Three Most Famous Coin Collections
Posted on — 2 CommentsWhat do Louis Eliasberg, Bob R. Simpson and Harry W. Bass have in common? They all amassed one of the finest-known coin collections in American history.
The Louis Eliasberg Collection
Louis Eliasberg was born in Selma, Alabama in 1896, the son of a dry goods and clothing dealer. He wasn’t born into wealth and yet he amassed his incredible rare coin collection slowly over time, with hard work, patience and persistence.
Today, Louis Eliasberg is a legend in the numismatic world. Nicknamed the “King of Coins” – the U.S. postal service once delivered a letter to him addressed merely King of Coins USA, with no address.
What makes the Eliasberg collection special? Eliasberg, a Baltimore banker, was the only known numismatic collector who assembled a complete collection of United States regular issue coins ever minted by denomination, date and mint all the way back to 1792. Starting in 1925, Eliasberg began purchasing U.S. coins and achieved his monumental goal by 1950. His collection is considered to be one of the greatest coin collections in U.S. history.
He compiled his entire collection for less than $400,000. After his death in 1976, Eliasberg’s unmatched collection passed down to this two sons. Neither of them shared their father’s passion for numismatics and eventually auctioned off the coins for an estimated $45 million.
Eliasberg was a man known to distrust paper money and was forever unhappy that FDR removed the United State from the gold standard. In his mind, hard metals were the only currency that was trustworthy.
Bob R. Simpson Collection
Texas oil billionaire Bob Simpson is co-chairman of the Texas Rangers baseball team, a philanthropist and a co-founder of XTO Energy, a natural gas firm acquired by ExxonMobile in 2010.
Simpson, now in his 70’s , wasn’t wealthy when he began collecting coins as a young boy. While other boys his age were collecting baseball cards, he would go to the bank, get a roll of coins and look for the most interesting. He was searching for Mercury dimes – the most famous, the 1916-Ds, were still being found in bank rolls back then. He also kept an eye out for copper pennies and Walking Liberty half-dollars.
Simpson’s collection, which is legendary in coin collecting circles, contains remarkable rarities with a particular focus on U.S. patterns. He purchased several large pattern collections over a period of years, spending more than $36 million on a single pattern collection in 2007. Notably, Simpson was the first person to ever assemble a complete P-D-S set of bronze-planchet 1943 Lincoln cents. That includes a 1943-S bronze cent that he paid $1 million for in 2012. Simpson’s collection is ranked by Professional Coin Grading Service as one of the best ever amassed.
In recent years, Simpson has sold off highlights of his legendary numismatic collection, which have so far totaled more than $54 million in sales. In 2021, Blanchard placed a 1910 Proof Gold $2.5 Indian Head, which was part of Simpson’s incredible collection.
He views himself as a steward of these remarkable rarities and said recently it is time for someone else to enjoy them. “I think coins should be appreciated almost as artwork,” he said. “I have gotten more than enough joy from them.” Simpson was asked if he viewed coin collecting as risky? “I viewed it as the opposite, as a haven more than a risk asset,” Simpson said.
The Harry W. Bass Collection
Starting in the 1960’s, Harry W. Bass, a Dallas born businessman, began collecting U.S. coins and ultimately created one of the most spectacular U.S. gold collections ever.
Notably, Bass assembled a set of virtually all known die varieties of early U.S. gold coin denominations in the finest condition. Bass carefully assembled the only complete collection of $3 gold pieces, including the rare 1870-S; plus a complete collection of U.S. gold coin types from 1795 to 1933; and an impressive grouping of rare U.S. pattern coins.
While Bass passed in 1998 and his collection was largely sold off – the remaining coins are proudly on display at the ANA’s Money Museum in Colorado Springs, Colorado.
What’s Next For Your Collection?
Blanchard encourages numismatists to acquire rare coins with a collector’s mentality. If you build your rare coin portfolio in a meaningful way it can increase the value of your total sum, in addition to bringing you greater personal enjoyment as you learn more about the time period and individual pieces. Many set collections have been sold as a whole for more than the total value of the individual coins.
