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Current Precious Metal & Rare Coin Commentary: Your comments are welcome:

(1) (Jan 17, 2011) CPM Group 2012 Gold Long-Term Outlook - CPM Group has released its 2012 Gold Long-Term Outlook. The 280-page study is a comprehensive analysis of the key market fundamentals of gold that are expected to influence prices through 2021. The report includes projections of supply, demand, and prices under three scenarios over the next 10 years. Investment demand is the key to gold prices. Various factors that influence gold investment demand, such as interest rates, exchange rates, purchases of gold coins and bars, exchange traded product holdings, and the use of gold as a portfolio diversifier, are discussed at length in this report. The report contains projections for mine-by-mine production through 2021, and provides a detailed analysis of major gold-producing countries’ contribution to total mine supply. The report also contains a thorough analysis of gold scrap recovery from old jewelry and other end-uses. The official transaction section of the report discusses trends in central bank buying and selling of gold, and addresses misconceptions related to the possibility of selling central bank gold holdings by European and U.S. central banks to offset their sovereign debts and deficits, and the potential for gold usage in future currency systems.

New York, NY, 17 January 2012. CPM Group has released its annual Gold Long-Term Outlook report. Last year marked the 10th annual average increase in gold prices. The past decade was a period of declining mine supplies, rapidly growing secondary supply, declining net sales of gold from central banks (turning to net purchases by 2008), declining fabrication demand, and significantly larger volumes of investment demand relative to previous decades. Over the coming decade mine supply is forecast to grow at a strong pace, secondary supply is expected to be flat, central banks and private investors are expected to remain net buyers of gold, and fabrication demand is expected to show signs of improvement. These factors are expected to equate to historically high gold prices, but an overall reduction in the rate of increase relative to the past decade. CPM Group’s Gold Long-Term Outlook posits that the annual average real gold price will peak in 2012, and that it will be several years before the 2012 average price is surpassed.

Investment demand for gold has risen sharply over the past ten years, from 9.7 million ounces in 2000 to 29.5 million ounces in 2011. The various economic, fiscal, and political problems that have attracted investors toward gold remain intact for the foreseeable future. These problems are not expected to drive gold prices higher at a similar rate seen in the past few years in the main scenario of this report, however. Instead, CPM Group suggests that investors will adjust to the reality of today’s economic and political environment. It is expected that investment demand for gold will remain at high levels going forward, but that investors will seek opportunities to buy at lower prices rather than chasing prices higher.

Central banks became net buyers of gold in 2008 and are expected to continue to add to their official monetary gold holdings over the next decade. The Gold Long-Term Outlook features detailed statistics on gross sales and purchases of gold from the official sector and contains a detailed analysis of central bank gold market activity.

The Gold Long-Term Outlook includes detailed analysis on mine supply by country. Mine supply growth is expected to grow at a healthy pace over the coming decade, in contrast to the decline in global output from 2000 to 2008. This section of the report reviews trends in the mining industry that have resulted in higher mine supplies in recent years, which are expected to remain key drivers of mine supply growth in the future. The report contains information on over 150 gold mine development and expansion projects expected to come onstream over the next ten years. The Gold Long-Term Outlook also concludes that secondary supply will be muted over the next ten years. Secondary supply has doubled from 2000 levels but is expected to plateau in the coming decade.

Gold fabrication demand is forecast to rise over the next 10 years. Gold jewelry consumers are expected to adjust to the historically high price of gold throughout the forecast period and respond positively to price declines. CPM Group’s report contains a detailed analysis of the sources of fabrication demand and a discussion on the trends expected to push demand higher.

Given the rise in Chinese gold mine production, secondary recovery, fabrication demand, and investment demand, a special chapter focuses on the Chinese gold market in this report.  China is the largest mine producer and refiner of gold and one of the largest consumers of gold. Gold fabrication demand and investment demand in China are expected to grow at a strong pace over the next ten years, outpacing growth in domestic supplies from mines and scrap.

The report contains an appendix containing historical information about each sector of the gold market as well as more in-depth historical statistics on investment demand, supply, official (central bank) transactions, fabrication demand, and prices.

