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The Bret Leifer Rare Coin Letter
Spring 2007 NEWSLETTER
Investment-Quality Rare Coins

Inflation Is Our Friend

Dear Collector,

There is an abundance of paper currency on the planet now. The Chinese are learning from the best, and now they enjoy the printing press. They love the money making process. Hey, everyone should be able to print their own money. Don't you think? Those in the know in Asia are aggressively buying gold coins, copper, oil, and coal, as well as leases on these commodities and additional resources from other countries. They're smart. They don't want to sit around wondering if they'll have the resources they need in the future. They want to ensure that they'll have these valuable resources going forward, and they're using their vast quantities of depreciating U.S. dollars to pay for all of it.

In the United States, Fed Chairman Ben Bernanke would rather leave interest rates low and keep the dollar weak to make sure U.S. commerce flows. When the Fed raises interest rates, the dollar gets stronger, but at the same time, commerce slows down. That's key. So, looking at it this way, I'm sure we'd all agree that inflation is preferable to a deep recession every time. But wait. It gets better. When inflation rises, so does the value of gold coins. Just take a look back to 1998 and 1999. While inflation was mounting, the rare collectible coin market took off and the value of gold coins soared!

While some money experts argue that inflation is a "dead issue,Ó the fact is that the U.S. dollar has lost approximately 80 percent of its purchasing power since 1967! So what is the best hedge on inflation? The answer is clear. Great hard assets. Gold coins constitute a market of over $1 billion a year. Naturally, when there is an increase in popularity of coin collecting, as we're seeing now, demand increases, which will make prices eventually increase.

Since the future is uncertain, we all make bets as to which asset class will do best. Because coin prices can move contrary to the stock market, they have been and can be an excellent way to diversify your overall portfolio.

Supply/demand trends include:

The supply of quality, properly graded coins is not enough to support the current demand. It appears that renewed interest by old-time collectors, combined with the demand from new market participants, is causing inventories of "niceÓ coins to dwindle. Collectors always want nicer coins.

Although gold bullion has been weak for several decades, the recent surge in the price of gold has caused the gold coin market to respond favorably. Over the past three years, prices have increased for most of the uncirculated grades. When gold bullion prices increase, the prices of numismatic coins usually increase. Even though quality inventory has been disappearing rapidly from the market, I recommend staying away from "garbage coins." Buy the best you can afford and buy fewer pieces.

If you wish to purchase a coin, call me. We also accept trades, so if you have coins you wish to trade, let us know.

The on-going process of upgrading coins is important to many collectors, and now is still an opportune time to trade up (once we can locate the coin). We can tailor trades to fit your individual needs. If you have coins you wish to sell, call me today at 1-800-331-2646 (COIN). I need coins and will send you an overnight check.


Whether you are looking to own one important, magnificent coin, or whether you are building a world-class collection (and everything in between), we can assist you in your endeavor. Gold does not change! It has always been revered and it has always been wealth!

Governments want to digitize money. Welcome to the electronic age! They want to control the flow of the digitized financial transaction. "Eager to collect taxes from builders and nannies, it will also be tempted to monitor electronic transactions."[1] "No wonder governments have long sought to control anonymous financial instruments."[2] When governments digitize all financial transactions, privacy goes out the window. Having numismatic gold coins in your possession is as good as it gets. They offer real wealth and real privacy.

Gold Prices and the Value of Coins

People ask me all the time about the relationship between the price of gold and the price of numismatic coins. Will the value of my coins go up by the same amount when the gold market takes off, or, conversely, will the value of my coins go down by the same amount when the price of gold drops? The simple answer is that numismatic coins can go up even when the price of gold goes down.

Typically, some coins are illiquid and have a shallow market. When prices go down people don't want these coins, so the prices can become exaggerated on the down side. But, when prices go up, the markets become exaggerated on the up side. The demand for some coin sectors, including pre-1808 coins, has gone through the roof due to their scarcity.

As in all markets, supply and demand dictate prices. Dealers and collectors are "going after" the true rarities, diminishing supply and increasing demand for exceptional coins. Because there are very few of these kinds of coins available in the marketplace, sellers are not willing to part with their coins, and we've seen massive increases in the prices of these coins.

As an example, an MS66 St. Gaudens $20 gold piece has fluctuated between $2,000 and $12,000 in the last 20 years. During this time, the gold price range has been from $255 to $725. When gold bullion was $725 in May 2006, MS66 St. Gaudens were only $3,450. The $12,000 price was reached when gold bullion was approximately $430 an ounce. As you can see, other factors were at work. The prime mover at that time was incredible demand.

Factors or notes

Best regards,
Bret Leifer
President - Member ANA / Member PNG

1 "The End of the Cash Era", The Economist 17-23 Feb 2007: p.13.

2 Ibid.

© Bret Leifer Numismatics
P.O. Box 5225 * Wayland, MA 01778
Tel: 508.655.1125  *  Fax 508.650.1847  *  US: 1.800.331.2646 * Email:
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