Maybe it’s time to stop thinking about gold coins as an investment.

March 25, 2011 – Maybe it’s time to stop thinking about gold coins as an investment. For some reason retail investors keep letting Wall Street convince them that investments belong only with them, regardless of how badly they were beaten in the past and despite gold’s stunning performance while they were being taken to the cleaners.

Throughout the financial crisis and continuing on through Bernanke’s phony recovery gold has not faltered as a safe haven. And it seems doubtful that anybody who has to live in the real world really thinks things are getting better. The companies in the manufacturing sector certainly don’t seem to think so.

While the Fed keeps shining the spotlight on manufacturing as evidence that the economy is underway, the latest durable goods report reveals that capital investment is still in decline. Spearheading the decline was a sharp drop in orders for the machinery that runs our factories, putting a different slant on the Fed’s report that manufacturing output has risen for eight months in a row.

Manufacturing companies invest in capital equipment when they are nearing capacity and their forecasts predict sufficient market growth to justify the expense. The fact that output is rising means only that companies are using more of their existing capacity put idle during the recession. They are not going to start buying machinery until production returns to previous levels and their forecasts give them reason to do so. With many well respected economists lowering their predictions for the annual growth in GDP to between 2% and 2.5%, that will be a long time coming.

All the fundamentals say that gold is undervalued, held back only by a lack of interest. It can’t stay like that forever because none of the drivers of the long-term trend has changed. Call it insurance or call it what you will, the logic of buying gold coins today is inescapable.

Kevin Johnson

Senior Staff Writer –

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