Brexit, U.S. election risks mean precious metals have become the must-haves
Posted onWarnings about a possible Brexit are starting to come faster and more furiously as the June 23 referendum in the United Kingdom nears. And because of the looming uncertainty over the future of Great Britains participation in the European Union, gold is gaining some serious luster overseas.
Right now no one knows how the referendum will turn out. The message from opinion polls is simple: It is impossible to predict how Britons will vote, a Reuters analysis found.
The British Treasurys own study of a Brexit impact estimates that household wealth will decrease, tax receipts will shrink, and GDP will fall, among other repercussions.
Brexit raises recession risks: The Bank of England also weighed in last week, saying that a vote to leave the European Union could slam the brakes on growth in the UK, push up unemployment and stoke inflation. The UK also could face a major financing difficulty and a technical recession, according to The Wall Street Journal.
The International Monetary Fund said the impact would range from pretty bad to very, very bad. An exit would precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output, it said. Such market reactions could sharply contract economic activity, further depressing asset prices in a self-reinforcing cycle.
And the Angel Gurria, secretary general of the Organisation for Economic Co-operation and Development, told Britons that they would face the equivalent of a Brexit tax equivalent to a months salary by 2020 if they leave the EU.
Shock waves through markets: A USA Today report warned that a possible Brexit may sendshock waves throughthe globaleconomy and affect four particular areas: stocks, economic growth, the currency markets, and trade.
Meanwhile, some major corporations also have voiced concerns about a Brexit, including Microsoft and Hewlett Packard. And U.S. banks too are worried about the effects of a Brexit, with Morgan Stanley CEO James Gorman saying that leaving the union could be damaging to the UK economy.
Thus, many investors are leaning toward a risk-off mode. Allocations to UK stocks have fallen to their lowest level since November 2008, MarketWatch reported. Brexit is seen as the biggest tail risk for global markets, supporting elevated investor cash levels, Bank of America Merrill Lynch noted.
Bank to double metals holdings: Some are seeking cash for safety, but HSBC is among the analysts who argue that a Brexit can boost gold. German bank Joh. Berenberg Gossler & Co. also like the metal.
Chief Investment Officer Manfred Schlumberger, who joined the Hamburg-based bank in January, expects gold, silver and platinum markets to rebound by as much as 40% in the next two yearsto a level last seen in October 2012, Bloomberg reported. For that reason, Berenberg plans to double the share of precious metals in its investment portfolio to about 10% in the weeks ahead.
What was gold trading at in October 2012? On Oct. 1 of that year, the yellow metal closed at more than $1,778. And on the same day in 2012, silver was commanding more than $34 an ounce.
The growing preponderance of negative interest rates is one reason why metals will gain, Schlumberger said. People used to go for 10-year German government bonds or treasuries, but as they dont offer any yield, more investors will consider buying bullion, he said. Major political question marks in Europe and the U.S. also will boost bullion. It will be a segment that will benefit from political uncertainties like Brexit or a possible Donald Trump election victory, he added.
Gold-bullish risks include U.S. election: Chief Saxo Bank commodity strategist Ole Hansen also factors the potential Brexit into his bullish gold forecast, which targets $1,400 this year. The outcome is by no means certain yet, said Hansen, who thinks resulting damage to the euro may leave gold in a good position.
However, he also thinks the U.S. presidential election is another likely catalyst for gold. Its not just one risk right now,he said. We have got several risks, so when you start adding them up, it could be that additional risks will sway some investors to add exposure to gold or maybe revisit gold. So these are all just adding to the reasons why precious metals have become the must-haves.
Another JPMorgan exec bullish on gold as Fed signals potential June rate hike
Posted onGold lost ground Wednesday after the minutes from the Federal Reserves April meeting showed some support among the central bankers for a potential interest-rate increase as soon as June.
Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committees 2% objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June, the minutes said. Still, the Fed continued to emphasize its longstanding data-dependent outlook, which leaves policymakers plenty of room not to hike rates in June or later.
Rate-hike talk also dents stocks: The minutes follow hawkish statements from Fed branch chief Dennis Lockhart and John Williams on Tuesday, in which they declared the banks June meeting live, plus a Consumer Price Index report for April that showed inflation rising at its fastest pace in three years.
