Why Silver is a sizzling investment
	By Jeff Clark Silver has been sizzling and causing lots of buzz in the industry. Investors are excited.Part of the hubbub is due to its current run. Since its February 8 low, silver has roared ahead 22.4% (through June 21) and has doubled from its November 2008 low.This excitement has spilled over into greater investment demand – especially so for coins. The U.S. Mint sold more Silver Eagles in the first quarter of this year – just over nine million – than any prior quarter in its history. The Royal Canadian Mint produced 9.7 million silver maple leafs in 2009, also a record. Take a look at the jump in U.S. Mint coin sales since 2007. Silver bullion ETFs are growing, too, experiencing a five-fold increase in metal holdings since 2006. There’s plenty we could talk about with silver, but our goal is to make money. So let’s focus on answering just two questions: Is today’s price expensive or cheap? And, what are the best silver coins, ETFs, and stocks to own? We have all the answers straight ahead, including lots of actionable info, so let’s jump right in… Why Should I Buy Silver? There are several reasons to own silver in addition to gold. First, it’s cheaper! Known as the poor man’s gold, those with limited budgets will find it easier to purchase. You might hesitate plunking down $1,200 for an ounce of gold, but you can pick up 32 ounces of silver for half that amount. Second, silver has wide industrial use and this component can help or hinder its price. As its consumption increases across a growing number of industries, this should help place a floor under demand. And because of its unique properties, new uses continue to be discovered. Third, silver is money and has served this role more than any other material on earth, save gold. Due to its historical role, silver will always have monetary value and offer similar protection as gold to the ongoing global currency devaluations, and will definitely benefit from the inflation hurricane we see as inevitable. Silver is more practical as a currency used for everyday purchases. When the time comes, you can sell the requisite number of silver coins to cover a specific need, as opposed to being forced to liquidate a high-dollar-value gold holding. Silver is perfect when smaller amounts of cash are required. Fourth and last, silver could possibly outperform gold before this bull market is over. The market capitalization of silver (and silver stocks) is much smaller, making its price more susceptible to demand spikes than gold. In the latter part of the 1970s precious metals bull market, gold gained over 700% – but silver soared over 1,400%. If you’ve got a bit of Gordon Gekko in you, we recommend investing a portion of your dollars in silver. Caution – Hot! Like all things, silver has its drawbacks, two in particular. First, the price is volatile. Over the past 12 months, silver has seen gains of 53.8% and 22.9% and drops of 21.9% and 19.6%, all within a period of months or even weeks. If you’re going to own silver, you must be prepared for big price gyrations. The best way to do that: buy it and forget about it. And… ►Make price volatility your friend. Big price swings present the opportunity to snag silver at a big discount. We give some guidance on prices below. Second is the storage issue. As your pile grows, the advantage to storing gold will become self-evident. At $1,200 gold and $18.50 silver, $10,000 will get you eight gold eagles that will fit nicely in the credit card slots of your wallet; however, it will buy 540 silver eagles, weigh nearly 34 pounds, and fill a small bank safe deposit box. ►How to store physical silver. There are several ways to solve the storage dilemma, even if you plan to buy like the Hunt brothers. Spread your holdings around. Not only is it wise to avoid keeping all your physical silver in one place, diversifying your storage arrangements allows you to buy more. Hide some at home in several locations (no cookie jars, though), and obviously tell only one trusted person. Store some in a bank safe deposit box and use more than one bank as your holdings grow. Buy bars. Silver bars take up less space than a pile of coins of the same weight. We wouldn’t start out with nor have all our holdings in bars, because you want the advantage coins offer. But the larger your holdings, the easier it will be to store some of it in bar form. Use pool accounts and unallocated storage. With a pool or unallocated account, you’re essentially getting free storage no matter how big your stash. That’s hard to beat. You’ll pay fabrication and delivery charges if/when you convert your holdings and take delivery, but in the meantime, you save on storage costs. Great value for the large holder. Private storage. Store your silver with a private vaulting company. The advantage is that it’s outside the banking system; the disadvantage is that it’s usually expensive, though it can be cost effective for large holdings. Do your own due diligence if you go this route because we can’t vouch for any facility, but you could start by checking out delawaredepository.com. Keep in mind that using a vaulting facility beyond a reasonable driving distance will mean added shipping/insurance costs and restrict quick access. Is Now a Good Time to Buy? With the gains we’ve seen in silver, would we buy right now? Let’s first look at the big picture. The following chart shows how far silver is below its inflation-adjusted peak reached in 1980. .Since our current bull market in precious metals began in 2001, the ratio, while fluctuating wildly, has never gone below 45. And yet look where it went during the precious metals peak in 1980: it bottomed at 17. Even though gold was soaring at the time, silver outran it. The ratio might show relative strength between gold and silver, but it’s not a good buying indicator. A falling ratio could mean silver is rising faster than gold, like it is currently, or it could mean silver is falling slower. As a result, we’d use the ratio to determine silver’s upside potential but not necessarily when to place an order. These big-picture signals tell us silver is undervalued and, at the moment, a better bargain than gold. And given the currency crisis we’re convinced is in the cards, we wouldn’t want to be caught without any. If you have a long-term mindset, silver is a buy today. Would we wait for a better price? If you do not own any, and plan on holding what you buy until a mania develops, then we wouldn’t wait. The risk of buying silver at current prices is lower than owning none at all. If you do own some but want to add to your holdings, we’d probably wait for a drop in price, in part because silver could more easily fall when the economy is found to be more fragile than what many believe. And with industrial uses comprising approximately half of silver’s demand, it would be more susceptible to sell-offs than gold if our research is correct about global economies. Further, summer usually brings pullbacks in prices, and this can be especially true for silver stocks. This is the tendency, though we can’t be sure if this summer will follow past trends. Still, our best guess is to anticipate another leg down this year. If you already own silver, we’d look for a correction to add to your holdings. In our opinion, owning no silver in this bull market would be a mistake. And your first (and biggest) investment in silver should be in a physical form. How much physical silver should you have? There’s no right answer and one size will not fit all. But we do recommend holding more gold than silver. Our suggestion for your precious metal holdings is roughly 80% gold and 20% silver. Like gold, silver comes in different forms. We’d start with the more popular one-ounce coins and then branch out into other types as your holdings grow. Jeff Clark Senior is a Editor with Casey’s Gold & Resource Report Courtesy: www.caseyresearch.com

 

VANCOUVER, BRITISH COLUMBIA (Commodity Online): Majority of the investors who took part in the 2010 Resource Investor Survey felt that gold prices will reach $1500 by end of 2010, according to Dig Media Inc.

