In September, I gave myself the gift of a vacation, and spent about two weeks without reading email, looking at television news or reading the newspapers. While this was mainly very relaxing, it had the added benefit of enabling me to return with a fresh and open mind when it came to analyzing recent developments.
My conclusion after this break is that the path our country is taking from a standpoint of monetary policy has not changed and likely will not change, regardless of the results of the presidential election. Should Obama win, increased federal spending and increased federal debt coupled with almost certain economic stagnation will require more money printing, which is inflationary. Should Romney win, the likely increase in economic activity will turn recessionary price deflation into price inflation, which, coupled with already strong monetary inflation will send inflation soaring. For even under a Romney administration, the debt will increase as will money printing. Like it or not, the Federal Government is heading toward a debt of $20 Trillion.
In other words, inflation is in our future.
The one big change while I was on vacation was QE3, or Quantitative Easing, where the Fed has committed to $40 Billion per month to buy mortgage securities. While this amounts to as much as half a Trillion dollars a year, the amount of money was perhaps not as significant as the fact that that Fed tied its new bailout not to inflation, but rather to employment.
The impact on precious metals was obvious and immediate: an increase of about five per cent in the prices of gold and silver. Few individuals are selling their precious metals. In fact, the vast majority of purchases I have made have come from people with a monetary need, or from more elderly individuals whose personal needs now make it fortuitous to sell. In contrast, more people are adding to their accumulations, indicating a continued upside to the metals. Expect this to continue.
Demand in rare coins also continues steady, with collectors actively looking for those tough to find key dates. Expect this to continue as more and more people begin to understand the implications of current economic policy and conditions. Furthermore, while many collectors are finding the coins they desire, many are not, indicating we may soon start to see shortages in supply.
While for collectors I strongly recommend the purchase now of better date and high grade type coins, key date silver dollars, and stalwart collectables like the Fugio Cent (that’s the one with the best motto ever put on a coin: “Mind Your Business.”) my strongest recommendation now is to buy $20 gold coins.
Here’s why: almost every $20 gold coin now has one of the lowest numismatic premiums compared to gold in history. That applies to all grades, from jewelry grade up to MS-64 for $20 Liberties, and MS-66’s for $20 St. Gaudens. Not only is the spread small when compared to the price of gold, it is also small when compared to other grades. For example, at this time, the price spread between MS-60 and MS-64 $20 Liberties is less than $500. That is one reason I so strongly recommend $20 Liberties in MS-64 – they give you a much enhanced upside potential with very little additional cost.
The same is true for better date MS-63 $20 Liberties and MS-66 $20 St. Gaudens, along with all rare date $20’s, especially from the Carson City and New Orleans mints.
Even lower grade $20 gold coins are so close to the price of gold, they represent a terrific way to get some numismatic potential with very little premium above the actual gold value – a possible boon to those who are mainly bullion buyers, but want to make a foray into the numismatic arena.
With $20 gold coins, it becomes very easy to adjust your gold bullion content and numismatic potential. The higher the grade, the more numismatic upside potential. Additionally, the higher the grade, the more value these coins should retain should gold prices move in the opposite direction. Some people select a variety of grades for added diversification.
We have ample supplies of $20 gold coins in all grades – at least for now. Call me if you have any questions.
Now is also a great time to consider trading massive low end accumulations not needed by your portfolio for their gold or silver content for these much harder to find coins.
On a personal note, the Rare Coin Report Newsletter, which normally comes out in September will come out sometime around the middle of October. Part of the reason for this delay was my vacation, but I was also waiting for some very exciting news, and it now appears I will be able to share that in the October Rare Coin Report, so look to your mail box.
Also, expect to see the “Rare Coins and the Economy” column published in the CNP blog on a monthly basis, as it appears that as time goes on, the economic picture will even more strongly affect the opportunities we expect will continue to materialize in the rare coins and precious metals market.
As always, if you are unsure of what move might be the best for you, whether you are interested in buying or selling, always feel free to call me. That being said, we are now strong buyers of all coins, so if has come time for you to sell, please call. I’ll make you an offer you won’t want to refuse.