Rate-hike odds spiked after the minutes were released, and gold dipped about 1% to trade near $1,266. But U.S. stocks also were pressured, and arguably they have more to lose than bullion if the Fed acts in June. A rate hike could revive volatility in equities and result in new capital fleeing to gold as a safe haven, as occurred as the start of the year.
But odds are that the Fed wont move to raise rates because its June 14-15 meeting comes just days before the United Kingdom votes on a potential Brexit from the European Union a referendum that has the potential to rattle currency, bond, and stock markets across the globe.
U.S. Mint coin sales soaring: Regardless of what the Fed does at its upcoming meetings, the overall attitude toward gold remains positive. Just look at the U.S. Mints bustling bullion sales. According to a recent Coin World report, gold coin sales are well ahead of 2015 levels, with 1-oz. gold American Eagles double 2015s totals at the same time last year.
Through May 16, about 381,500 ounces of gold Eagles were sold, versus 197,500 ounces during the first full five months of 2015. Gold American Buffalo coin sales this year also are beating last years totals, with 89,500 sold versus 75,500. And silver American Eagle coins are maintaining their record-breaking pace, with 21.576 million sold through May 16.
Very, very bullish trend for gold: And this week another top JPMorgan executive pronounced blue skies ahead for the yellow metal in a CNBC interview, following Solita Marcellis appearance earlier this month in which she predicted $1,400 gold.
JPMorgan Asset Managements global chief investment officer and head of fixed-income and commodities, Bob Michele, doesnt think the Feds rate-hiking pace this year will be aggressive to golds benefit. If the Fed marches on its path [from] a zero real fed funds rate to something like 2%, obviously thats going to put a lot of pressure on gold, he said. However, I dont think theyre going to get there. I think theyll struggle to do one more hike this year, and I think that again will unleash the gold bugs into the market.
Therefore, Its certainly a time that people want to get into gold, he said. I think theres no doubt that central-bank policy response has unleashed the gold bugs. One of the big knocks on gold for a long time had been that it had no yield. Well, if youre in Europe, if youre in Japan, no yield is high yield. You throw on top of that, there is a currency-devaluation war under way; its in Europe, its in Japan. You toss into the mix China and Australia, and suddenly gold is an alternate currency, certainly to paper money. So I think the intermediate and longer-term trend for gold is very, very bullish.
Surprising how resilient gold has been: For Michele, golds recent dip from $1,300 is no big deal. Theres no doubt when you look at spec positions, theyre at 10-year highs. You need some sort of consolidation here, he said. When I look at the charts, I could see a pullback to the $1,200 level, maybe $1,204, but Ill tell you: All the interest that I see circling around gold, Im not so sure well get there.
Asked whether more quantitative easing by foreign central banks might boost the dollar at bullions expense, he said, I think the buyers will come in anyway. I think that when you look at gold, its surprising how resilient its been. Its done well on days when theres been dollar strength, when theres been dollar weakness, on risk-on, risk-off. I think that theres a lot of value in gold here and I think that its under-owned. So Ive been surprised myself at the widespread interest.
Gold Fort Knox for Texas advances as Tennessee lawmakers back similar plan
Posted onChinas largest bank, ICBC Standard, just sent shock waves through the international gold trade by purchasing Barclays secret London vault capable of holding $90 billion worth of the yellow metal.
While Barclays is pulling out of the precious-metals business and Deutsche Bank is reportedly still trying to unload its London vault, China is capitalizing on these opportunities. But its not just China expanding its focus on precious metals. Lets look closer to home.
After passing a law to establish an in-state bullion depository and recall its gold held in HSBCs New York vault, the state of Texas is now fielding its first proposals for the construction of its own Fort Knox. One firm just pitched a plan for a $20 million structure to be built 250 miles south of Fort Worth with no tax dollars.
A new type of currency possible: Storage of the states roughly $650 million worth of gold costs about $650,000 a year to safeguard in New York. The Texas-storage plan would save on those costs while also offering several other serious advantages: At the depository, Texans will be able to open accounts similar to checking or savings accounts at traditional banks and monitor them online, the Star-Telegram reported. The depositors fees would go to the state.