If there’s a coin that you are interested in acquiring or would like advice on how to build a set talk with a Blanchard portfolio manager today. You may not become the next Louis Eliasberg, Bob R. Simpson or Harry W. Bass, but then again, maybe you will.
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The Native American Woman Behind Lewis & Clark’s Legendary Expedition Westward
Posted on“We were now about to penetrate a country at least two thousand miles in width, on which the foot of civilized man had never trod. The good or evil it had in store for us was for experiment yet to determine…I could but esteem this moment of my departure as among the most happy of my life.” –Meriwether Lewis, from The Journals of Lewis and Clark.
The historic 1803 Louisiana Purchase from France became one of President Thomas Jefferson’s most notable and lasting achievements. The Louisiana Purchase expanded the United States by about 828,000 square miles of territory – doubling the size of our young nation.
After the purchase, the door opened for quick expansion westward for adventuresome Americans. President Jefferson quickly commissioned the legendary Lewis and Clark expedition to explore the lands acquired in the Louisiana Purchase. Jefferson tasked the intrepid explorers to survey the terrain, create maps, learn about the Native Americans who lived on that land, and collect scientific specimens of plants and animals.
Jefferson’s secretary, Meriwether Lewis, led this remarkable adventure through the wilds westward. Lewis, 29, asked his friend and former military superior, 33-year-old William Clark, to be his co-captain on the expedition westward from the Mississippi River to the Pacific Coast.
Sacagawea’s Valuable Language Skills
The team was fortunate to have Sacagawea, a Native American Shoshone woman, as their interpreter and guide on their journey from 1804-1806. Sacagawea contributed greatly to the expedition’s success.
Sacagawea’s language skills as a translator were invaluable as they encountered Native Americans who might otherwise have gone into attack mode against the strangers in their land. It is said that Sacagawea and her infant served as a “white flag” of peace for the expedition westward, as war parties did not include women and infants. Not a single member of the Lewis & Clark party was lost to hostile action.
Sacagawea was bilingual in two very different Native American tribal languages – Hidatsa and Shoshone. Her husband spoke French, English, and Hidatsa. This translation chain was viewed as extremely valuable. Lewis and Clark needed all the help they could get communicating with the Shoshone tribes at the headwaters of the Missouri River.
Astoundingly, Sacagawea accompanied the legendary group on this difficult and long journey all while caring for the son she bore just two months before departing.
The Golden Coin that Honored the Legendary Native American Woman
In 2000, The United States Mint bestowed a great honor on Sacagawea’s memory and her significant contributions to the early explorations of our great nation with the production of the Sacagawea Golden U.S. Dollar coin. The coin was minted under the auspices of the United States $1 Coin Act of 1997.
Sculptor Glenna Goodacre’s design won a national design contest for her representation of Sacagawea with her infant son, with the reverse side of the coin featuring an eagle representing peace and freedom.
By and large, the majority of gold Sacagawea coins are not rare and circulated coins do not carry numismatic value. They are also not true gold coins, despite the golden color. The coins were composed of primary copper (77%), with small portions of zinc, manganese, and nickel.
The coins still circulate today, but proved to be ultimately proved to be unpopular with the public and are not widely used.
Golden Proof Coins in Space
Interestingly, 39 Proof 2000-W Sacagawea Dollar coins were struck in 22 Karat gold at the West Point Mint in June 1999. While 27 were ultimately melted, the remaining dozen examples took a journey into space on board the space shuttle Columbia. The coins returned to earth five days later on July 22, 1999. The dozen gold Sacagawea proofs were then sent to the Gold Bullion Depository in Fort Knox, Kentucky.
Some Circulating Sacagawea’s Are Valuable
There are a few key dates that are rare and have value beyond the $1 mark on the coin. The U.S. Mint embarked upon partnerships with both Wal-Mart and General Mills to promote the use of the Sacagawea coin in commercial transactions. The partnership with General Mills included 10,000,000 boxes of Cheerios cereal that would contain a Lincoln cent as a prize or a new Sacagawea dollar. Some lucky Cheerios breakfasters would receive a certificate redeemable for 100 Sacagawea dollars.
