Odd Things Can Influence Some Prices

By Harry Miller, Numismatic News September 28, 2010

I received an e-mail regarding the 2004-D Wisconsin quarter extra leaf low in MS-67. This coin is listed at $10,000 in Coin Market for that grade and the sender of the e-mail questioned the value since he had seen one available on eBay for a great deal less in a reputable certified holder. The question is a legitimate one and the answer deserves close scrutiny by all, especially those who favor ultra-high-grade modern issues, which I feel can be a trap pricewise, because they have no long-term proven stability of value. They are also fickle according to current fads. Here is the response I gave:

2011 U.S. Coin Digest Up-to-date market prices in 11 grades of condition! Get your 2011 copy today!

“The main reason being the thinness of the market and the quality level on the grading, in this case we have a coin offered at $1,450 with no takers and I have a record of a PCGS coin at $11,500. The possibilities here are several.

1. The other coin was not particularly nice for some reason. 2. There could even have been a scratched holder. 3. There could have been a bad picture. 4. Or perhaps no one was shopping for one that week. 5. The PCGS price could have been two registry set guys battling for the finest available. 6. In a practical sense in pricing on modern coins PCGS usually beats most other reputable slabs by about one grade and that is mainly because of registry set demand and sometimes very slightly tighter standards.”

The registry set issue can very often distort market pricing because when you get two or more egos involved vying for that elusive item it can get wacky. Several months ago I saw an early half dollar in AU-58 sell for considerably more than an MS-62 and an MS-63 of the same date that were also available. This was because several collectors that were putting together circulated registry sets all needed the point value of the highest circulated grade possible to vie for the #1 position. While unusual, this sort of distortion is becoming more commonplace.

There has been a lot of action in old-fashioned collector coins and a hot bullion market. One would think all bullion-related items would be soaring, but there are anomalies in this area as well.

While most bullion-related U.S. gold type coins are up (not all) they are not nearly as strong as one would think and proof gold Eagles are down 10-20 percent. The market is anticipating new ones soon.

There has been a strong surge in Mint State Barber coinage and the later Seated dimes and quarters. In earlier type, the no drapery quarters are sought in most grades and Trade dollars in EF and AU are experiencing good demand.

What Price Gold in a Gold Standard?

By David C. Harper, Numismatic News September 28, 2010

Asking whether the U.S. dollar should be backed by gold prompted many reader responses to our poll. Dealer Steve Album very thoughtfully did some calculations. He concluded there isn’t enough gold.

“According to the Federal Reserve M1, current number of dollars is about 1.75 trillion. After doing the calculation, I found that at the current gold price of about $1,280 per ounce, we would need about 48,000 to 50,000 tons of gold to back up all the dollars. That is about one-third of the amount of gold that has been mined since ancient times, about 150,000 tons according to an article that appeared in The Economist a few months ago.

“There is absolutely no way any government could acquire that much gold. The alternative would be for the price of gold to rise to something like $5,000 per ounce, at which pointonly about 350 million ounces would have to be stashed in Fort Knox. No wonder the goldbugs are hungry for the gold standard. But if we take the M2, then we are talking about 8.65 trillion dollars.” Those are very large numbers.

Readers who suggest there is enough gold do so on the basis that we simply set gold’s price at $10,000, or even $30,000, as one reader did. Certainly anyone who buys gold at today’s $1,280 would love to see an official price set at $30,000.

I’ve decided to jump into the numbers game this week, too.

During the classic operation of the gold standard before World War I, what was required was that all government paper money be exchanged on demand for the official amount of gold each note represented.

Now the economy of the period was almost as sophisticated as the current economy. Banks made loans. People wrote checks. Credit was extended (maybe not with modern debit and credit cards) but certainly with merchants running tabs for customers that were settled later. Bank loans were not backed by gold in the sense that there was gold sitting in a vault covering the money lent. Checks were not backed by gold. Private credit was not backed by gold. Only paper money was backed by gold.