Dig Media recently conducted its Resources Investing News 2010 Survey to gauge the interests of its readers and gain insight into investors’ perception of the markets.

The survey results showed that nearly 69 percent of respondents said they believe the price of gold will reach $1500 before the end of 2010. This bullish sentiment is most likely supported by the increasing flight-to-safety climate currently taking shape in Europe and North America as investors contemplate the likelihood of a slow economic recovery and the possibility of a double-dip recession.

Our audience is very focused on the resource investing market and as such has some interesting insights into the current state of the market,” said Nick Smith, Publisher at Dig Media. “Our reporters have taken these results and are digging into the background to provide readers with some interesting insights on the market overall and specifically in gold, uranium, copper and oil and gas.”

It’s not surprising that such a high percentage of respondents would answer yes when many analysts this past month have been calling for $1500 gold this year or next, including commodities analysts at Citibank, Macquarie Securities, UBS AG and Fairfax IS plc, Dig Media said.

Quoting Wayne Atweel, Managing Director at Casimir Capital and former Morgan Stanley Managing Director, the Gold Investing News brought out by Dig Media said that the longer term outlook for gold prices is rather bullish with the precious metal at $1500 to $2000 an ounce within the next one to three years, his short-term outlook goes against the grain, pegging gold as trading in a band between $1100 and $1300 an ounce through the end of the year.

When gold hedge won’t do, consider investing in silver

If you’re a gold investor, you have to be worried about an unwonted outbreak of good news. What if the economy doesn’t enter hyperinflation? What if peace breaks out, or the world’s terrorists scare themselves to death? Gold rarely thrives on good news, so you might consider adding silver to your portfolio. Like gold, silver is a good investment if paper money collapses. But unlike gold, silver is also an industrial metal, and demand for silver should rise in an economic recovery. As an added bonus: An ounce of silver is far cheaper than an ounce of gold.

 Like gold, silver is widely used as a medium of exchange when paper money loses its value. It’s a good store of value, and easier to carry around than chickens or canned hams. Silver and gold have been rising in the past few years, and with good reason:

 •U.S. government debt is now $8.6 trillion, or $13 trillion if you include intragovernmental holdings, such as the Social Security trust fund. The nation has the option of using a mix of tax increases and budget cuts to reduce the budget deficit and, ultimately, the debt. It also has the option of inflating its way out of the debt. Gold’s rise in price reflects the widespread notion that we will use the printing press to reduce our debt.

 •The euro has been sinking the past few weeks, as the world tries to figure out if Europe will be able to stabilize its more fiscally creative members, particularly Greece, Portugal, Ireland and Spain. Whenever the future of a currency is in doubt, investors look for an alternative, such as gold or silver.

Gold has soared from $258 an ounce in March 2001 to $1,221 Thursday, a 373% gain. Silver has trailed gold slightly during the same period, rising from $4.30 an ounce to $18.34, a 327% gain. If you buy any precious metal now, you’re certainly not getting in on the ground floor. But the metals may still have some room to run. “This is the best environment to invest in precious metals,” says Shanquan Li, manager of Oppenheimer Gold & Special Minerals fund. “The worldwide currency problem isn’t easily solved.”

 Industrial uses

 Unlike gold, silver also has myriad industrial uses. It’s a great conductor, so it’s in widespread use in electronics. The chemical industry uses about 700 tons of silver a year, according to The Silver Institute, an industry trade group. And it’s an effective antibiotic, useful in water purification, which accounts for its appearance in the portfolio of the Kinetics Water Infrastructure fund (ticker: KWICX).

 Should the global economy recover, silver should have some additional upside, says Joe Foster, co-manager of Van Eck Global Hard Assets (GHAAX). “I expect silver to outperform gold, because it has some industrial applications as well,” Foster says.

 If you’re interested in investing in silver, you have a number of choices:

 •Physical. The most cost-effective way to buy silver is in large bars, says David Beahm, vice president of economic research at Blanchard & Co., a New Orleans precious metals dealer. Those are a problem if you only want to sell a quarter of your bar, he notes. Most people buy 1-ounce silver coins. “Look for the coins with the lowest premium, whatever that might be — American Eagles or other 1-ounce coins.” A premium is the coin’s markup from the silver spot price. You can also buy bags of “junk” silver — pre-1965 silver coins — but those, too, are cumbersome. Try hauling around $5,000 in quarters some time.

 Bear in mind that you’ll have to store your silver somewhere, and that depends, to some extent, on how much you trust your neighbors. If you put your silver in a bank safe-deposit box, your rental fees will eat into any profit.

 •Exchange traded funds. Several ETFs now invest in physical silver, which makes the problem of storage much easier. If you’re worried about a financial collapse, however, your silver shares won’t go far at the corner grocery store.

 •Silver-mining stocks. Silver is typically a byproduct of something else, and so there are few pure plays in silver. But silver stocks aren’t followed as closely as gold-mining stocks, says Oppenheimer’s Li, and that can be an advantage.

 One interesting silver stock: Silver Wheaton (SLW), which buys silver production upfront for a fixed cost from miners, typically as a byproduct. Its cost of silver in the first quarter was $4.04 per ounce.

 Silver is a highly speculative investment, and if you’re worried about taking losses, then you should be investing elsewhere. But if you think the world is in trouble — but are willing to admit you could be wrong — silver is one way to go.

 John Waggoner is a personal finance columnist for USA TODAY. His Investing column appears Fridays. His book,Bailout: What the Rescue of Bear Stearns and the Credit Crisis Mean for Your Investments, is available through John Wiley & Sons. Click here for an index of Investing columns. His e-mail is jwaggoner@usatoday.com. Twitter: www.twitter.com/johnwaggoner.

