-- Posted 18 July, 2008 | | Discuss This Article - Comments:

Yesterday I visited the local coin shop in my home town, Salisbury in England and while full of interesting medals and collectables something was missing this year. The coin counter had shrunken to a small selection in the corner.

I asked the owner of The Castle Galleries, John Lodge what had happened and he explained that it was proving hard to buy sufficient supplies to keep up with demand. Indeed he apologised for only having two silver bullion coins on display: a 1924 Silver Eagle and a 1780 Marie Theresa. So I bought both for $40 and emptied his shop!

However, Mr. Lodge has been in business for a long time, and as a very small boy I used to go to a youth club he ran called the Happy Hour Club. He recalled that in the late 1970s people used to queue down the road to buy gold and silver coins, and nothing like that had happened yet.

Mr. Lodge felt it was remarkable just how long ago the last gold boom seemed. It certainly appeared unreasonable to me that I should pay $20 for an ounce of silver as a coin, exactly the same price as I would have paid in 1979.

In that year I worked as a labourer for my father’s building company and we sold one house for $36,000. Today it would be twenty times that amount.

Nothing else I have bought on my short visit is close to the 1979 price. In just the past year gas prices are up 27 per cent and the average supermarket basket by 21 per cent, according to the Daily Mail. So why should bullion coins be unchanged over 29 years?

Mr. Lodge says it is extraordinary how long the bear market lasted and reminded me that the coins bottomed at $5 each. Yet you look at one ounce of silver and it looks like it ought to be worth $100 or more.

But there is a shortage emerging, clearly and that ought to be driving prices higher if nothing else. Mr. Lodge also thinks the industrial consumption of silver is forgotten, and that means the silver of 1979 has gone, unlike gold which piles up in vaults.

Apparently bullion dealers report a doubling of sales in the UK over the past year with increasing interest among the public in buying silver and gold coins and bars of metal. But if inflation does what it did in the 1970s then the queues down the road to buy from Mr. Lodge will be there again. I just hope he finds some stock.

Peter J. Cooper