Some of the gold Sacagawea coins that were found in the Cheerios boxes were struck from a different set of dies. Within numismatic circles, these coins which showed “high detail” and enhanced eagle feathers on the reverse side of the coin became known as the “Cheerio Dollars” or “enhanced reverse die.” These are valuable and depending on the grade have sold for $5,000 to $25,000.
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1936 Elgin Half Dollar
Posted on — 2 CommentsThe Elgin Illinois Centennial half dollar honors the founding pioneers of Elgin, Illinois located 30 miles west of Chicago. Founded in 1835, the area eventually became a village by 1847, then finally a city in 1854.
The first person to suggest commemorating the town was Trygve Rovelstad, the son of Norwegian immigrants in the U.S. As a sculptor, he decided that he would erect a statue in Elgin to remember the pioneers that settled the town. He eventually got approval from city officials and prepared a foundation for the statue in 1934. However, not long after, Rovelstad ran into financing problems and was unable to generate the money needed. Then he had an idea.
Rovelstad decided that he could raise the money through the issuance of a commemorative coin. In 1935, he arranged for a bill to be introduced to Congress authorizing a half dollar that would commemorate Elgin’s centennial. Again, Rovelstad ran into problems, as the bill was not considered.
That same year, Rovelstad met Lyman W. Hoffecker, a coin dealer from El Paso, Texas who had learned of the bill and took an immediate interest in the project. Hoffecker offered guidance on how to earn approval from Congress. Importantly, he also offered to handle the distribution of the coins. Determined to make these coins a reality, Hoffecker didn’t reveal to Rovelstad that he was a coin dealer and even warned him in a letter that “it would not be good for either of us if the word got out you had disposed of the entire issue to me.”
By the end of 1935, Hoffecker offered to pay the Elgin committee $12,000 and sell the coins for $2.00 each. He offered to advance the Mint the face value of the coins while also covering engraving and shipping charges.
The collaboration between Rovelstad and Hoffecker was finally enough to get the bill passed and signed by President Roosevelt in 1936. The mint quantity was set at 25,000 coins and would be paid for by the Elgin committee. The Philadelphia Mint handled the issuance and, by the end of 1936, they had struck all 25,000 pieces.
The obverse of the coin shows the profile of a pioneer and the reverse shows a group of four adult pioneers and a baby in its mother’s arms. The reverse image was, in fact, a bas relief of the model that Rovelstad originally intended for his statue. This image also appeared on the medal Rovelstad designed for Elgin’s centennial along with the words “to the men who have blazed the trails, who have conquered the soil, and who have built an empire in the land of the Illini.” The final design of the coin included “Elgin, Illinois” at the suggestion of Hoffecker.
As planned, Hoffecker sold the coins directly to collectors at the issue price rather than to speculators or dealers. Ultimately, he was able to sell about 20,000 of the total minting, with the remaining coins being returned to the Mint for melting.
In the end, Rovelstad was successful, though he did not live to see his final work. In 2001 his memorial was completed. It was all possible due to the popularity of the Elgin half dollar.
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Gold and Silver Are Winners: Debt Ceiling Looms As another Catalyst to Keep Precious Metal Rally Going
Posted on — 1 CommentFrom bank failures to rising interest rates and still high inflation, investors around the globe are rushing into precious metals for safety, portfolio diversification, and as an asset to grow their wealth.
Gold is up 10% since the start of 2023 and recently raced above the $2,000 an ounce level. Silver is up 4% and looking ahead Wall Street remains positive on precious metals. Citigroup has a bullish forecast for gold climbing to the $2,300 ounce level in the near-term. And, a new forecast from a BofA Global Research report says a gold market close above $2,078 on both a daily and weekly basis “would go a long way in signaling significantly larger upside…such as $2,391/2,543.”
Shifting to the macroeconomic environment for a moment, some may wonder what could be the next catalyst for another upleg in gold?
Two words: Debt ceiling.
While the debt ceiling confrontation has fallen to the background in the wake of the banking system turmoil, it still has potential to trigger a new round of chaos in the financial markets.
