Investors Worldwide Choose Gold as 4th Asset Class; Gold Hits $1800 per oz. on Wednesday

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In Wednesday’s video message, Michael Haynes, CEO at APMEX, discussed why foreign investors buy Gold in greater quantities than the U.S. investors and how the worldwide acceptance of Gold as the 4th asset class has established Gold as a global asset. Gold Prices reached record highs over the past few weeks as investors worldwide flock to Gold as a safe haven.

Historically, investors buy Gold and Silver to balance and diversify their portfolios during high inflation periods. With the value of the dollar continuing to spiral downward, many investors have chosen to invest in precious metals.

Michael R. Haynes is a 30-year veteran of the precious metal and rare coin markets. He has served as a board member, president, COO or CFO of nine different public and private companies engaged in the specialty retail, distribution, e-commerce and manufacturing businesses.

Balance your portfolio with the 4th asset class of Gold today.

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7.29.11 WEEKLY RECAP

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The eyes of the world are on Washington while Gold spot prices are at record-highs.  Investors all over the globe have a stake in the outcome of the debt ceiling negotiations.  With each passing hour, the nation moves closer to a crisis and anxiety builds.  Markets reflected that anxiety this week. Precious metal prices are up due to safe-haven buying strategies and stocks are down sharply.  In fact, the Dow Jones Industrial Average is set for its largest weekly decline in over a year, while Gold pushed to record high spot prices three times this week.

In Hong Kong earlier this week, Secretary of State Hillary Clinton spoke to Chinese investors. She spoke reassuringly that “political wrangling” is a part of democratic problem-solving. She explained that the U.S. is working towards resolving the disagreements and improving the country’s long-term fiscal outlook. She also framed the debt debate as a sort of bump in the road.

The partisan tactics being employed by U.S. political party leaders became clear on Wednesday when both President Obama and House Speaker John Boehner made televised addresses.  President Obama clearly showed that the two sides are no closer to an agreement that would allow the U.S. to raise the debt ceiling in order to avoid what most analysts describe as a devastating default. “For the first time in history, our country’s triple-A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet,” he said in remarks late Monday. Obama was quite critical of the Republicans’ unwillingness to compromise but he made it clear that he expects a compromise package on his desk this week.  

In his rebuttal, House Speaker John Boehner pointed the criticism back towards the President and the Democratic Party. He categorized the Democratic plan as “full of gimmicks.” There is still the expectation that an agreement will be reached, albeit a short-term one. Their concern is that the credit rating agencies may still downgrade the U.S. credit rating if they see no significant steps taken to reduce long-term debt.

Another concern is the Commerce Department data that reports any economic growth we were experiencing had actually started to wane late last year, not this year as a number of economists’ data implied. Previous reports had the economic growth at 1.9% during the second quarter, but in actuality it only grew 1.3%. According to Ryan Sweet, a senior economist at Moody’s Analytics, “The economy essentially came to a grinding halt in the first half of this year…We did get side-swiped by some temporary factors which are fading, but it raises some concerns about the sustainability of the recovery.”

WEEKLY SPOT PRICES

Gold:
Spot Gold prices opened this week at $1,600.60. The all-time record high was on Friday, July, 29th at $1,637.50, while the low for the week occurred on Monday, July 25th at $1,600.60. Gold ended the week up $27.40 at $1,628.00. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Silver:
Spot Silver prices opened this week at $40.16. Silver reached a high of $41.47 on Wednesday, July 27th, while this week’s low for Silver occurred on Friday, July 29th at $39.30. Silver ended the week down $0.21 at $39.95. The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum:
Spot Platinum prices opened this week at $1,799.00 and ended the week down $17.10 at $1,781.90. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium:
Spot Palladium prices opened this week at $807.90 and ended the week up $15.40 at $832.30. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

 

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½ oz Gold First Spouse Coins

In 2007, the U.S. Mint released the first four coins in a series of Gold First Spouse Coins. These coins are the government’s first  1/2  oz. 24-karat gold coins. They are also the first commemorative 1/2 oz. Gold coins. With a face value of $10, these .9999 fine Gold coins are minted and released annually in the order the First Ladies served in the White House. The First Spouse Coins are minted in Proof and Uncirculated condition. Each First Spouse Gold Coin will coincide with the release of the four annually circulating Presidential $1 Coins.

