Are gold and tangibles dead?

on 20 March 2015. Posted in News

As with most questions like this the answer is it depends.  Gold over the last month has taken it on the chin going down in price from about the $1200/oz level to the $1150 /oz level.  It is no wonder that gold and tangibles have reacted downward with the dollar on an unprecedented run especially against the Euro.

How are tangibles going to perform in the future?  We got a brief preview on Wednesday afternoon (March 18, 2015) after Fed Chair Janet Yellen spoke.  To prove how the market is on pins and needles Ms. Yellen eliminated one work, “patience” from her speech and the market went crazy.  Within minutes the gains the dollar made for the day were eliminated, gold went from down $9/oz to up $20/oz and oil went from down $1-$2/bbl throughout the day to up $2.50/bbl after her speech.

Is the market that fearful that one word can trigger a turnaround of that proportion, apparently so.  Imagine what will happen when the dollar declines to more historic and realistic levels.  We all know the dollar will make a negative move but the question is when.  The answer is not surprisingly, it depends.  It depends on what happens in Europe and how successful Quantitative Easing (QE) is in the Euro sector and in my opinion what happens in the oil market will also have a big impact.  Make no bones about it large multinationals do not like the dollar at these levels.  It makes their products more expensive overseas and when more than 50% of your product is sold beyond the shores of the United States then a high dollar has a major impact on your sales and profits and a weaker dollar is your friend.

As for the oil market, if an agreement is reached with respect to Iran and its’ nuclear program and sanctions are lifted then watch for oil to temporarily go down a little more.  Iran currently produces about 2.8 million barrels a day but speculation says that if sanctions are lifted Iran can quickly ramp up to 4 million barrels per day.  This of course would have a negative impact on oil but in the long run I don’t think many people would argue that oil is not going to be more expensive in the future.  Does anyone remember that oil was in the $30’s as recently as 2009 and since reached the low $100’s?  Either scenario is bad for economies and a happy medium must be reached and I believe that happy medium is going to include a declining dollar and more inflation.

As for bullion and tangibles this would be good.  Currently in the rare coin market smart money is buying.  Yes major collections are coming on the market in unprecedented numbers but not because coins are a bad deal it is because the owners who have been accumulating these historic coins over the last several decades are now at a point in their lives that they are donating the proceeds to foundations that will benefit from their coin profits and make people’s lives better.  Remember these coins are selling and quickly being absorbed by other buyers and these buyers are not dealers they are other individuals putting together wonderful collections. 

Now is the time to reposition your numismatic holdings and price average your bullion.  Please call our numismatists with any questions.

 

Joseph Presti

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