May 2022 Update – Markets, Politics and Collectables

Intro

Please forgive the colourful post as this author remembers how to write HTML.

Some 30 years after writing the most basic webpages that were all that could be created in the early age of the internet, I’m at that age where I’m ready to devote serious hours to learning the craft. As inflation runs rampart, it behooves an online shop owner to have a greater understanding of the background processes and programming that makes the 21st Century coin collecting experience possible. Did you know that the WWW web was created at a scientific site presently located under Geneva and neighbouring France. More information here: https://home.cern/science/computing/birth-web.

Markets

It becomes clearer that there is an effort to shut down bank trading in bullion. Liquidity in the bullion market is drying up as efforts to make the financial system “safer” – as witnessed by Basel III banking regulations https://metal.digital/articles/basel-iii. From 2019:

“As discussed, the major impact of Basel III will be reduced liquidity, due to lack of market makers and bullion banks and supply chain shocks through higher costs, eroding profits.”

Shutting Down the Retail Market

On matters of markets, there’s only one person I listen to – https://ask-socrates.com. Various banks are preparing to withdraw from the London Metals Exchange futures market mid-year. While it is being reporting as a “non-event”, the lack of liquidity trading in that LME futures market is indicative of market conditions, which are anything but stellar. Let’s not kid ourselves here. The eventual switch to digital central bank currencies (likely sooner rather than later) will create a retail market in physical metal, especially if people are suspicious of the switch, which is going to be the case.

What I am seeing right now is a winding down of market trading in bullion, especially silver. If it walks like a duck and quacks like a duck… that’s too say, the rules set in place, which preceded the interest in creating a new digital currency (particularly in Europe) look fortuitous to those that are seeking to eliminate competition to central bank plans for digital money. That does not mean that silver is not in demand! Take a look at Perth Mint’s bullion coin stock and try to purchase 1oz silver coins – ain’t gonna happen! https://www.perthmint.com/shop/bullion/bullion-coins/. It means that the popular demand for physical silver is going to diverge from market prices. I strongly suspect that the softening of silver prices will not slow down retail demand.

What this means for me is that I will be focusing on having a lot more Australian small silver pre-decimal in stock moving forward. If you are holding large quantities of bar, consider swapping into small silver in case the bullion trade is closed off to the public.

The above image should be screen responsive. It’s silver in USD and shows some channels and levels where prices are likely to ping around. Chances are that back to $20 USD is likely.

Politics

The 9th of May

Russia celebrates the 9th of May as the liberation of Europe from the Nazis in WWII. Let’s wait and see what results from this week’s annual celebration. I note above the coiling of crude prices – is May going to be an auspicious month? A retest of $125 per barrel would not surprise, with EU cancellation of Russian crude and gas contracts having the potential to send prices (based on this chart setup) up to test $150 per barrel. The chart above is telling me that (likely EU) politicians are preparing something sanctions-wise and crude traders are aware.

With German fuel prices hitting nearly $3.50 AUD per litre in recent weeks (see below), any action against Russia moving forward is going to tear EU GDP a new one. I’d hazard much of the world is in recession, even as the boffins in government fix the numbers to say otherwise. The politics of recession are going to be front and centre for the next 12-24 months. 

Collectables

If the world is entering recession, the opportunity arises to seek out collectable bargains as Australian mortgage holders – 2nd only to Switzerland in household debt to GDP – will need to offload in order to raise cash. (Strangely enough, there’s no reading for Australia debt-to-income in the link provided).

AIG has just finished its latest auction – take the time to browse what DIDN’T sell, notably banknotes, high priced rarities and over-priced low grade bronze. I continue to review the literature on Australia’s early bronze production as a research project and purchased the following:

I have some difficulty purchasing on the basis of AIG’s photography. It’s difficult to tell if the coin is cleaned/corroded and as always, Caveat Emptor! It’s why I go to such trouble to take high resolution images of Top End Coin’s product. Elsewhere, I am trialling a product HIGHLY recommended by a coin dealer in the UK. The trend in collectables has been to get the American’s to authenticate and then flog off the product at a premium. If the trial phase of this new product I’ve imported specially from the USA pleases, I’ll be taking coins like this 1920 English Obverse penny out of the slab and restoring it. Removing the accumulated gunk and leaving a passive hi-tech coating on the bronze is arguably more important for these scarce dates than pushing them through PCGS. I know the slabs are not air tight and metal degradation continues once graded.

If you’ve got something worthy of sharing in the collectables space, please do not hesitate to leave a comment below. I find that leads and comments left by others can trigger some very rewarding reading and research. Let’s see how May plays out in both Australian national politics and in Europe. Cheers, Les 0455 660 884.