But thats not all: Existence of the depository opens up the possibilities for users creating a new type of currency in which purchases are made electronically with the backing of the gold in the depository, wrote Ryan McMaken of The Mises Institute. In other words, one could potentially use the depositorys infrastructure to make purchases using gold, and to have gold either directly deposited into anothers account, or converted to U.S. dollarsand deposited in a conventional bank. Arguably, this is just anelectronic version of gold-backed money.
Fear of financial crisis spurs Tennessee: And other states are now taking steps to emulate the Texas plan. Tennessees legislature just passed a joint resolution supporting the establishment of its own official state bullion depository.
The resolution acknowledges that because of our evolving and unpredictable national economy, there is an effort to achieve increased monetary stability and liquidity and greater financial security in the event of a national or international financial crisis.
Therefore, in response to the state of our national economy, individuals and entities have purchased gold and other precious metals in the form of bullion and coins in order to achieve the desired financial security and stability, it reads.
These metals deserve security and safekeeping for their utilization as investments in the event of an economic crisis. The states solution is to build a facility like Texas is now planning.
First step toward gold, silver as money: Tennessees resolution is setting the stage for the creation of a state bullion depository, an important first step toward establishing gold and silver as money in the state, noted the 10th Amendment Centers communications director, Mike Maharrey. As the next step, a bill to establish a depository should be introduced and passed during the next legislative session, he added. There appears to be no barriers to getting this done. Now its up to activists in Tennessee to keep the pressure on and ensure the legislators and governor follow through.
Challenging the Feds monopoly: The Tennessee depository also would help undermine the monopoly the Federal Reserve System by introducing competition into the monetary system.
And lessening the Feds dominance of the monetary system is crucial, given that one of its top officials, New York Fed President William Dudley, recently expressed his approval of the dollar potentially losing its global reserve-currency status in the future.
Anticipating the day that the dollar is no longer king, China is working hard to corner the market on physical precious metals through actions like buying the Barclays vault. And now some American states are starting to wake up and smell the coffee for themselves hence these proactive steps by Texas and Tennessee, certainly worthy of emulation by individual investors.
Chinas largest bank buys massive London gold vault
Posted onWhen was the last time you heard about a big Western bank investing in the future of the gold trade by building a massive new vault to house the loot? Answer: not lately.
More likely, you’ve heard about those same Western banks selling off those vaults to the new big player in the global gold market: China.
That’s the news that hit Monday when ICBC Standard Bank Plc, the worlds largest bank by assets, announced that it is buying one of the biggest gold vaults in Europe from Barclays Plc. ICBC, not incidentally, just won a role in determining prices as part of the London Bullion Market Association.
Bank to expand gold services: The London vault, which can hold up to 2,000 tons of precious metals, or about $90 billion worth of gold, was only just opened in 2012 in a secret location.
This enables us to better execute on our strategy to become one of the largest Chinese banks in the precious metals market, said ICBC commodities executive Mark Buncombe. The acquisition of a precious metals vault allows us to expand our services in clearing and processing.
The London Guardian described the vault in a report on the sale: Its security precautions reportedly include: a front door that can withstand a direct hit from a rocket-propelled grenade; an electrified roof; and plinths that have been sunk to keep out anyone ambitious enough to try to tunnel in.
ICBC had sought Deutsche Bank vault: ICBC had reportedly bought the lease to Deutsche Banks massive London gold vault back in January, but that deal is said to have fallen through. The purchase from Barclays now fills that slot.
ICBC’s vault purchase comes on the heels of its new collaboration with the Hong Kong Gold and Silver Exchange Society. The partners are reportedly planning to build the biggest gold vault in the world and establish a trading hub that would link Hong Kong, Macau, Qianhai, and Shenzhen.
The acquisition of the Barclays vault is more concrete evidence that China is aiming for a tighter grip on the West’s gold-trading epicenter of London while also expanding its domestic trade via ambitious new plans such as its yuan-denominated gold-pricing fix on the Shanghai Gold Exchange.
China dominates in terms of actual physical gold trading, CNN confirmed. Gold imports to China have surged over 700% since 2010, and the country overtook India to become the worlds biggest gold consumer in 2013.
With the West busy trading paper and electronic representations of gold (such as ETFs, futures, and options), China is busy working to corner the market on physical gold. Get your physical metal while you still can.