Congressional leaders are bracing for a high-stakes standoff over raising the debt ceiling in the months ahead. Back in 2011, Congress took the nation to the brink of default with its in-fighting over raising the debt ceiling. Those political shenanigans were costly – the incident resulted in a Standard & Poor’s downgrade of U.S debt. Barron notes that that has meant the yield on U.S. Treasuries has consistently been one to two percentage points higher than German government bonds since that time.
What could this mean for gold in 2023?
The last time Congress held the debt ceiling hostage and took the U.S. to the brink of default was in August 2011 and gold soared to its then all-time high above $1,900, as global investors turned to the precious metal as a safe haven.
A debt ceiling standoff 2.0 in 2023 would open the door for another round of massive gold buying, as investors rush to the safety of precious metals, which are attached to no government debt or obligations like the U.S. dollar is.
What could happen if Congress doesn’t raise the debt ceiling and the U.S. defaults on its debt payments?
As we’ve talked about before, a Congressional failure to raise the debt limit would destroy the global market’s confidence in American Treasuries and the U.S. Dollar the reserve currency. It would trigger a recession in the U.S., causing millions of Americans to lose their jobs and the stock and bond markets would crash. Social Security checks would stop coming. Interest rates would soar because in order to continue funding the massive U.S. debt, America would be forced to pay extremely high rates of interest on new bonds because no one would trust Treasuries anymore.
This is a dark scenario indeed, and one that we hope our politicians will never create. It would be a self-induced economic crisis – perhaps one of the most serious that you have ever seen in your lifetime.
In the meantime, gold has become a favored asset of choice in 2023. It’s no surprise. Gold offers investors so many tangible benefits – including a physical asset they can own and hold in their hand. Gold has no counter-party risk and you can have access to physical metals you own at any time you like.
If the current economic environment has you questioning, it may be time to consider increasing your allocation to physical metals. Consider trading some of your U.S. dollars for gold. Investing in gold and silver offer you peace of mind in ownership of an asset that has served as a store of value for thousands of years – and can protect and grow your wealth today.
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Gold Races above $2,000: Three Reasons It Can Keep Going Higher
Posted on — 1 CommentGold soared through the $2,000 level yesterday fueled by steady investor buying following weaker-than-expected economic reports and a big jump in crude oil prices. The early April OPEC announcement of a planned crude oil production cut triggered a 6% jump in oil prices to $80 per barrel. And, higher crude oil prices can boost the already high levels of inflation in the economy.
Investors turned to the safety of gold in recent weeks amid bank failures, concerns about recession, rising interest rates and still-high inflation. The shiny yellow metal soared 12% in the past month and has climbed 25% from its November low.
You may be wondering – can gold still climb higher? Citigroup says yes – with a near-term price forecast of $2,300, which would stand as a new all-time record high. The current record high for gold sits at $2,059.90, scored in 2020.
Here are three reasons gold can still climb higher from here.
The U.S. dollar slid to its lowest level since February this week. The dollar is in a downtrend, has been declining since its October 2022 peak and appears to have more to fall. The recent weak economic reports increased the odds that the Federal Reserve will need to pull back on additional aggressive interest rate hikes to fight inflation, ultimately meaning that the fed funds rate will peak out at a lower rate than previously expected.
Because gold is bought and sold in U.S. dollars on the world marketplace, an ounce of gold is worth more dollars when the greenback weakens. As the dollar weakens even more, it creates additional momentum for gold to climb higher.
2. Falling Bond Yields
Bond yields are falling, which increases the attractiveness of gold as a portfolio diversifier and safe haven asset. Two-year U.S. Treasury note yields slid from 5.1% last month to 3.8% this week.
3. Increased Risk Aversion
Investors worldwide have been spooked by the recent bank failures, worries about a U.S. recession, and high inflation that the Fed just can’t seem to get rid of. Gold has served as a store of value for thousands of years and in times of uncertainty, precious metals increase in value. As worries about systemic financial system risk grow, investors are moving assets into gold, which has no counter-party credit risk.
It’s not too late to buy gold. Precious metals are in an uptrend and have more room to run.
