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Money managers and wealth advisors recommend adding gold and other precious metals to portfolios as non-correlated investments, and as a hedge against inflation.
The value of gold is not tied to the securities markets, and gold will not lose its value because an issuing company goes bankrupt.
For collectors, adding collectible coins to a portfolio is not just an acquisition – it can be an investment. Many have found that their prized collections of historical coinage have increased dramatically in value over years.
SC&B client realizes record price at auction – Letter from Superior
Galleries
" …(T)he
1907 $20 High Relief gold coin, certified Mint
State 67 by the Professional Coin Grading
Service, realized $184,000 in our September 2006
Beverly Hills Elite Auction, an all-time price
record for this coin. This result was a
win-win-win - your client obtained the highest
possible price, Stanford Coins & Bullion
provided a valuable service to the client, and
Superior Galleries garnered headlines in the
numismatic press by featuring such a prestigious
coin in its auction."
Larry
Abbott
Executive Vice President, Chief
Operating Officer,
Superior Galleries of
Beverly
Hills |
Gold: Where is it Headed?
Stanford Commodity Review 1st Quarter 2008
2007 was another strong year for gold prices. In fact,
gold spot prices increased 30.98% for the year, giving
gold its seventh consecutive year of positive price
action. Over this seven-year period, the average
increase in gold spot prices was 17.74% compared to
2.73% for the S&P 500 Index (SPX) over the same
time period.
The impressive thing about last year’s price action in
gold is that most of the advance took place during
the last four months of the year, showing strength in
the market that should continue into 2008. In fact,
from December 29, 2006, to August 31, 2007, the
spot price of gold increased only 5.76%. The basically
sideways action in gold was due mainly to strength
in the equity indices, which lowered the demand for
gold as an alternative investment along with gradual
moves higher in commodities, which kept inflation
expectations low. However, the gold spot began to
strengthen in mid-August, and by early September,
prices managed to break above strong resistance at
694.00. The penetration of this level coincided with
renewed strength in energies due to lower inventory
levels and strength in grains due to production
outlooks and the Fed lowering rates for the first time,
which put pressure on the U.S. dollar (USD). All of
these factors culminated to push gold spot prices
from a closing price of 673.40 on August 31 to a
closing high of 833.59 on November 8, an increase
of 23.78%. After rallying to this level, the highest
closing price in 27 years, prices began to weaken as
profit taking entered the market. The pressure from
profit taking pushed prices down to support near
the 770.00 level, where a bottom was put in and
prices have since continued to rally and closed on
January 16, 2008, at 877.03, an increase of 5.16%
thus far in 2008.
Going forward, we continue to believe that the overall
trend in gold will remain to the upside over the
long term, with a run to the 1,000.00 level likely
later in the year, due to the following factors:
• Inflation worries should continue due to high
commodity prices.
• Continued near-term uncertainty about the
future of interest rate changes in both the
United States and Europe should continue to
be supportive for metals as investors look for
areas of certainty.
• Continued weakness in the U.S. dollar due to
possible rate cuts by the Fed.
• Recession fears in the United States should
increase demand for metals as an alternative
investment to stocks.
• The fact that central banks continue to hold
gold rather than dollars is also supportive for
gold prices as the dollar has fallen out of favor
with many investors and is not always the
currency of choice as it once was.
• Dwindling supplies of gold in key mining areas such as South Africa will likely be supportive for gold as it is becoming a challenge to meet the growing demand for luxury items such as jewelry in emerging markets, especially China and India.
• ETFs have opened commodity trading to more
investors due to the ease of getting into the
funds. This trend is no different with precious
metals, and the added investing is partly
responsible for pushing values sharply higher.
• There is continued speculation that China will
reduce its holdings of U.S. dollars in favor of
gold or other currencies. China is the largest
foreign holder of USD.
Even though we remain bullish for the long term, prices
are likely to correct from overbought conditions at
some point in the near term. If a correction does occur,
the first level of support that will be encountered comes
in at 850.00. If this level is broken to the downside, the
next major levels of support come in at 800.00 and
773.10, respectively, and then at the 2006 high of
730.40. At the current time, it is our view that an
extended move below the 850.00 level is unlikely. To
the upside, the gold spot has resistance at the January
14 high of 914.30. Above this level, resistance should
come in at 950.00 and 1,000.00.
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