The CPM Gold Long-Term Outlook is part of a series of long-term studies of precious and specialty metals markets. These studies are used by producers and industrial users for strategic planning and in the preparation of technical reports. In addition, institutional investors and physical traders supplement their internal research with CPM Group’s comprehensive analyses, conclusions, and projections. The reports serve as authoritative reference guides for gold market statistics. CPM Group sells the reports as stand-alone products, although most clients use the CPM Group reports as parts of broader consulting packages related to the specific metals markets.

About CPM Group:

CPM Group is an independent commodities research, consulting, and investment banking firm headquartered in New York. The company is considered the foremost authority on markets for precious metals, and also provides detailed and highly regarded research on specialty and base metals, energy, and agricultural markets. CPM Group provides investment banking services, and advisory services relating to commodity risk management and asset management. Since 1986 CPM Group has provided a range of consulting and research services to companies, investors, governments, and other entities that have a financial exposure to commodities. The group has produced annual reports on precious metals since 1971.

To view the full table of contents, please click here. Alternately, contact Matt Taub at (212) 785-8320 or info@cpmgroup.com to learn more about CPM Group’s advisory and consulting services as well as our research product offerings.

(2) (Dec 27, 2011) How Much Did You Say? - So it’s Tuesday and we are back at work for 3 days before leaving for the New Year holiday. I see that President Obama is asking Congress for the third and final installment of the already worked out increase in the US debt ceiling (remember that big fight the Congress had not too long ago?). I am not a big fan of screaming about the rising US deficit because regardless of what pundits have to say America is still the big player on the international scene and we produce a pile of stuff which is needed worldwide. We also print the only currency which is capable of keeping the world economy afloat and maintaining order in the process. Alternatives to the dollar like another paper currency or the gold standard or an economy based on ecological barter all sound good but when you consider how large and interconnected the world has become and how many lives are at steak these all turn into a wonderful pipe dream. But the numbers needed to keep this train moving along are becoming alarmingly large even if you embrace the larger picture. The President’s last installment (for now at least) is $1.2 trillion dollars and this number is so big I had to do some research to think about how big was big? Keep in mind I was a kid in the Eisenhower administration and in high school when Jack Kennedy was President. So back then dollar amounts needed by our friendly government were described in the millions and even then the American public was wowed by the "M" word. By my own recollection the notion of a billion dollars came into more common usage in the 1980’s and not long afterward we began hearing the “T” word. So for those that like to count a million dollars is $1,000,000 and a billion dollars is $1,000,000,000 or 1000 million. That’s big but I am still O.K. with trying to imagine how much money that represents when old Uncle Sam wants more to pay his bills. The use of the “T” number is now common so when I read about the President’s request for the final $1.2 trillion I failed to question the Commander in Chief. But on reflection I began to once again wonder just how big is $1.2 trillion? A trillion dollars is $1,000,000,000,000 or a 1 followed by 12 zeros or 1000 billion dollars. See what I mean? The number is so large it loses its meaning even if you are searching for a way to keep tract of what is going on with Congress and their attempt to make America a better place for all. And for the record the number of IOU’s we are building up (for everyone’s own good of course) might soon require the use of even bigger numbers. So let me say for those who might fall into the Doubting Thomas ranks there is such a thing as 1 quadrillion dollars ($1,000,000,000,000,000) or even 1 quintillion dollars ($1,000,000,000,000,000,000) which unfortunately might soon be playing at a theatre near you. In meantime let me wish you all the best in the New Year and remind everyone CNI will be closed this Friday and Monday for more bubbly.

(3) (Dec 6, 2011) More Important Insight from The CPM Group Gold and U.S. and European Sovereign Debt and Deficits. "In recent months there has been some talk in the gold market, and also the broader financial press, about the idea that European central banks could or should sell their official gold reserves to alleviate, to some extent, their sovereign debt problems. There also have been similar comments about the United States selling its monetary gold reserves to pay down its debt. This seems highly unlikely to occur for several reasons." This is the first paragraph of their latest Market Commentary dated December 6, 2011 and the entire article is worth reading to explain why selling gold reserves in an attempt to help the debt problem is lunacy in the first degree. When I first learned about this idea I thought it was a joke but as the debt problems of the entire world are reexamined I have learned nothing is now impossible in search of the free lunch. As is the usual case with CPM their reasoning is backed with facts and figures and so worth the read. Their site is also recommended: CPM Group

