If looks and feeling have anything to do with it, rare gold coins would beat stocks every time. They are charming, beautiful, surround them beautifully and, because they have been around for some time, represent an intriguing part of history.
But there are other reasons, timely reasons, to add more gold coins than stocks to your portfolio today … although such a claim to traditional stock investors can come dangerously close to blasphemy. However, ignore the available clues at your own peril. For example…
Trace # 1: Call options indicate higher gold. This analysis was given by Prieur du Plessis and Adrian Douglas. In short, these two men noticed that the gold call options contracts in December 2007 were really significant, currently numbering around 122,000. Moreover, it outnumbered number 2 by 1.
Based on this “positive jump in gold,” both Du Plessis and Douglas believe gold is on the verge of a big price jump. Douglas is not the first time he has believed this way. In November 2005, he predicted a jump in the price of gold from the level of $ 460, based on a similar accumulation of gold call options. Two months later, the gold was $ 100 higher. Next …
Trace no. 2: Demand for gold continues to go higher; The gold supply continues to go lower. The situation here has only gotten worse. According to a recent report by the World Gold Council, global demand for gold is up 30% from a year ago, while supply continues south. The world’s largest gold producer, South Africa, has reached an 84-year low, despite high gold prices. And the world’s largest gold producers have witnessed a reduction in production of almost 20% since 2001.
Needless to say, higher demand and lower supply lead to higher prices.
Trace # 3: The “triple threat” from the housing dilemma. Harvard economist Martin Feldstein has warned that we are facing a triple threat due to falling housing. According to Bloomberg’s September 2 report on Jackson Hole’s speech, “Feldstein highlighted the ‘triple threat’ of housing: a ‘sudden drop’ in house and construction prices; higher borrowing costs and a ‘freeze’ in credit markets stemming from primary mortgage losses.” and less equity loans and refinanced mortgages, leading to less consumer spending.
The overall effect will have, needless to say, frightening consequences. “The economy could suffer a very serious downturn,” he added. More reasons to diversify into great stuff.
Trace # 4: America is going the way of the Roman Empire, Comptroller General David Walker. Yikes. You know you’re in trouble when a guy in charge of government finds “striking similarities” between the U.S. and the Roman Empire. The end of the Roman Empire. Among his comments, the U.S. suffers from “declining moral values and political courtesy at home, excessive self-confidence and excessive military in foreign countries, and fiscal irresponsibility of the central government.” He is so serious that he even refused to sign government “books”. Again.
How does this relate to gold and stocks? When senior members of our own government immediately come out and warn us of the coming “economic tsunami,” it is time to find refuge in gold.
Trace no. 5: Inflation, inflation and higher inflation. Despite all the government statistics in the world, we all know that inflation is ongoing and ongoing. We know that every time we fill the tanks. And somewhere in the back of our minds, we know that rising energy prices must be bad for the economy, that it affects anyone and everyone who sells something. Not surprisingly, this intuition is actually rooted. According to the Federal Reserve Bank of Dallas, “nine out of ten post-World War II recessions were preceded by soaring oil prices.”
When the Fed rushes to delay the recession by lowering rates, we know somewhere in our psyche that the dollar will only weaken further, perhaps dangerously, from its current historical weakness with each of these cuts. The conclusion of all these changes is inflation. We will need more dollars to buy what we used to buy.
No doubt you have heard the saying, “In 1911, for one ounce of gold one could buy a very nice suit. Today it can still be done.” That means saying that gold follows inflation. He did so in 1911. And today, almost a hundred years later. Which is why gold was chosen as a weapon to fight inflation.
But why just stay on the defensive with Gold?
In 1995, Penn State economist Dr. Raymond Lombra, did a study that he presented to Congress. This 40-page report “proved” that rare coins, including rare gold coins, were among the best-performing assets of the last 25 years (and that included stocks). He also reported that “rare coins dominate gold bars as diversification assets.” These “numismatic coins” do this by reducing volatility, while providing improved yields.
A recent Lombre survey from 2003 revealed almost the same situation, from 1979 to 2003 rare coins, such as rare gold, earned the highest average annual rate of return and beat gold bars as investment and inflation protection.
Whether you want to take a more aggressive position with rare gold coins instead of stocks or you simply want a proven financial haven, the time may be right for gold. And that may be an understatement.