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  

Market Recap 5/27/11

The European Union’s debilitating plague of a debt crisis continues to dominate news headlines this week. Italy was downgraded from an A+ to an A-, and while seemingly insignificant, this goes to show even further decay of Europe’s financial situation. As well as the fact that analysts at UniCredit downgraded the insurance sector and the basic-resources sector in Europe to neutral from overweight today, and the industrial goods and services to underweight from neutral. Last weekend, local elections in Spain rejected any move towards austerity measures. This week, the Greek public did the same. This week’s election result in upstate New York are an indication the U.S. may not be ready to experience the pain of cut-backs either.

China is rapidly closing in on India, as the world’s largest consumer of Gold. Although China is one of the leading producers of Gold, they cannot produce near enough to satisfy their appetite. Gold production should reach 400 tonnes by 2014 with a gain of 19%, but still the demand will be for 700 tonnes. In the first quarter of 2011, China bought more Gold than the combined totals of the developed Western Nations. Demand in France, Germany and Switzerland increased triple-digits, yet China outpaced them all put together. Despite this strong rise in per capita consumption, an analyst from Standard Chartered Bank said that there is still much room to grow, “In terms of Gold consumption per capita, there is no doubt that [China and India] have a lot of catch-up potential and the impact on Gold prices could be dramatic.”

The financial instability in the euro zone gave some stabilizing strength to the U.S. Dollar this week but the end result did little to curb people’s appetite for Gold. Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, says, “People see the whipsaw in the currencies market and they want to buy Gold and call it a day.” Most analysts would attribute this to Gold being historically less volatile. Gold is viewed as a means to protect wealth through portfolio diversification and asset allocation.

The U.S. GNP report was released this week and the U.S. economy grew less than expected in the 1st quarter…up only 1.8%. The weekly jobs report again indicated a surprising move upward.

As the week ends, international markets are focused on Greece while our thoughts are on the demise of the QE2 program. The U.S. Dollar Index was down almost 0.9% at mid-day today. Some analysts question if we will be heading toward a double dip recession. “…[W]e continue to expect a disappointing bounce back to just 3% growth in the second half of the year. The slow-down feels very similar to last year’s soft patch,” according to economist Ethan Harris. Will the fragile U.S. economy be able to make a significant move upward in the next 3-5 years?

GOLD PRICES:
Spot Gold prices opened this week at $1,515.10. The high during the week was on Friday, May 27th, at $1,539.50, while the low for the week occurred on Monday, May 23rd, at $1,503.70. Gold ended the week up $23.00 at $1,538.10. 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 PRICES:
Spot Silver prices opened this week at $35.17. Silver reached a high of $38.85 on Thursday, May 26th, while this week’s low for Silver occurred on Monday, May 23rd, at $34.34. Silver ended the week up up $2.95 at $38.12. 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 PRICES:
Spot Platinum prices opened this week at $1,774.90 and ended the week up $31.20 at $1,806.10. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

PALLADIUM PRICES:
Spot Palladium prices opened this week at $739.60 and ended the week up $24.90 at $764.50. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

APMEX Product of the Week: 40% Silver Coin Bags

Today, a popular and convenient way of investing in precious metals is purchasing bags of U.S. Silver coins containing 40% Silver. As the price of Silver began to increase in the 1960s, the U.S. Government began seeking a more cost-effective alternative to the minting of 90% Silver content coins. In honor of the assassinated President Kennedy, the U.S. Mint began minting half-dollars depicting Kennedy that were 40% Silver instead of 90%. The Kennedy half-dollars consisted of an inner layer containing 79% copper and 21% Silver. This inner layer was clad by an outer layer of 20% copper and 80% Silver. Thus, rather than containing 90% Silver, the Kennedy halves contained a total of 40% Silver and 60% copper.

These 40% Silver Kennedy half-dollars were the last regularly-circulated coins from the U.S. Mint that still contained Silver. Extremely popular among Americans interested in collecting a memento of President Kennedy, the coins quickly disappeared from circulation after their release. Even after the U.S. Mint increased the production of the coins, the Kennedy half-dollar still remained more of a collector’s item than a widely-circulated coin. While the Kennedy halves are still available from the U.S. Mint, the coins continue to have a limited circulation and primarily meet the demands of collectors.

