Skip to main content

Gold has risen $60 in past year

In the 40-day period ending in the middle of September, gold and other metals rose quite strongly as the weakened U.S. dollar struggled against the pound, yen and euro.

In the 40-day period ending in the middle of September, gold and other metals rose quite strongly as the weakened U.S. dollar struggled against the pound, yen and euro. A few analysts are predicting a potent new floor for the gold spot price at $450 per troy ounce, while others feel more comfortable with a support level at $440.

Spot gold was trading in New York at about $467 per ounce and spot silver was trading at $7.34. Gold has risen about $60 an ounce the past 12 months.

In the opinion of this writer, gold coins continue to be the safest and sanest way to hedge one’s future. As always, I prefer real numismatic coins, such as pre-1934 U.S. and European gold coinage, to modern bullion pieces. I adopted this position publicly in 1964 as a numismatic editor and have seen no reason to alter it. Gold is the premier value hedge, along with land. These two avenues for excess income will always outlast stocks, bonds, bank accounts and other paper debt instruments, but of the two, gold is best because it is easily transportable and untaxed in most jurisdictions.

The overall metal price uptick extended to several of the base coinage metals.

It is difficult to consider copper, for example, as a precious metal, but it reached $1.793 per pound on the London Metal Exchange Sept. 5, while nickel stood at $7.053 a pound and tin at $3.23. Much of the world’s coinage today uses copper and nickel extensively; North America mines an inordinate fraction of the world’s supply.

Almost lost in the news about the multibillion dollar losses in Louisiana, Mississippi and Alabama and the inundation of New Orleans due to Hurricane Katrina was an overseas discovery of potentially huge magnitude.

Jubilee Platinum PLC, a company with platinum group mining properties in South Africa and Sierra Leone, but with a capitalization of only $55.5 million, has been operating in the Malagasy Republic (Madagascar) since 2002. It just announced potential world-class platinum group, nickel and copper projects about 94 miles north of the capital, Antananarivo.

The Malagasy Republic or its predecessor, French Madagascar, never issued precious metal coinage for circulation. In 1988 the republic issued a 10-ariary (50-franc) gold piece in proof only for the World Wildlife Fund. The coin was struck in only about 5,000 pieces, containing 10 grams of .9167 fine (22 karat) gold, approximately 3/10th troy ounce of fine metal.

The recent (2005) Standard Catalog of World Gold Coins has values based upon $410 an ounce gold, $830 ounce platinum and $220 ounce palladium for bullion-type coins. Based on the new world pricing realities, gold coin values would have to be boosted.

Foreign central banks are in the process of dramatically lowering their purchases of U.S. Treasury securities. The peak was $400 billion in 2004, about $200 billion in 2005, and now annualized at $100 billion over the 2005 third quarter (July, August September). These figures are deduced from Federal Reserve System indicators. Can we infer that this means a heightened interest in gold as monetary reserves or merely other paper currencies, such as the euro?

One of the least likely monetary events to happen is that the U.S. would revert to the gold standard dollar that existed until 1933, or even a gold exchange standard unit which was abolished in 1971. Like almost every nation on earth, the U.S. depends on unbacked paper currency which it can issue at will, backing it up (in theory) by government bonds. In other words, paper money is merely monetized debt.

The U.S. debt now stands at nearly $8 trillion, a mind-boggling figure that is unlikely ever to be repaid to its creditors in full. A comparison would be that the Federal Reserve System has a credit card with an infinite, unlimited credit maximum – but one that can continue to pay its interest by printing more monetized debt dollars.