an economy that was free of both Deflation AND Inflation.

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New Orleans Investment

29 October 2010, 3:48 p.m.
By Daniela Cambone
Of Kitco News
http://www.kitco.com/

(Kitco News) -Gold and silver prices have been remarkably resilient during the chatter about the mid-term U.S. elections and the Federal Reserve's potential for quantitative easing next week but there could be a correction after these events unfold, according to Brien Lundin, publisher of the Gold Newsletter.



In an interview with Kitco News at the New Orleans Investment Conference, Lundin said many traders and analysts had expected a correction or consolidation because of the run-up in prices. "We've seen that in precious metals prices the last couple of weeks but nothing like we thought we would have seen," said Lundin, who is the organizer of the conference. "Gold and silver have been remarkably resilient."

Lundin said there has been strong physical buying from India on every price pullback, helping to market to bounce right back. "I have been surprised at the level of strength," he said.



He said many in the markets have been cynical, waiting for a pull back. "It is due from the standpoint of the duration of this rally, the degree of this rally, the technical factors," he said. "But it just keeps going."



Lundin said the mid-term election was seen as a potential for a correction. But he said the markets seem to have factored those events into the price, so a correction might not happen at that point. The Fed action is more of a possibility.

"The Fed decision is the predominant issue facing the market right now," Lundin said. "The market expectations for this are just massive," he said, but noted that expectations "have been ramped down" in recent days. "Perhaps the market is factoring in that it is not going to be just a flood of money in the market and won't be as big as expected."

Lundin said it seems doubtful the Federal Reserve will meet market expectations. "It's probably going to be a bit of 'buy the rumor, sell the news' phenomenon," he said.



The Fed action will likely be a bit negative for gold, said Lundin, "but it has surprised us. It has really surprised us to this point."



Lundin said there is a consensus that the market is at a crucial point. "We may see a pullback toward the end of the year," he said. "That is what is expected." A correction would be a good buying opportunity, he said. "But regardless of that, looking further for the long-term view, everyone is very bullish and very positive."

[Watch the Video Interview]

By Daniela Cambone of Kitco News dcambone@kitco.com

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Fed, Elections To Determine Metals Market Path Next Week

Metals Outlook:

 

29 October 2010, 2:42 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/





(Kitco News) - Next week brings several key events that can drive precious metals prices in the short and long-term: the U.S. mid-term elections and Federal Open Market Committee meeting.


Further, the European Central Bank, the Bank of England and Bank of Japan will all have their own monetary policy meeting, giving metals traders plenty to digest in a week. Through it all, the direction of the dollar will guide market activity.


Gold prices have come off their recent highs as the dollar has rebounded. December gold on the Comex division of the New York Mercantile Exchange settled at $1,357.60 an ounce, up 2.45% on the week. December silver settled at $24.564 an ounce, up 6.26%


Ron Coby, co-founders of Coby Lamson Capital Management and a commodity trading advisor, said the dollar could be getting ready to set a bottom, and if that is the case, many financial markets – precious metals included – will reverse. “We don’t have any signals yet, but we’re set up for it. If the Fed does not deliver what the market is expecting next week – or even if they do – we think there will be selling on the news, sort of a ‘buy the mystery, sell the history’,” he said.


Coby said he’s bullish on gold, but said the market could see a pull back because so much anticipation of quantitative easing by the Fed at the end of the Nov. 3 meeting is priced in. “We have hedged all of our longs. We’ve cut back to a core position in gold. Anything can happen, so we want to see how the market reacts,” he said.


Tom Pawlicki, analyst at MF Global, said ahead of the U.S. election and the FOMC meetings next Tuesday and Wednesday, respectively, gold prices will likely keep a rough trading range of $1,315-$1,350. “Pressure will come from the possibility that the new Congress focuses on spending reductions, the likelihood that the FOMC conducts a smaller QE2 package than anticipated,” he said.


Barclays Capital said they expect the FOMC to issue a second quantitative easing round and announce $100 billion of asset purchases per month while the Bank of England and European Central Bank remain on hold. “We think the FOMC's announcements will disappoint the market and that the ECB and BoE decisions will be broadly in line with market expectations,” they said.