Currrent U.S. paper money outstanding totals $952 billion (M1 includes checking accounts). Whatever gold there is has to add up to $952 billion with 100 percent gold backing. The U.S. official gold reserves are 261 million troy ounces. To make them worth $952 billion would mean an official price of $3,647.51.

In 1968, near the last point that the gold standard was functioning, it was called the gold exchange standard because of all countries, only the U.S. had to exchange its notes for gold (others exchanged their paper for U.S. paper money).

That was the year the Congress repealed the requirement that there be 25 cents in gold for every $1 note issued. Such a backing requirement implies that a successful gold standard can be operated by the United States with its present resources at an official price of $911.88, though to start off at the lowest point possible probably would not generate confidence that it could work.

However, the $911-$3,600 range shows that whatever reasons there are not to adopt a gold standard, the quantity of gold is not one of them. It is a matter of will and a question of price.

Monday, September 27, 2010

2010 American Gold Buffalo Bullion Coins Sold Out

Commodityonline.com

Finding undervalued blue chip companies with exposure to Asian growth ranks high on Porter Stansberry’s to-do list these days. And it works as a hedge against inflation, too, according to the fellow who founded Stansberry & Associates Investment Research, because the companies’ earnings and assets would grow as prices climb. There’s a caveat, though. “If you’re not willing to short stocks as well, don’t buy stocks at all,” he cautions readers of The Gold Report in this exclusive interview. “Stay in cash and gold.”

The Gold Report: The National Bureau of Economic Research announced last week that not only are we out of the recession but that in fact, it ended in June 2009. They did note that it was the longest recession since the Great Depression. Did this announcement surprise you?

Porter Stansberry: On one hand, I expected the authorities to come out and say everything is getting better at some point, and I also expected that pumping enough money into the economy could stimulate some economic activity. So, I guess in that way, I was expecting it.

Then, in a deeper, more intrinsic way, I wasn’t expecting any significant improvement to the economy whatsoever. I would argue about the meaning of this conclusion, too, and point to measurements of our national net worth as being the appropriate gauge to measure whether we’re experiencing any genuine economic growth. America’s net worth continues to fall in terms of the average household net worth, and also, of course, our government’s net worth is growing in the red dramatically every quarter.

So while I’m pleased that there is more economic activity, I wish there was more employment, and that we were heading in the right direction in terms of growth of median incomes and net worth. But I’m unfortunately very pessimistic that any real increase to net worth, either measured by the government or by individual households, can be achieved when the government continues to paper over our problems with more credit and more money instead of making our economy more competitive on a global basis.

TGR: But measuring net worth as the true driver, hasn’t individual net worth really been decreasing over the last decade? Wasn’t the perceived net worth really based on debt?

PS: It’s very interesting that ever since the whole U.S. economy came off the gold standard in 1971, the average household income has really stagnated. For a while, it continued to increase in terms of statistics, because more and more families had two wage earners. During the ’70s, household income looked as if it was still increasing, but factoring in the additional wage earner, it didn’t change at all. And then it began to decline in the late ’90s, and has continued down for the last 10–12 years.

So in terms of household incomes, we’ve definitely gotten much poorer over the last 30 years, and that’s just a measure of income. In terms of net worth, meaning all of our balance sheets—our assets minus our liabilities—America was richest on paper in the spring of 2007 before the start of the mortgage crisis and the real estate bust.

TGR: You’re talking about individual net worth, not corporate net worth?

PS: Exactly, talking about median household net worth, median household income. So, individual incomes have been stagnant and/or declining for more than 30 years, and individual net worth has fallen precipitously since 2007 and continues to do so.

You can survive your income falling if it’s not dramatic. Your income can decrease for a long time before you start living beyond your means. I think what’s happened to America, in a cultural sense, is we stopped getting richer as a country in the early 1970s, but we haven’t adjusted our consumption patterns in any way, shape or form to meet the realities of the new lower income. As a result, debt has piled up over the last 35 years. And of course as you add debt without increasing income, you’re reducing your net worth.