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What Does It Mean To Be “Bullish On Gold?”

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Recently, Michael Haynes, CEO of APMEX, appeared for an interview on The Hays Advantage from Bloomberg Radio.  Kathleen Hays, the show’s host, mentioned the fact that the price of Gold had increased to over $1,600 per ounce. She stated that she reviewed presentation Michael’s recent presentation titled “Asset Alchemy in the Uncertain and Volatile 21st Century.” Listen to the entire interview here. Kathleen got the conversation rolling by asking a pointed question:

KATHLEEN HAYS: “Michael, you’re bullish on Gold. Why?”

MICHAEL HAYNES: “Well, actually, it’s not a question of being bullish on Gold. It’s a question of being bullish on asset allocation that would include Gold.”

“Bullish” is a word that often arises in discussions related to investing, but what does it actually mean?  The term “bullish” relates to a type of financial market trend known as a “bull market.”  In a bull market, investors feel confident that the market is rising. They believe the share prices will increase for the foreseeable future. This is in contrast to a “bear” market, which is characterized by a decline in both market prices and investor confidence over a sustained period of time. 

The confidence a bull market inspires tends to lead investors to… well, invest in the hopes of benefiting from potential future price increases.  Bull markets generally exist for a country at a time when economic growth is high and unemployment is low.  Therefore, to be “bullish” about something in the financial world is to be optimistic about it, and to believe that investing in it is a sound decision that will have a positive outcome.

With that in mind, why is Michael Haynes bullish on including Gold as part of asset allocation?  What makes him confident that buying Gold as part of an investment strategy is a smart choice? He explained later in the interview:

MICHAEL HAYNES: “Of course no one can predict the future.  No one knows if cash is better, stocks are better or bonds are better; there’s seemingly a need now for a fourth asset class.  Historically that asset class has included gold, oil and real estate; all of which have different elements to them.  But Gold seems to be the asset that has been performing both in – historically – inflationary periods as well as in periods of economic stress and uncertainty, much as we’ve had for the decade of the 2000s.”

So there you have it.  Michael is bullish on Gold as an asset because the market for Gold has been and will likely continue to be a bull market.

By Craig C. Calvin, APMEX Account Manager

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Weekly Recap 7.22.11

All eyes were focused this week on the European debt crisis and the U.S. debt ceiling discussions.  While there was serious progress made on one of these issues, it’s certainly debatable whether any real progress was made on the other.

Following a day-long meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy on Wednesday, the European Union leaders approved a bailout plan for Greece.  Details of the European Union’s bailout of Greece have emerged, and the package is being seen as stronger than expected.  Fitch Ratings said it will declare Greece to be in “restricted default,” however this was an expected consequence, according to EU leaders.  The deal is expected to stave off any contagion to other countries in the euro zone.

In the U.S., every time progress appeared to be made, it stopped dead in its tracks.  A major deficit plan was agreed upon by the bipartisan “Gang of Six” in the Senate. This deal would reduce federal deficits and is seen as a major step forward in debt ceiling negotiations. President Obama had publicly backed the plan, but he has since backed off.  House Republicans voted this week in favor of a campaign to reinforce their budget views and eliminate the need for compromise. The slogan for this campaign is “Cut, Cap and Balance.” A bill the Republicans are promoting this week would condition any increase in the debt limit on immediate spending cuts, set caps on future outlays and require a congressional passage of a balanced-budget amendment to the Constitution. Obama has specifically said that he will veto this bill if it passes the Senate.

