Investing in gold coins is still taking a back seat to the stock market.

July 01, 2011 – Investing in gold coins is still taking a back seat to the stock market. That’s great news for those buying gold coins, but not so good for those still playing stocks.

In a 24/7 Wall St blog reprinted in MarketWatch, Douglas A. McIntyre says it is very likely that the “DJIA could drop below 7,000 again before the middle of next year.” And he gives us several solid drivers of the fall.

Two of McIntyre’s drivers are global – Greece’s crumbling economy and the slowdown in China. When Greece tanks – and only a miracle can prevent it – it will push the EU past the tipping point, and the domino effect will undermine a crucial market for US exports. With exports to China reaching nearly $92 billion in 2010, even a small percentage drop in demand would wipe out what little “growth” our manufacturers have experienced through exports.

On the home front, McIntyre pulls the veil from the recovery. Thirty percent of our states are not even participating in what Bernanke keeps trying to sell as economic growth. Construction, which had played a major role, is playing out. “The US economy cannot grow at a rate of 3% or better,” McIntyre says, “if large regions of the country are shrinking economically.”

According to McIntyre the biggest damper on the economy is underwater mortgages. Already more than a quarter of mortgages are floating on negative equity, and that number is growing as housing prices continue to fall. “The ripple effect from a rise in underwater mortgages will affect everything from bank earnings to consumer credit to consumer spending,” says McIntyre.

“No matter what the Federal Reserve says, inflation is in full bloom … [it] is a poison to consumer spending and to the profit margins of companies that have commodities or transportation-based businesses,” McIntyre says. The Fed’s denial only drives a wedge between us and the rest of the world while robbing us of our ability to compete abroad.

Unemployment, of course, also gets strong mention. According to McIntyre, “the Brookings Institution recently said … that the single biggest threat to the economic recovery of many cities is layoffs of government workers.” Workers are being shed in the private sector as well as corporations hoard cash – between the US and Europe a staggering $2 trillion – rather than spend it to create jobs.

The market may not collapse all the way to 7,000, but there is no economic law or precedent that says it can’t. Stocks today are a risky business, and at today’s prices, buying gold coins just makes a lot more sense.

Kevin Johnson

Senior Staff Writer – GoldCoin.net