TGR: Is what you’ve described unique to the U.S. or would you put other leading countries in that same bucket?

PS: In scale, I’d say it’s unique to America. The scope that we have continued to consume above our level of income is oppressive, and it was enabled by the fact that our paper currency is the world’s standard. So we had no barriers to credit, which meant that we could borrow a heck of a lot more than anybody else and end up with a lot more debt than anybody else.

The macroeconomic problem of stagnant to falling median household income is common throughout the developed world. That has only one cause, which is poor competitiveness. We don’t work as hard as our Asian competitors, to put it in plain terms. But in America, unlimited access to credit exacerbated the problem.

TGR: To what extent has government debt increased to cover the increased credit provided to individuals?

PS: Over the last three years, what’s happened is a huge transfer of obligations from private balance sheets to public balance sheets, right? The biggest and most important example—which isn’t even discussed in Congress or in Washington as being a problem, which is truly amazing—was shifting $10 trillion of obligations owed by two private corporations, Fannie Mae and Freddie Mac. We shifted responsibility for all those credits onto the U.S. Treasury. That had the impact at the time of doubling—doubling!—our entire national debt in one swipe of the pen. That’s just an incredible transformation that took place when the government decided to guarantee all of Fannie’s and Freddie’s creditors, when you know what Fannie and Freddie really own with all that money they borrowed is pretty much every mortgage in the United States.

You can see that we as a nation have decided that the government ought to be responsible for our mortgages. In a way, that’s us saying we believe the government ought to be responsible for all of our private debts.

TGR: And where does that lead?

PS: It’s interesting, isn’t it? That was the goal of every socialist regime in history, right? And yet, here we are in America living in the new socialist utopia where no private citizen is really responsible for their private debts. It all becomes a matter of social obligation.

You know, I don’t think it’s any really great surprise to any thinking person when I say I doubt this experiment has a happy ending. I don’t think you can socialize everyone’s private obligations and end up with a good economic result.

TGR: Is some big train wreck the likely outcome?

PS: I’d argue that we’re in the midst of the train wreck. We’re going to see a continual increase in sovereign debt around the world, even though according to any standard model of repayment, all the leading sovereign debtors are already bankrupt. Just to give you an example, if you look at the size of the U.S. federal government debt outstanding today—not the unfunded obligations, just the bonds that are outstanding—and you look at the federal government’s annual revenue, the debt is now 356% of the revenue.

If the federal government didn’t own the world’s reserve currency, you can imagine that it would be impossible for that government to get credit anywhere. No one would lend to an entity that’s so far in debt as the government already is. And yet it’s the government that continues to provide additional stimulus to the economy by adding to its already swollen obligations.

So what I think that you’re seeing is that the government continues to pump money into the economy via expansion of credit and/or straight out printing money (via quantitative easing). That has a diminishing-returns effect, so people would argue now that “cash for clunkers” and TARP, etc., didn’t do anything.

In the middle of this train wreck, our currency is gradually being debased and efforts to restart the economy with additional spending aren’t working. They probably can’t work. How long does this continue? How much debt gets racked up before real, true panic sets in and people simply start to flee the currency at all costs?

TGR: How long? How much?

PS: I don’t know the answers. But I don’t believe the current strategy is feasible. I think the only thing that really can be done—it would be painful, but less painful than the calamity we’re heading toward—is to demand that people be responsible for their private obligations. No more bailouts, no more stimulus, no cash for clunkers. You, the American people, have to live within your means starting on this date.

If we then defaulted on the U.S. government bonds, we’d tell our creditors, “We’re going to give you a certain percentage of our tax receipts, but we have to renegotiate our debt because we can’t pay it back.” It would be really bad for six or nine months, but then I think things would be great because you would have washed out all the excesses, people could get back to work and the dollar would fall to a value that would make our economy very competitive on a global basis.