Fed not ruling out negative rates under very adverse scenario
Posted onThe Federal Reserve has two meetings scheduled for this summer, first on June 14-15 (with accompanying press conference by Chairwoman Janet Yellen), followed by July 26-27.
Several of Yellens lieutenants, including Boston Fed President Eric Rosengren and Cleveland Fed chief Loretta Mester, have been making hawkish noises. And Fridays retail-sales report, which easily beat expectations with a 1.3% increase for April, is the latest catalyst that the Fed could cite for raising interest rates during the summer.
Congressmans query answered: But despite these calls to raise rates, its important to remember that the Feds big boss, Yellen, remains a super dove when it comes to monetary policy. Her penchant for extreme monetary accommodation was borne out in a letter made public last week.
U.S. Rep. Brad Sherman, D-California, published Yellens response to a question he submitted about what the Fed might do if another serious economic downturn occurred. His question was a followup to Yellens February appearance before a House committee.
Yellen responded that she wont rule out imposing negative interest rates here in the U.S. Negative rates, which are currently in place in Japan and Europe, have been hailed as one of the most gold-bullish policies enacted in recent years.
Tool for additional accommodation: Under negative rates, a central bank charges other banks fees for storing their cash. Those lower-level banks in turn pass those costs on to their customers. The result is that instead of getting an interest payment for keeping cash at a bank, those depositors instead pay for that privilege. The end result is that they have no incentive to keep their money at the bank. Gold, which has no yield under normal conditions, thus has a positive carry under negative rates. In contrast, cash in a bank becomes a money-losing proposition.
Negative interest rates are a tool employed by countries in Europe and elsewhere, Yellen wrote to Sherman. By some accounts, these policies appear to have provided additional policy accommodation. As I have noted previously, we certainly are trying to learn as much as we can from the experience of other countries. That said, while I would not completely rule out the use of negative interest rates in some future very adverse scenario, policymakers would need to consider a wide range of issues before employing this tool in the United States, including the potential for unintended consequences.
Commenting on Yellens response, Sherman said he interpreted her answer as implicit statement that they have legal authority to impose negative rates in the U.S.
Carlyle founder sees recession: Although some recent data, such as retail sales, suggest that the U.S. recovery is on stable footing, some heavyweight economic players think that the U.S. is overdue for a recession.
For example, private-equity billionaire David Rubenstein, who cofounded the Carlyle Group, noted, Weve been growing at relatively modest rates, and we are due for more of an economic slowdown than weve probably had for the last couple of years. Our last recession ended in June of 2009. Typically you have seven years between recessions. It could go eight years, maybe eight and a half, but it doesnt usually go 10or 11 years.Probably in the first term of the next president we will probably have something close to a recession or something that might be close to very low growth.
A recent Bloomberg story on the issue also found that former Treasury chief Larry Summers, JPMorgan Chase chief economist Michael Feroli, and Conference Board economist Gad Levanon all agree that a recession could be in the cards.
Next president cant stop recession: And former Reagan-era budget chief David Stockman told CNBC that theres no way the next president can stop a recession. Thats been baked into the cake. The idea that this economy is somehow going to get stronger in the second half or that the next president can forestall a recession thats already baked into the cake I think is wrong.
With interest rates already close to zero after only one Fed rate hike in a decades, the central bank still does not have much room left to play with if it needs to cut rates to fend off a more overt slowdown. And if a real crisis erupts, Yellens words cited above already show that negative rates remain in her toolbox. Therefore, gold should be a key defensive element in investors own toolboxes.
Gold can protect you from cybercrime even if the FDIC cant
Posted onGold expert and author Jim Rickards calls it one of the top reasons to invest in gold today: financial theft via computer hacking.
The nation of Bangladesh got a firsthand look at the costs of financial hacking back in February, when $81 million it was storing at the Federal Reserve Bank of New York was stolen. The criminals used sophisticated techniques to transfer the cash via the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network, and experts see similarities to the hacking of Sony Pictures in 2014.
The attackers clearly exhibit a deep and sophisticated knowledge of specific operational controls within the targeted banks knowledge that may have been gained from malicious insiders or cyber attacks, or a combination of both, SWIFT said, warning of a wider and highly adaptive campaign targeting banks.
