Rare Coin Investor

http://www.businessinsider.com/we-might-be-in-the-early-stages-of-a-gold-super-spike-2016-5?utm_source=feedburner&utm_medium=referral

Gold is a chameleon. It changes in response to the environment.

At times, gold behaves like a commodity. The gold price tracks the ups and downs of commodity indices.

At other times, gold is viewed as a safe haven investment. It competes with stocks and bonds for investor attention.

And on occasion, gold assumes its role as the most stable long-term form of money the world has ever known.

A real chameleon changes color based on the background on which it rests. When sitting on a dark green leaf, the chameleon appears dark green to hide from predators. When the chameleon hops from the leaf to a tree trunk, it will change from green to brown to maintain its defenses.

Gold also changes its nature depending on the background.

Golden Chameleon

Right now, gold is behaving more like money than a commodity or investment. It is competing with central bank fiat money for asset allocations by global investors. That’s a big deal because it shows that citizens around the world are starting to lose confidence in other forms of money, such as dollars, yuan, yen, euros, and sterling.

This is great news for those with price exposure to gold. The price of gold in many currencies is going up as confidence in those other currencies goes down. Confidence in currencies is dropping because investors are losing confidence in the central banks that print them.

For the first time since 2008, it looks like central banks are losing control of the global financial system. Gold does not have a central bank. Gold always inspires confidence because it is scarce, tested by time, and has no credit risk.

Gold’s role as money is difficult for investors to grasp. One criticism of gold is that is has no yield. Gold has no yield because money has no yield. In order to get yield, you have to take risk.

Bank deposits, and so-called money market funds, have yield, but they are not money. A bank deposit is subject to default by the bank, as we saw recently in Greece and Cyprus. A money market fund is subject to collapse of the fund itself, as we saw in 2008.

Gold does not have these risks.

Lost confidence in fiat money starts slowly then builds rapidly to a crescendo. The end result is panic buying of gold and a price super spike.

We saw this behavior in the late 1970s. Gold moved from $35 per ounce in August 1971 to $800 per ounce in January 1980.

That’s a 2,200% gain in less than nine years.

A “Super Spike” in Gold

We may be looking at the early stages of a similar super spike that could take gold to $10,000 per ounce or higher. When that happens, there will be one important difference between the new super spike and what happened in 1980.

Back then, you could buy gold at $100, $200, or $500 per ounce and enjoy the ride. In the new super spike, you may not be able to get any gold at all. You’ll be watching the price go up on TV but unable to buy any for yourself.

Gold will be in such short supply that only the central banks, giant hedge funds, and billionaires will be able to get their hands on any. The mint and your local dealer will be sold out. That physical scarcity will make the price super spike even more extreme than in 1980.

The time to buy gold is now, before the price spikes and before supplies dry up.

What signs do we see that gold is now behaving like money?

For one thing, gold price action has diverged from the price action of other commodities. This divergence first appeared in late 2014 but has become more pronounced in recent months.

Gold observers know that gold measured in dollars is down significantly from its all-time high in 2011. COMEX gold peaked at $1,876 per ounce on Sept. 2, 2011. And recently traded as low as $1,056 per ounce on Nov. 27, 2015. That’s a 44% decline in just over four years. Yet in the same time period, broad-based commodities indices fell even more. One major commodities index fell 53%.

The contrast between the behavior of gold and commodities is even more extreme when we narrow the time period. From June 20, 2014 to Jan. 15, 2016, the broad-based commodity index fell 63%, while gold fell only 17%. The recent collapse in commodity prices was almost four times greater than the decline in gold prices.

From mid-January to mid-February 2016, gold rallied 14% while commodities still languished near five-year lows.

The Monetary System Is Going Wobbly

Right now, investors around the world are losing confidence in Chinese yuan, Saudi rials, South African rand, Russian rubles, and a long list of other emerging market currencies. Investor preferences are shifting toward gold. This accounts for gold’s outperformance of the rest of the commodity complex when measured in dollars.