For investors, $1,000 and $500 face value bags of 40% Silver Kennedy halves minted between 1965 and 1969 are convenient and easy ways to own Silver. Not only are 40% Silver coins legal tender that will never lose their face value, but they are also Silver coins that do not have the high premiums associated with one-ounce Silver bullion coins, such as the Silver American Eagle coins. Unlike many other methods of investing in precious metals, buying 40% Silver bags is extremely versatile. Investors who buy Silver bags can trade the bags in units or sell and trade the coins individually.

If you are looking to purchase Silver in the most cost-efficient way, the 40% Silver coins from APMEX are a great option. APMEX makes it easy to buy Silver by offering competitive Silver prices on all Silver products.

Market Recap 4/29/11

Gold and Silver started the week on the upside and remained upbeat all week. On Monday, Silver nearly broke the $50 barrier before backing off profit-taking. It turned out to be preparation for another move upwards. On Monday the IMF (International Monetary Fund) dropped bombshell news. The Age of America will end and then China will take over as the world’s largest economy in 2016. If you forgot your calculator, that is less than five years away.

The University of Texas made an extraordinary investment decision on April 15th. Not only did they move 5% of their assets into gold, they bought physical Gold instead of an ETF. This second-largest academic endowment in the U.S. decided they needed insurance against inflation as a result of current fiscal and monetary policies. “The role Gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus,” Bruce Zimmerman, CEO of The University of Texas Investment Management Company told CNBC television. Mr. Zimmerman also described Gold as an anti-currency since it is in limited supply. He described, “You can’t turn on the printing presses and make more Gold.”  Gold will not only protect you against inflation and currency risk but market failure as well. This story created big news and was commentated on for three to four days.

The buzz began on Monday as the investment world awaited Wednesday’s Federal Reserve Board announcement. Federal Chairman Bernanke was the first Federal Chairman to ever hold a press conference which immediately followed the announcement on interest rates. The precious metals market was unusually jittery preceding the event.

During the Fed announcement, Gold and Silver began to go up. Platinum and Palladium, which had declined on Monday and Tuesday, also began to rise. Once Mr. Bernanke’s press conference concluded, they rose more and continued this path through Friday.

The Fed is continuing down the same path. Mr. Bernanke acknowledges there were inflationary pressures in the first quarter, but the Fed feels they are transitory. He acknowledges the economic growth was less than expected in the first quarter, but this is also transitory. Gold and Silver went up as a bet against their wisdom and the stock market climbed on the news of more easy money. The U.S. dollar began its descent down to 3-year lows.

On Friday, Gold soared to all-time record highs. Silver was up marginally, while Platinum and Palladium both showed significant gains. The decline of the U.S. dollar has begun to signal more Central Banks to exchange their U.S. dollars for Gold.

Gold:
Spot Gold prices opened this week at $1,513.50. The high during the week was on Friday, April 29th, at $1,558.00, while the low for the week occurred on Tuesday, April 26th, at $1,492.00. Gold ended the week up $53.80 at $1,567.30. 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 $46.86. Silver reached a high of $49.82 on Monday, April 25th, while this week’s low for Silver occurred on Tuesday, April 26th, at $44.61. Silver ended the week up $1.18 at $48.04. 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 $1,816.60 and ended the week up $62.40 at $1,879.00. 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 $771.80 and ended the week up $24.80 at $796.60. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

Featured Bullion Product:

Each week, APMEX will review a different bullion product for the benefit of our readers. This week, we will review the 2011 Gettysburg & Glacier Silver Two Coin America The Beautiful Set.

Minted in the same design as the popular America The Beautiful quarter series, these extremely popular “large format” five ounce .999 fine Silver bullion coins are the first two America The Beautiful coins to be released in 2011. One side features a prominent national park design and the opposite side features founding father George Washington. The parks featured in this set are The Gettysburg National Military Park and The Glacier National Park.

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 February 22, 1897 and consists of 1,000,000 acres.

The Gettysburg & Glacier Silver Two Coin America The Beautiful Set will only be sold as a set and will not be available individually. APMEX makes it easy to buy Silver by offering competitive Silver prices on all Silver products and a satisfaction guarantee.

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Market recap 4/15/11

This week was one of significant gains for both Gold and Silver prices. However, on Monday it was only Silver going up as Gold retreated on the news that a budget deal had been struck and that Libyan President Gaddafi was going to accept a peace plan brokered by the African Union. Of course, President Gaddafi made it clear he would not step down, which killed this proposal by the next day.

