April 2014, Week 2 Edition

Gold recovered to $1300 last Friday, capping its first weekly increase in three weeks. The probable cause was a weaker-than-expected monthly jobs report, indicating that the Federal Reserve would likely keep printing money to fuel the economy. At the same time, stocks fell sharply. Then, on Tuesday, April 8, gold opened strongly, touching $1315, due to two major factors we have highlighted here recently: (1) continued tension in Ukraine, as Vladimir Putin is obviously not finished taking parts of Eastern Ukraine; and (2) a continued decline in the U.S. dollar as the Federal Reserve keeps expanding money supply and giving every indication of more easing to come. This pushes investors to the competing Japanese yen or euro (or gold) vs. the weakening U.S. dollar. (A falling dollar boosts the price of gold in dollar terms.)

Nebraska Is Now "Coin Tax Freedom" State #31

Last week, on April 2, Nebraska became the 31st state to pass some form of a sales tax exemption on coins and other precious metals investments. Nebraska Governor Dave Heineman signed LB 867 into law last week, protecting Nebraska citizens from any state tax consequences and privacy invasions on the sales of their numismatic investments. Section 14 of the new law specifically states that "sales and use taxes shall not be imposed on the gross receipts from the sale, lease, or rental of and the storage, use, or other consumption in this state of currency or bullion," which are further defined within the law: "(a) Bullion means bars, ingots or commemorative medallions of gold, silver, platinum or palladium, or a combination of these, for which the value of the metal depends on its content and not the form; and (b) currency means a coin or currency made of gold, silver, or other metal or paper which is or has been used as legal tender."

The Nebraska effort is part of an ongoing campaign by the Industry Council on Tangible Assets (ICTA) of which I am a board member. Previously, I was the primary Texas state advocate in gaining total tax exemption for coins in the state of Texas last year, making both rare coins and precious metals exempt from taxes. I was able to help Representative David Simpson secure an exemption on taxes of sales of coins or precious metals under $1,000 in Texas and passed the key information to Louisiana dealers for their successful legislative campaign. Now both Texas and Louisiana have complete tax exemption.

More Coin News: My Meeting With Smithsonian Representatives

Last week, I met with representatives of the Smithsonian National Museum of American History in connection with that museum's planned expansion of their numismatic display. We met in Baltimore, where Smithsonian officials told me that they will be expanding from the current 300 square feet display to a 1000 square feet display in a prominent position in their first floor, where most visitors begin their tour of the History Museum. This new display area will be up and running by the end of 2015.

Smithsonian officials told me that their decision was based on the fact that numismatics is a dynamic industry and hobby. By more than tripling their space devoted to numismatics, the Smithsonian is showing respect for our hobby and industry, which bodes well for how numismatics will be viewed by the millions of visitors to the Smithsonian in Washington, DC. We have been strong supporters of the Smithsonian for years. Whenever you are in the DC area, I highly recommend you visit the Smithsonian.

First Quarter Scoreboard: Gold Beats The Bitcoin And Everything Else (But Food!)

Even though gold dropped below $1300 in late March, gold was a big winner in the first quarter of 2014. Gold beat all of the major stock market indexes and major currency options in the first quarter. Despite fickle traders and an often-biased press, gold is more than holding its own so far in the New Year 2014.

Precious Metals (Jan. 1 to March 31, 2014)*

Gold		+7.51%
Platinum		+4.71%
Silver		+2.41%

*Basis: London pm price fix

Major U.S. Stock Market Indexes (same dates)

S&P 500		+1.30%
Platinum		+0.54%
Silver		-0.72%

Other Leading Global Stock Markets

Nikkei 225 (Japan)		-9.2%
Shanghai (China)		-3.2%
Sao Paulo (Brazil)		-2.4%
London FT 100		-1.4%
Frankfurt (Germany)		+0.5%

The U.S. Dollar to Other Currencies

Australian dollar		-3.8%
Indian rupee		-3.3%
Japanese yen		-2.0%
Swiss franc		-0.9%
British pound		-0.6%
Euro		-0.2%

Some investments beat gold - namely, food! While the U.S. government says inflation is flat, here are the first quarter price increases of some leading wholesale foods on the leading commodity exchanges:

First Quarter Gains, Wholesale Food

Butter (AA Chicago)		+31.2%
Eggs (Large White)		+26.5%
Corn (#2 Yellow)		+20.6%
Oats (#2 Milling)		+20.3%
Cheddar Cheese		+19.3%
Choice Beef		+15.0%
Flour (Hard Winter)		+13.9%
Soybeans (#1 Yellow)		+13.9%

The government tends to avoid the impact of these astronomical food price increases by omitting food and energy from "core" inflation. But when these wholesale price increases start hitting the American pocketbook, we might see a return of gold buying as part of gold's traditional role as an "inflation hedge."

And finally, I want to mark the death of a "computer coin" investment during the first quarter of 2014. The "bitcoin" bubble finally burst. Bitcoins were valued at up to $1200 each as of last November, but they fell to $700, then $400 and then to ZERO on the most widely followed bitcoin exchange, Mt. Gox, in Japan. Investors thought that these electronic coins were better than gold, but they were fool's gold.

Metals Market Report Archive >