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A Good Case For Gold, A better Case For Gold Coins

Rare gold coin prices aren’t completely immune to the vagaries of the spot price, and on occasion that can present some real bargains.

Current gold prices are way out of sync with reality. There are numerous reasons for that, the greatest of which is probably prolonged selling due to an extended liquidity crunch.

Markets around the world are beginning to slow down in unison, threatening a broad weakening of the global economy says the Wall Street Journal. It’s not just Europe anymore, “reports of economic trouble are turning up in China, India, South Africa, Brazil and elsewhere … Economic weakening, in turn, means investors are taking it on the chin.”

Those aren’t long-term household investors they are talking about, but big money short-term traders who need to raise fast money to cover their positions. So they sell their gold for whatever they can get, driving down the price. The spot price would undoubtedly have fallen a good deal more, but central banks have been moving in to buy up cheap gold.

The message couldn’t be clearer. Central banks are reacting to the same economic slowdown as the traders, only they are taking action to mitigate its long-term effects. They know how undervalued gold is today and they are anticipating a windfall that will help offset the steady decline in their currency based reserves.

Household investors would be wise to follow their lead, but the last few months have put their mettle to the test. In just two months the spot price has plummeted 7.69%, which for many has made it very problematic to stay focused on the long run – despite overwhelming evidence that prices cannot remain depressed much longer.

One of the many advantages of rare gold coin investments is their resistance to volatility in the spot price. While the spot has fallen nearly 8%, rare gold coins have only twitched.

The CU3000 index, which is the cumulative valuation of a basket of 3000 rare gold coins, fell just 0.85% over the same period. The index for MS grade coins dropped about the same. To look at it another way, the numismatic value of rare gold coins offset nearly 7% of the spot price’s decline.

Gold will surely rebound as conditions deteriorate and central banks step up their buying. When it does, the steady growth in numismatic value of rare gold coins will only augment rising gold prices.

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