November 2019 - Week 2 Edition
Gold Outperforms All Other Major Commodity Groups
Gold dipped below $1,450 then recovered on Monday (Veteran’s Day), based on continuing trade uncertainty over the U.S.-China trade “Phase-1” deal. President Trump said on Friday that he hasn’t agreed to roll back tariffs on China. Despite the latest dip, gold has still outperformed stocks by a large margin over the last 15 to 20 years, and it has outperformed all other major commodity groups (including energy and industrial metals) over the last 5, 10, 15 and 20 years.
The “Stealth Gold Bull Market” in U.S. Dollars –
Gold is Still Rising, Despite a Sharply Rising U.S. Dollar
The Trade-Weighted Dollar Index reached a low of 95 in 2011, when gold peaked at $1,900. When gold was falling, from 2011 to 2015, that dollar index remained fairly level, at about 100, but both the dollar and gold have soared since 2015. Gold bottomed out at $1,049 in late 2015 and has since risen 39% to $1,457, while the Trade-Weighted Dollar index has also soared 30% to 130 in 2019. Gold at $1,455 is up 38.7% in dollar terms. That means gold is up about 80% in “currency-neutral” terms, factoring out the strong dollar, meaning that gold is up about 80% since 2015 in terms of America’s major trading partners.
With the Federal Reserve now cutting interest rates, the attraction of the U.S. dollar for global investors may fade, taking some of the luster off of the U.S. dollar’s bullish run. If the dollar index were to retreat to 100 again, gold could gain 25% or more even if it didn’t rise much in other currencies.
The strength of gold in terms of so many other global currencies is why so many central banks have been loading up on gold – on a pace to set a new record high in central bank purchases this year, after setting a new high last year. Also, hedge funds have been buying record amounts of gold ETFs. Holdings in gold exchange-traded funds as of September 30 stood at more than 2,855 metric tons, surpassing the previous high of 2,839 tons, set in November 2012, when the price of gold was substantially higher. It looks like the world’s central banks and its smartest investors are turning to gold to replace paper money reserves.
Project 20/20 is Gaining Steam
In May, I told you a little bit about Project 20/20, which will be our program for enlightened coin accumulation – using a “rifle shot” approach rather than a “shotgun” blast to find undervalued “sleeper” coins. As I said, we will begin by bringing you highlights of recommendations in the major types of coins we like most – for their sheer beauty, profit potential and historical importance. We’ll highlight the most undervalued coins, starting with $2.50, $3, $5 and $10 Indians and Type II and III Liberty Double Eagles.
By using the capitalization approach (coin population reports times market value), we now have one more tool toward determining better coin purchase opportunities – where the profit leverage is to your advantage.
Already, we have seen over 25% of our antique coin 20/20 recommendations rise in price and most of our 20/20 $10 and $25 American Gold Eagle coins also rose in price. This is just the beginning. Please contact your account representative to learn more about how you can benefit from this innovative 20/20 program.
There are some other factors that increase a coin’s popularity, like low mintage, first and last year of a series, etc. I still believe strongly in set building, which is a good way to diversify coin holdings. In past bull markets, this has often resulted in “set premiums,” resulting from the sale of special complete sets.
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