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Gold: Bad Year, Good Decade
By Patrick A. Heller
January 14, 2014

A number of major global banks have released their 2014 precious metals price forecasts. In near unanimity, they proclaim that prices will be weak or, at best, largely unchanged.

On the other hand, demand for physical gold exceeds global mine output and recycled supplies – even before some mines cut output because current low prices do not cover production costs.

So, what will precious metals prices actually do in 2014? The one thing I can say with 100 percent certainty is that they will – fluctuate.

There are several of what I call financial oxymorons that might or might not have significant impact on the overall economy this year, which would then have impact (or not) on precious metals prices. Here are just a few of the confusing financial statistics.

1. The U.S. government keeps trying to pretend that the U.S. economy is recovering. If so, then why did the U.S. Bureau of Labor Statistics report last Friday that the percentage of working age Americans who actually had a job was at the lowest percentage (62.8 percent) since 1978?

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2. In the same jobs report, the BLS claimed that the unemployment rate in the U.S. had fallen dramatically from the previous month, to the lowest level since before President Obama assumed office. At the same time the BLS also reported the highest number of working age Americans, more than 90 million, who did not have a job.

3. Further, if the lower unemployment rate were accurate, there should be no need to advocate for an increase in the minimum wage law or for a renewal of the extension of federal unemployment benefits. Yet many members of Congress are pushing for one or both of these measures.

4. During an economic recovery, interest rates normally rise as businesses compete for funding. Yet the Federal Open Market Committee claims that interest rates must be kept low at least through at least the end of 2015 because the economic recovery isn’t really happening.

5. More than one news commentator recently claimed that Federal Reserve Board Chair Ben Bernanke’s program of inflation of the money supply (disguised by calling it “quantitative easing”) is largely responsible for the alleged economic recovery. At the same time, commodity guru Jim Rogers this month called it a probability that the Federal Reserve will disappear in the next decade because “People will realize that these guys have led us down a terrible path.”

6. If America’s banking system was so strong then why is the U.S. government planning to seize funds out of the accounts of a bank’s customers, even those covered by “FDIC insurance,” should that bank get into financial difficulty?

I could go on, but I think you get the idea. Many in the media report contradictory news without asking any probing questions. Yet the true state of the economy, whether it is good, bad, or indifferent, will eventually affect precious metals prices, no matter how the current news coverage is slanted.

Gold and silver prices dropped significantly in 2013. At the same time, most stock indices, especially in the United States, rose markedly. If an investor were to make decisions on the basis of only one year’s results, he or she would probably be in trouble. When analyzing trends over time, the time frame you pick can give you sharply different results. Here is a stark example:

 

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Other commentaries are available at “Coin Week." He also writes a bi-monthly column on collectibles for The Greater Lansing Business Monthly. His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing.



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