President Obama is now said to be working on a major deficit-reduction package that includes $3 trillion in cuts while not including immediate revenue increases.  This is a sticking point to Democrats, who are said to be upset with the plan.  Obama would have to convince his fellow Democrats that this is the right deal, and he will need to do it quickly; the U.S. is now a mere 11 days away from defaulting on its debts.

Credit rating agencies were in the headlines frequently this week.  On top of the situation in Greece, the agencies came out in force to warn of the consequences of a U.S. default.  Standard & Poor’s reiterated its position Thursday that if the U.S. government misses its scheduled debt payments, it could cut the U.S. credit rating as early as August. There is some tie-in to both raising the debt ceiling and balancing the budget that S&P needs to see to avoid that type of action. The trickle-down effect could be catastrophic to a number of companies, including Fannie Mae and Freddie Mac, plus the sovereign debt rating and the insurance industry. Senator McConnell’s “back-up plan” that had been discussed as a fall-back option has just been discredited by Moody’s as not doing enough to balance the budget and would still put the U.S. on a path for a negative credit outlook.

Gold hit a record high Monday, and has spent most of the week around the $1,600 mark.  Silver hit over $40 for the first time since May, and remains in that range.

Weekly Precious Metal Spot Prices

Gold:
Spot Gold prices opened this week at $1,591.10. The all-time record high was on Tuesday, July, 19th at $1,610.70, while the low for the week occurred on Wednesday, July 20th at $1,581.10. Gold ended the week up $9.50 at $1,600.60. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Silver:
Spot Silver prices opened this week at $39.04. Silver reached a high of $40.88 on Tuesday, July 19th,  while this week’s low for Silver occurred on Wednesday, July 20th at $38.22. Silver ended the week up $1.12 at $40.16. The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum:
Spot Platinum prices opened this week at $1,758.00 and ended the week up $41.00 at $1,799.00. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium:
Spot Palladium prices opened this week at $783.80 and ended the week up $24.10 at $807.90. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

America the Beautiful 2-Coin Set

America the Beautiful, Silver, Glacier, Gettysburg

This two-coin 2011 America the Beautiful  set contains the five ounce Gettysburg National Military Park coin and the five ounce Glacier National Park coin.

The America the Beautiful Silver bullion program marks a significant change for the U.S. Mint’s coin offerings with the introduction of the larger format of five Troy ounces of Silver bullion. The entire 56-coin collection will display the beauty and diversity of America’s National Parks and sites. The coins will be issued over the course of 12 years. Designs and inscriptions are duplicates of the currently circulating commemorative quarters.

The Gettysburg National Military Park coin shows the Soldiers National Monument, which stands in the center of the Soldiers National Cemetery. This monument was constructed to honor the soldiers who fell at the Battle of Gettysburg in July of 1863. The statue now stands guard over the 6,000 American soldiers laid to rest at Gettysburg.

The Glacier National Park coin depicts the majestic glacier-carved Mount Reynolds. The mountain goat in the foreground reminds us of the diverse wildlife fostered within Glacier National Park. Glacier National Park obtained federal protected status on Feb. 22, 1897 and consists of 1,000,000 acres.

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Forget 6,000 Years of History; Bernanke Says Gold Isn’t Money

Federal Reserve Chairman Ben Bernanke took to the stand in Congress on Wednesday to defend the Fed’s Quantitative Easing programs.  Rep. Ron Paul (R-TX) asked Bernanke point-blank whether Gold was money.  Bernanke responded with a simple, “No.”  For such a well-respected chairman to answer so flatly regarding Gold, one would imagine Gold prices had tanked.  Just the opposite occurred- Gold closed at a record high on Wednesday, over $1,580/oz.  So, maybe the question goes a little deeper.  What constitutes money?

Generally speaking, there are three main functions of money.  The first is as a medium of exchange.  Rep. Paul went on to explain to Bernanke that Gold has been used as a currency for some 6,000 years.  As economies developed throughout history, representative money such as the Gold standard gradually replaced commodity money.