Posted by TheStreet Staff on Tuesday, June 8, 2010 10:02 AM

By Alix Steel, TheStreet

Gold prices set a record high today as investors scrambled to buy the precious metal and appetite for risk diminished.

Gold for August delivery was trading at $1,245.70 an ounce at the Comex division of the New York Mercantile Exchange after reaching an all-time high of $1,254.50. The gold price today has also traded as low as $1,238.50. The U.S. dollar index was slipping slightly to $88.26 while the euro rallied 0.23% to $1.19 vs. the dollar. The spot gold price Tuesday was rising $3, according to Kitco’s gold index.

The risk trade was deteriorating fast, and investors fled into gold as a safe haven asset. Fitch ratings agency said that the U.K. is up against a “formidable” task to cut its budget deficit, and the news spooked investors and pushed gold past its old high of $1,249 an ounce.

“I think gold is smelling that these lows that we’ve held in the past few weeks in the equity markets are not going to hold. And if they don’t, gold will make that move towards that $1,300-or-higher an ounce in the near term,” says Scott Redler, chief strategic officer at T3Live.com.

In times of financial turmoil and currency devaluation, gold becomes the ultimate safe haven. A double-digit rise in gold prices, like investors saw on Monday, represents a flood of fear in the markets. The euro rebounded modestly from its 4-year low of $1.18, but many analysts expect it to fall to $1.16 before it gains some temporary stability. As traders and hedge funds pile into gold and prices start moving fast and furiously, many retail investors will jump into the trade for fear of missing the boat.

There are several supporting factors that help move the gold price, such as peer pressure and central bank buying.

Scott Carter, executive vice president of Goldline International, a 50-year-old seller of precious metals, says, “When there’s a spike in the price of gold, it’s somewhat counterintuitive, but you see buyers increase into the markets. So it’s almost like the train is leaving the station … if gold goes up 1%, 2% in a day we’ll see a dramatic increase in the interest.”

The advent of gold ETFs that are physically backed have given investors an easier, safer and faster way of buying gold. The most popular, SPDR Gold Shares (GLD), currently has 1,286.35 tons in its holdings, which is slightly less than its record of 1,289 tons. If investor demand outpaces available shares, more gold must be added to issue new stock. Shares closed almost 2% higher Monday at $121.46.

Another popular theory for strong gold price movement is central bank buying. Since the second quarter of 2009, central banks from emerging market countries like India and China have been reallocating their reserves with a strong push into gold. India and China hold 6% and 1.5% respectively, as compared to the U.S. which holds 74% of its reserves in gold. Recently Iran joined this trend, announcing it would sell 45 billion euros for U.S. dollars and gold.

Central banks typically don’t announce when they are buying gold for fear of moving the price higher. But when they buy they typically purchase in large quantities and can be a possible factor in big price swings.

Double-digit price gains work both ways, however; some analysts believe that when the fear of a crisis subsides and more confident investors stop turning to the gold market, prices could plummet to $800 an ounce.

“As the global macroeconomic environment stabilizes we continue to expect a significant decline in gold prices,” says Michael Crook, Vice President and Strategist at Barclays Wealth. “[We] initiated a recommendation that clients consider adding a short gold position into their portfolios.”

Gold prices broke through their previous high of $1,229 an ounce in early May but only sustained that level for a week, which has many investors wondering how long this momentum can last. Gold prices Tuesday have already backed away from their $1,254 high as U.S. stock futures pointed slightly higher.

Silver prices were rising 14 cents to $18.31 while copper was flat at $2.77.

Copper prices have fallen 11% in the past week as investors worry that slowing global growth will curb demand for the industrial metal. Although Fed Chairman Ben Bernanke tried to reassure investors that the U.S. recovery was on track, China’s recent attempts to pop its real estate bubble and eurozone nations’ fervor to slash their budget deficits and reign in spending could weigh on prices. Shares of Freeport McMoRan Copper & Gold (FCX) have reflected these concerns with the stock down over 26% year-to-date.

Gold mining stocks, a more risky but more profitable way to invest in gold, closed higher Monday and continued their gains Tuesday morning. Barrick Gold (ABX) was up 1.8% in early trading while Newmont Mining (NEM) gained 2.6%. Other large cap miners Kinross Gold (KGC) and Goldcorp (GG) rose slightly at 1.8% and 0.6%, respectively. Agnico-Eagle Mines (AEM) had gained 1.8% to $60.36.

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By Jim Wyckoff
Nymex platinum and palladium futures markets this week have seen strong selling pressure that has resulted in major near-term chart damage which has put the bears in firm near-term technical command. Platinum futures this week have shed around $200.00 an ounce, while palladium futures are down around $120.00 an ounce this week.

The daily bar chart for July platinum futures shows that prices Thursday spiked to a fresh three-month low of $1,490.30. Prices are presently in a steep two-week-old downtrend on the daily bar chart. The next downside technical objective for the empowered platinum bears is to push and close prices below solid chart support at the February low of $1,456.00 an ounce.

It would take a close in July platinum futures back above strong technical resistance at $1,625.00 to provide the bulls with some fresh upside near-term technical momentum.

June palladium futures are in a steep three-week-old downtrend on the daily bar chart and hit a fresh 3.5-month low. The next downside price objective for the powerful bears is to produce a close below solid technical support at the February low of $382.00.

It would take a close back above major psychological resistance at $500.00 an ounce to provide the palladium bulls with fresh upside near-term technical momentum and repair this week’s chart damage.

By Jim Wyckoff, contributing to Kitco News; jim@jimwyckoff.com

What Gold Can (and Can’t) Do For You

It wasn’t so long ago when the Euro was flying high and some experts were predicting that the dollar could be replaced as the world’s reserve currency because of the United States’ ballooning deficit. Now, there are fears that Greece could default on its debt and even the Euro may cease to exist. The dollar has made gains against the Euro, but the real winner in this debt crisis can’t be printed by central banks. It must be harvested by miners: gold.

