Coin Shops Will Close Forever IF THIS HAPPENS

Key Concepts

• Bullion Taxation: Varies by state in the USA, with no national Value Added Tax (VAT). Some states are implementing sales tax on bullion.
• Numismatics vs. Bullion: The distinction between collecting coins for their rarity and condition (numismatics) versus buying them for their intrinsic metal value (bullion).
• Coin Shop Operations: How coin shops adjust buy/sell prices, the process of evaluating incoming collections, and the ethical obligation to inform customers of valuable finds.
• Gold Supply Elasticity: The concept that gold mining operations can increase production if prices make it economically viable.
• International Gold/Silver Buying: Countries rich in mineral resources are often good places to buy precious metals.
• Business Diversification: Coin shops often diversify beyond bullion to include collectibles, watches, and diamonds to mitigate market risks.
• Coin Storage: The pros and cons of using plastic sleeves versus hard capsules for coin storage, considering factors like tarnish prevention and scratch protection.
• Coin Security Features: The varying levels of security features on government-issued bullion coins to prevent counterfeiting.
• Reputable Dealers: The importance of purchasing precious metals from trusted and reputable dealers.

Taxation of Bullion in the USA

The taxation of bullion in the United States is a state-by-state matter, unlike the Value Added Tax (VAT) common in the European Union. There is no national VAT on bullion. Some states, such as Washington, are soon to implement a sales tax on bullion. Oregon, however, has no sales tax of any kind, including on bullion. California has minimum thresholds to avoid sales tax on bullion purchases. Crucially, there is no distinction in taxation between new and used silver coins or bars.

Trading Numismatics for Bullion

For individuals looking to downsize their collections or simplify asset management for their families, trading numismatic coins for silver and gold bullion is presented as a viable option. This is because bullion is generally easier to dispose of. If one is no longer enjoying collecting or wishes to have more liquid assets, converting numismatics to bullion can be beneficial. Furthermore, some believe that bullion can appreciate more than certain collectibles over time. The advice is to consider this transition if one has "fluff" or items they are not particularly attached to within their collection.

Discovering Rare Coins in Collections

The discussion highlights the scenario of a customer unknowingly possessing a rare coin, such as a 1916D Mercury dime, within a larger lot of silver dimes. Coin dealers would inform the customer of such a valuable find, emphasizing that withholding this information would be considered stealing. The process of checking collections varies. If a collection appears to have been meticulously assembled by a collector (e.g., filling album holes), it's less likely to contain overlooked rarities. However, if a collection is more haphazardly accumulated (e.g., a "coffee can full" from someone who simply believed in silver), a thorough examination for rare dates is more probable. The ethical stance is clear: dealers will disclose any significant discoveries.

Coin Shop Pricing and Market Fluctuations

Coin shops adjust their buy and sell prices daily, often in the morning, to reflect market fluctuations. In fast-moving markets, adjustments might occur midday as well. The frequency of these changes depends on market stability. For minor fluctuations (e.g., 20-30 cents), prices might remain unchanged. However, significant movements can trigger price updates. The goal is to maintain relative price stability throughout the day for customers, especially those traveling to the shop, while also ensuring the shop remains profitable. The most frequent price changes observed in one day were twice.

Calculation of Silver Content in Circulated Coins

A traditional convention in the coin business is that circulated 90% silver coins contain 0.715 troy ounces of silver per dollar face value. Therefore, $100 face value of dimes (1,000 dimes) would contain approximately 71.5 troy ounces of silver, not 90 ounces as initially suggested.

Elasticity of Gold Supply

The supply of gold is elastic, meaning that if the price increases significantly, more mines will open, and existing operations will ramp up production. This is analogous to the oil market, where low prices can make extraction uneconomical, while higher prices incentivize production. Mines often have known reserves that are not currently being exploited because the price is not high enough to make extraction profitable. This principle applies to any mineral resource.

Best Countries to Buy Gold and Silver

While the United States is recommended as a primary place to buy gold and silver, other countries rich in mineral resources are also considered good options. Mexico has historically been a strong silver-producing nation. Central America, Australia (known for gold nuggets), and South Africa are also mentioned. Canada, with its significant mining operations, is also a viable option.

Business Resilience of Coin Shops

Coin shops are generally resilient to market downturns. They operate by making a market in precious metals, meaning they are continuously buying and selling. Even in extreme scenarios like negative oil prices, a coin shop would likely remain open and potentially profit from negative gold prices by buying at a premium. The primary factor that could lead to a shop closing would be a complete cessation of buying and selling activity by the public. Furthermore, many coin shops diversify their offerings to include collectibles, watches, and diamonds, which are not as directly affected by precious metal market fluctuations. This diversification strategy helps ensure business continuity.

Stacking vs. Collecting Silver and Gold

The distinction between "stacking" and "collecting" silver and gold lies in the motivation and criteria for acquisition. Collecting implies a focus beyond the intrinsic metal value, incorporating factors like the coin's date, condition, mint mark, or specific varieties (e.g., an ounce from every country issuing bullion coins). It involves being discerning about what is added to the collection. Stacking, a more recent term, can be seen as a broader approach where the primary goal is accumulating precious metal. For some, the terms are interchangeable, but collecting often involves a deeper level of specialization and appreciation for the coin's historical or aesthetic attributes.

Coin Storage: Sleeves vs. Capsules

The choice between plastic sleeves (like 2x2 flips) and hard capsules depends on the desired outcome. For gold, which is softer, a harder container like a capsule is recommended to prevent scratches. Capsules are also effective in preventing silver from tarnishing. Plastic sleeves are suitable for protecting coins from scratches if tarnishing is not a primary concern. Hard capsules, often referred to as "airtights," are more expensive than flips but offer superior protection against toning. Ultimately, for simple bullion, the storage method may not significantly impact its buy/sell value.

Security Features of Government Bullion Coins

The security features on government-issued 1oz bullion coins vary. The Britannia coins are noted for their security features, including micro-engraved rays and privy marks. US Silver Eagles and Gold Eagles (prior to 2021) are considered to have lacked significant security features against counterfeiting. Canadian Maple Leafs are highlighted as having advanced security, featuring micro-engraved rays on the field and a privy mark with the year on the maple leaf design, making them difficult to counterfeit.

Importance of Reputable Dealers

Beyond examining security features on coins, the most critical aspect of purchasing precious metals is to buy from a reputable dealer. Even sophisticated security features can be replicated. Buying from unknown individuals or unverified online sources carries a higher risk of acquiring counterfeit items. Reputable dealers, whether brick-and-mortar or online, provide a level of assurance and recourse if issues arise.

Conclusion

This discussion covers a range of practical and insightful topics for precious metal enthusiasts. It clarifies tax implications in the US, offers advice on managing coin collections, explains the dynamics of coin shop operations and pricing, and delves into the economics of gold supply. The conversation also touches upon international purchasing, the philosophical differences between collecting and stacking, practical coin storage solutions, and the crucial aspect of security features and dealer reputation. The overarching theme emphasizes informed decision-making and ethical practices within the precious metals market.