TGR: Demanding people live up to their private obligations on a par with the defaulting on U.S. government bonds strikes me as curious. On one side, I see individuals who have benefited least from any stimulus—in fact many of them are unemployed, losing their homes and going into bankruptcy. The banks are the ones getting bailed out.

PS: When I say that people have to be responsible for their private obligations, I’m talking about the big banks, right? If a bank actually had to be accountable to its depositors, there’s probably not a major bank in the United States that would be open tomorrow. I mean we’re all comfortable with the banks because we know that the printing press stands behind them. But that’s no way to run an economy. For the economy to work, there has to be winners and losers and people have to be responsible for their obligations. We’re living in a socialist dream right now, and it’s going to end up becoming a socialist nightmare. These dreams always do.

So, when I say individuals have to be responsible for their obligations, really what I mean is the creditors of people cannot continue to expect the government to guarantee every obligation. It simply isn’t feasible. It can’t be done. You can’t guarantee every mortgage in the United States. You can’t do it. Likewise, the U.S. government’s creditors have to understand that there is such a thing as government default on debt; it happens all the time. If you make a loan to a government that is in as far over its head as our government is, you’re making a bad bet.

TGR: The default discussion has been going on for quite a while, and with elections coming up, it seems there’s more talk about either additional stimulus coming out or quantitative easing. What’s the straw that finally breaks the camel’s back?

PS: I can only tell you that no one really cares about a creditor’s debt load up until the moment that everyone cares. The Greek bond yields didn’t move at all until the market went into a panic six months ago over them, and yet the creditors all had the data on the way the Greek economy was working for years. I vividly remember reading commentary in the late 1990s of well-known economists saying there’s no way Greece should ever be part of the EU because they have a kleptocracy, basically a government of thieves. But they still were able to borrow money on ridiculous terms up until the moment people decided not to lend to them anymore.

TGR: Well, they’re actually still lending them money.

PS: Yes, but only with that $185 billion bailout fund standing behind the Greek credit. Otherwise, no one would have lent them any more money. Greek bonds that are denominated in euros are not going to default. Rightly or wrongly, creditors believe that they can get an extra 200 basis points at yield by buying Greek debt instead of German bunds, because to the creditor it’s the same thing. Now that the Germans have not allowed the Greeks to default, in reality the credit risk of the Greek bond is no more or less than the German bund. So you’re giving speculators all the basis point difference for free. That’s the way they see it.

Even more interesting than the fact the Greeks were bailed out, the stock market has picked up noticeably in the last several weeks, which coincides exactly with the beginning of the latest European quantitative easing. The same thing happened in the spring of 2009 in the U.S.—asset markets and asset prices of all types start going higher every time there’s more quantitative easing. It’s not because those assets are becoming more valuable, but because people are fleeing the currency every time the printing presses come on.

TGR: And is more quantitative easing in the cards in the U.S.?

PS: The answer is absolutely, 100%, for sure, yes, there will be. And I think it will cause asset prices to rise. I don’t think it will cause our economy to have any real benefit.

Of course, it’s not just the federal government that’s in big trouble. If there were a real rating agency, California’s rating would be lower than Greece’s. I read somewhere that something like 300 separate agencies have the power to issue bonds under State credit in California. And there are going to be bankrupt municipalities all over the United States; Harrisburg, the capital of Pennsylvania, declared bankruptcy this month.

TGR: Earlier this year you advised your readers to not be upset to be sitting in cash and be really careful about the markets because there’s tremendous volatility. For those who didn’t want to truly hedge themselves in equities, you recommended short-term Treasuries and gold. If asset classes are going to increase in value in every quantitative easing, why wouldn’t you recommend equities?

PS: When the quantitative easing started in March of 2009, I was wildly bullish, the most bullish I’ve probably been in my entire career. I told people straight out that equities are much cheaper than precious metals; they’re cheaper than bonds. I did put my readers into a lot of stocks in 2009, and we made a lot of money.

