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Letters to the Editor: Aug. 11, 2020

Research Reveals Find Created by Chet Krause

Krause Mint Set

Check out this historic find! The steel penny isn’t part of it, it’s just something I picked up at the same time. I started researching and found that this publication’s founder made these. I thought it was a cool find considering I’m in Florida.

Michael Blankenship

Panic Buying for Gold Yet to Hit

Thank you for printing the brilliant article by Patrick A. Heller: “Why Isn’t Gold $3,000-Plus?” To complete the discussion, we may add some background regarding the drag on gold bullion appreciation.

When President Nixon demonetized precious metals in the late 1960s, he eliminated much demand for gold and silver. Without bullion to back money, the U.S. government needed no gold or silver for any purpose beyond defense. Other countries followed the lead of the United States, causing precious metals demand to tank.

Not until bullion dealers advertised and predicted economic doom via the likes of Howard Ruff did the general public become interested in gold as an investment. In the late 1960s, one could buy all the coin silver desired from circulation at face value. Gold was equally abundant near the old official price of $35 per ounce. Only gold in jewelry seemed desirable.

Investment experts scoffed at gold and silver for acquisition, regarding metals as “a non-producing asset with zero rate of return.” Given the large number of investments with better returns, gold and silver languished for years.

Gold is now promoted as a sound investment to protect wealth, but not for capital appreciation. Hence, gold is only a hedge against inflation or economic collapse. Investors have not turned to gold except in times of economic instability, where most other investments are either overpriced or excessively risky.

Gold bullion price peaks have been brief, with broad valleys in between. The years 1980 and 2011 were gold rush years. Most other years did not lead to great returns on gold compared to other investments. Each successive peak in gold price is higher, but the average price of gold rises with inflation and with the fall of the dollar versus foreign currencies. Speculators keep hoping that something will happen in the economy that will scare investors into paying more than its intrinsic value. Speculators want big profits from panicked buyers as has happened in previous peak years.

The current pandemic has created an investment uncertainty that could cause investors to buy gold in quantity. Prices have been rising steadily the past few months. Panic buying has yet to hit.

A big drag on the gold market may be paper gold. Rather than buying physical gold, many investors buy paper from companies that represent that they hold real gold to back the paper. Given the inability of the average investor to verify such claims, investors may be buying worthless paper that diverts money away from real gold bullion purchases. Paper gold dampens demand for real gold.

If everyone were to take delivery of actual gold bullion, real gold would be purchased on the open market. Perhaps the purchases would cause gold to spike to $3,000 or higher. But because unlimited amounts of paper gold can be sold without government oversight, paper can absorb all investment demand without increasing physical demand. If there is no new physical demand, the spot price will not rise.

Price suppression of gold is easy. To cause the price to drop, a deep pocket can short sell a large amount of gold. Since few investors demand the real thing, the paper price drops and the physical price may follow. When gold was priced at $35 per ounce, who predicted we would ever see the current $1,800 level?

We needed 50 years to get to the current spot price. With the huge deficits, the federal government is currently running up, the $3,000 level will be reached regardless of any efforts to prevent it.

One should hope that the price of bullion stays low. When the price goes up, the purchasing power of the average citizen drops. Thank the suppression of the spot price for keeping gold as affordable as it is. If one wants to liquidate, sorry for the underperformance of the investment!

Bruce Frohman
Modesto, Calif.

Error in Unc. American Legion $5 Total

The June 30, 2020, issue of Numismatic News (Page 14) shows the mintage of the 2019 $5 Uncirculated American Legion gold coin to be 2,445.

From the information I can find from the U.S. Mint, the mintage is 2,929.

Where’s the difference? Did the Mint release some new figures and not update their website?

Last Name and Address Withheld

Editor’s Note: You are correct. The U.S. Mint reports a total of 2,929 for the 2019 American Legion uncirculated $5 coin. We regret the error and have corrected it in this issue’s Mint Statistics chart on Page 30.