Regarding the election and the impact on the dollar, if the Republicans take the House and reduce the Democrat majority in the Senate, it would be in line with financial market expectations and have little dollar impact. Barclays said ultimately the impact on the dollar is likely to be the same whether there are more Republicans in Congress or a continued Democratic majority. “The increased appetite for tax cuts (will mitigate) any long-term dollar gains from proposed spending cuts…. Any potential decline in fiscal deficits from the partial expiration of the Bush tax cuts (will be mitigated) by the greater probability of a new fiscal stimulus bill,” they said.

Gold Core said if the Republicans do make gains in Congress, generally it hasn’t favored the yellow metal. “Gold has performed better during periods of Democratic power as they have traditionally been less fiscally conservative than their Republican rivals. However, in recent history, Republicans under George Bush spent money in a manner that would make a drunken sailor proud. The fiscal challenges facing the U.S. are of a magnitude that no matter which party comes out on top in next week's mid-term elections, gold is likely to remain robust for the foreseeable future,” they said.


Leonard Kaplan, president, Prospector Asset Management, said elections aside, gold and precious metals in general will stay supported as long as interest rates remain low. “When China raised their interest rates a quarter of a percent, gold fell $30. When the U.S. and Europe start to do this, prices will fall. But it might be years and years until that happens.”


Aside from the activity in the U.S., some support for gold could come from the beginning of festivals in India, Pawlicki said. Dhanteras takes place on Wednesday and Diwali is on Friday and Pawlicki said demand is expected “to be strong based on a favorable monsoon and high global prices for food commodities grown in India. Farmers should be flush with cash and able to take advantage of the recent drop in gold prices.”

By Debbie Carlson of Kitco News dcarlson@kitco.com

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FOCUS: Analyst-Trader Survey Indicates Silver Manipulation Is In The Eye of the Beholder

29 October 2010, 12:00 p.m.
By Debbie Carlson and Daniela Cambone
Of Kitco News http://www.kitco.com/


(Kitco News) - The U.S. Commodity Futures Trading Commission is seeking to draft new regulations to stop market manipulation, with a proposal expected at the end of the year. Not surprising that silver quickly came to the forefront.

During a Tuesday hearing, one of the commissioners of the government oversight agency said he’s concerned that “there have been repeated attempts to influence prices in the silver market.”

Bart Chilton, who spoke based on his personal beliefs, said regarding the CFTC’s current investigation into the silver market that: “the public deserves some answers to their concerns that silver markets are being, and have been, manipulated.”

Previously, to win a case about manipulation, the CFTC had to prove intent by the trader to control prices, but with the financial overhaul’s new powers to prosecute fraud, the agency now has a lower burden of proof.

Market participants who believe the silver market is being artificially controlled say it is major banks, including JP Morgan Chase and HSBC, that have big short futures positions and are trying to keep down prices. Those who disagree say the futures market is being used as a hedge against positions in the physical and cash markets and that fluctuating short positions is how the markets operate.

These two banks just became subjects of separate lawsuits claiming manipulation of the silver futures and options prices are in violation of U.S. antitrust law.

Below are comments of market participants,

 in alphabetical order

regarding the latest developments in regulation of the silver market.

Jeffrey Christian,
managing director, CPM

“Look at what Bart Chilton said. He was very specific and very careful. He said ‘I believe there’s been manipulation.’ He didn’t say, ‘I know.’ His belief is based on what’s publically available and not from something internally from the CFTC. It’s the same old, tired garbage.

“The CFTC has studied silver and has found nothing of substance. They issued reports on this in 2004 and 2006. In 2008 Gensler said to the enforcement divisions and the market surveillance divisions to take another look at silver. The political appointees want a popular case; the enforcement division says there’s nothing here.”

“It’s a frivolous lawsuit…. We know how it will end, in tragedy.”

Gijsbert Groenewegen,
managing partner of Silver Arrow Capital Management in New York

“What is their reason to manipulate? Do they want to make money, or do they have other motives? That’s the first line of attack. You’ll never find why a bank is doing it. Otherwise having a massive short position doesn’t make a lot of sense. Or are there other reasons, say the government wants to keep the price of silver down because they don’t want gold to rise. My feeling is that they will stall it, that they won’t get to the bottom and they’ll say ‘we need more transparency next time.’”

