November 2015 – Week 3 Edition

Gold continued to consolidate last week, falling to its annual low of $1080 once again.  The main culprit was the renewed strength of the U.S. dollar, combined with the assumption that the Federal Reserve will raise interest rates by a small amount (0.25%) in December. In the meantime, the World Gold Council announced on Thursday that global gold demand rose 8% in the third quarter.  Global investment demand rose 27%.  The WGC added that “U.S. retail investment demand jumped to 32.7 tonnes, generating growth of more than 200% year-on-year,” a level not seen since 2008. 

Gold is Still a Far Better Investment than Paper Money

In the last century, the Consumer Price Index (CPI) has risen 23-fold and gold has risen 52-fold.  If you turn these numbers around, the dollar has lost 98% of its value to gold and it has lost nearly 96% of its buying power.  In the last 50 years, the dollar has lost 86% of its buying power and gold is up 3,000%.

The Federal Reserve System opened its doors 101 years ago this week, on November 16, 1914.  The original mandate of the Fed was to provide price stability and prevent the failure of banks.  But the truth is that prices were far more stable in the 125 years before the Federal Reserve was created than afterward.

The birth of the Federal Reserve coincided with the birth of the Internal Revenue Service (IRS), which lifted the top U.S. tax rate to 70% within five years of its founding.  This resulted in an expanding central government, in part to fund America’s involvement in World War I.  This caused double-digit inflation.

Civil War Gold Survives: At Historic U.S. Mint

On the battlefield, the British-made Whitworth rifle was a favorite weapon of Yankee and Confederate sharpshooters during the Civil War.  On the home front, hard money – especially gold coinage – would have enjoyed similar popularity with civilians … if they could have gotten it.  Coins of all kinds virtually vanished from view in both the North and the South because of widespread hoarding during the war.

The Union and Confederacy both issued paper money to keep the wheels of commerce turning and pay their large armies, but almost no one trusted it.   Many remembered hearing the phrase “not worth a Continental” to describe the colonies’ nearly worthless currency during the American Revolution. 

Gold coins were minted during the Civil War, but few found their way into people’s pockets and purses until hostilities ended.  Some turned out to be quite scarce and all are prized today as valuable collectibles.

Recently, we acquired an original collection of popular double eagles - $20 gold pieces - issued during the War Between the States.  Heightening their historical significance all had been stored for many years at the old San Francisco Mint, one of the few major buildings to survive that city’s calamitous earthquake in 1906.  That building, now a museum, is affectionately known as “The Granite Lady” because it withstood the quake and the fires that followed.

This collection contains original double eagles dated between 1862 and 1865, many bearing the coveted “S” mint mark, showing they were made at the San Francisco Mint.  We immediately had them submitted to the respected Professional Coin Grading Service, and Numismatic Guaranty Corporation, which certified their authenticity and grade and sealed them in protective holders displaying their Granite Lady pedigree.  Call us for current price and availability.

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