tag:blogger.com,1999:blog-6089228851855763774.post4722275019366651936..comments2024-03-29T07:10:06.022+08:00Comments on Gold Chat: Government Issued BullionBron Sucheckihttp://www.blogger.com/profile/00530576934994289879noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6089228851855763774.post-16251045674379340962009-05-05T03:58:00.000+08:002009-05-05T03:58:00.000+08:00Hi Bron,
Your response is quite true: "I the...Hi Bron,<br /><br />Your response is quite true: "I therefore believe that when you are selling gold you are selling trust and peace of mind. Reputation is crucial to generating trust. So the second half of the value proposition is trust in the brand."<br /><br />Reputation is a huge piece of the equation. All things being equal, it makes sense that one would select Perth or the US Mint over a competitor. No doubt. The reality is that not all things are equal, especially price, so the choice is quite often a difficult one for many consumers.<br /><br />Your point about the spread is quite right, though the advent of eBay, SeekBullion, Gold&SilverNow, and other online vehicles are changing the marketplace by eliminating the middleman - the dealer. I think it will be interesting to see if a serious, prolonged shortage changes the retail landscape dramatically.<br /><br />Pleasure discussing this with you, and best wishes in your business!<br /><br />TarekUnknownhttps://www.blogger.com/profile/14342391757653329981noreply@blogger.comtag:blogger.com,1999:blog-6089228851855763774.post-12581850918631567552009-05-04T23:20:00.000+08:002009-05-04T23:20:00.000+08:00Tarek,
As I say towards the end of my post, I don...Tarek,<br /><br />As I say towards the end of my post, I don't have any problem with private mints and I am not really trying to make a case for Government mints, rather just countering your points against Government and for private.<br /><br />Your statement "equivalent nature" is actually the crux of the issue and interests me particularly from a buisness strategy/marketing point of view.<br /><br />I would agree that physically, as exemplified by your Jason Hommel quote, Government and private coins are "equivalent". This is to say that they are equal in purity and weight. However, this is only half the story, or half the value proposition to consumers.<br /><br />Why do people buy gold? Because they don't trust fiat currencies, because they don't trust conventional products to store/protect their wealth. I therefore believe that when you are selling gold you are selling trust and peace of mind. Reputation is crucial to generating trust. So the second half of the value proposition is trust in the brand.<br /><br />What is a simple marker/indicator of reputation - time. The fact is that consumers do not see, for example, equivalence between the Perth Mint which has been making coins for 110 years and someone established for 10 years. That is why I would not agree with your statement that "They haven't earned the pride of place."<br /><br />This is proven by the facts you mention - premiums, willingness to wait, willingness to expose their money to a dealer while waiting (I did miss your point there). Indeed, it is no better demonstrated by the fact that the Sunshine Mint makes the blanks for the US Mint out of which Eagles are made, so logically Sunshine Mint product should trade at a premium to the US Mint, as they are the source!<br /><br />I understand you frustration, but then is not the consumer always right? Having said that, I have worked in retail so know it is not always the case. My point is that this demonstrated consumer behaviour, this preference, is strong. You can't fight it with appeals to logic - you have to fight fire with fire, or brand with brand, that is, marketing. I think it is a lot easier to convince rather than change the consumer.<br /><br />Out of curiosity, I checked out Lydian and Silvertowne websites. What a contrast. I didn't know how long Lydian had been in business and I still don't - its website has no mention of its establishment date or company history. The site is factual/logical and few images.<br /><br />Compare to Silvertowne. In the header it says "since 1949" and in big capitals on the first page "OVER 50 YEARS". The images are all of a substantial physical building and showroom. This guy knows it is all about establishing trust.<br /><br />I would be interested to know if Silvertowne products trade at a premium to Lydian - I'll probably be proven wrong :)<br /><br />Anyway, for me, being a logical type person, there is only one criteria that matters and that is the buy/sell spread. There is no point buying a good quality coin at a cheap premium if bullion dealers are going to buy it back at 10% under spot. You want to check that there is product recognition and a resale market. One key marketing job of a private mint is therefore to make sure the bullion dealer community knows about your product and will accept it. Marketing to the distribution network, not just the end consumer is part of the game.Bron Sucheckihttps://www.blogger.com/profile/00530576934994289879noreply@blogger.comtag:blogger.com,1999:blog-6089228851855763774.post-7645062417303331742009-05-04T12:00:00.000+08:002009-05-04T12:00:00.000+08:00Dear Mr. Suchecki,