Leonard Kaplan,
president of Prospector Asset Management in Chicago

“Ben Franklin said people who can keep a secret are dead. The idea that there is a long-term conspiracy is ridiculous. In the short-term yes, there is, but there are a lot of ways of doing it. If silver is trading at $5 and Chase comes in and says they want to buy it at $4.99, what happens to the price? It goes up because people want to get in ahead of Chase. Is it manipulation? Yes. Is it legal? Yes. It all depends on how you define manipulation and that can get a little scary. Silver can get manipulated like anything else. If ADM, one of the largest grain firms in the world, goes into the corn pit and starts selling, what happens? The price goes down. Other people might sell because they think ADM knows something. If the Fed raises interest rates it’s manipulating the stock market. But to think that bankers are meeting in a smoke-filled room with the Abominable Snowman and the bogeyman is just ridiculous. Banks can’t be naked short. They’re highly regulated. Can they be a little short? Yes. Can they be a little long? Yes.

John Lothian,
publisher, John Lothian Newsletter

“The lawsuits are frivolous. Chilton complains that they don’t have the tools to ferret out or fight market manipulation, but now he’s come to the conclusion there’s been market manipulation.

“When markets rise, you can expect to make changes (in positions). They reduce positions. They might want to minimize coverage, it’s the natural progression of markets.

“Banks are not monolithic things. They buy, they sell, they have proprietary trading.
“I don’t know if (Chilton’s comments) will influence the CFTC’s investigation, but it really depends on their interpretation of manipulation. I have every right to try and defend my position in the market … bluffing is all part of the trade.

“The CFTC has to be very careful with how they define manipulation. If you’re a short, you have an obligation to make delivery. You can’t squeeze a long, you can squeeze a short. If you’re long it’s easier to come up with the cash to take delivery, but you have to come up with the commodity if you’re short.”

Brien Lundin,
publisher, Gold Newsletter and Owner of New Orleans Investment Conference

“I think that is a potentially explosive issue for the markets. We’ve tracked this since the late 1990s for gold in particular but the amount of central bank selling in gold or leasing in gold and what that has done to central bank gold reserves, there has been a lot of great work since then through GATA.

“As far as silver issue, that is potentially explosive for Silver, it is not and it is important to note this, that this issue no matter what happens to it, is not a potential negative for the metals. So if it has not been factored in at all we are still where we are, but if it does turn out to be something that is really gets exposed that there is an expose here it will be very positive for the metals.”

Paul Mladjenovic,
silver analyst at Raving Capitalist.com and editor, Precious Metals Investing for Dummies

“I’m in the camp where I think large firms have taken efforts to try and control prices. When you have a player like JP Morgan, who has shorted thousands of contracts of silver – that’s an unheard of amount. These are not firms that are hedging production or are industrial users. There are patterns of trade that lend themselves to appear as manipulative. Especially when you see large trades occur near option expiration. I think these lawsuits (against HSBC and JP Morgan) have a lot of validity. I’d like to see it investigated.”

David Morgan,
Independent precious-metals analyst with Silver-Investor.com

“I’m glad it’s being looked at…. It’s adding interest. But as Bart Chilton said, it’s impossible to show intent to influence prices,” he said. While he doesn’t believe the plaintiffs will win their lawsuit, “it’s important to stand up and fight. You have to admire these guys. I hope they have deep pockets.”

“I guess that there is likely more scrutiny of the firms’ trading and (that they are less likely to exit these large positions en masse). They will either have to meet margin calls or close out the short positions (which could cause prices to rise)…. The super large sell orders haven't been there for some time. The question again is - will the banks cover large positions or not? If so the price will move up in a similar manner to how it has moved down in the past?”

Bill O’Neill,
principal, LOGIC Advisers

“Regarding the lawsuit, I don’t think there is any imminent significance to that. Whether there is market manipulation going on, that’s up to the CFTC to figure out. They have excellent computers to track that.

