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Author Topic: Hedge Your Precious Metals Position with Chinese Coins  (Read 1157 times)
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groovemachine
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« on: 2010 Dec 27, 01:23:00 am »


Be a hedgehog and win!

A hedge is an investment made in order to reduce the risk of adverse price movements in a given market.  We are in a long-term commodity bull market that is nowhere near the top, but there will be many ups and downs along the way.  Volatility will only increase as market forces get more violent to both the upside and downside.

One of the best ways to protect your precious metals investment and provide stability to your portfolio is to branch out into modern Chinese coins with a percentage of your portfolio.  Many of these coins that have been produced over the last 30 years or so have extremely low mintages, so they derive their value from both the intrinsic metal content and also the numismatic potential.  You can maintain your exposure to the bull market, and at the same time limit your downside risk.

There will eventually be a top in this commodity cycle where spot prices will retreat.  Many more people will be trading precious metals before we hit the final peak.  This will only serve to raise awareness, and create additional interest in Chinese coins. There are not enough to go around without prices finding a floor that is much higher than it is today.  Being invested in numismatics will insulate you from the violent corrections when the metals market finally does hit a top.  You won't have a day to sell your coins at top prices, but rather a period of years.  The last commodity cycle topped out in 1980, but  numismatics picked up steam and stayed strong for many years after the top in commodities.

My recommendation is to take small profits on your commodity positions along the way as spot prices rise, and funnel some of those funds into numismatics.  Find the coins that are selling with low premiums and pick the coins that have more numismatic potential.  This is currently happening with some common BU Morgan and Peace dollars, for instance.  You would pay nearly the same price for a well-worn silver dollar as for a BU silver dollar, if buying by the roll, so choose the best quality coin of the options before you.  As the spot price rises, continue to look for the best quality numismatic coins available to you by considering the factors of condition, desirability, and rarity.

If you have not already done so, I would encourage you not to wait, but to diversify a portion of your precious metals portfolio into semi-numismatic coins now to give yourself a hedge should 2011 prove to be a turbulent year.

For someone completely new to the hedging concept, and new to Chinese coins, I would recommend acquiring a few 2009 and/or 2010 silver Pandas as they will likely be the lowest premium Chinese coins available.  Of course, if you can pick up any older dates for similar prices, then you should apply the principles discussed above and do so, because they likely have lower mintages.  Here are a few links to get you started:

lot of 5 2010 BU panda coins - $200 BIN

lot of 5 2010 BU panda coins - $225 obo

2009 BU panda coin - $45 BIN
« Last Edit: 2010 Dec 27, 01:38:12 am by LBCeditor » Logged
GhostRider808
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« Reply #1 on: 2011 Feb 25, 04:52:43 pm »

Any thoughts on this price $2445?  Badon said, it was too cheap.  I have no ideal, lol.


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groovemachine
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« Reply #2 on: 2011 Mar 05, 11:10:17 pm »

I'd say gold is much more temperamental than silver.  It's a completely different numismatic market.  Badon has a vested interest in calling that "too cheap" as one of his favorites is the 1 oz. gold 1995 unicorn.  The higher the 1/4 oz. goes, the higher the 1 oz. becomes.
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