Precious metals moved lower today but commodities suggest that the current spot price of gold does not reflect actual gold coin value.

December 12, 2011 – Precious metals moved lower today but commodities suggest that the current spot price of gold does not reflect actual gold coin value. The first time a major decoupling of this kind took place was in spring of 2008. The spot price dropped, but the actual cost of gold coins and gold bars remained at a premium. It was generally accepted that the market had evolved ever since, incorporating the changes.

Things may be progressing a bit further, now. As the European summit has ended, rifts in the EU are beginning to show, and Moody’s has its downgrading eyes set on France, traders and investors are waiting for the next phase to kick in. The stimulus in the form of the Federal Reserve decision to lower US dollar swap rates with the major central banks of the world seems to be keeping liquidity in the system, but eventually the European problem will have some effect on US markets.

This kind of risk in the system proves the strength of gold coins not just as an investment mechanism but as a store of actual physical wealth. So long as your gold is not in MF Global, you’re still have your money and are most likely enjoying a return. That’s quite a bit in this market.

Especially as we go forward and further complications necessarily arise the value of gold will become more apparent. It is the best performing asset of the past twelve months, but it is still undervalued in this market. The actual, real value of gold coin is almost indeterminable considering the nominal amount of OTC derivatives in existence. Contrary to common sense, there has been a vast acceleration in the creation of derivatives on the open market with $107 trillion worth coming into existence this year alone. All of those valueless paper debt instruments debase the fiat money and strengthen gold.

The price of gold cannot be nearly accurate for the actual underlying value in that kind of climate, but it can be reasonably understood that precious metals are a lot more valuable than we think. However decoupling actions work out in the market is fairly irrelevant when considering real value of gold is many times what is currently paid for it at market.

Kevin Johnson

Senior Staff Writer – GoldCoin.net