July 2022 - Week 2 Edition
Dollar’s Buying Power Affecting Gold Prices
Gold is down on a massively powerful surge in the U.S. dollar, which is up over 13% this year and up nearly 7% since May 31, 2022. Even though gold is down 4.7% in dollar terms this year, it is up an average of 8% in terms of most other major currencies. Gold has also declined in response to a positive jobs report released last Friday, as that could lead to a rebound in the U.S. economy, skirting a recession. India, the world’s second largest bullion market, raised its basic import duty on gold from 7.5% to 12.5%. In addition to the other factors, Gold is also suffering from Russian gold sales and India’s higher import duties on it.
Beware! China Continues to Advertise & Sell Counterfeit Coins to Americans
If I can help you remember just one thing in investing, it’s “There is no ‘Free Lunch’” or, put another way, “There is No Santa Claus in Numismatics” (or any other investment). If something seems “too good to be true,” that’s because it is literally too BAD (for you) to be true. Specifically, if a coin dealer (so-called) is offering you gold or silver coins well below the spot price (or melt value), that is a fraud! They can’t survive as a company that way, even if they call it an “introductory offer” or a “loss leader.”
Repeatedly, Facebook and other social media outlets have not been very careful in policing their advertising providers. They police certain conservative political comments very rigorously. However, when it comes to fly-by-night false advertisers paying top advertising dollars to make fraudulent promises, they have let too many of them through their ad screeners in previous years, too often fleecing retired Americans out of a good chunk of their life savings.
When you see a 1-ounce gold coin priced at $499, or a roll of 20 silver dollars priced at $199, you know it is a fake. Even if the photograph looks like a genuine coin and maybe the fake coins look “almost real,” they are easily flagged by an experienced numismatist as fake. Another trick is to picture genuine bullion products and ship counterfeit products to consumers. That’s why I have devoted a good part of my career to counterfeit detection and investigation, in conjunction with law enforcement in many cases and have been honored my peers over the years for my efforts.
That’s also why I’m a part of the Anti-Counterfeiting Educational Foundation (ACEF) led by Doug Davis, a former Texas Police Chief and coin enthusiast. We help seek partial or complete restitution of funds for wronged investors. Doug offers wise words to those buying coins: “Remember, if you don’t know precious metals or rare coins, you’d better know a reputable seller.” I suggest a safeguard of verifying if your dealer had been honored by his industry peers for his expertise and business practices.
Fed Statements of “Peak Inflation” Have Hurt Gold, but What if Inflation Keeps Rising?
All through 2021, the Federal Reserve directors said inflation was “transitory,” but by year-end, Fed Chairman Jerome Powell finally said he was willing to retire the “T” word. The word for 2022 has been “Peak.” Starting in March, the Fed’s message has been that inflation “peaked in March,” then it was that inflation “peaked in April,” then maybe, June. By the same token, the Fed has also said we won’t fall into a recession.
In the bond market, 10-year Treasury rates seemed to have peaked in mid-June at 3.49%, at about the same time most of the major stock market indexes hit their lows, so we’ve seen falling long-term bond rates and rising stocks since about June 16. This gave rise to a headline in last week’s Wall Street Journal:
“Falling Commodity Prices Raise Hopes That Inflation Has Peaked” (July 4, 2022, Wall Street Journal)
We’ll see about those falling commodity prices this week. The Consumer Price Index for June comes out this Wednesday at 8:30 am Eastern time, and the Producer Price Index (PPI) comes out Thursday at 8:30 am. If those indexes don’t “peak” in the way the pundits expect, we may see a major correction in stocks and a surge in gold and silver prices. Who knows? Inflation may take as long to peak as it was transitory!
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