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The Mercury Dime: Liberty of Thought
Posted onThe Mercury dime, struck from 1916 to 1945, gets its unusual name from its depiction of a young Liberty. Her image on the obverse shows her wearing a winged Phrygian cap which gives her a look similar to that of the Roman god Mercury.
While the model used as inspiration for the design is unknown, many believe that Elsie Stevens, the wife of American poet Wallace Stevens, served as the basis for the image. The design is the work of German-born American sculptor Adolph Weinman. He was selected for the design work after winning a competition with two other sculptors. Though the imagery was well-received, minor modifications were required to get the coin to work with vending machines of the time. AT&T also warned officials that the original coins were too thick to work in their pay phones.
Weiman’s motivation for the famous winged cap was to express “liberty of thought”. Others suggest that Weiman crafted this design simply because he liked the look of feathers in relief. The reverse of the coin shows a fasces which is a bound bundle of wooden rods. Traditionally, this image is intended to represent a magistrate’s power and jurisdiction. Weiman’s intent was to use the image to represent war and justice.
The first Mercury dimes entered circulation in October 1916. The design received nearly universal praise. The mint continued to strike the coin until 1930 with a pause in 1922 due to an economic downturn.
Today, there are a few Mercury coin mintings that are particularly sought after. One example is the 1916-D issuance struck at the Denver Mint. Only 264,000 were minted because officials had to pause their minting when an unusually large order for quarters had to be fulfilled. This relatively low number of Mercury coins makes that particular issuance somewhat rare.
Another unusual minting is the 1942/41 overdate which is a double die error. The obverse die used had one impression from a 1942 hub and one from a 1941 hub. As a result, the date 1942 on the obverse also has a “1” appearing over the “2.” The error is easy to spot as the date appears to have five digits instead of four.
The 1945-S variety is also an outlier. The coin has an abnormally small mint mark. This error was the result of the mint having to resort to different equipment stemming from wartime resource demands.
The rarest Mercury dimes were those that were flown into space aboard the Mercury-Redstone 4 sub-orbital mission on July 21, 1961. This was the second US human space flight. The coins ultimately sank with the capsule in the Atlantic Ocean but were recovered from the ocean floor in 1999.
The US Mint also released a gold 2016 centennial version of the Mercury dime. The coin was so popular that they were sold out within 45 minutes of its release.
Today, the coins are still appreciated for their unique design and unusual journey into space and into the depths of the ocean.
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Call Option Volume Offers Clues us About Future Gold Prices
Posted onGold prices have been rising. Since the end of the third quarter of 2022, gold is up about 18% and reached a 12-month high in the last week. Many investors think it will rise even further.
How do we know this? We know because the 5-day rolling trading volume of call options on the SPDR Gold Trust has risen more than five-fold in recent weeks. In fact, these inflows into bullish call options on gold have reached near-record levels.
Investors purchase call options when they believe the value of an asset will rise. The call option contract gives them the right, but not the obligation, to purchase an asset – in this case, gold – at a fixed price. In contrast, a put option gives the contract holder the right to sell an asset at a fixed price. Recent data shows that the ratio of calls to puts on gold prices has increased dramatically indicating that the market believes gold has even more room to rise.
Investors appear so bullish that they have increased their purchase of “out of the money” options. These are contracts that give them the right to buy gold at a price that is above the current market price. Clearly, investors believe that buying gold above the market value is an investment that will pay off.
It’s likely that this optimistic outlook is being fueled by SVB’s collapse and troubles in the banking industry. These developments have led many to question if their bank has the capital to fund withdrawals. The spot price of gold made a steep ascent after the news of SVB’s demise. As other banks faltered, both in the US and abroad, many account holders lost faith in their banks. Gold is giving these individuals an alternative because it is an asset that is recognized the world over.
Importantly, it is also an asset that, when held in physical form, is free of counterparty risk which is the risk that other parties involved in a financial transaction will not fulfill their obligations.
These recent bank failures have surfaced uncomfortable memories of the 2008 global financial crisis even though the two scenarios have many differences. However, despite those differences, many investors appear more vigilant today and more eager to act quickly and decisively by moving more assets into gold.
