"Previously, American Eagle coins
were going for 5 percent over the
market price of gold on the
Commodity Exchange (Comex).
Now the premium can be anywhere
from 10 percent to 15 percent, even
though the US Mint raised its price
to dealers by just 3 percent for an
ounce coin.
In one sense, the attraction for gold
coins isn't surprising. Since ancient
times, gold has been considered the
safest investment to hold in times
of uncertainty.
With fears of future inflation rising
and concern about the value of paper
currency and government-debt increasing
with each new recovery plan announced
in Washington and in foreign capitals, the
desire to hold gold grows.
That part makes perfect sense. But
there's another more puzzling aspect
to the recent gold rush.
Even as the demand for gold coins
such as the Canadian Maple Leaf or
the Krugerrand of South Africa has
grown, the market price of the
precious metal itself is off its highs.
In early October, the price of an
ounce of gold on the spot market
was about $930 an ounce. With
the commodities bubble bursting
in recent months, gold declined
into the upper $600 range. Spot
gold closed yesterday at $739.90,
down $2.60.
Bill Murphy, chairman of the Gold
Anti-Trust Action Committee, says
the price of spot gold is even more
perplexing given the demand for
coins and the fact that central banks
in Europe have stopped selling
gold into the open market.
"Gold should be moving up,"
Murphy says. "How could there
be such a dichotomy between
the historic high premium for coins
all over the world and the low
Comex price?"
were going for 5 percent over the
market price of gold on the
Commodity Exchange (Comex).
Now the premium can be anywhere
from 10 percent to 15 percent, even
though the US Mint raised its price
to dealers by just 3 percent for an
ounce coin.
In one sense, the attraction for gold
coins isn't surprising. Since ancient
times, gold has been considered the
safest investment to hold in times
of uncertainty.
With fears of future inflation rising
and concern about the value of paper
currency and government-debt increasing
with each new recovery plan announced
in Washington and in foreign capitals, the
desire to hold gold grows.
That part makes perfect sense. But
there's another more puzzling aspect
to the recent gold rush.
Even as the demand for gold coins
such as the Canadian Maple Leaf or
the Krugerrand of South Africa has
grown, the market price of the
precious metal itself is off its highs.
In early October, the price of an
ounce of gold on the spot market
was about $930 an ounce. With
the commodities bubble bursting
in recent months, gold declined
into the upper $600 range. Spot
gold closed yesterday at $739.90,
down $2.60.
Bill Murphy, chairman of the Gold
Anti-Trust Action Committee, says
the price of spot gold is even more
perplexing given the demand for
coins and the fact that central banks
in Europe have stopped selling
gold into the open market.
"Gold should be moving up,"
Murphy says. "How could there
be such a dichotomy between
the historic high premium for coins
all over the world and the low
Comex price?"
Leave it to me, a simple handyman to explain why we have a dichotomy between a run on gold coins and the low price of gold. The largest problem facing our economy right now is the possibility of Hedge Funds imploding. Many of the Hedge Funds have taken a large position in gold over the past few years. Now with the stock market on the decline many investors will want out of the Hedge Funds. Very simple, the Hedge Fund managers are flooding the market with gold bullion. That drives the price down even though gold coins are in high demand.
Man I am so smart, I will probably be flooded with job offers after giving such an insightful concise explanation of the gold market. No applause, just throw job offers and money!
Man I am so smart, I will probably be flooded with job offers after giving such an insightful concise explanation of the gold market. No applause, just throw job offers and money!
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