While the Euro has taken a hit, gold has shot up to all-time highs, above $1,200 per ounce. Investors must decide for themselves whether or not commodities like gold belong in their portfolio, but for those who want to know what all the fuss is about, here are a few things to know:

[See U.S. News's list of the Best Mutual Funds for 2010, and use our Mutual Fund Score to find the best investments for you.]

It has never been easier to invest in gold. Exchange-traded funds have revolutionized investors’ access to commodities. “The ease and liquidity of ETFs have really opened up commodities in general as a new asset class for investors,” says Tom Lydon, editor of ETFTrends.com. “In the past, for investors to buy gold, they either have to buy the coins or the bullion, and now in the form of ETFs there’s a whole variety of options,” Lydon says. In addition to buying gold through futures contracts, investing in physical gold—bars in underground vaults—through ETFs is now possible.

[See The Appeal of Gold ETFs.]

Gold can diversify. A small amount of gold can limit the overall volatility of your portfolio because it often performs differently from mainstay investments like stocks and bonds. “Gold and some other types of commodities are what you call non-correlating assets, so they tend to move independently of overall moves in the market,” says John Diehl, senior vice president in the retirement division at the Hartford. Gold sometimes reacts differently to market selloffs, which can help offset losses in stocks.

Gold as a reserve currency. The past few weeks have been a roller coaster ride for stock investors, punctuated by steep falloffs and strong rallies. The market’s behavior is partly due to worries that debt problems in some European countries like Greece could spread to other parts of the European Union and damage the Euro. The dollar has rallied somewhat in responses, but the United States has debt problems of its own.

The world’s primary reserve currency—the most commonly held currency by central banks around the world—is still the dollar, but when fear strikes the market, many investors flock to the safety of gold. “It’s not irrational that people are buying more gold right now because in the past, you had two reserve currencies, potentially, then you were down to one with the Euro, and now you may be down to none for a while, so gold is really the ultimate reserve currency,” says Paul Zemsky, head of asset allocation for ING Investment Management. “It’s the only thing that holds its value even if central bankers and governments are eroding the value of their own currency.” When there are global concerns about monetary policy, Zemsky says, gold will benefit from a flight to quality.

It has been a good, long run. The shiny metal set record highs last week. Diehl says he is worried that some investors who are new to commodities may not know what they’re getting into. “If fear in the market is at a high and everyone you talk to is saying, ‘Hey, you should put your money in gold,’ as a contrarian investor, that should be somewhat of an alarm to say, ‘Is this really the right thing to do? When everybody says, ‘Now is the right time to buy anything,’ you can generally feel fairly confident that it probably isn’t,” he says. A general rule of investing, Diehl says, is to look for asset classes that seem to be undervalued, and gold could be reaching its peak price.

Gold can be extremely volatile. Gold can provide diversification, but investors should be aware of the risks of investing in commodities. “Gold is really a precautionary hedge and not something your whole portfolio should be in,” Zemsky says. He recommends that investors only have 3 to 5 percent of their overall portfolio in gold. Diehl is even more cautious. “A singular bet on gold is, at its core, still a singular bet,” he says. “Just as emotions are volatile, the price of gold is a pretty volatile asset.” He suggests finding a fund that invests in a broad basket of commodities and not just in gold alone. Two popular choices are PIMCO Commodity Real Return Strategy Fund (PCRAX) and PowerShares DB Commodity Index Tracking Fund (DBC).

Investing May 13, 2010, 10:55PM EST text size: TT

The Gold Frenzy: Why Investors Should Resist

The price of gold is at a record high, attracting the attention of many retail investors. But this precious metal is no safe haven

By Ben Steverman

As an investment, gold has never been more popular. And, for individual investors, that’s part of the problem.

Gold spot prices hit a record of $1,243.10 per ounce in Comex trading on May 12 before slipping $13.90, or 1.1 percent, to $1,230.10 on May 13. In the past three years, the precious metal is up 84 percent. The SPDR Gold Shares (GLD) exchange-traded fund now contains $48.1 billion in assets, with the number of shares outstanding up 111 percent since September 2008.

Encouraged by TV and radio ads touting the virtues of gold, retail investors are buying it up. One leading gold dealer, Goldline International, estimates it has added 50,000 clients in the past three years. The gold frenzy is worldwide: On May 13, a vending machine that dispenses gold bars was unveiled at Abu Dhabi’s Emirates Palace hotel.

Financial experts warn that all this enthusiasm for gold could be a warning sign—that gold prices could be near their peak. “It’s very in vogue right now, which is usually a telltale sign [of] a bubble-like mentality,” says James Miller, president of Woodward Financial Advisors in Chapel Hill, N.C.

Gold’s advocates may be right that the metal could head higher still, driven by the fiscal crisis in Europe, high deficits in the U.S., and fears of inflation. “All we can do is put our money into real assets, because paper money everywhere is being debased,” Jim Rogers, chairman of Rogers Holdings, told Bloomberg Television on May 12 as gold hit new highs.

Treacherous Field

But even if gold keeps rising—a prospect very difficult to predict, given the metal’s volatile track record—there are several features of gold that make it treacherous for individual investors, financial advisers say.

Gold might have a reputation as a “safe haven,” but nothing could be further from the truth, says Susan C. Elser, of Elser Financial Planning in Indianapolis. Unlike other commodities, gold has few industrial uses. Unlike businesses owned through the stock market, gold earns no profits and doesn’t pay out dividends. Unlike bonds, no one pays interest to holders of gold. And, unlike insured bank deposits, there is no guarantee of your principal investment.

“There is no downside protection on investing in gold,” Elser says.

Gold used to be the backing for currencies, but no longer. Now “it really is only a store of value because people say it’s a store of value,” says Ken Eaton, principal at Stepp & Rothwell, a financial planning firm in Overland Park, Kan. That can lead to extreme volatility, which financial planners cite as one of gold’s biggest downsides.

Gold may be up 84 percent in three years, but it has taken a wild path to get there. Most recently, gold fell 12.6 percent from Dec. 2 to Feb. 8, then rebounded 16 percent in the next three months.

Much of gold’s appeal is built on its use as protection against inflation, which some—but not all—investors see as a potential threat.