“The CFTC has been investigating the silver market for a long time. There’s been a number of investigations – the Hunt Brothers for example. I like to describe silver as a speculators’ playground. There’s a history of volatility in it and when people see that they think maybe it’s market manipulation.

“The big difference between the gold market and the silver market is the dealer community is huge. There’s a lot more commercial paper in gold and that offsets the speculation. That’s one reason why gold is less volatile than silver.

“In general, understanding of the futures market is lacking. It’s increased in recent years as commodities as an asset class has grown. A lot of people don’t understand it and it can be a rude awakening.”

Ned Schmidt,
The Value View Gold Report

“Silver lawsuits will have no impact in short-term, if ever. Most likely they will be thrown out. CFTC commissioner comments are meaningless for the CFTC tests for manipulation are well established, and EXTREMELY hard to prove.”

Mark Skousen,
Producer, FreedomFest and Editor Forecasts & Strategies

“Well they are not doing a very good job of manipulating it because it is moving substantially higher, obviously the central bankers want to keep gold down because if gold and silver really take off, particularly gold, that is a monetary commodity and it is a vote against the global monetary system, it is a vote against the dollar. So if gold really skyrockets that could indicate a financial crisis so you can see why government would want to manipulate or keep gold and silver from going up to high.

“I just think it is overwhelming it is just like currency plays trying to manipulate currencies that have proven to be an impossible task so gold is just owned by too many people, too many people can buy so I’m not sure that they could really counter that trend for very long. And even in purchasing power terms gold has done better ever since it was deregulated in 1971 so to argue that it has been artificially held down, why complain about it gold is already doing extremely well.

“You don’t need a conspiracy theory to argue that gold and silver are artificially low, I think they are definitely headed higher.”

By Debbie Carlson of Kitco News news@kitco.com

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Is It Time to Buy an S.S. Central America Double Eagle Gold Coin ?

Featured News


By Doug Winter on Friday, October 29, 2010

Filed Under: Commentary and Opinion, Featured, Shipwrecks & Treasure, Tips for New Collectors, US Coins, US Gold Coins

By Doug Winter – RareGoldCoins.com

For many years, it’s been no secret that I haven’t been a big fan of the 1857-S double eagles that trace their origin from the famous S.S. Central America shipwreck. I’ve written that price levels of these coins haven’t made sense to me and I’ve have had problems with their appearance. More than a decade after they were first released onto the market, has my opinion changed?

I believe that this is (finally) a sensible time to purchase an S.S.C.A double eagle. But there are some important parameters for the collector to follow when considering a purchase. Some of these are as follows:

1. Be Selective. There are over 5,000 1857-S double eagles from this shipwreck and they range in grade from Extremely Fine to Mint State-67. With this wide variety of grades, there are a tremendous number of coins to choose from. At any given major auction, there are typically three to five available and it isn’t terribly hard to find them in specialist dealer’s inventories. I have noticed a huge variation in quality for coins in the same grade. As an example, I’ve seen some in MS63 holders that I’ve loved and I’ve seen some in MS63 holders that I thought were horrible. Spend 10-20% more and buy a coin that is high end and attractive. In some instances, you will be able to buy nice, high end examples for little or no premium.

2. Find the Sweet Spot. In my opinion, the “right” grade range for one of these 1857-S double eagles is MS63 to MS64. There is not much of a premium for these two grades over AU and lower Mint State grades and when you buy a coin that grades MS63 to MS64 you are getting good value. In the current market, AU58 examples can bring as much as $3,500-4,000. An MS63 is worth around $7,000-8,000 while an MS64 is worth $8,000-9,000. It seems to me that an MS63 at around 2x the price of an AU58 is good value. And it also seems to me that an MS64 at around $1,000 more than an MS63 is good value as well.

3. Stick With Coins in Original Holders. It is important to focus on 1857-S double eagles that are in their original gold foil PCGS holders. And having the original box and other packaging is an added benefit. Avoid coins that are not in these holders and stay clear of NGC graded S.S. Central America double eagles. They may be nice coins but they have been cracked from their original holders and probably upgraded.

