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Gold Coins Are What Gold Should Be

Gold coins remind us what gold should be: money. As we head into a rather calm week with
only a couple of new reports coming out and stocks continuing to tumble, we can expect to see
the now customary downward pressure on gold.

Weekly jobless claims could very well bring more bad news, once again mysteriously surprising
the investment world. The ISM Non-Manufacturing Business Activity Index is also coming
out this week. The Index has been slowing lately, but it has experienced nearly three years of
continuous growth. Retail trade, information, and construction are leading the sector while only
agriculture, forestry, fishing & hunting; utilities; and – interestingly – mining are contracting.

As long as the sector doesn’t stall out, which is highly unlikely, the wishful thinkers can be
expected to wring every last drop of optimism out of the report. But I doubt it will be sufficient
to turn the tide.

So here we go again. Gold will be taking several hits this week as traders sell to cover losses. We
have seen that already. Volatility hasn’t left the market by a long shot, but there are signs that
gold is reclaiming its true position as a hedge against failing currencies.

The strongest signal comes from the central banks themselves. The World Gold Council has
at last made the obvious but never-the-less significant gesture of moving central banks from
the supply side of its ledger to the demand side. In a recent report the Council said, “The net
purchasing of gold by the official sector is now an established trend, which is likely to remain in
place for the foreseeable future.”

Unlike the Central Bank Gold Agreement (CBGA) of 1999, under which the world’s major
central banks agreed to cap sales and leasing of gold, this latest trend represents the aggregate
of independent actions taken in defense against deteriorating conditions in the global monetary
system.

In effect, nations are conceding that their currencies are doomed and that gold will endure.
Eventually that will drive up the price of gold, perhaps to a point where they will start to look
elsewhere to get it. Private bullion makes a very tempting target.

Gradually gold will work its way back to being the defining asset behind money. Gold coin
investments capitalize on that trend while remaining beyond the government’s reach.

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