Critical security gaps remain: And the hits keep on coming. News has surfaced that in late 2015, a Vietnamese commercial bank also was targeted by hackers. Tien Phong Bank of Hanoi issued a statement denying that it incurred any financial losses but admitting that hackers attempted to transfer $1.1 million in funds.
That attack and the $81 million heist from the Bangladesh central bank account at the Federal Reserve Bank of New York in February are thought to be part of a broad assault on the global banking system by thieves whose operating methods and digital fingerprints are being studied carefully by analysts worldwide, The New York Times reported.
I remain concerned that there are critical security gaps in the international payment system, New York Congresswoman Carolyn Maloney said.
Digital wealth can disappear: These ongoing vulnerabilities now being exploited by hackers mean that investors need to consider storing at least part of their wealth in physical precious metals that are impervious to computer theft.
Rickards agrees, noting that financial hackers are busy all over the world, working individually as well as for sovereign entities. Russian President Vladimir Putin has a 6,000-member cyber brigade working night and day to destroy, disrupt and erase digital wealth, he recently told Bloomberg TV.
I run into billionaires and say, What do you have? And they say, I have stock and bonds, and I say, No, you dont. You have electrons, he noted. Its all digital wealth. This can all be wiped out by Putin and Syria and North Korea, Iran, other countries. The thing about gold, you cant hack it, you cant erase it, you cant delete it. Its tangible.
FDIC accused of lax security: Sure, you can depend on the Federal Deposit Insurance Corp. to back you up if your account is hacked and looted. It pledges to guarantee bank deposits of up to $250,000 for a single account holder.
Of course, the FDICs dirty little secret is that it is wildly underfunded. And ironically, according to a recent report, the agencys own financial data have been subject to breaches, with departing employees leaving with depositors personal data on removable hard drives.
Altogether, more than 160,000 people were affected, Congress discovered at a hearing covering the breaches. To date, FDIC has failed to notify any of those individuals that their private information may have been compromised, Georgia Congressman Barry Loudermilk lamented.
Regrettably, the American people have good reason to question whether their private banking information is secured by the FDIC, hesaid. The agency is failing to safeguard private banking information.
So the very agency charged with guaranteeing Americans deposits is itself allegedly failing on the information-security front. That shocking news, along with the growing list of financial-hacking victims, means its more important than ever to protect yourself with hard assets and precious metals.
Bank of Montreal sees $1,400 gold as more hedge funds pile in
Posted onAdd the Bank of Montreal to the list of major financial institutions that have become bullish on precious metals.
One of its subsidiaries, BMO Capital Markets, has issued a positive medium-term forecast for both gold and silver.
Its projecting that gold will hit $1,400 by the end of first-quarter 2017, up from its previous forecast of $1,200, while it sees silver reaching $22.50 by the same time.
Fed policy key to golds movement: The BMO analysts hedged their optimism by insisting that their forecasts hinge on the Federal Reserve keeping interest rates lower for longer. Maybe the Fed does decide to hike rates in July which would be the biggest downside shock for gold prices, in our view, they said.
They also conceded that gold could see another traditional summertime dip that might damage sentiment.
Gold prices nearly always decline between May and July, Canadas Globe and Mail newspaper noted. If that pattern, which has held true in 36 of the past 40 years, continues, it could deflate the enthusiasm around precious metals.
We are not advocating an extreme doom-and-gloom and $10,000-an-ounce gold price argument, they said.
Big funds load up on bullion exposure: BOM is bullish, and so are some major hedge funds, recent federal filings show. Jana Partners now owns gold for the first time since December 2014, according to Reuters. Barry Rosensteins fund bought 50,000 shares, worth almost $6 million, of the worlds largest gold-linked ETF.
Meanwhile, CI Investments Inc., an investment manager of Toronto-based CI Financial Corp., almost quadrupled their stake in the ETF, becoming the sixth-largest shareholder, Reuters noted.
CI purchased 2.81 million ETF shares to bring the total values of its bullion holdings to $441 million. It also has interest in various gold mining companies.
The buying by some of the largest gold investors highlights how funds rushed back into bullion ETFs, which are backed by physical gold, as expectations that the U.S. Federal Reserve would continue to raise interest rates fade, Reuters added.