This decisiveness is seen in the increase of gold buying activity not only in options contracts, but also futures contracts, and exchange-traded funds. As Akash Doshi, head of commodities for North America at Citigroup, recently remarked, “it has been pretty much one-directional buying.”
This trend is likely to continue as Fed rate increases continue to weigh on the equities market and as new regulations emerge to deal with excessive risk-taking among banks.
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Gold Soars As Bank Failures Spark Worries of Larger Crisis
Posted onIn a span of 10 days in mid-March, gold surged 9.8% higher as investors parked cash in the safety of precious metals. A loss of confidence in the banking sector is spreading following the nation’s second and third-largest bank failures. While the Federal Reserve pumped $300 billion in credits to banks in mid-March, investors and depositors remain skittish – and gold is shining bright in its role as a safe haven.
As you know, on March 10 and March 12, Silicon Valley Bank in Santa Clara, CA, and then Signature Bank in New York NY failed – meaning they shut their doors permanently and depositors could no longer get their cash. What’s more, teetering First Republic Bank got a $30 billion bailout in the last few days from a deal between eleven giant banks.
Simply put, banks fail when they can no longer meet their obligations to their depositors or creditors.
What caused these 2023 bank failures? The recent spate of bank failures can be blamed on a number of factors including the Federal Reserve’s rapidly rising interest rate campaign, a collapse in technology stocks, and the blowout in the speculative cryptocurrency sector. Add in bad risk management by bank managers and you have bank failures.
What may come next? While we don’t have a crystal ball, Blackrock CEO Larry Fink’s recent insight on the banking turmoil is instructive:
“The price of easy money – are the dominoes starting to fall?”
The Fed took away the easy money punch bowl and look what happened.
Every day Americans, businesses big and small, and even governments are trying to adjust to the end of the easy money, zero-interest rate punch bowl that the Fed left out on the table far too long.
Since the 2008 global financial crisis, the Fed kept interest rates at abnormally and historically low levels for over a decade. With those ultra-low, near-zero interest rates, the Fed lit the match of the inflation that has now turned into a raging fire that even the most powerful fire engines aren’t able to douse.
Money managers are warning: This isn’t the end of the financial sector instability, it may be just the beginning.
Gold is insurance for your wealth
The current spate of big bank failures are a reminder of how important it is to take risk management seriously.
When you buy a home, you buy home insurance to protect your dwelling in case of storm damage, theft, or fire. When you buy a car, you buy car insurance to protect against an accident that wrecks your new vehicle. As you build your wealth and work toward your financial goals, investing in precious metals offers you the same ability to buy insurance and protect your wealth.
As we’ve seen in mid-March when banks collapse and the stock market sinks, the price of gold climbs. Precious metals ownership gives you the opportunity not only to protect but to grow your wealth with the safety of gold and silver. Do you own enough?
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Silicon Valley Bank Failure Reminds Us of the Security Gold Provides
Posted on — 1 CommentWhen you put your money into a bank, you expect to be able to get it back – in full, any time you want it.
The shocking Silicon Valley Bank headlines and worries about contagion throughout the banking system remind many of 2008 and the Global Financial Crisis that impacted so many Americans. As news of the bank run and the subsequent failure of Silicon Valley Bank on Friday rocked the U.S. banking system, it reminds us all of the value of gold.
Gold is the ideal liquid investment – and that provides security and peace of mind to those who own it. When you take physical ownership of your gold, you have access to your gold any time you want or need it. Gold is recognized as a wealth asset in every advanced country around the globe. No matter where you go, gold is recognized as a liquid currency.
What caused Silicon Valley Bank’s failure?
Most banks take in deposits and then lend out funds as mortgage or business loans. What hurt Silicon Valley Bank is that as the tech industry saw challenges, new deposits slowed, while withdrawals increased fast. The bank was forced to liquidate some of its holdings at a loss to meet withdrawal demand. This in turn decreased confidence in the bank’s health and spiraled into an actual run on Silicon Valley Bank
Simply put, the rapid rise in interest rates caused Silicon Valley Bank’s failure.
Here’s what one money manager said:
“This is the first sign that there might be some kind of crack in the financial system.” – Smead Capital Management’s Bill Smead told the Wall Street Journal.
