US Mint Gold Coin Price Decrease Likely
As a consequence of the US Mint's new pricing policy, the prices for gold coins will likely decrease this week.
Will collectors use this as an opportunity to buy US Mint gold coins?
http://mintnewsblog.blogspot.com/200...se-likely.html
Gold This Week . . . from The Privateer
The Return Of "Risk Appetite"
Last week, we talked about the huge rally in global stock markets over the past month. This week, coupled with increasing talk - especially in the US - about the "end" of the recession, we have seen a surge of reports that investors are now reassured by the stock market and that their "risk appetite" is returning. One major piece of evidence for this is, of course, the falling $US Gold price. As you know, spot future Gold could not break back above the $US 900 level early in the week and then fell away to close on April 17 at $US 867.90. That is its lowest spot future close since January 22. For the record, the lowest spot future close so far in 2009 was $US 805.20 - reached on January 15. That's right, Gold has moved in an almost $US 200 range so far this year.
In reality, of course, there was very little in the way of "risk appetite" over the 25 years (1982-2007) when paper assets - stock market assets in particular and real estate in the later stages - were in their great boom. Most of the participants in these markets didn't see themselves as taking risks at all. When a market keeps setting new (nominal) highs for a quarter of a century, an attitude becomes entrenched. And once entrenched, it takes a HUGE amount of contrary evidence to destroy it.
A recent article in Bloomberg illustrates this point very well. The Boston College "Center for Retirement Research" has recently shown that a median-income worker who put money into an all stock retirement plan over the decade ending on March 31, 2009 would end up with 26 percent less than he or she had contributed. This has changed the investing habits of most people hardly at all. In the fourth quarter of 2008, 6.1 percent of retirement fund participants changed their asset allocation. This was up a mere 0.3 percent from the fourth quarter of 2007.
The Dow hit its all time high in the fourth quarter of 2007.
Nor has it changed the asset allocation of most of the big US retirement or mutual funds. To give one example, the Vanguard Group still maintains a 90 percent weighting in stocks for all investors under the age of 42. And that is after the already mentioned 26 percent haircut suffered over the past decade. The old mantra - "in the long run, stocks ALWAYS go up" - is not going to go away without a fight.
Even more to the point, it is an all but universal attitude in the US and in many other "developed" nations that stock market investments are actually "savings". When asked about the implications of the Boston College findings, the director of the college center which compiled the data said she was not surprised that most investors were still feeding their 401K plans as before. "What is the alternative", she said."Are you not going to save at all?"
Compare, for just a moment, the alternatives to putting one's "savings" in two other types of asset rather than stocks. Someone who had merely held cash in hand - earning no interest at all - would be 26 percent better off. Someone who had bought Gold ten years before March 31, 2009 would have seen their holdings appreciate from $US 287.80 to $US 922.60. That's an increase of 220.6 percent. Here's the scorecard, using $10000 as a constant.
In stocks: $10,000 on March 30, 1999 becomes $7,400 on March 31, 2009
In cash: $10,000 on March 30, 1999 remains $10,000 on March 31, 2009
In Gold: $10,000 on March 30, 1999 becomes $32,060 on March 31, 2009
Show this simple list to almost anyone who is dutifully keeping up his or her monthly contributions to a mutual fund or 401K fund which still allocates 80-90 percent to the stock market and they would not believe it. Don't forget, we are talking about a DECADE of comparative returns here, this is not a short term situation. Yet the attitudes of most people have not changed at all from what it was when stocks were peaking in early 2000 or peaking again in late 2007. They still see paper assets as the only viable means of either getting ahead or saving. The halving of stock indices and the much worse performances of many individual stocks since late 2007 has not dissuaded them. They did not sell out when stocks fell nearly 50 percent in the US last year. They did not sell when they plummeted even further in the period up to March 9 this year. And now, six weeks later, their "risk appetite" is returning??
They never had a risk appetite. They were sure they were onto a sure thing. Most of them still are. If anything, they are even more sure of it since now they believe that the government will always be on hand to bail out anyone or anything that gets into any kind of financial grief. It is a sad and tragic phenomenon to watch unfold.
US Treasury funded debt is now on the verge of being 100 percent of (real) US annual GDP. No nation has ever recovered from such a position without a gut wrenching valuation collapse. Even though the Fed cut official US rates to effectively ZERO last December and announced plans to directly buy (with US Dollars created out of thin air) Treasury debt a month ago, longer-term Treasury bond yields are inexorably rising. On April 17, the yield on the 30-year bond hit 3.8o percent. When the Fed cut rates to ZERO it was just over 2.5 percent. The yield on the ten-year bond has gone from 2.10 percent to 2.95 percent over the same period. Somebody out there is certainly not regaining their "risk appetite".
It is impossible to know how long US and world stock markets will continue their rally. It is crystal clear, however, that most holders of paper assets have sold little if any of them and that this rally has seen many of them buy more. No bear market ever ends before the majority of investors give up and sell in a panic. There has been no vestige of that yet in this paper bear market. That means that it has a LOT more to fall. And somewhere in that fall, the "no risk" attitude of those who have spent their lives watching paper assets go higher is going to crack right down the middle. Until then, Gold is going cheap.