The rising tide of bullishness has raised gold ETF holdings to their highest levels in years. The great gold rush of 2016 is gathering pace, Bloomberg reported. Holdings in exchange-traded funds have now surged by a quarter,with investors taking advantage of lower prices over the past two weeks to enlarge stakes on rising concern about central bank policy making worldwide. The holdingshave increased to 1,822.3 metric tons, the most since December 2013.
Gold demand blazes to biggest 1st quarter ever thanks to surging ETF inflows
Posted onEveryone knows that gold just experienced its best quarterly price performance in 30 years, gaining almost 17% and now we know why.
In its Gold Demand Trends report for the first quarter of 2016, the World Gold Council has confirmed that consumption surged in the first three months of the year.
The WGC estimates that almost 1,290 metric tons (t) of the metal were consumed in Q1, a 21% increase year-on-year, making it the second largest quarter on record, behind only to the fourth quarter of 2012, the report found.
ETFs shine and central banks buy: The main driver was the renewed interest in ETFs from Western investors, who were rattled by the volatility in the stock markets because of Chinas economic woes, plunging oil prices, and the Federal Reserves first interest-rate increase in a decade.
This increase was driven by huge inflows into exchange traded funds (ETFs) 364t fuelled by concerns around the shifting global economic and financial landscape, the report noted.
Although coin and bar demand stayed relatively flat with a 1% increase, central banks (chiefly those in Russia and China) also continued to be strong buyers, purchasing 109 tons during the quarter. Its now the 21st straight quarter that central banks have been net buyers of the metal.
From the demand point of view, investment bank and central bank demand … has created a structural shift that will result in stronger demand not only as we see now but over the long run,” WGC executive Juan Carlos Artigas said.
Negative rates bolster bullions allure: On the negative side, the WGC found lower demand in India because of a jewelers strike and a drop in jewelry consumption in China because of falling consumer confidence.
Its been a pretty good start to the year, WGC researcher Alistair Hewitt told Bloomberg. Hewitt also cited the growing occurrence of negative interest rates for making the investment sector the dominant driver of gold demand.
Ongoing market uncertainty and unconventional monetary policies should keep the interest in gold sustained, Hewitt added. “The world hadn’t seen negative rates before. And it’s expanded significantly over the past two years. Investors are now askinghow these moves aregoing to affect a whole range of asset classes and the banking system.”
In fact, the rise of negative rates has even sparked anecdotal reports of a rise in demand for safety deposit boxes in Germany as some customers looked for alternative options in case of further interest rate cuts, the WGC said.
Brexit fears stoke physical purchases: Citing the WGC report, Londons Telegraph also noted that gold coin and bar purchases have increased notably in Great Britain ahead of the June 23 referendum on a Brexit, or potential British exit from the European Union.
Bar and coin demand in the UK climbed by more than 60% both in value and volume terms amid heightened Brexit fears, while improved goldaccess for investors made purchases easier, the Telegraph said.
Looking ahead, the future looks brighter for Asian demand. The jewelers strike India is over, and monsoon season is forecast to be healthy, boding well for robust buying during the fall Diwali celebration. “The monsoon is forecast to be extraordinarily good, said the WGCs VP for Indian operations, Somasundaram PR. Meanwhile, Chinas new yuan-denominated gold-pricing fix in Shanghai, along with Hong Kong reportedly planning the biggest gold vault in the world, suggests that the worlds fastest-growing major economy will remain a top consumer alongside India.
And Western investors have any number of growing motivations to buy gold in the coming months, including a stock market that looks exhausted, a Federal Reserve that could upset the U.S. economy with an ill-timed rate hike, and a presidential election dominated by the wild-card candidate that is Donald Trump.
A philosophy for rare coin investing
Posted onBy Bruce Smith, Senior Portfolio Director and Numismatic Writer at Blanchard and Company
One of the first symbolic, political, and critical economic actions to announce the independence of the newly forming American Colonies was the coining of monies. Investors should embrace these historically significant symbols of the American story when investing in rare coins. More than paper or a certificate, and more than just money to be handed down to the next of kin, these are investments with meaning, virtue, history and passion.
This begs the important question: How do I go about investing money, hard-earned money, in this market?
After two decades of handling portfolios both large and small, I am convinced that several critical principles must be embraced to achieve success.