(4) (November 30, 2011) The CNI Holiday Schedule - It is hard to believe but another year has passed and it is time to once again give thanks for God’s many blessings. This is especially true at a time when some citizens simply cannot make ends meet and storm clouds are still on the economic horizon. I have always been proud of the real American ability to help the less fortunate even when those helping are not doing as well as hoped. This type of charity is what truly makes our country a great place to live and provides exceptional family values to our children. So let me along with the CNI staff wish everyone the happiest of holiday tidings, a wonderful Christmas of course and a healthy and prosperous New Year. We will observe the same holiday schedule as last year so CNI will be closed for Christmas on Friday, December 23rd through Monday, December 30^th and for the New Year we will close Friday, December 30 through Monday, January 2^nd. Also keep in mind that most shipping during the holiday season slows by more than a week so your extra patience is appreciated.

(5) (Sept 22, 2011) The CPM Group Talks About Gold and Economic Uncertainty. Jeffrey Christian and the CPM Group offer many services including their much watched and quoted commentary concerning the precious metals. Their latest 3 page read Gold and Economic Uncertainty is worth your time because it frames gold not in the usual "the world is ending buy gold" scenario so often heard from hyped newcomers or large telemarketing firms with the hidden agenda of selling overpriced product to an uninformed public. But instead this latest look at "gold investment" by CPM provides a needed historical look at gold and offers a professional and nuanced approach which suggests that gold makes for a great insurance policy but also presents hidden or unpredictable factors which influence price. I am also providing a direct link to their web site for further reading: CPM Group

(6) (Aug 1, 2011) Protecting Valuables: Commercial Safe or Bank Safe Deposit Box? - Salt Lake City police investigate coin theft from residence / Burglars steal heavy gun safe containing $500,000-plus in coins: This headline along with the sad story was written by Paul Gilkes of Coin World (August 1, 2011). According to the published account the victims were away from their home only a short while and upon returning found their basement ransacked and the valuable treasure missing. Unfortunately this happens more than we would care to admit in the coin business.

So what is the chance this collection will be found and returned to its rightful owners? If they are lucky and the robbers make a few mistakes there is a chance but I’m not hopeful because of the extreme liquidity of rare coins and precious metals.

In the Gilkes story some of the missing material was graded by NGC so this is a beginning and if the thieves were not skilled, or simply stupid, recovery is possible by circulating a detailed list among dealers along with law enforcement information including contact numbers. You would think this is the most obvious first step but until recently making such information available to national law enforcement was not easy. Before the widespread use of the Internet and in my early years as a PNG Board Member I actually mailed a thousand copies of the PNG Dealer Directory to a list of the current Police Chiefs in the US. I also included a cover letter which explained that if numismatic material went missing these dealers might be able to help. I did not get one return answer so in the old days distributing national information about stolen material was limited. Today the Professional Numismatists Guild will post and relay your list to all its dealers and The Numismatic Crime Information Center founded by Doug Davis will also post and distribute stolen coin information.

There are recent and dramatic technical advances by PCGS and NGC which can positively identify your material even out of their original holders but I believe all too often certified coins are simply cracked out of their cases and “put to sleep” in an attempt to create cover. They are then re-submitted to another service and eventually resold into the legitimate trade and go undetected unless the coins are particularly rare.

The PNG (Professional Numismatists Guild) presents The Sol Kaplan Award yearly to an individual for information leading to the arrest and conviction of people involved in numismatic crime so it pays to keep your eyes open because it is the little things that lead to a successful conclusion. The fact is that the coin business is relatively small and most major dealers know each other so distribution of information is not difficult if you know which button to push. Anyone can contact Bob Brueggeman (PNG Executive Director) at (951) 587-8300 and suggest the work of a worthy individual for the Sol Kaplan Award. In my book Doug Davis would be a natural recipient because of his work with The Numismatic Crime Information Center.