“We’re in very unusual times,” says Barbara Camaglia, head of Legacy Financial Advisors in Beachwood, Ohio. “Everyone is debasing their currencies, so I think having some gold is not a bad idea.”

Portfolio Allocation

Gold is just one part of a diverse portfolio, she says, with a portfolio allocation often kept to 5 percent, though “you could argue for a higher percentage.” A small gold holding is typically recommended even by financial planners, like Eaton, who are skeptical of buying gold now. Gold is one sliver of commodity holdings that make up 2.5 percent to 5 percent of his clients’ portfolios, Eaton says.

It’s true that gold kept pace with inflation in the 1970s. The annual increase in the consumer price index averaged 9.3 percent from 1973 through 1981. The market price of gold at the end of 1972 was $63.91, rising to $456.90 by the end of 1982. That’s a 615 percent increase, compared to cumulative inflation from 1972 to 1983 of 138 percent.

However, gold’s record as an inflation hedge is more mixed over the long term. Because gold fell from 1980 to 2001, the metal’s total appreciation from 1972 to 2001 was just 336.5 percent. That barely beats inflation over those 29 years of 323.7 percent, and is way behind the 2,466 percent return of the broad Standard & Poor’s 500-stock index if dividends are included.

“There are [short] periods of time—like now and the 1970s—when there is really a lot of uncertainty out there, and people flock to [gold] for safety,” says Miller of Woodward Financial Advisors. But gold’s long-term record is weak, he adds. “It’s a short-term trading vehicle rather than a long-term investment.”

There are practical problems with owning gold, as well. It’s heavy, and not easy for the average investor to buy, sell, ship, and store. “You’re dealing with a lot more transactional costs,” says David Lamp, a financial planner at BBJS Financial Advisors in Seattle. He keeps no more than 1 percent or 2 percent of client portfolios in gold.

Goldline’s Profile

One easier way to get exposure to gold is through exchange-traded funds. For example, the SPDR Gold Trust holds actual gold bullion. The PowerShares DB Gold Fund (DGL) holds futures contracts linked to the price of gold, and the Market Vectors Gold Miners ETF (GDX) holds stock in gold mining companies.

Many gold investors, however, don’t trust funds to hold their gold. The vast majority of Goldline customers want their gold physically delivered to their homes, says Goldline Executive Vice-President Scott Carter.

The company, which nets about $500 million in revenue each year, touts the endorsements of conservative pundits Glenn Beck, Laura Ingraham, and Mark Levin, as well as former Arkansas governor and Republican Presidential candidate Mike Huckabee. The average initial customer at Goldline invests $15,000 to $25,000, and Carter says Goldline discourages “the speculator,” recommending holding gold for three to five years and only as 5 percent to 15 percent of a diversified investment strategy.

The transaction costs of gold are reflected in Goldline’s prices. To buy from Goldline, gold bullion sells for about 5 percent above the current market price, while special gold coins can get markups of up to 35 percent. Selling back to Goldline, customers typically pay 2 percent below the market price, Carter says.

For many investors, however, the appeal of gold, especially in its physical form, remains strong.

“They don’t want a piece of paper,” Carter says. “You’re buying something you can see and touch. There is a large group of investors who like to buy physical, tangible assets.”

Steverman is a reporter for Bloomberg Businessweek’s Finance channel.

LONDON (Commodity Online): Will gold price zoom past the record of $1227 per ounce that the precious metal achieved in December 2009? It looks gold price is surging once again prompted by a number of reasons that include the Greek financial crisis, volatility in dollar and Euro and several central banks’ decision to raise interest rates.On Monday, gold price started climbing in global markets across several continents from Asia to Europe. Gold prices hit a fresh four-months high in Asian trading on euros rebound as EU offered a bailout package to Greece. Gold for immediate delivery was seen trading at $1165.35 an ounce at 11.30 a.m while U.S. gold futures for June delivery was at $1,166.40 per ounce.Bullion analysts said that gold price is once again on a boom. Gold’s steady ascent to a record of $1227 per ounce began in October 2009 in the aftermath of India buying 200 tonnes of gold from the International Monetary Fund (IMF). IMF decision to sell gold to India at a high price led to a frenzy in bullion markets around the world, resulting in the precious metal’s historic rally to $1227 per ounce on December 4, 2009. Precious metals analyst Mark Robinson says gold price is once again on a surge. “Gold has turned out to be the best investment asset for common people, banks, brokerages and investors around the world. Everyone is betting on gold on increasing political and currency worries in several nations from Greece to Brazil,” he pointed out. “April is going to be the month for gold, it looks. The current gold rally has the potential to cross the $1227 per ounce. I am looking at a gold price of $1250 or above per ounce in short terms. Gold is surely going to achieve another historic record. Gold is on a bullish run on global investment demand,” Robinson told Commodity Online. Analysts like Robinson say that the bull run in gold will continue for some months now as investors are scouting for pouring money into gold funds, gold bars, gold coins and several other bullion-based assets. “In countries like India, one of the largest gold consuming countries in the world, people are buying into Gold ETFs and gold funds based on mutual funds. This is all leading to another bullish run on the yellow metal,” he added..Several bullion analysts are now banking on the bull run theory on gold. David Levenstein, another precious metals analysts posted this report on gold on Monday: “In dollar terms the gold price is now about 5 percent below its all time high, but the weakness of the pound and the euro against the American currency means that the price of the yellow metal in sterling and euros has just made new record highs. The price of an ounce of gold has thus reached record levels of £754 and €865 in recent trading, and the dollar price has reached a three-month high of $1,157. In August last year the gold price in sterling terms, for example, was £562, so British gold investors have made a profit of 34%, compared with a rise in the dollar price of 23% over the same period. During the past week, the Euro was very volatile especially as the financial drama in Greece continued. As expected, the ECB left the main refinancing rate at 1% in April, and both growth prospects and inflation were largely unchanged from previous meetings. ECB President Trichet addressed questions about Greece’s deficit problem and said that ‘default is not an issue for Greece’. Although the Euro edged up higher on Friday, the trend for the week has been down. There were a number of Central Bank events last week. Australia raised rates by 25bps to 4.25% as widely expected, and the Bank of Japan and Bank of England left rates and the quantitative easing program unchanged. The U.S. Federal Open Market Committee minutes for March’s meeting unveiled the Fed’s dovish monetary outlook. While forecasts of real economic activities remained largely unchanged from previous meeting, policymakers were surprised by deceleration of inflation. At the same time, the Fed noted unemployment would be undermining recovery. Nicholas Brooks of ETF Securities, which runs exchange-traded funds, said: “The strong performance of gold, despite the strength of the US dollar, indicates that investors are increasingly viewing it as an alternative store of value, not just to the US dollar but to fiat [paper] currencies more broadly, as sovereign risks continues to rise. “Traditionally, investors concerned about the structural outlook for the US dollar would buy euros, British pounds or yen. However, with policy and debt risks rising in all of these countries, investors – as well as central banks and sovereign wealth funds – are increasingly looking to gold as an alternative ‘hard asset’ store of value.” On April 8, of this month The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings hit an all-time high at 1,140.433 tons surpassing an earlier record of 1,134.03 tons touched on June 1, 2009. The rise in the ETF holdings to a new record level reflects strong investor demand. In my previous report I mentioned that the IMF had turned down a bid from Eric Sprott to buy the remaining 191 tons of gold on offer. Evidently, the IMF claimed that Sprott’s desire to purchase the gold from the IMF did not comply with ‘protocol”, and that the IMF only sells gold to central banks. When Sprott explained what happened, he also mentioned that “I’m a 100% believer that central banks have suppressed the price of gold. I find it hilarious today that they have these programs to sell gold – it’s of no use. It’s one of the dumbest decisions in the last decade.”