From coins that cost as little as several hundred dollars apiece to those into the millions, the clients who have prospered the most are those that have implemented the principles shared in following paragraphs. Regardless of ones budget, applying these principles can help deliver handsome rewards.
Investors should always focus on quality over quantity. Many investors come to the rare arena thinking they need to acquire as much bulk as possible that owning many lower priced gold coins is better than placing the same amount of capital into a smaller number of truly rare coins. This is not the case, and the principle is true in any collector market. The rarest art, cars, watches, and historical artifacts are always the ones that are most coveted and the ones that appreciate most substantially. Translate this over into the rare coin arena, and investors should focus on the quality coins that will be sought after by the entire market.
Invest in the rarest coin a budget will allow, and acquire the coins with the lowest populations, the greatest allure, and the biggest story. Acquire the coins that others will compete for when it is time for you to sell.
In the stock market, blue chips are those stocks that have been around for a long time and have historically given strong returns to investors. The rare coin market has its blue chips as well. Blue chip rarities are those sectors of coins that have been very strong producers of investment return over the long-term. These are the various segments of the blue chip market where collectors and investors should put their focus:
Key Date Gold/Key Date Coins
These coins have smaller populations, strong investor sentiment, are important parts of set-building strategies and have great history behind them. Mintages for key dates vary from year to year depending upon certain political, economic, or historical realities, but their demand rarely wanes. Coins become key date through time and circumstance, becoming rare and desirable by comparison to other more common coins.
Early Date Gold: Coins Minted Prior to 1838
These coins are magic. They are full of the history of Americas founding, its patriarchs, and the American ideal. As such, and because they are exceedingly rare especially those dated prior to 1800 these coins are sought after by all savvy investors. Early date gold coins also are very tough to acquire, and when they do appear, they can trade in the moment regardless of the price. Early date silver is also very desirable and extraordinary. Many of these remarkable early silver coins, aesthetically speaking, capture the imagination and hearken back to the early American period unlike any other coins.
Proof Gold
These coins were minted for collectors and have mirror-like finishes that are absolutely breathtaking. Japanese investors have been in the states in recent years acquiring these coins rabidly. Many seasoned investors build entire portfolios of proof coinage. They are truly mesmerizing to view, and the populations are minuscule. In many cases only handfuls were minted. Struck by highly polished dies with precise requirements in place, many were only given to dignitaries. The famous $4.00 Stella coin is one great example.
The Civil War
Talk about history! Has there been another moment in American history that has captivated authors, storytellers, and movie makers more? Because of their history, low survivability, and collector fervor, these coins are a very sought after segment of the market. A rare and exceptional niche would be Civil War proof coinage, which is one of the more coveted sectors of all coinage.
Gold Rush Gold
One could be argued that the American West and the American economy really got their starts on the back of this epic American saga. From the fields of the Gold Rush grew the American spirit of adventure, enterprise, and entrepreneurship. Due to the relatively small number of coins, the history, and the ability to build sets from this period, this is another very strong arena for collectors and investors to explore. Territorial pieces from important sanctioned assay offices make up one of the more interesting sectors for many investors, and some collectors have focused exclusively on this segment.
Branch Mint Gold
Coins minted at mints other than Philadelphia and Denver. The coins to pursue in this category were minted in Dahlonega, Ga., Charlotte, N.C., San Francisco, Calif., and New Orleans, La. These mints generally produced fewer coins and operated for shorter periods of time. Consequently, the rarity factor really favors these specimens, and collectors cannot get enough of them. Typically, the scarcest of these coins are from Charlotte and Dahlonega, but again, it depends on the date, type, and variety. In recent years the New Orleans mint has become a hot market as investors and collectors have gained greater knowledge of coins like the 1838-O half dollar and other rarities.
Pedigree Coins
These are coins with a historically important lineage or story. To own a coin that was previously owned by a famous collector is important to many investors because they realize this history lends itself to a greater potential value. A coin once owned by a king, for example, will have more appeal than the same coin without that pedigree. Some of the pedigrees to look for are: King Farouk, King of Siam, Eliasberg, Trompeter, Norweb, Garrett, Elrod, Reed, Pittman, and Bass. Further, pedigrees can help establish the authenticity of big-dollar coins.
An investor considering a major six- or seven-figure purchase will find great assurance from the evaluation of a coins trading history and important lineage.