It is obvious that some robberies are a case of inside information so let’s be careful about how coins are purchased and the resultant paper trail even within your inner circle. Professionals use a Post Office Box to transact business instead of a home address and also try to keep a low profile in other areas especially in today’s social media world.

A robbery can happen at any time but is particularly dangerous when a dealer or collector travels to or from a coin show. It is always a bad idea to leave a brief case in your trunk while stopping for something to eat and when leaving a show I take my badge off before I’m off the floor. Believe it or not sometimes well-organized professional teams get paid a flat rate to watch coin shows carefully for dealers or collectors who might get careless. The stolen material is then turned over to their handlers for evaluation and in some cases is out of the country in a few days.

The nondescript portion of the collection can then be sold to unaware and out of state dealers so the crime cycle is complete.

At this point in our discussion it is easy to see that it is much better to prevent this possibility than to find the horse after you left the gate open. But it is amazing how many people believe their coins and precious metals are safer at home. This misguided idea stems from the notion that big government is somehow out to interfere with your personal belongings.

The steps taken by folks to hide their stuff are legendary but can be misguided or even dangerous because of the extreme value of their holdings. In the cited case more than half a million dollars of rare coins and precious metals were stored in a gun safe! I appreciate there are rated gun safes but most I have seen are designed to keep guns safe and not protect valuables so the victims may not have considered how easily some gun safes can be opened.

Most professionals use commercial safes which have been UL approved to withstand certain types of assaults for specific periods of time. Underwriters Laboratories Inc. (UL) is an independent product safety certification organization and they test better quality safes on all 6 sides and assign a rating based on predetermined criteria.

In my opinion no home safe is a good idea for long term storage because there are too many variables but if you must consider short term storage at home don’t just look on the Internet or visit Walmart. Choose a commercial safe with an appropriate UL rating provided by a professional with a great deal of experience. This higher end safe should then be equipped with a commercial alarm and appropriate insurance. And don’t even consider this option if you are not willing to pay the few thousand dollars it will cost which is money well spent if your collection is valuable. A cheap safe is the worst option because the novice is lulled into a false sense of security. A good safe man can pop a cheap safe in a matter of minutes so don’t fool yourself or risk your money.

If you attend coin shows you may already be familiar with one good provider of quality safes commonly used in this business: Maximum Security Safes (www.maximumsecurity.com) located at 1415 E. McFadden Suite J Santa Ana, CA 92705. Shep Bryan (800-538-0600) runs the place and I have done business with him for years. He will provide a straight answer to your questions about quality and his expertise is valuable regardless of where you purchase your safe.

The crazy notion that your home is secure as a permanent storage solution is usually touted by the paranoid or people who don’t know any better or coin dealers with an agenda. The end of the world scenario was born during the cold war and has been abused by many for decades to stoke the fear that America is doomed and the banking system can not be trusted. I believe this unreasonable conclusion is dangerous especially to new buyers who may not be experienced with security.

A much better way to keep your valuables completely safe is the common safe deposit box at your local bank. These boxes come in a variety of sizes, are inexpensive for the protection they offer and are better secured than anything you might consider at home. They also provide another priceless advantage: They are not in your home which can lead to a compromising situation in the wrong circumstance.

Banks are federally insured and inspected so insurance companies quote very low rates if your valuables are mostly kept at the bank. By the way, insurance coverage is never paid on a mysterious disappearance and collection of insurance money is virtually impossible if you cannot produce accurate records with receipts of what you purchased, when it was purchased and for what price. So let’s work on our record keeping skills just in case.

A final tip might prove helpful. Let’s hope a robbery is not in your future but, just in case, a complete list of what was in the safe will prove magical. This list should include as much detail as possible and will go a long way in helping law enforcement recover your treasure.

Consider this lame description usually offered after the fact: “Well, there was a 1924 $20 gold piece, what else do you need to know?” There were more than 9 million twenties minted in that year so to stand any chance of recognizing your example more information is needed.

Was your coin certified? If so by what service and what are its unique numbers? Was your missing coin in an old holder or new holder? Can you point to any obvious marks which might identify your example from others? If your coin was not certified are you able to include a general description and grade? Does this also include distinctive marks, the type of holder, notes on that holder, type of staples, color of ink, storage boxes and virtually anything (even pictures) which will make your example distinctive among other examples?

