The past few years have been interesting and challenging times for the coin and precious metals industry. The U.S. dollar price of gold has been in retreat since 2011, but we should focus on the big picture. Let’s review why gold, silver and rare coins still resonate with my clients.
For many, it acts as a hedge against future economic disarray. For others, purchases are made as an investment or speculation for profit. Many of my clients intend for their purchases to become part of their family estate. For them, rare coins and historic collectibles become sentimental heirlooms. For most everyone, gold and silver bullion, and rare coins act as an insurance policy, in case other assets fall. I am a firm believer in hard assets/money and am passionate about it.
- Some investors have been expecting gold to “take off.” However, government and financial institutions seem to have a vested interest in keeping the debt based currency where it is. They legislate and lobby to keep the markets at a certain level. Their perspective is that it benefits the majority of society. Some believe that this managing of the market pricing is the “new normal” and will be with us for long time. Others call it “rigging.”
- I am not in the “gold is finished” camp. However, it is apparent to me that political financial power is currently the driving force behind what used to be free, marketplace pricing. This recent influence is attempting to support the stock, bond, & real estate markets.
- America has historically been the world’s innovation and technology exporter. With our Silicon Valley mindset, it is easy to turn a blind eye to what is actually going on. Urban real estate has soared, big businesses are prospering, many stocks have made new highs, and bond prices have risen with falling interest rates. Technology has been profitable directly and indirectly for most of us, but that will not solve the monetary situation and cultural disintegration that the industry has created. This recent technology party appears to be benefiting corporate and political entities of the United States for now, but at what cost? Perhaps at the long-term expense of the overall economy for future generations. Is it a ticking time bomb?
- No one knows when a turning point will begin. Perhaps it be in 2016, or maybe it is still years away. None of us know if it will turn quietly, with large assets moving in new and different directions, or if it will be sudden and volatile – the result of critical mass, as in 2008. What I see is pessimism amongst precious metals owners and non-owners, along with giddiness by owners of financial paper assets. This formula has usually preceded a major turn in the market.
- Something new and unusual is happening. Retail speculators are taking net short paper gold positions on the exchanges. Money professionals and bankers are taking the other side of that trade. It might not be long before the same people that were caught with long gold and silver positions at the 2012 highs will be caught short as the trend changes.
- The same retail public looks now to be long in the U.S. dollar versus major foreign currencies. One could argue that the dollar is the best of the debt currencies and may be the last to deteriorate, but I believe it is a real gamble to be betting on the long-term growth of the dollar at this time (as opposed to an inflationary time) in the U.S. economy.
- I am confident that we will live to see a resolution of the debt house of cards, and that we will see new highs in gold. The US government debt, still expanding despite truly low interest rates, should eventually result in resold, inflated away, or reneged upon debt. Almost zero to negative real interest rates and an impending monetary crisis have already crushed the market for bonds. The Federal Reserve might be the only real buyer remaining. The debt load of the typical American household prevents any significant interest rate hike. Such a hike could start an intense economic breakdown.
My recommendations for this new year are:
- Maintain economic discipline.
- Continue to grow your gold and silver holdings.
- Live just a bit under your means.
- Pursue career and personal fulfillment.
- Live life to its fullest rather than obsess over the daily price of gold.
- Avoid speculation.
- Educate your children. Teach them to save in real assets – gold, silver & real estate!
I appreciate your business and friendship, both past and present, and look to 2016 to be a year of health, happiness and prosperity for all.