In early 2010, the Fed announced it would stop its quantitative easing, which made me very cautious because I believed as soon as the quantitative easing stopped, asset prices would resume falling again. And so I’ve recommended more individual short positions this year than I have ever recommended before.
  Continued…

Tuesday, September 28, 2010

Legislation Allows Proof Silver Eagles, Changes America the Beautiful Silver Bullion Coins

Tuesday, September 28, 2010 From Paul Montgomery of APMEX as of 9/27/10 We lost 2 UPS packages this morning in Palm Beach Gardens Florida. Each contained 4 10oz Johnson Matthey Gold Bars. Please alert our dealers because they may show up in someone’s shop….thx,  Paul   From Bill Johnson of PPI Hello, This list of coins was stolen from one of our client’s customers in Texas, would you please notify ICTA’s membership to be on the lookout for this deal or any part of it? ITEM DESCRIPTION SERIAL NUMBERS 2004 $25 American Platinum Eagle MS-69 NGC    1793100-035- 1793100-054 2004 $25 American Platinum Eagle MS-70 1793860-051; 1793860-053 2004 $25 American Gold Eagle MS-70 NGC 1791113-076; 1791113-077 2004 $25 American Platinum Eagle MS-70 1793860-245; 1793860-246 2004 $25 American Gold Eagle MS-70 NGC 1792029-136; 1792029-137 2004 $50 American Platinum Eagle MS-70 NGC 1793860-051; 1793860-053 2005 $25 American Gold Eagle MS-70 NGC 1793860-051; 1793860-053 2005 $50 American Platinum Eagle MS-69 NGC 1985612-068- 1985612-074 2005 $100 American Platinum Eagle MS-69 NGC                  1959736-074- 1959736-078 2005 $100 American Platinum Eagle MS-70 NGC   1959737-032 2005 $25 American Platinum Eagle MS-69 NGC 1988758-031- 1988758-034 2005 $10 American Platinum Eagle MS-69 NGC   1989598-009- 1989598-013 2005 $50 American Platinum Eagle MS-70 NGC  1956222-041- 1956222-042 2005 $100 American Platinum Eagle MS-70 NGC    1986288-012; 1986288-013 2005 $25 American Platinum Eagle MS-70 NGC 1988759-041; 1989074-121- 1989074-126 2005 $10 American Platinum Eagle MS-70 NGC 1988052-027- 1988052-035 2005 $50 American Platinum Eagle MS-70 NGC  1545401-023 2006 American Silver Eagle 20th Anniversary Silver Set MS-69 1550434-001; 1550434-002: 1550434-005 2006 $50 American Gold Buffalo 1oz  MS-70 NGC   1545753-052 2006 $50 American Gold Buffalo 1oz  First Strike MS-70 NGC 1541849-024 2006 American Eagle Platinum Eagle 4 piece set MS-70 NGC  1553339-023 2006 American Gold Eagle 4-pc set W Burnished MS-70 NGC 1571974-026; 1571974-029 2007 American Eagle Platinum Eagle Early Release Set MS-70 NGC 3076674-017 2006 American Silver Eagle W MS-70 NGC 1570496-008 2006-W American Eagle Platinum Eagle 4 pc set Burnished MS-70 NGC 2515772-001 2007-W American Gold Eagle 4-piece Set MS-70 NGC 3078890-046 2007-W American Silver Eagle Early Release MS-70 NGC   3081863-018 If you have any information, please contact William Johnson at william@lmrcinc.com or 310-377-1299.

 

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Friday, September 24, 2010

American Palladium Eagle Proposed

Gold & Silver Political Action Committee (PAC) Formed to Support Rare Coin & Precious Metal Community

By Allen Sykora of Kitco News
(Kitco News) - Most-active gold futures poked above the much-anticipated $1,300-per-pounce level for the first time early Friday on the Comex division of the New York Mercantile Exchange.

