Europe’s problems holding up the price of gold coins.

December 22, 2010 – Market behavior becomes somewhat erratic over the holidays and gold coin prices typically slump this time of year as investors cash in their speculative accounts. However, this year has been anything but typical and discouraging news from across the Atlantic will likely temper this year’s selloff.

Moody’s Investors Service delivered the latest blow with a warning that concerns over Portugal’s ability to sustain a healthy economy may cause it to downgrade the country’s A1 long-term government bond rating. That follows on the heels of last week’s downgrade of Ireland’s rating, less than a month after the EU bailout.

Now Fitch Ratings has joined Moody’s and Standard & Poor in considering dropping Greece’s bond rating to junk status. Greece, the poster child of the European debt crisis, has made little headway in the first year of recession and another significant drop in its GDP is expected for 2011.

Things still could work out if the crisis stopped there, but Spain will very likely be next in line. Compounding the problem is uncertainty about whether Germany will support any further EU bailouts, which could put its own healthy economy at risk. As the future of the Euro becomes more doubtful, some unlikely investors are coming over to gold’s side.

Cited by Adrian Ash in International Business Times, J. P. Morgan Asset Management’s Ian Henderson states that he has "never been a long term advocate of gold as an alternative to currencies, but it has now adopted that role" and points to the bad news from Europe as “the driver of the gold price."

For that reason, Henderson, who is less than enthusiastic about gold, predicts that gold will climb to $1600 next year. Even Henderson’s customarily conservative forecast make 2011 look like another good year to buy gold coins.

Kevin Johnson

Senior Staff Writer – GoldCoin.net