4. Avoid Coins That Have “Turned” in the Holder: All of the coins in this treasure were conserved after they salvaged. The conservation process has been well-documented and, in some cases, the work was outstanding. But there are other coins that have “turned” in the holder. These can be identified either by very hazy surfaces or unnatural splotchy golden color. Avoid these coins and look for pieces that are bright, lustrous and evenly toned. At this point in time, coins that haven’t turned are probably not going to.

5. Disregard The Die Varieties. All 1857-S double eagles from the shipwreck are attributed to a distinct die variety. There are over 20 varieties known. Some are probably rare but it is even rarer to find a collector who cares. I’d suggest not paying a premium for these.

6. If You Are Buying a PL or DMPL Example, Carefully Study the Market. A very small number of 1857-S double eagles were designated as either Prooflike (PL) or Deep Mirror Prooflike (DMPL) by PCGS. These are some of the most visually arresting coins from the shipwreck. I have seen a few pieces in the last few years bring extremely high premiums. These are no doubt very scarce and very flashy coins but I question the premium that they are currently bringing. If you do decide to purchase such a coin, carefully check auction prices for comparable examples and make certain that the price you are paying is in line with the last auction trade.

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Care and Storage of Coins

October 27, 2010
Warman's U.S. Coin Collecting
By Alan Herbert,


One of your early concerns as a collector is the safe storage and protection of your collection. Storage methods vary widely and there are numerous potential hazards that could damage or even destroy your favorite collectible.

The two topics fit together as some of the things you do to store your coins and some of the hazards go together. Some you can insure against, others you can’t, and it’s frequently impossible to replace valued pieces in your collection.

Coins need to be protected from handling and from pollution or contamination in the air around us. Add in the possibilities of a fire or a flood, or a broken waterline in your house. There are burglars and home invasion baddies that will strip your collection to the bone. Some of these security things you will want to do yourself. Some of you are probably going to have to risk it because of the expense factor. When your collection gets into the triple digits it’s time to find a safety deposit box at a bank.

Before you sign up, read the fine print in the box contract. If the vault is broken into, the bank’s insurance may not cover the loss. Homeowner’s Insurance probably won’t cover it either, but you can buy a special policy that will protect your collection at home, or in the bank. Usually there is a discount for coins kept in the bank. Talk to your insurance agent.

Coins are much like humans. They like the same moderate temperatures and low humidity that we like. That’s why the attic and the basement are ruled out as places to keep your coins. Your storage media will suffer as well. If you have coins in holders of flips containing PVC, heat will speed up the PVC damage.

An important point is to not only dispose of plastic flips that contain PVC, but get rid of the plastic-vinyl album pages that contain the chemical. Fumes from PVC will seep into your neutral plastic holders stored in a PVC-laced vinyl page. As a general rule, most flips that contain PVC are soft and pliable, while most Mylar and other safe plastics are stiff and hard.

A closet shelf may come crashing down under the weight of the coins, and those under the bed will catch a lot of lint for the cat to play with. It’s amazing how much a small box of coins will weigh.

Don’t put them in a freezer, as crooks have learned that is the first place to look. A wall or floor safe, securely bolted down is one option, but you will probably have to compromise on a burglar proof safe, as the fire proof safes may contain chemicals that will damage your coins. Try and find a storage place that isn’t that obvious, which also rules out the back of the closet. Think out of the box. For example, a box buried under old clothes in a clothes hamper is not likely to draw unwanted attention. Use your ingenuity.

Storage media is a hot topic. I’d suggest keeping an eye on your increasing number of coins. It’s an excellent idea to start sorting and pick a value, perhaps $50 or $100. Any coin over the value you pick gets VIP treatment – storage in an inert, hard plastic holder. These are somewhat similar to the holders (slabs) used by the grading companies. They provide maximum protection, especially for proof or uncirculated coins.

“Always use products specifically designed for coins.”

For a pot full of cents, or dozens of dimes, the next best things are inert plastic coin tubes. A glass prescription bottle may hold a handful of coins, but drop it and you’ll be picking up glass splinters for days. The hard plastic holders give the coins the best possible protection. Make sure your budget includes proper storage media. Oddly enough, an exception to the rule are plastic bags used to hold various foods for human consumption.

Next come the plastic 2x2 coin flips and the matching paper ones. Make sure that you get rid of the PVC plastic. Mylar Flips will replace them, but can damage coins if they are moved in and out frequently.