Normally, at FDIC-insured banks, deposits up to $250,000 are insured. In a stunning and abrupt reversal over the weekend, federal regulators deemed Silicon Valley Bank a “systemic” risk to the banking system – and in this case decided to protect and insure all customer deposits – including those that exceed $250,000.
What is that system risk, regulators worry about?
A nationwide run on banks in big cities and small could crash the banking system. There’s no guarantee the rapid rise in interest rates we’ve seen in the past year won’t impact other banks. That’s what regulators are worried about now.
As a literal bank run occurred at Silicon Valley Bank as panicked Americans pulled their money out of the bank before it went under, it reminds us of the importance of “liquidity” – or having access to your money when you need it.
Gold Is One of the Largest, and Most Actively Traded Markets in the World
About $130 billion worth of gold is traded each and every day in all its forms, according to 2021 data. In fact, gold trades more frequently than many other assets on a daily basis, including stocks in the the Dow Jones Industrial Average and US corporate bonds, according to the World Gold Council.
The Bottom Line
Gold and silver bullion and coins can easily be converted to cash because of the large number of investors around the world who participate in the precious metals markets. There are many reasons to buy physical gold and silver and bank failures are just one of them.
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State of the Economy and Gold: American’s Credit Card Debt Hits All-Time High
Posted onJust charge it. As high inflation squeezes consumers at the checkout line, credit card debt just hit an all-time record high at $986 billion, according to the New York Reserve Bank. Americans are drowning in credit card debt as everyday necessities like housing costs, food and interest rates on anything borrowed remain uncomfortably high. In the meantime, total U.S. household debt surged to a record $16.9 trillion during the fourth quarter, a jump of 2.4% from the prior three-month period.
Why is this happening? Interest rates sit at their highest levels in 15 years, inflation is off it’s 40-year high, but still elevated and wages just aren’t keeping up. Americans have gone through their pandemic savings accounts – boosted by government stimulus payments – and are now turning to their credit cards to make ends meet.
What this means for gold: The rising debt levels on the consumer front reveal cash-strapped spending. Overall consumer spending will suffer in 2023 as high prices and high-interest rates and mass layoffs derail spending plans. Gold tends to increase in value during slowing economic periods and slower consumer spending means slower economic growth. Remember, consumer spending makes up two-thirds of the American GDP.
Stock market earnings reports disappoint
As fourth quarter earnings season nears its end, overall company reports were grim. From Apple, Amazon and Google to Home Depot and Domino’s Pizza – companies reported worse than expected fourth quarter earnings in recent weeks. What’s worse? Looking ahead to full-year 2023 estimates, company results could be the worst in over 20 years according to a new UBS forecast. The firm expects companies to continue to downgrade their earnings forecasts in 2023 amid weak growth and cost pressures on top of recession risk.
UBS economists expect a U.S. recession between the second and fourth quarters of this year, leaving aggregate S&P 500 earnings per share about 11% lower, MarketWatch reported.
What this means for gold: While the stock market posted a minor recovery in early 2023, following 2022’s double digit losses, weaker-than-expected earnings will pull the stock market down again later this year. Look for renewed stock market weakness to support additional gains in gold in the second and third quarters as investors seek diversification and safety from volatility.
Fed nearing the end of its interest rate hikes
The Federal Reserve is widely expected to raise interest rates again at its March meeting. From there all bets are off on future interest rate hikes. With signs that aggressive rate hikes throughout 2022 are taking a toll on consumers and the economy, the Fed may be forced to stand back from additional interest rate increases.
What this means for gold: This is positive for gold and could propel the yellow metal above the $2,000 mark, Wayne Gordon of UBS Global Wealth Management told CNBC earlier this month. He said the Federal Reserve is going to pause after its next interest rate increase and gold will continue to be a “very good hedge” against renewed weakness in the U.S. dollar.
If you have questions about the state of the economy or would like to discuss how you can protect your wealth in the current environment, talk to a Blanchard portfolio manager today. We have been helping clients grow and preserve their wealth through diversification into tangible assets since 1975 and we can help you too
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