Make it a habit to update this important list as you make changes in your holdings and always keep the results in a separate location. Also keep in mind that folks who might need to use this list are not as knowledgeable as you so the less arcane the better. Like I have said I hope you never have to travel this road but the key to success here is to prevent the problem from happening in the first place. Thanks for reading and I welcome any comments concerning safety which can be added to this post.

(7) (July 27, 2011) Just How Much Money Do We Owe? - I’m a Republican but not an alarmist about the US debt talks and actually side with President Obama in that a balanced approach at this point is the responsible solution. But the Republicans have placed a very bright light on a problem which gets a great deal of talk but not much action. Remember when most thought the Tea Party was a kind of political joke? The reason this fringe group has gotten so much traction is that many Americans are looking carefully and perhaps waking up to the implications of paying this colossal bill. At any rate click on the live link and understand why a picture is worth a thousand words.

(8) (June 30, 2011) The US Mint - I'm all for collecting coins but sometimes even the US Mint can get it wrong and fails to learn valuable lessons. There have been many recent and failed attempts at replacing the US paper dollar with a coin substitute: the deplorable Eisenhower dollar comes to mind (1971-1978) which never circulated and made a war hero look like Mr. Clean, the Susan B. Anthony (1979-1999) which was not popular and did not circulate and was confused with the quarter in the bargain, the Sacagawea dollar (2000-2008) which was not a complete embarrassment to the Shoshone but for some reason the US Mint decided to plate with a gold color so I now get Emails about how much this American gold coin is worth as the price of gold moves higher, and finally the new Presidential Series Dollar Coins (2007-2016) honoring US Presidents which are also gold toned so I either get the same gold question or folks think these coins were minted when these early presidents were in office because the requisite information is incused into the side so no one can read what it says. I am glad however that Uncle Sam continues to try and save me money by spending more money to mint dollar coins which folks don't appreciate and don't use but which must be stored and guarded from now until the second coming. The American public just seems like it does not want to do away with that old paper dollar and can you blame them? Why is the U.S. making money that nobody wants?

(9) (June 23, 2011) No Multiple Checks Please - Now this is interesting and something I was not aware of before reading the current edition of the Grey Sheet (the Coin Dealer Newsletter) dated June 24, 2011: “ICTA is advising dealers, when making purchases from customers, not to accommodate or agree to pay any customers with more than one check per transaction. Repeatedly paying with more than one check could result in your bank closing your account, and you being accused of “illegal structuring”. In other words, this could be considered conspiracy to commit money laundering. When dealers are asked by customers to split up payments, it is sometimes to reduce the amount of each check to less than $10,000, which the customer then deposits or cashes on different days. An innocent accommodation to serve a customer now could create a big problem in the future for a coin dealer.”

I have written about the misunderstanding of many reporting rules but have never touched on the idea of multiple checks because frankly I thought the size of the dealer's check made no difference because it was deposited and so the money was easily traced through the customer's bank. The ideas that a seller could then cash a smaller check and produce green money under the radar or deposit smaller checks on different days to somehow avoid tax considerations are now on the table. This warning from Industry Council for Tangible Assets illustrates how far our Uncle Sam will go to make sure all you folks who still have jobs are paying your share of taxes so he can redistribute the national wealth in a fair and equitable manner.

(10) (May 23, 2011) Rules for Reportable Bullion & Cash Transactions or Lack Thereof - The subject of “reporting” has to be one of the most misunderstood and misrepresented in the trade today so I can’t figure out why you don’t see more about these rules in print or on the net? The reason might be that these mystical directions while holding sway over dealers are a virtual mess which were poorly written at inception and poorly resurrected a number of times since the government took an interest more than 30 years ago.

When gold was once again made available to Americans in 1975 today’s modern bullion dealer was reborn. Rare coin dealers at the time did not have much to do with bullion transactions except to facilitate trades for good customers. There were cash reporting requirements already on the books but mostly no one cared even the banks. If you were given cash you simply deposited it into your business account but most of the time payments were made by check.