“It’s a safe-haven story. A lot of people are scared of the recent performance of the dollar. A lot of money is coming into the commodities market, particularly the precious metals,” said Afshin Nabavi, head of trading at trade house MKS Finance.

Around 8 a.m. EST (1200 GMT), most-active Comex December gold was $3.90 higher at $1,300.20 an ounce after hitting an overnight peak of $1,301.30. Spot gold was $5.80 higher at $1,298.30.

“With the dollar being under pressure, that naturally creates a path of least resistance for gold. And that path right now is definitely to the upside,” said Sterling Smith, commodity trading adviser and market analyst with Country Hedging.

He also cited at least some apparent nervousness about European debt, with overnight weakness in the credit default swaps for Portugal, Ireland and Spain.

Gold has steadily climbed since 2001, after prices for the precious metal had fallen into the $250s a number of times between 1999 and 2001.

Analysts have cited a number of factors prompting the most recent round of safe-haven investment demand in recent weeks. This includes uncertainty about the strength of economic recovery in the U.S. and other Western nations, lingering worries about European sovereign debt that dominated headlines in the financial press earlier in the year and general uneasiness about devaluation of global currencies.

More recently, the focus returned to easy Federal Reserve monetary seen as hurting the U.S. dollar and ultimately contributing to potential inflation whenever the economy recovers. As the market rallied, the move was accelerated by buying from traders and funds that rely on technical charts.

Numerous brokerages and banks issued research reports in recent days suggesting that it was only a matter of time before gold hit $1,300. However, many also cautioned that this is also a likely area for some speculators to sell and book profits, meaning potential for at least a temporary price retreat from here.

Nabavi also suggested some kind of pause could be in order before any further advance to the $1,350 area.

“I think it ($1,350) is going to happen, but I don’t see it happening that quick, to be honest,” he said. “Not a huge correction. But it would be good to see at least (a correction to) the ($1,2)85-ish to ($1,2)80-ish area or something like that.”

Smith said he is surprised the market has not yet triggered buy stops, which are pre-placed orders activated when certain chart points are hit, around $1,300. It’s hard to say where these might lie since “we’re boldly going where no gold has gone before,” he said. But some points might include $1,305 and $1,318 in December gold.

“As far as the overall condition of the market, the bull looks fairly healthy here,” Smith said. “We haven’t had a lot of aggressive buying. We’ve made our move very quietly, which kept us getting too overbought in any way, shape or form.”

Smith put chart support for December gold around $1,289.

As for the rally over the last decade, much of the interest in gold “playing gold against dollar weakness,” R.J. O’Brien said in a report Thursday. This especially was the case from 2005 to 2008, as the euro strengthened to around $1.60 against the greenback. Historically, dollar weakness tended to lead to buying of gold as an alternative currency, plus a weaker greenback makes all commodities cheaper in other currencies and thus can boost demand.  Continued…

Popping the Soros Gold Bubble

By Christopher Barker | More Articles
September 22, 2010 | Comments (4)

I have a bone to pick, and a conceptual bubble to pop.

George Soros is at it once again, sparking fear and uncertainty among the less committed holders of gold. Following up on his January declaration that gold is “the ultimate asset bubble,” the billionaire investor and philanthropist Soros elaborated with the caveat that “it may go higher.” With the sort of verbiage that can turn hesitant buyers into hapless sellers, he added: “But it’s certainly not safe and it’s not going to last forever.”

The ultimate conceptual bubble
If there’s one notion relating to gold that I observe most unnecessarily confounding the prospective precious metal investor, it’s this useless application of the word bubble in reference to gold. By my reckoning, the only time that word becomes helpful is when an asset class soars over time in the absence of a discernable fundamental basis for the move.