Gold Ready for New Highs?

By Patrick A. Heller February 16, 2010

Other News & Articles

• Gold Ready for New Highs?
• UNESCO, Nationalism, Collectors Clash
• Greek Economic Turmoil Could Hurt Euro

As I write this mid-day on Monday, gold has addded more than five percent to recover from of its intraday lows 10 days ago. It is about $1,100 at the moment.

It looks like the $1,108 level is one that would signal to technical traders to again jump in to buy. If gold can get and hold that level, and there is a good possibility it will occur this week, then it’s highly likely that gold will generally rise in the short term to pass the early December 2009 all-time high of about $1,212. It won’t go in a straight line, but it could rise so quickly that it will amaze people.

Once gold reaches a new record high, the odds are that it would pause for some profit-taking before again rising up to even higher levels.

There continues to be so much demand for physical gold (versus paper gold contracts) relative to the available supply, that many would-be buyers seeking immediate delivery in the London market are having their orders rejected by every trading house on that exchange.

London is the world’s largest gold trading center, so larger buyers frequently try to place their orders there. The London Bullion Market Exchange trades contracts for physical delivery of gold. In theory, the trading houses on the exchange have the physical gold to deliver on maturing contracts. It does not make sense for these firms to reject orders on which they would make a profit. With multiple reports of great difficulty experienced by buyers seeking delivery of London contracts, a great suspicion is raised that the physical gold may not all be there.

I would not be surprised if, within a month, a two-tier market develops between the physical and the paper gold spot prices. If this happens, the price for physical is almost certain to be significantly higher. The lower price for paper gold contracts reflects the risk that the seller of the contracts would default. Obviously, a buyer who takes custody of physical gold has no risk of seller default.

The recent major snowstorms in the eastern part of the United States have disrupted U.S. Mint production and delivery of gold and silver American Eagles. The U.S. Mint headquarters in Washington, D.C., was closed Feb. 8-11. Both the Philadelphia and West Point, N.Y., mints, the manufacturers of most Eagle products, closed on Feb. 10. The receipt of planchets to make the coins, the production of the coins, and the shipment of finished product were all interrupted. This has made existing supply shortages even more of a problem.

Even better than the positive outlook for gold, silver seems hugely undervalued at today’s levels. Silver fell more than 20 percent from its early December peak, with the result that the gold/silver ratio is now above 70. The long-term forecasts I have seen for this ratio range from about 10 to 50, so all of the analysts behind these projections like silver’s prospects better than gold.

My own long-term expectation is for a gold/silver ratio of about 35 to 40. If our analyses are correct, silver’s price should appreciate far more than that of gold.

It should be no surprise that most of the action in physical metals in the past two weeks has been in the silver market. It is almost unanimously one-way traffic, with buyers eager to buy but almost no liquidation by owners. As a result, premiums are rising and delivery times are stretching out into the future, with some products already having expected delivery of more than one month. Supplies are not yet as tight as they were in late 2008, but they are going in that direction.

Physical gold products are relatively available, though U.S. Buffaloes are up in premium and not that easy to find. Once the price of gold starts to rise to new heights, I anticipate that supplies will dry up, just as we are now experiencing with silver. Between now and the end of March, the precious metals markets could get very exciting.

Patrick A. Heller owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” the company’s monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Financial Sense University (www.financialsense.com). His periodic radio interviews on WILS-1320 AM can be heard at http://www.amlansing.com and on the Korelin Economic Report at http://www.kereport.com.

Historic Hoards Echo in Population Reports

By Paul M. Green, Numismatic News January 07, 2010

There have always been some mixed emotions when it comes to hoards. It’s probably natural if you are a collector or dealer to have a concern about hoards and the possibility that one might appear and cause a sharp decline in the price of a coin you own.

The classic instance of that happening occurred to collectors owning 1903-O Morgan dollars back in 1962. They thought that they had a $1,500 coin only to see it fall to $15 seemingly overnight as hundreds of thousands of examples were released by the Treasury.

It would be hard to convince them that hoards are good.

On the other side of the matter, there is the very real fact that a hoard can make a certain coin much more available and at a much more reasonable price than was previously the case. This allows many collectors who otherwise would never have owned something to be able to acquire it.

The discovery of roughly 5,400 examples of the 1857-S Coronet Head double eagle on the sunken wreck of the S.S. Central America made not only the date available, but it also made it possible for many to have a chance to have a Mint State Coronet Head double eagle and one that was produced from the early days of the San Francisco Mint.