Investors were more interested in how many Krugerrands they had to purchase to avoid paying state sales tax which was the way they used to do things. But then Treasury began to get interested in what Middle America was doing with precious metals and the “reporting” idea got more attention. Since that time both dealers and the public have come to believe many of these reporting requirements are an attempt by Uncle Sam to more closely monitor the precious metals because our government began to see them as a kind of unregistered security which is easy to buy and easy to sell privately. Perhaps, but I actually believe the truth is more mundane and the government based their first decisions about “reporting” more on what was traded on the nation's commodity exchanges and less on what was happening in coin stores across America because they really had little interest in the individual investor.

But to understand how this whole thing unfolded and why I believe much of the “reporting” requirement jargon is a red herring let’s look at the two areas most talked about by the public:

1. Cash Reporting: If you bring in more than $10,000 in cash or cash equivalents to your dealer he will present you with a Federal Form 8300 which will require things like your name, address, and social security number. Form 8300 is the real deal and presents serious legal consequences for both the buyer and the dealer. So please no winking or playing around here as this has been on the government radar screen since the cash trade in drugs entered America’s living room and more recently as terror became a reality in the US. And to make sure professionals were listening Uncle Sam prosecuted a few famous coin dealers and sent them to jail. They then published the results in Coin World which scared the bejeebers out of everyone because like I said prior to these landmark prosecutions cash was not a big deal in this business.

Also note that when the government talks about cash it is referring to the real green kind. I get regular questions about paying with wires or checks in reference to the $10,000 rule which clearly shows the public is still going through the learning curve when it comes to “reporting”. You can purchase anything you want for any amount $10,000 or $10 million and there are no dealer reporting requirements as long as you pay with a check or wire.

2. Bullion Products Reporting: I will get into specifics further down but for the time being understand that there are a limited number of bullion products in certain quantities which are reportable and the buying dealer will file Federal Form 1099B. Now pay attention because for some reason the public misses this important point: This 1099B rule only applies to what you as a consumer are selling and does not have anything to do with what you purchase or how you pay for that purchase.

So why the long buildup and walk down memory lane? Because these rules were not presented properly in the first place the public now confuses state and federal tax issues, cash reporting requirements, federal and state capital gain rules and the use of both Federal Forms 1099B and 8300. They actually pick and choose through this dog and pony show and so the question of “reporting” is further obscured. And to make matters worse some honest coin dealers still do not have it right and the hard sell telemarketers use “reporting requirements” and fear mongering as a blunt club to “steer” new investors into the worst possible choices while lining their pockets with ridiculous commissions.

And even if you are new to this game and do a little research on your own there are questions which remain unanswered. The first thing you will notice is that many of these rules are arbitrary. The US Gold Eagle is one of America’s favorite bullion coins and yet it is not reportable but similar bullion coins like the Canadian Maple Leaf or the South African Krugerrand made the hit list.

So let me state what might seem like heresy about government commodity reporting. I believe they really do not give a fig about what you do in any specific sense and this reporting nonsense is another urban myth misread by the public and used and misused by dealers to sell product.

What really happens to all the reporting information we collect and submit to the government each year? I cannot site a single example of Uncle Sam coming back and asking questions except in the case of a wrong address or incorrect social security number. I believe no one is home in that he does not care when it comes to the physical metals because it is small potatoes when compared to commodities like wheat or corn.

If you study the reportable list below the first thing that should seem obvious is its lack of conscience intent. Some bullion product is listed but much of what is commonly accepted as bullion precious metal is missing and there is not even a provision for new products to be added. I guarantee the government could have done a better job if its real intent was invasion of your privacy and a “big brother” attempt at controlling the precious metals.

I believe the only reason we are bothered with this little sister today is because it was on a list of other big commodities and the statistical Washington wizards simply through it in on the deal because they were following orders. My bet is that in the end your reporting information becomes a very small part of a large government information stream studied by academics and burned out commodity traders.

The people that make a big deal out of this convoluted scheme are the conspiracy buffs who still believe in the grassy knoll theory. This is where the real paranoia began because they simply could not believe the government was not looking in their window.