Thank you for reading my artic...Dear Mr. Suchecki,<br /><br />Thank you for reading my article and for commenting at length. Mark sent me your response, which is well-articulated. Allow me, if I may, to clarify several points and perhaps offer a rebuttal:<br /><br />In reading your response, I fail to understand your argument favoring government coins over reputable private issue coins. Perhaps I have misunderstood your position? Even if you disagree with my opinion about the advantages to selecting a private mint, perhaps we can agree to the equivalent nature of govt vs private-issue coins, which at the very least disqualifies the argument that consumers somehow benefit by choosing government coins.<br /><br />BRON: (Regarding the full faith argument) "The argument can easily be turned on private mints - greedy “private” banks, Enron, etc, there are plenty of examples of privately run companies that have defrauded consumers."<br />RESPONSE: Yes, and most of our politicians come directly from the private sector - Bush, Geithner, Paulson, etc etc. Nevertheless, I think you have misstated my position. I am not arguing that private mints are necessarily more ethical than government mints; rather, I am arguing that government mints should not automatically be honored as being more ethical than private mints. They haven't earned the pride of place, and therefore paying an additional premium for a government backed coin is not a warranted use of capital. You asked "Can Tarek name one case of underweight or under purity (government) coins?" The answer is: no, I cannot, but then again, I am not the person to ask. Can you name one case of underweight or under purity coins from The Sunshine Mint, Johnson Matthey, Silvertowne, or Lydian? Assuming the answer is no, what is the argument in favor of the government mint? At best, we are comparing equals, which is precisely my point. I thought Jason Hommel's e-mail from Friday was an excellent testimony:<br /><br />JASON HOMMEL, FRIDAY MAY 1ST:<br />"We are also selling the Lydian Mint's new 1/4 oz. gold pieces at the rocklincoinshop.com. So since we are selling them, we tested their purity this morning . . <br /><br />There are four tests that will verify without a shadow of a doubt that a gold coin is real:<br /><br />Weight, acid score, acid rub, and the ultimate test -- cutting it in half. To prove that our stock of Lydian Gold Coins were good, we took a random coin from the stock. The coin weighed out at exactly 7.775 Grams, exactly ¼ Troy Ounce, as indicated on the coin. Next, we made a small score on the edge of the coin, and placed a drop of nitric acid on it. Nitric acid will not affect gold, and did not affect the area of the coin that was scored. This verifies that the coin is not plated. The acid rub test is a standard jeweler's test, and verifies the karat weight of the coin. In this case, the coin tested at 24 Karat, or .9999 fine, as indicated on the coin. To conduct the final, ultimate test, we cut the coin completely in half to completely verify that the coin was indeed pure “all through.”<br /><br />BRON: (Regarding availability) "So, this is because demand rises and falls and the same applies to private mints, probably more so as being profit focused they are less willing to sit on unsold stock."<br />RESPONSE: The US Mint owns a monopoly on the "legal tender" bullion market in the US, so its profitability is less impacted by competition than private mints, which must compete against a slew of "non-legal tender" mints. Because of the competition, most private mints run on very thin margins. As any dealer will confirm, there exists markets within the gold/silver market, and although demand rises and falls in the metals market in general, these fluctuations vary considerably amongst individual types of coins. It is a fact, not an opinion, that during the recent major shortage in October '08 demand for government issue coins far exceeded that of private mints, like the Sunshine Mint, for the very reasons I am arguing against in my article. All mints were affected, but some far more so than others. My point is simply that privately minted coins are always the last to become unavailable, and therefore lead times are very often more favorable for consumers.<br /><br />BRON: (Regarding Default) "How is this an argument against Government mints? It is private enterprises that are failing and need Government bailouts. This is more an argument against leaving your money with private mints. Anyway, in this current market, any mint would have to be spectacularly mismanaged to lose money making coins and bars, so I don’t really think this is a big risk."<br />RESPONSE: Bear in mind that I am addressing the consumer market. The major dealers selling government coins ARE private companies, along with 4,000 other localized dealers in the US. They purchase from the mints in order to resell. When buying from a dealer, if given the option to wait 4 months for a US Eagle order or take delivery of a Sunshine Mint order immediately, why should a buyer wait? Even if the dealer is the most reputable company in the world, consider this: 36 banks have failed in the past year. What is the advantage to risking it? Why wait for a government coin if a private coin is readily available?<br /><br />BRON: "Anti-money laundering rules would generally require identification of any bullion purchase."<br />RESPONSE: Not true in the U.S., though I am not sure about other countries.<br /><br />Thank you again for your response. I appreciate your feedback, and I hope I have answered your questions.<br /><br />All the best,<br />Tarek Saab<br />www.goldandsilvernow.comUnknownhttps://www.blogger.com/profile/14342391757653329981noreply@blogger.comtag:blogger.com,1999:blog-6089228851855763774.post-71293936590860271562009-05-03T23:53:00.000+08:002009-05-03T23:53:00.000+08:00Great post Bron, and a balanced intelligent respon...Great post Bron, and a balanced intelligent response to Tarek's statements. It's probably important to also note that the web site GoldandSilvernow was taken down by the FBI recently though no fault of their own. Another company was selling pirated software or films from a 100% separate web hosting account. The gov. agents were extremely rude, disruptive and hostile which caused his business an enormous amount of down time and problems. So that may also factor into Tarek's mistrust of government anything and I tend to agree with Tarek on that matter. Also silver bullion whether it is private or gov. it's all the same to me but I look at gold much differently. <br /><br />MarkMark Herpelhttps://www.blogger.com/profile/16570867131790072001noreply@blogger.com