Without that recovery of 5,400 examples of the 1857-S from their underwater resting place, the possibilities of owning a nice Mint State double eagle from San Francisco in the 1850s would definitely be reduced and that is just one of many examples.

The discovery, promotion and original sale of hoard coins is just one part of the story. That may be the most exciting part of the story, but after the hoard coins are dispersed, how well do they really hold up in terms of price? In fact, there may be no single answer for the simple reason that there are literally hundreds, if not thousands of hoard coins.

In many cases, we simply do not have a name and story to attach to the numbers of one issue or another that are known today. That is especially true in the case of gold where hundreds and in a few cases even thousands of Mint State coins returned to the United States from primarily European bank vaults in the past half century.

There was no accounting of the numbers, but when you check the numbers seen at grading services today there is absolutely no doubt that there were substantial numbers.

Even in the cases where we know of specific hoards and likely numbers involved, it is unfair to expect that each and every hoard coin will show similar price movements. After all, they are part of a set and a set of large cents is not likely to move in price at the same rate as double eagles or silver dollars or Jefferson nickels. Consequently, we cannot really expect uniform results. That said, there is still a certain question as to just how well hoard coins have done in recent years, not when compared with each other, but perhaps when compared to other non-hoard dates of the same type.

One of the most famous hoards of all was the Randall Hoard. If you have collected large cents for more than three hours you have probably heard of the Randall Hoard. The story may not be quite in tune with the reality, but the fact remains that sometime in the late 1860s in Georgia there was a discovery of a significant number of large cents allegedly in a keg. The precise dates were debated as were an assortment of issues and the story over the years has evolved slightly but we have very solid evidence that five dates were found in some numbers in Mint State in the Randall Hoard.

The two most heavily represented dates were the 1818 and the 1820, with lesser numbers of the 1816, 1817 and 1819. We can say that with some certainty as the numbers of Mint State examples of the dates found at the grading services showed the 1818 having been seen 296 times at the Professional Coin Grading Service and 288 times at Numismatic Guaranty Corp. in Mint State, while the 1820 was seen 267 times at PCGS and 391 times at NGC. In comparison, the lowest numbers for any of the five dates were posted by the 1819, which appeared 81 times at each service. In the case of a date with a similar mintage from the period the combined total at the grading services was basically under 50.

Clearly the 1818 and 1820 are available in significantly higher numbers. Back in 1998 in MS-60 the 1818 was priced at $250 while the 1820 was $275. Today, in the same grade, the 1818 is $270 and the 1820 is at $300. It would appear that the dates are not doing well except for the fact that the large cents of the period in general have moved very little. The 1816 for example was $420 in 1998 and still is $420. Other dates have increased and usually more than the 1818 and 1820, so while perhaps increasing in price at a below average pace, it would be hard to say that the Randall Hoard dates are very different from other dates of the type.

The 1857-S double eagle found in such large numbers on the S.S. Central America, which sank in 1857 off the North Carolina coast, certainly has to be seen as an extreme test in terms of double eagles. It is not simply a case where the numbers are large, but it is also a case where the S.S. Central America is a relatively recent hoard.

The market has had very little time to really absorb what was over $100 million in sales. It is probably too early to expect the 1857-S, which was basically an available date in circulated grades but not a readily available date in Mint State, to show any signs of price increases. In fact, with very serious doubts that there are even 5,400 collectors of Mint State Coronet Head double eagles to absorb the supply, it would not be at all out of the question to expect the 1857-S to show some potentially serious price declines.

If you check the prices for the 1857-S back in 1998 in MS-60 it listed for $2,600 while an MS-63 was $10,000 with no price listed in higher grades. Today in MS-60 the 1857-S is at $4,500 while an MS-65 is at $7,250. It’s a very interesting situation and a somewhat volatile one as prices are all over the board depending on the price guide. The consensus, however, is that in MS-60 the 1857-S seems to have increased in price perhaps as publicity over the sale of the S.S. Central America coins encouraged some to want to acquire a lower cost example of a famous date.

The price decline in MS-63 may well be a case of this grade was actually hurt because there were suddenly significant numbers of higher grade examples. It is definitely an opposite trend from other Coronet Head double eagle dates. The question for the next few years is likely to be not what happens to the MS-60 or MS-63 prices, but rather how does an MS-65 or MS-66 fare at their current levels.

Another recent double eagle was one involving Saint-Gaudens double eagles. Called the Wells Fargo Hoard, the hoard involved 19,900 examples of the 1908 no motto double eagle. The number was extraordinary and so was the quality of the coins. The breakdown given to Q. David Bowers for his book A Guide Book of Double Eagle Gold Coins by Ron Gillio, who purchased the hoard, had 6,000+ in MS-66 with 1,700+ in MS-67.

These high grades were not just wishful thinking by the person buying the hoard. The coins have gone through the major grading services with stunning results. At PCGS, 793 Wells Fargo hoard coins were called MS-67 compared to 38 that were not from the hoard.

At NGC the number of Wells Fargo MS-67 coins was 941 compared to 94 not from the hoard. There were similar numbers in other high grades. The impact of so many top quality examples of a single date almost had to have an impact.

The MS-65 listing of the no motto 1908 back in 1998 was $1,350 and today in MS-65 the price is $2,350. This is the cheapest of the “No Motto” type.

If MS-65 were the top grade available, then there would be considerable pressure on buyers to find and buy an MS-65. The Wells Fargo Hoard, however, has made MS-65 an average grade for this one date. Combined NGC and PCGS have graded over 6,400 Wells Fargo coins as MS-66 and 1,700 more as MS-67. Under the circumstances, buyers will seek those upper grades and not the MS-65 so there are more than just numbers potentially working against the MS-65 price of the “No Motto” 1908.

A dramatically different situation involving gold coins would be the gold dollars of 1879, 1880 and 1881. The three were low mintage, with the 1879 having a mintage of 3,030 while the 1880 was just 1,636 and the 1881 was 7,707. The three should have all been tough dates, but back at the time they were released someone saved examples. In fact. they saved hundreds of each.