The second function is as a unit of account.  Since the world went off the Gold standard in 1971, fiat currencies serve as the unit of account.  Central banks are permitted to print money as they see fit or as policymakers dictate.  They then use the paper money as a measurement of value for things like goods, services, and assets.

The third function of money is as a store of value.  According to the World Gold Council, “Gold has maintained its value in terms of real purchasing power … Despite price fluctuations, Gold has consistently reverted to its historic purchasing power parity with other commodities and intermediate products.”  In other words, Gold (historically) has protected wealth.  Central banks are seeing this.  In 2010, they became net buyers of Gold for the first time in over twenty years.  In the first half of 2011, they bought more than all of 2010.

Maybe Bernanke answered a question correctly.  Maybe he thought the question was something along the lines of, “Is Gold the same thing as the sheets of paper you and the Fed have decided to insert into the economy?”

By Ryan Schwimmer, APMEX Account Manager

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Gold As An Insurance Policy

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Are you intrigued about the reasons why investors are purchasing more Gold? A primary reason for this interest in Gold is its role as an insurance policy. Possibly because no one has ever defaulted on Gold, it is considered an insurance policy that will pay out when needed.  The following are examples of how Gold reinforces that belief and how it provides financial security and protection against uncertainty:

  • The fragile economic recovery we are experiencing in the U.S.
  • The high level of debt in our cities, states and federal government.
  • The fragile economic recovery in the European Union, Russia, Japan and many other parts of the world.
  • The sovereign debt crisis in Greece, Portugal and Ireland that threatens to spread into Italy and Spain and eventually the entire European Union.
  • The geopolitical tensions in the Middle East; India and Pakistan; North & South Korea and elsewhere
  • The volatile currency markets. Even Central Banks are becoming less reliant on paper money and trading it for gold.
  • The devaluation of the U.S. dollar.
  • Investors try to deal in financial markets which move at the speed of light, and where “flash crashes” occur and one year later can still not be explained.
  • Inflation in the U.S. and other countries where governments choose to print more money to cover their debts.
  • Black Swan Events. The recent earthquake, tsunami and nuclear reactor problems devastated Japan. Unexpected events with severe negative consequences cannot be predicted. We know they will come but we cannot anticipate the time and locations.

Gold holds value in times of uncertainty where your other investments do not. There is an old saying, “Put 5-10% of your money in Gold and 90-95% into the three primary asset classes; then every night go to bed and hope Gold prices go down because that means everything else just went up.” 

Geoff Varner, APMEX Account Manager

News: Major Institution Forecasts $5000 Per Ounce Gold

An article published by John Melloy, Executive Director of Fast Money, references a report by Standard Chartered that forecasts Gold prices could soar as high as $5000 due to pressure on the supply side. Most bullish analysts are predicting that Gold prices will increase based solely on mounting demand for Gold. London-based Standard Charter is one of the first firms to focus on supply issues. They analyzed 345 Gold mines and 30 copper/base metal Gold mines around the world and they estimate Gold production will increase 3.6% over the next five years. Limited supply may prove a difficult hurdle to overcome in keeping up with demand at a time when central banks have turned from net sellers to net buyers (in record amounts) of Gold.

China’s increasing activity in the investment of Gold is an alarming factor. “Currently, only 1.8% of China’s foreign exchange reserves are in Gold,” wrote Chen in the Standard team’s 68-page report. “If the country were to bring this proportion in line with the global average of 11 percent, it would invest in 6,000 more tonnes of Gold, equivalent to more than 2 years of Gold production.”

The United States has 73.2% of its foreign exchange reserves in Gold, Germany has 70.3%, France has 67.2%, and the European Central Bank has 25.2%. China and the other emerging countries that comprise the BRIC group, Brazil, Russia, and India, have a long way to go to catch up to the developed nations of the West. For a list of the top 17 largest Gold reserves click here.   By Peter LaTona, Vice President of Sales at APMEX