To help sort out the situation and make more sense of a confused marketplace a few definitions might also be helpful because the word “reportable” has a number of interpretations when buying or selling bullion products. Believe it or not I regularly receive Email which asks for the list of bullion coins which have no reporting requirements in the sense of capital gain reporting. So some readers mistakenly think that choosing a particular product will avoid “reportable” income from the buying and selling of precious metals. There is no such list because there is no such product. Your Uncle Sam is interested in all your capital gains and losses because the resultant tax flow is important in supporting his spending habits.

But it might surprise you to find that the majority of bullion transactions are not reportable to Uncle Sam via Federal Form 1099B. For those bullion products which are reportable the rules can still be confusing because there are minimum size requirements. The really good news here is that if the few government reporting requirements bother you, it is easy to do your homework and avoid products which fall into the reporting area. There are many low premium bullion bars and coins that have no reporting requirements upon resale and move directly with the spot market.

The following is what The Industry Council for Tangible Assets (ICTA) has to offer about what the I.R.S. wants in the way of paper work. They are describing the paper work provided by bullion dealers which relate to what you purchase or sell. These basic rules are taken from the ICTA newsletter Washington Wire dated December of 2004 which is the only source material I can find at the moment and you will just have to put up with my added comments.

First: You can place any size order and pay with a check or wire. No one cares, not even the government. The only time they want to hear from a dealer is if you invest more than $10,000 in real green cash or cash equivalent like a group of money orders purchased in smaller denominations. Then you must fill out I.R.S. Form 8300. There is nothing wrong with large cash transactions, but the government wants to know about them. And, by the way, you can't spend $5000 today and $6000 tomorrow because Uncle Sam looks for these “chain” transactions and does not like to be fooled.

Second: There are rules which apply only to bullion and only come into play when you sell. As long as you don’t use cash you can purchase all the gold Kilo bars you want and no one cares but the first one you sell produces a “reporting” requirement. All Kilo bars are 32.15 troy ounces of gold and are subject to reporting by the purchasing dealer. Dealers are also required to report any one gold bar they purchase from the public which totals 32.15 ounces or more.

And what about those popular 1 ounce gold bullion coins everyone likes? If you sell 25 coins or more of the Krugerrand, Maple Leaf or Mexican Gold Onza dealers are also required to report the sale on Form 1099B.

But let’s not lose faith because there is some joy in that such reporting is not required on transactions involving the U.S. Gold Eagle the Australian Kangaroo or the Austrian Philharmonic. There is also no reporting on any small gold bullion coins or the popular fractional gold bullion coins which are available in 1/10, 1/4, and 1/2 ounce sizes.

Third: Dealers are required to report $1000 face 90% silver bags and 1000 ounce silver bar transactions only when you are selling. We are not asked to report your sale of 40% bags or less than $1000 face in 90% silver coin. The 10 and 1 ounce silver bar is exempt as long as the sale does not exceed 1000 ounces.

Fourth: When you sell platinum or palladium bars in quantities of 25 ounces or more the transaction is reportable. Platinum bullion coins like the Canadian Maple Leaf, the U.S. platinum Eagle, or the Australian Koala are exempt. Finally, palladium bullion coins like the Russian Ballerina are exempt.

Let me also mention an issue virtually never seen in print and ask a small favor: Don’t ask me or your neighborhood dealer how to “get around” these reporting requirements by variations on the theme. In other words if a $1000 bag of 90% is reportable a customer might suggest selling two half bags and avoiding the paperwork? Or why can’t I bring in a “friend” and both of us spend $9000 in cash and thus avoid the required reporting? No dealer in their right mind should answer this type of transparent question because it is a form of “structuring” and would make the dealer a party to the transaction. I just walk away and get accused of being rude.

Before I move on let me also say this commentary is not gospel because I labor under the same burden that you do in trying to discern what our hard working government wants in the way of paperwork. So I would not use this information to make decisions without seeking professional help from your CPA or other tax professional. I had to put that in because without it the lawyers get nervous. I would also like to say this commentary should be considered only a beginning of this important discussion. It would be nice to hear from those readers who have more or better information on government reporting requirements so this missive can be updated and reposted. Thanks again for reading and keep your head down as I used to say in the military.