Marquis Coins
This is the really exciting stuff. These are the coins that get most of the press. These are the most aggressive of the blue chips. This is where the big boys play. This sector is not for the average investor, and the returns historically havent been average either. These are the Picasso coins, the Rembrandts. In the rare coin market, this is where the big thrills exist.
James F. Byrnes wrote, Too many people are thinking of security instead of opportunity. They seem more afraid of life than death. To really live in the rare coin market, this is the sector to pursue. In fact, many of these coins were owned by the infamous King of Egypt, King Farouk (1933 St. Gaudens Gold Double Eagle, 1913 Liberty Nickel, and the 1804 Silver Dollar), and others by the King of Siam.
The blue chip coins do not wait for the timid investor. They are rare, they are sought after, and they trade quickly. Moreover, in an environment in which the market is doing well and values are climbing, the fever is greater for the real rarities. Do not assume the rest of the market will wait for a collector to make a decision on a truly rare coin. With coins of great rarity its a matter of availability. If the coin you need comes available, have the confidence in your strategy to make the move. Otherwise, you will in all likelihood have to pay more when and if the next opportunity for the same coin arises.
Billionaire Paul Singer touts gold as Goldman Sachs is forced to raise price forecasts
Posted onA day after a JP Morgan commodities expert declared the start of a new bull market in gold, a note from billionaire Paul Singer expressing the same sentiment has emerged. Meanwhile, golds resilience forced longtime bear Goldman Sachs to retool its price forecasts to the upside.
Were actually recommending to our clients to position here for a new and very long bull market for gold, and I think $1,400 is very much in the cards this year, JPMorgans Solita Marcelli told CNBC on Tuesday.
Closer to the beginning than the end: And adding to golds burgeoning bullish sentiment, Elliott Management chief Singer, a longtime gold bull, re-emphasized his position in an April 28 note to clients. It makes a great deal of sense to own gold. Other investors may be finally starting to agree, he said. Investors have increasingly started processing the fact that the worlds central bankers are completely focused on debasing their currencies.
If investors confidence in central bankers judgment continues to weaken, the effect on gold could be very powerful,he added. We believe the March quarters price action could represent something closer to the beginning of such a move than to the end.
Goldman ups targets by $100+: Though Singers love of gold is no surprise, the backtracking of Goldman Sachs is. The investment bank was forced to raise its price forecasts for the coming year, with its three-month target increasing by $100, from $1,100 to $1,200.
Its longer-term forecasts also rose. The firm lifted its six-month target by $130, to $1,180 from $1,050, and its 12-month prediction by $150, to $1,150 from $1,000.
The firm altered its price forecasts after slashing its outlook for further interest-rate increases from the Federal Reserve. Still, it hedged its more optimistic stance by emphasizing what it called the metals limited upside because of its views on the Fed, the dollar, and China.
Next president to see recession: Zero Hedge also noted that Goldman has halted its recommendation to short (or bet against) gold, which resulted in a loss for the investment bank. Though we forecast that gold prices will decline from spot over the next 3-12 months (with c.5%-9% downside the changes to our economists rates forecasts act to reduce the degree of downside to our modelled gold price profile and thus change the risk-reward of our previously implemented short gold trade recommendation (published February 15), which we close as a result at a c.4.5% loss, Goldman analysts wrote.
Theres a good chance that Goldman will have to do some more backtracking in the months to come. Why? Because were currently in the fourth-longest economic expansion in more than 150 years. And given how weak growth has been Barack Obama, for instance, will be the first U.S. president in history to never see a quarter of 3% or higher GDP the odds are significantly better than 50-50 that we will have a recession within the next three years, former Treasury Secretary Larry Summers has predicted. In fact, it would be a record if the next president didnt preside over a recession.
Thus, despite its hawkish talk, the Fed in kneejerk fashion could be forced to backtrack, like Goldman, on its planned rate-hike pace. After all, its counter-intuitive to raise interest rates during economic slowdowns. A handful of Wall Street firms think the Fed is done, or almost done raising rates, after making its first increase in December, noted MarketWatch. Thus, this would be the shortest Fed rate-hike cycle in history, and that eventuality jibes more closely with the gold-price projections of JPMorgan and Elliot Management than that of Goldman Sachs.