Gold Futures And Coins Out Of Sync
Arizona Coin Collector
I remember when the inflation rate was in the double
digits. According to the story below, gold was trading
at $295.00 dollars. I just check the link below to see
the spot price on gold from Kitco.
http://www.kitco.com/charts/popup/au24hr3day.html
The last time I check, it was trading at $745.30. The
market has not closed yet.
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FROM:
http://news.yahoo.com/s/ibd/20081021/bs_ibd_ibd/20081021etf
Gold Futures And Coins Out Of Sync
Trang Ho - Tue Oct 21, 6:25 pm ET
Gold has been losing its luster as the dollar strengthens. The
yellow metal fell almost 4% Tuesday as the dollar rallied to
a 11/2-year high against the euro.
But gold still shines in some quarters. A mad rush for gold
and silver coins that started in July has left dealers'
shelves across the country bare. Gold now trades with a
two-tiered pricing structure.
The only coins for sale are on eBay, where sellers want an
18% to 35% premium. Silver coins at some dealers are
fetching as much as 80% over spot prices.
Buyers also snatched up silver, platinum and palladium coins.
Sales picked up 500% in July, and in September vaulted to 12
times average monthly sales as major banks collapsed, said
a coin and bullion dealer who asked not to be named.
Fundamental View, A Bull Case
"With all the integrity and trust issues of the marketplace
today, counterparty risks, etc., gold and silver's ultimate
status as money, as a safe-haven asset, is driving buyers
into the real product," said Peter Spina, president of
GoldSeek.com.
"The safe haven for Americans is to live in the U.S. The
safe haven for everyone else is get out of their currencies
and buy gold," said Tom Winmill, portfolio manager of Midas
Fund (NASDAQ:MIDSX - News), which specializes in precious
metals and natural resources.
"We don't know when (gold) will recover, but it will
because global demand for commodities isn't going away,
" Winmill added.
Gold is also a "screaming buy opportunity" in his view
because it's trading at an unusually deep discount
relative to the AMEX's Gold BUGS Index or HUI. The HUI
is an index of gold miners.
Technical View, A Bearish Case
A chart of gold prices provides a different view. It
shows evidence that the precious metal lacks some of
its safe-haven traits these days.
The spot price for gold peaked in March at $1,011 an
ounce and has been trending downward ever since. It's
fallen 21% from its high and has made a series of higher
lows and lower lows. The 10-week moving average crossed
below the 40-week average in September and both lines
point 15uth -- a bearish signal.
Long- and short-term trading signals flashed a sell signal
on spot gold Thursday when it fell to $817.45 an ounce,
according to Adam Hewison, president of INO.com, who trades
based on his MarketClub software program. He expects the
yellow metal to fall to $700 to $720 an ounce.
On the bright side, gold has held up better than other
commodities since they peaked in July. Silver, as tracked
by iShares Silver Trust (AMEX:SLV - News), has collapsed
51% from its high. Spot copper has plunged 48% from its
peak of $4.06 per pound and now trades at $2.11.
Crude oil has skidded 49% from its peak of $145.66 a
barrel, trading Tuesday at about $74. Gold has also held
up better than the S&P 500, which trades 37% below its
October 2007 high.
Hedge funds have played a role in the sell-off, Spina
notes. Falling commodities prices have forced hedged
funds to sell positions to meet margin calls and raise
cash.
"As with nearly all markets, a massive deleveraging has
been occurring, and the gold and silver markets have not
been immune to this violent process," Spina said. "There
will be more victims of the fund collapse and more
forced liquidations even if it requires them to sell
their most desired assets like precious metals."
A recession may spur deflation. Gold wouldn't be a safe
haven under such conditions, according to Dennis
Slothower, president of Alpine Capital Management, with
more than $100 million in assets under management.
"In a deflationary environment, investors want out of
the market totally," Slothower said.
He notes that in the recession of the early '80s, gold
peaked at $850 an ounce (or more than $2,000 in today's
dollars) in January 1980 and crashed 65% to $295 by 1982.
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