How Have Gold Coins Performed in 1999?
by David L. Ganz
Column 8 - October 13, 1999
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(CONTINUED FROM PAGE 1)
This has been the story from the Bank of England, the government of Australia, and even the International Monetary Fund (whose efforts are currently stymied by Congress's shot across the bow threatening legislation to reclaim the gold for the United States).
Yet, even with that depressing element, the MS-63 is a star, and the MS-64 is a sure winner. The mere uncirculated version more than holds its own, while the XF-40 does a more plausible job than might otherwise be expected. To see if this was a fluke, I took the opportunity to test it with the 1923-D Saint, another relatively common coin (1.7 million pieces minted) but widely available in MS-63, MS-64 and even MS-65.
Again, an extremely fine specimen was used - and contrasted with an MS-60 specimen, one in MS-63 and gold bullion. The bullion rides downward, like a donkey going to the foot of the Grand Canyon.
Headed in the other direction: all three of the other coins. (The extremely fine specimen performed least well, but still respectably - especially when considered in terms of the change seen in the equities market).
There probably is no simple explanation for the movements of the stock market, or the failure of the gold coins to parallel the price changes in gold. The stock market gyrations, it almost seems, have taken and switched places with what gold used to do.
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In addition to the Dow, the market price of gold bullion can be used as a comparison.
Here, the values of the three 1910-S $20s are compared to gold bullion.
Gold has been marketed, and positioned, as a storehouse of value, an asset that protects against inflation, but which also is an asset of last resort.
It has certainly had its moments in the last 25 years since gold ownership was legalized this December 31st, but the gyrations in that market which many of us remember - or have read about - came at a time of serious economic disorder and distress.
It's hard, in 1999, to recall that in 1980 and 1981 interest rates had gone out of control and were in the 20 percent range. Home mortgages had all but dried up - and gold looked very attractive as a means of hitching a ride to the anti-inflation bandwagon.
Once inflation subsided, gold's bubble settled on a more traditional role - a monetary asset that had an important economic role in some parts of the world, but which was ignored by many of the leading first world governments and banks.
What has certainly happened, at least in recent times, is that banking institutions on a governmental level and international institutions as well, have looked to the equities marketplace and seen growth at a 10 percent annual rate become commonplace.
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The values of three 1923-D $20s, another fairly common date, in different grades
are compared with the price movement of gold bullion thus far in 1999.
Problematically, gold does not increase in value -but declines- making the governmental decision to sell off some assets natural: they want their asset of "last resort" to be a current, rather than a long term investment. Gold is not particularly well-suited for this role, and indeed, part of its allure and value is that there is just not that much of the stuff around. All the gold mined from the beginning of time, to the present, if melted and cast, would not fill the Washington Monument.
But what has broken out in 1999 is that gold coins now evidently have a life of their own - and a value that, while attached at some level to precious metal bullion, finds the numismatic end pulls the rest of the value up.
No one can say for certain where the new trend will lead, but the statistics, for the time being, are clear that gold coinage is the future of tomorrow's investment decisions - and that if a portfolio is to contain gold, rare coins should be included in it.
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Copyright 2000 by Krause Publications, all rights reserved. Reprinted by permission of the assignee, David L. Ganz. Unauthorized reproduction is a violation of Title 17 of the United States Code and other statutes.
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David L. Ganz