We can see evidence in hundreds of each in Mint State reported by both PCGS and NGC. The hoards of the three were not all that well known, although it is a case where relatively few study and collect gold dollars. While we do not know the details of the hoard, we know that hundreds of each of the three dates are known and the MS-60 price of the three back in 1998 saw the 1879 at $700 while the 1880 and 1881 were each at $400. Today in MS-60 the 1879 is $525, the 1880 is $425 and the 1881 is $410.

There is simply no good way to make sense of that change. Ironically, the 1879 which declined the most in price is the least often seen of the three in highest grades, while the 1881 which actually increased in price in the highest Mint State grades has been graded more often than either of the other dates. There is no good way of explaining the changes, but every so often strange things happen in the market and this would have to qualify as one of those times.

If there is such a thing as a blue chip hoard coin, it is ironically a pattern as the 1856 Flying Eagle cent could not have been a coin even though it circulated simply because the law authorizing the Flying Eagle cent was passed in 1857. Over the years, few coins have been hoarded like the 1856, which seemed to always inspire speculation or at minimum a hoarding instinct.

George Rice of Detroit probably won the prize for the largest hoard of the 1856 with his accumulation numbered 756 pieces while close behind was John Andrew Beck of Pittsburgh, whose total included some from the Rice collection, reached 531.

In the case of the 1856 the numbers are small, but the percentage of the total mintage is large. Produced both in proof and also with a small number of business strikes there is no certainty regarding the 1856 mintage although perhaps 1,500 to 2,500 pieces would be a good range. Back in 1998 the 1856 was at $4,000 in G-4 and today that price is $6,250. In MS-65, the 1998 price was $21,000 and today that price is $65,000. Clearly as hoard coins go, the 1856 Flying Eagle cent continues to defy the other patterns by surging strongly to higher prices and in all grades.

There was a great deal of hoarding during the Civil War and some of that even reached down to copper-nickel cents. As a result, small groups of the copper-nickel cent dates have been reported over the years. The largest was discussed by Q. David Bowers in his book American Coin Treasures and Hoards” The group of probably 1,000 Mint State specimens of the 1862 was offered in a Thomas Elder auction in 1918. The group was significant based on the fact that PCGS has seen about 675 Mint State examples of the 1862 while NGC is at roughly 850. The 1998 prices for the 1862 in Mint State were $80 for an MS-60 and $575 for an MS-65. Today those listings are the same for an MS-60 but $1,050 for an MS-65. For a hoard coin that is not heavily publicized, that’s a strong MS-65 increase, although in reality it reflects a general increase in copper-nickel Indian cents prices in MS-65 as all dates have done basically the same thing in terms of price.

One of the more interesting dates that was heavily hoarded was the 1883 without “CENTS” Liberty Head nickel. No particular hoard can be discussed although groups of 100 or more were known. The 1883 without “CENTS” was simply hoarded by many as a new design. It was an unusual time for hoarding, but people then also hoarded the last couple years of the Shield nickel series. We see the proof in the fact that there are thousands of Mint State 1883 without “CENTS” nickels reported at the grading services and that produced 1998 prices of $32 in MS-60 and $300 in MS-65. Today those prices are $25 in MS-60 and $260 in MS-65, so clearly the extremely large numbers reported by the grading services are keeping the price down.

In his book, Bowers reports on the mysterious appearance on the market of hundreds of Mint State 1877-CC quarters in Mint State. It was an odd situation as traditionally there was very little saving of new coins at Carson City and even if there had been, the 1877-CC quarter with a mintage of nearly 4.2 million would have been an odd choice. That said, the observation of Bowers is supported by grading service totals, which show hundreds of examples of the 1877-CC in Mint State.

Since 1998, the 1877-CC which was at $375 in MS-60 has dropped to $325. Interestingly enough, that is still a premium over the most available Mint State Seated Liberty quarter dates of the type. Realistically the 1877-CC is one of those most available dates, but it happens to have a “CC” mintmark, which may be the only thing stopping it from further declines.

There is no doubt there have been a few Lincoln cents that were hoarded. It was reported that John Zug had some 25,000 examples of the 1909-S VDB, although that hoard was allegedly broken up before 1920. There were at least 10 or more rolls that hit the market in the 1950s, but the demand for the 1909-S VDB is so great that such numbers were drops in the bucket when it came to meeting demand.

Since 1998 the 1909-S VDB has gone from $720 in MS-60 and $1,800 in MS-65 to a current $1,825 in MS-60 and $6,850 in MS-65, proving that with enough demand no hoard can keep prices from rising. The situation with the Philadelphia 1909 VDB is slightly different. Its total numbers hoarded were much, much larger. There is solid demand for the 1909 VDB, also. Its 1998 prices of $9 in MS-60 and $39 in MS-65, respectively, have risen to $25 in MS-60 and $195 in MS-65.

A final Lincoln cent worth noting is the 1931-S. With a mintage below 1 million we know the 1931-S was hoarded. We can dispute the numbers hoarded with a Walter Breen claim that the Maurice Scharlack hoard had 200,000 pieces, which would have been about 25 percent of the entire mintage, but there is no doubt the 1931-S was heavily hoarded in Mint State and upper circulated grades. Since 1998 in Mint State the 1931-S has moved from $53 in MS-60 and $215 in MS-65 to a current $163 in MS-60 and $685 in MS-65.

Probably the most famous hoard coin of all time would be the 1950-D Jefferson nickel. We frankly do not know what percentage of its 2,630,030 mintage was hoarded initially, but somewhere on the order of 50 percent or more would be in the ballpark. A.J. Mitula of Houston, Texas, reportedly had 1 million pieces while another 320,000 were reported in Wisconsin and there were others with larger numbers involved.

The 1950-D soared in price during the 1950s and 1960s probably in part because all were tied up in hoards. Then it simply went into a coma, not moving for decades. In 1998 the 1950-D was $6.50 in MS-60 and $9.50 in MS-65. Today it sits at $18 in MS-60 and $30 in MS-65.

It is certainly a mixed bag when it comes to prices of hoard coins. Greater numbers should hold prices down, but a good story or heavy demand for the whole series can still lift prices higher.

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