The plastic and paper flips should not be used for long term storage – more than six months. Under exceptional conditions they will protect your coins over a longer span, but the big problem is that they are not air tight.

The same is true of the cardboard 2x2 holders. They have a Mylar window so that you can see both sides of the coin. These can be stapled shut, again with the warning not to get the staples or the stapler too close to the coin. To keep the coin safe the 2x2 needs to be stapled on the three open sides. Again the reminder to use your pliers to flatten the staple legs so they don’t damage an adjacent coin. Staples will rust, but there are stainless steel staples on the market.

Next come coin folders and coin boards. These have holes for each date and mint, and in some cases the outstanding minting varieties, such as overdates. These are what you most likely will use to start your collection.

The folders have a paper backing, so you can see only one side of the coin. They expose the visible side to the atmosphere and any pollution, contamination or fingerprints. My recommendation is that you use them for circulated coins that will not show problems. Your uncirculated coins need special protection and proof coins should be left in their packaging.

The album pages allow seeing both sides of the coin, usually held in place by plastic strips. This type of album should also be used for circulated coins, as the plastic strips can scratch the coins as they slide back and forth. There are also albums designed to hold the coins in inert plastic holders, such as those used by the grading companies. These of course can be used for proof coins and uncirculated grade coins.

Coin folders are the basis for many, if not most collections, because they provide several collecting aides. There is a hole for coins for each date. Under the hole is the mintage figure, which tells you the relative rarity.

Canvas mint bags are among the poorer storage media. They obviously are not immune to water or contamination. Plus, every time the bag is moved the coins rub and scratch each other.

At the very bottom of the list are paper wrappers and the plastic tubes used by the Mint to ship coins. The paper wrappers offer only a bare minimum of protection. They tear easily, offer no protection from water damage and are easily penetrated by contamination. The “shotgun rolls” have the two end coins exposed. The soft plastic tubes also offer limited protection, with open ends. As with the paper wrappers, they should not be used for upper grade coins.

The odds are that you may have stored some coins in aluminum foil. This is something you need to immediately change. Any moisture will result in the metal-to-metal contact corroding the coin. I learned this after digging up several rolls of Morgan dollars that had been wrapped in foil and buried in the damp dirt floor of a garage. Every coin had suffered damage that no collector would want.

If you are using a shoe box for coin storage, you are running the risk of contamination. Trade it in for a plastic bin with a tight fitting lid, which will keep out anything in the air.

Summing up, it’s very important that you take special care of your coins. I was as guilty as anyone of letting coins fend for themselves in cups or bowls that offered no protection. Nothing will hurt as much as to discover that a coin with some value has lost much of it due to scratches or dings inflicted while they were lying loose. Doing your housekeeping will pay big dividends.

Keep paper (except 2x2 coin flips) such as tissue paper, envelopes and cardboard away from your coins. Paper contains sulfur, which will turn your coins black. Cotton lined flips are relatively safe, but as with the regular flips, they should not be used for long term storage. A reminder again, use products specifically tested and intended for use with coins.

Even with the best of care, your proof and uncirculated coins may discolor or tarnish. In many cases this is from exposure prior to being packaged. Don’t be surprised if your prize coin that’s safely housed in a protective holder suddenly shows a fingerprint or a change in color. If you handled the coin correctly, the odds are that the coin was exposed before you got it.

Back during World War II they used a slogan to warn against giving information to the enemy: “Loose lips can sink a ship.” Today you can lose your collection to a burglar by bragging about it, or openly displaying it. You need to impress on your relatives and friends that they are a risk to your collection if they talk about it to strangers, or even have their conversation overheard.

Coin dealers go to great lengths to overcome this problem. Gangs of thieves have been known to follow a dealer for miles when leaving a coin show and breaking into the vehicle when he stops for food or gas. As a collector you are not likely to face this problem unless you display a bunch of gold coins at the show. Use your head.

You can also rent a post office box so that your home address isn’t on everything that comes to you through the mail. Address labels should be removed from all envelopes and other papers before they go in the trash or to be recycled. A paper shredder is a good investment.

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