June 2021 - Week 3 Edition
A Record-High $18.9 Million Paid for a One-of-a-Kind 1933 Gold Coin
Until last week, the most money any single rare coin fetched was $10 million. That was the 1794 Flowing Hair silver dollar, which sold for $10 million in 2013. Instead of rising by baby steps to $12 million or so, the highest price paid for a rare coin almost doubled last week to $18.9 million when the only legally available 1933 gold Double Eagle brought far more than coin experts previously thought it was worth.
Experts had placed the value of this coin at somewhere between $10 million and $15 million. That same coin brought less than $7.6 million in 2002, so it has gained 149% in under 20 years. This one-of-a-kind gem, minted in the year President Franklin D. Roosevelt outlawed most gold ownership for Americans, once belonged to Egypt’s King Farouk and was later seized in a secret service sting operation. It turned out to be the final U.S. coin ever produced for intended circulation, but it was never issued. Most of the 1933 double eagles were destroyed or declared illegal, with this one legally available coin remaining.
The St. Gaudens Double Eagle design has been called the most beautiful coin design in American history. It is also the inspiration for the obverse of the American Gold Eagle, the most popular gold bullion coin series in America since 1986. That series will enjoy increased popularity this year since there will be a new reverse design produced at mid-year, causing a two-design transition year, always a source of increased demand.
As we reported here two weeks ago, U.S. Mint sales of gold bullion coins were up 360% in May (over last May) and sales are up 40% for the year-to-date. We continue to see steep premiums on American Eagles due to delays in deliveries and high demand, so be sure to call your representative and inquire about availability and premiums for these bullion coins. However, the biggest story is that RARE coins are taking off in price. When top-quality rare coins with low population reports come in, they tend to go fast, so remember a lesson my mentor once taught me about capturing the best bargains: On the road and in the wild, there are “fast rabbits” and “dead rabbits,” so it is best to act fast when the finest rare coins come on the market. Be a fast rabbit.
Gold Rebounds Quickly
On Monday morning, gold fell as far as $1,845 in anticipation of the Federal Reserve’s 8-times-per-year Open Market Committee (FOMC) meeting, with its interest rate announcement coming Wednesday. By noon Monday, gold recovered $20 to $1,865 as traders sensed a bargain. There’s no chance the Fed will raise rates on Wednesday, but they might adjust their language on Quantitative Easing (QE) or inflation, which could shock the market. Currently, the Fed is buying $120 billion a month in Treasury instruments to help keep rates low, and they say that recent inflation gains (the highest in 13 years) are “transitory.”
Inflation is the Highest in 13 Years (or More) and Liable to Go Higher
On Thursday, June 10, the Labor Department reported that the Consumer Price Index (CPI) rose 0.6% in May (a 7.2% annual rate), bringing the 12-month increase to 5%, the fastest rise since mid-2008. The core CPI, excluding food and energy, rose even faster (+0.7%) and is rising at the highest rate in 29 years – since June 1992! Energy has pushed the headline rate up, since energy prices are up 54.5% in the past 12 months but the semi-conductor shortage has pushed used car prices up 7.3% in May after April’s 10% rise. The Manheim Used Vehicle value index is up 48% in the past year and pickup trucks cost 70% more!
Wage inflation is also rising. President Biden is doing his best to push the minimum wage up to $15 per hour by requiring supplemental unemployment benefits to run through September 6 (Labor Day), and he may try to extend those benefits through Christmas. On top of regular benefits, averaging $320 per week, these $300 per week extra benefits amount to an extra $15,600 per year for a combined benefits income of more than $32,000 ($15.75 per hour), and these benefits have been ongoing since the pandemic began. There was some justification for this help last year but not when 9.3 million jobs go begging and healthy, vaccinated workers could fill those jobs for businesses.
Commodity price inflation is rising even faster than consumer prices. The Producer Price Index (PPI) for May came out on Tuesday morning, June 15, at +0.8% (a near-10% annual rate), the fastest annual rate since 2010, and the last 12 months delivered the fastest annual increase since the series began (in 2010) – up 6.6%. In May, prices for goods rose more than twice the rate of prices for services. Much of this had to do with a continuing shortage (and price rise) among basic commodities required for manufacturing.
Here are the price increases – year-to-date through June 14 – for key energy and industrial commodities:
The Federal Reserve is meeting this week and will make its public announcement on Wednesday. It will be interesting to note if they feel that all of these price gains are “transitory.” Is wage inflation transitory? Are energy gains transitory? Industrial metals? Lumber prices? Food? It seems clear the Federal Reserve Governors seldom gets out of their Ivory tower to buy gas or groceries – or a pickup truck!
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