On Tuesday, Japan raised its nuclear crisis to the highest possible level, which is level seven. This puts this radioactive disaster on par with what occurred in Chernobyl back in 1986. The Japanese government, already under scrutiny for what appears to be a campaign of miscommunication tried to make the world feel better by letting us know, that there has been no real change, it has been level 7 the whole time. The government further states that although there is radioactive contamination in the air, water, soil, fish and vegetables, there are no immediate health risks. Comforting indeed!

Wednesday, Gold and Silver began to drift up as President Obama came out with his budget-cutting plan that chops $4 trillion off in the next 12 years. Apparently, many investors felt the need for a safe haven after seeing the details (or lack thereof). An interesting article written by Julian Phillips gave his view on why Silver has been rising faster than Gold. In a nutshell, Gold has been seen as an investment metal by high net worth individuals, central banks and institutions for a very long time. Silver did not take on this aspect until 2009. As Silver becomes the poor man’s Gold and as Silver gets the attention of high net worth individuals and institutions, it is starting to catch up in appeal.

Thursday’s jobs report was an unexpected negative surprise. New jobless claims rose last week rising once again above the 400,000 level. Economist polled by Reuters projected claims to fall to 380,000. The four week moving average, which is considered the best measurement, went up 5,500 to 395,750. Inflation fears grow as US core prices rose faster than projected in March, and the increase from one year ago was the largest since August of 2009. By the end of the day, Gold advanced more than 1% as it nears record highs. Fear of inflation, a weakening US dollar and more problems in Europe continue to drive investors to Gold (and perhaps Silver, which established a31-year high today.)

Friday’s news was that in the US, consumer prices rose 0.5% in March, which is 6% annualized. Also, a separate report shows that real average hourly earnings of US workers fell by .6% in March, and have declined 1.0% in the past 12 months. On the European front, Moody’s has again cut Ireland’s debt rating, which puts it on the verge of becoming junk status. Moody’s is keeping their view of this situation negative, thus pushing the Euro lower and putting added pressure on the Euro Zone’s weaker countries.

Gold:
Spot Gold prices opened this week at $1,476.40. The high during the week was on Friday, April 15th, at $1,489.80, while the low for the week occurred on Tuesday, April 12th, at $1,445.00. Gold ended the week up $11.70 at $1,488.10. 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 $41.00. Silver reached a high of $43.12 on Friday, April 15th, while this week’s low for Silver occurred on Tuesday, April 12th, at $39.71. Silver ended the week up $2.12 at $43.12. 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 $1,816.50 and ended the week down $22.50 at $1,794.00. 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 $769.50 and ended the week up $1.50 at $771.00. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

Featured Bullion Product:
Each week, APMEX will review a different bullion product for the benefit of our readers. This week, we will review the 2011 1 oz. Platinum Australian Platypus.

On March 1, 2011, the Perth Mint in Australia unveiled a new Platinum investment coin: the Australian Platinum Platypus coin. The Australian Platinum Platypus coin is the latest addition to the Perth Mint’s Australian Bullion Coin Program. Until the release of the Platinum Platypus coin, the Perth Mint had not minted a Platinum investment coin since the Australian Platinum Koala coin. With the discontinuation of the Platinum Koala in 2000, the Platypus coin will pick up where the Koala left off in the Perth Mint’s series of investment coins.

Legal Australian tender under the Australian Currency Act of 1965, the Australian Platinum Platypus is struck from one ounce of 99.95% pure Platinum and has a face value of 100 Australian Dollars. For 2011, the Platinum Platypus coins have a limited mintage of 30,000 and will continue to have the same limited mintage for future years of issue.

Released by the Perth Mint, a world leader in the production of precious metals products, the Platinum Platypus coin features a captivating design. The obverse of the Australian Platinum Platypus coin depicts an effigy of Queen Elizabeth II designed by Ian Rank-Broadley. Additionally, the reverse features one of the most unique creatures inhabiting the Australian Continent: the Platypus. Showcasing this interesting member of the animal kingdom, the Platinum Platypus coin celebrates the wonder of Australian wildlife. Illustrated in its underwater home, this semi-aquatic mammal comes to life on the coin. Created by Perth Mint designer Natasha Muhl, the image of the Platypus gives the newly-released Platinum coin an appeal that is sure to attract collectors and investors all over the world.

The Australian Platinum Platypus coins are a great way to acquire and invest in Platinum. To add these beautiful coins to your coin collection or investment portfolio, shop APMEX’s selection of Australian Platinum Platypus coins. APMEX makes it easy to buy Platinum by offering competitive Platinum prices on all Platinum coins.

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