What is interesting is that when the price of gold is measured not in dollars but in rubles, yuan, or rials, the percentage price increase in gold increases as currencies decline against the dollar.

When you understand that gold is money and competes with other forms of money in a jumble of cross rates with no anchor, you’ll know why the monetary system is going wobbly.

It’s important to take off your dollar blinders to see that the dollar is just one form of money. And not necessarily the best for all investors in all circumstances. Gold is a strong competitor in the horse race among various forms of money.

Normally, I recommend a 10% allocation of investable assets to physical gold for your permanent portfolio. But when short-term trading opportunities arise, certain gold trades, such as exchange traded funds (ETFs), are a great way to get dollar price exposure to gold and book 100% or more profits.

This chameleon has changed color recently. And the new color is gold.

http://www.coinweek.com/dealers-companies/ngc-dealers-companies/coin-collecting/

Being in a rush when buying or selling coins will lead to poor results.

http://money.cnn.com/2016/02/10/investing/china-gold/

China’s government doesn’t share exact figures, but the vast majority of gold heading into mainland China passes through Hong Kong, which does make its records public.

Exactly what China is doing with all that gold remains somewhat of a mystery. The increasingly wealthy Chinese are buying, but that doesn’t explain all the jump in demand.

The government says its gold reserves have grown only a little in recent years. Experts question whether China is telling the whole truth.

“China has a lot more gold than they declare,” says John LaForge, head of Wells Fargo’s commodities team.

China’s big gold binge

China now consumes about 40% of the gold that comes out of the ground every year, according to LaForge.

The Hong Kong data alone show that China went from importing just over 100 tons of gold in 2010 to just under 1,000 tons last year.

In addition to all the imports, China is also the world’s largest gold miner, according to the World Gold Council. So it’s both buying and unearthing a lot of gold each year.

Who’s buying the gold?

Much of the gold going into China ends up in the hands of wealthy Chinese.

Citizens in one Chinese city actually attempted to construct a huge gold statue of Mao Zedong, the father of modern China, but the government tore it down in January.

From 1950 until 2004, private citizens in China were forbidden from owning gold. Now there’s huge demand for the shiny metal, according to an extensive report by the World Gold Council.

But the council concluded that gold imports “exceeded by some margin” the demand from people who want new rings and necklaces. The other big buyer is the Chinese government.

China was notoriously secretive about its government gold reserves. It reported 1,054 tons of gold in the spring of 2009.

It didn’t disclose its holdings again until 2015. Bloomberg Intelligence estimated that China’s government likely had over 3,500 tons of gold by then.

But the Chinese only reported about 1,700 tons.

“Next to oil, gold is probably the most important commodity in the world,” says LaForge. The Chinese “don’t want you to know what they’re doing with gold,” he added.

China now reports its gold holdings monthly because it was encouraged to do so by the International Monetary Fund.

In January, China said it had 1,778 tons in its reserves, a jump from December.

The People’s Bank of China has been taking extraordinary efforts to try to stabilize the value of the yuan. Buying gold helps increase confidence in the yuan’s worth. It’s also a way for China to diversify its reserves away from U.S. dollars.

Still, China lags the U.S. in gold reserves. The U.S. has by far the largest government reserve of gold in the world with over 8,000 tons.

This Rare Coin Just Sold for $2 Million

Fortune.com

Talk about a return on investment.

If you were lucky enough to have gotten your hands on the rare 1894-S struck by the San Francisco mint during that year, you could have sold it today for a cool, 20 million percent return.

That’s right, at an auction run by Heritage Auctions in Tampa, Florida, the rare coin sold for $2 million, the company tells Fortune. The dime is prized by coin collectors for its rarity: there were only 24 ever minted, and only 9 are thought to still be in existence today.

David Hall, co-founder of Professional Coin Grading Service of Santa Ana, California, told ABC News, “A couple of coins have been known among the rarest of the rare for 100 years and this is one of those numismatic icons.”

Both the buyer and seller of the coin wish to remain anonymous, but a statement from Heritage refers to the buyer, who placed his bid online, as “an experienced collector.”