For example, the primary basis for soaring U.S. home prices before 2007 was a derivative-based scheme for unchecked leverage and fictional risk assessment that effectively removed that market from its underlying fundamental drivers. Housing, then, provides a textbook example of an asset bubble that that represented true peril … and one that I have argued will continue popping for some time yet.

There may come a time when I will become comfortable applying the term to gold, but not before the identifiable fundamental drivers for higher gold prices fail to continue accumulating. Somewhere north of my $2,000 price target for gold — which incidentally is shared by Soros’ former business partner Jim Rogers — we may eventually witness a dramatic spike that could render new investment in gold an exercise in dangerous and untimely speculation. But until those cows come home, I will reassure gold investors that we are a very long way removed from the inception of a final blow-off phase for gold’s multi-year bull market run.

Why Soros has more gold than you do
Small-fry investors like you and me are at a big-enough disadvantage to the big-money crowd as it is, so Soros Fund Management’s massive increase in gold exposure (revealed shortly after the legend’s initial bubble declaration earlier this year) caused understandable consternation among those whose confidence in gold had been rattled by his comments.

The fund still holds 5.24 million shares of the SPDR Gold Trust (NYSE: GLD), with a present market value of $660 million. The fund also retains bullish positions in Kinross Gold (NYSE: KGC) and NovaGold Resources (AMEX: NG) of scale that seemingly goes against Soros’ stated notion that gold is “certainly not safe.” Uncertain investors contemplating a flight from gold on the basis of Soros’ warnings may wish to ponder a pair of telling tidbits from the man who once broke the Bank of England:

• “Gold is the only actual bull market currently. It just made a new high yesterday. In the present circumstances that may continue.”

• “When I see a bubble, I buy that bubble, because that’s how I make money.”

With that first statement, uttered earlier this month, I can offer only my heartfelt agreement. Bravo! As for the second, we are thrust into the conclusion that Mr. Soros views bull markets and bubbles as virtually synonymous. This is where he and I run into a brick wall of disparate definitions. When I see a bubble, I want no part of it — because that’s how I protect my money. I perceived the mother of all credit-driven bubbles developing throughout the financial system years before the collapse unfolded, and that is what led me to gold nearly six years ago.

The safest places for new money
Whether they’re locking in profits from recent gains in broader equities, or fleeing wisely from the true bubble that is the market for U.S. Treasury bonds, I sense that many of my fellow Fools are at a loss to identify asset classes in which they feel confident allocating fresh capital. Aside from reminding investors that cash can be an important tool in a high-volatility environment, and with the caveat that allocation strategies must be carefully tailored to suit each individual’s unique circumstances, I wish to dispel the notion proposed by Soros that gold does not represent a safe investment at this point in time.

Gold is highly unpredictable in the short-term. It is prone to sudden, gut-wrenching corrections that have burned their fair share of uncertain retail investors over recent years. In order to avoid selling into weakness in a fit of panic, successful gold investors must possess a strong and disciplined long-term outlook on the multi-year trend under way.

With the $1,000 price level offering what Marc Faber and I both consider a cement floor beneath gold prices to last for the remainder of this secular trend, I would argue downside risk in gold under the prevailing macroeconomic climate is limited. The upside potential, meanwhile, remains subject to the likely exacerbation of impairment to the world’s two major reserve currencies over the years to come.

Fortunately for newcomers, the Motley Fool community is packed with investors who have accrued valuable experience assessing the pros and cons of individual gold stocks. Major producer Goldcorp (NYSE: GG) is conducting a high-profile raid for future production growth, but a smaller producer that facilitated a recent Goldcorp victory — New Gold (AMEX: NGD) — has yielded superior share-price appreciation over the past year. I continue to see the greatest investment potential of all in carefully vetted junior producers including Aurizon Mines (AMEX: AZK) and Northgate Minerals (AMEX: NXG).

So don’t avoid gold just because George Soros’ bubble-talk leaves you feeling uncertain; simply shape your allocation accordingly. You can skip the “only actual bull market” if you wish, but I don’t recommend it.

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