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Paul Albarian & Associates, LLC, Jewelers  Retail, Burbank, CA

COIN & METALS MARKET OVERVIEW

This is a report I wrote back in February 19, 2010. It is interesting to see where the precious metal prices were then, what has changed, and what has not changed. You can find us at WWW.Albariancoins.com.

By Paul Albarian
February 19, 2010

 

Prices on Feb. 19, 2010 Prices on Feb 12, 2010  Prices in 1980
Gold $1121     Up $3 $1094 $850($1,225 in 2009)
Silver $16.41  Up .35c $15.64 $50
Platinum $1,540 Up $25 $1,520 $1,055($2,289 in 2008)
Palladium $442 Up $7 $419 $350($1,200 in 2001)

The pendulum swings in different directions these days as the more than two year long, “Great Recession” takes new twists and turns. While the United States economy has shown very modest signs of recovery, it may just be the best of the worse, with its unemployment rate at 9.7% and twenty bank failures in 2010. Europe’s economy is under a threat of a double dip recession as the European Union tries to save the troubled countries of Greece, Spain, Portugal, and Italy from bankruptcy. As a result of Europe’s economic problems the United States dollar is getting stronger in value.

In spite of a stronger United States dollar recently, (Today at 80.88) gold is showing an incredible amount of strength, as it rose above a $1,065 support level a few weeks ago to close today at $1,121 per ounce.

Typically, gold and the other precious metals rise when the United States dollar is weak. The recent rise in gold can be attributed to a no faith attitude around the world as countries issue (Print) more money to monetize their debt to try to control this “Great Recession,” from taking a turn toward a “Great Depression.”

Many people around the world are turning to gold as a store of value and insurance against the many frightening variables in the future. Historically the price of gold has never gone to zero.

China, recently has been one of the strongest economies of the world and as an aggressive buyer of gold last year, helped push prices higher. Recently, they have been taking a more conservative approach to their monetary and lending policies to control inflation and have pulled back their gold purchases. Analysts believe China’s gold purchases will resume in the future.

Many analysts and economists agree that you cannot throw trillions of dollars into the economy without having devaluation of the United States dollar and inflation in the future. As a result of this, gold and other precious metals should be higher in the future.

One has to contemplate the question posed to me by an economics professor. If money was as plentiful as grains of sand on the beach what would its value be? How much would you need to pay for your goods and services?

Before 1933 the amount of money the United States issued was tied to the amount of gold in its depository. President Franklin Roosevelt took us off the gold standard and reduced the amount of gold tied to the dollar. By the time President Nixon left office there wasn’t any gold linked to our currency. According to Wikipedia the United States currently holds 147.3 million troy ounces of gold and was valued at $173 billion in November 2009. That would not even pay for the interest on our debt.

On February 5 of this year congress voted to raise the debt ceiling to $14.3 trillion dollars and borrow an additional $1.9 trillion to make good on Social Security and Medicare payments. The interest payment on this debt will be over $500 billion this year. It is the fourth largest expenditure by the United States after Medicare/Medicaid, Social Security, and Defense.

In addition to this, the CPI (Consumer Price Index) which is used to gauge inflation rose by 2.6% last year. Last year, Federal Reserve Chairman, Bernanke made a dubious statement to congress indicating that the Federal government would be able to reel in the trillions of dollars issued (Printed) to combat the problems in the economy. Today when he raised the discount lending rate by .50% he said it would have no impact on the consumer, but many believe it is just a prelude of interest rate increases to come, to curtail inflation.

On February 15, Secretary of State, Clinton, said, “The U.S. would not stand idly by and watch Iran acquire a nuclear weapon.” In addition to world instability, this would cause higher oil prices (Today $79.06 per barrel) and they are both bullish for gold and the other precious metals. Iran is the fourth largest oil exporter. Higher oil prices is inflationary and one of the reasons gold rose to an all time high in March of 2008 of $1,033 per ounce.

The fundamentals that drive the price of gold and the other precious metals higher are inflation, devaluation of the U.S. Dollar and world instability. Many financial advisers tell their clients to have at least 5% to 15% of their investment portfolio in rare coins and precious metals as a hedge against these fundamentals.
Many analysts believe that the price of gold could rise to a range of $1,200 to $1,500 per ounce this year. Merrill Lynch predicted we can see gold rise to $1,500 per ounce in the next two years. Other analysts believe the present value of gold should be $2,200 per ounce based on a record high price of $850 per ounce in 1980.

The price of precious metals goes up and down. Past performance does not guarantee future results. They should be a long term investment of three to five years or more. When buying gold please ask me about the advantages in owning the Brilliant Uncirculated Swiss 20 Franc gold coin $245 and the British Gold Sovereign at $315.

COINS

For the long term investor (With the potential for a weaker U.S. dollar, more inflation, and higher gold and silver prices) rare coins may show more profit potential than just owning gold and silver bullion.
These prices are for PCGS and NGC graded coins. They are subject to change due to market fluctuations, and without notice.
               

  MS63 MS64 MS65
$20 Saint Gaudens  $1600 $1800 $2200
$20 Liberty $2300 $3200 $5100
Morgan Silver Dollar $52 $65 $150
Peace Silver Dollar $42 $50 $160

Call or e-mail me today with questions. I would be glad to meet with you to help you plan a well diversified coin and bullion portfolio. If you know someone who could benefit from this and other reports, please let me know. I will be happy to add them to my e-mail address book.

Thank you,
Paul Albarian

Paul Albarian & Associates, LLC
Buying and Selling: Rare Coins, Precious Metals, & Jewelry
3500 West Olive Ave. Suite 300 (Third Floor)
Burbank, CA 91505
Hours: Monday Through Friday 10am to 5pm
Open On Saturday By Appointment Only
(818) 827-7152
(818) 200-8816
E-mail Address: Paul@Albariancoins.com
Website: WWW.Albariancoins.com