Tuesday, November 30, 2004
It's been a dollar bear market, not a gold bull market, so far...
"I was a little scared..." Investment U Vice President Brian Hunt recalled today.
Brian was filing some papers, and came across the invoice for when he first bought my recommended coins.
"Steve, I probably considered investing in gold coins more because you were so fired up about them, not because I was interested. Quite frankly, I wasn't so sure about this one."
Gold Coin Investments Up 53% and 64%, With Room to Run...
Brian looks smart today. The invoice he came across, dated 9/23/03, shows Brian paid $475 for his MS63s and $935 for his MS65 Saints. Today those gold coins will cost you $729 and $1,535 respectively. So the prices of these coins are up 53% and 64%, in 14 months.
"The one thing that did strike me, Steve, was how you said you'd never seen such hatred toward an asset class."
Brian knows that's what I'm looking for in an investment - I want to buy 1) exceptional values, when they are 2) hated, yet are just entering 3) an uptrend. That was gold coins in 2003.
I liked investing in gold coins because they were trading at their smallest premiums over their meltdown value in their recorded history. So I had two ways I could make money: if the price of gold rose, or if the "premium" over meltdown value rose. Fortunately, both have happened...
Gold was around $385 when Brian bought, and it's around $450 now. So 17% of the move in the coin prices can be attributed to the price of gold rising. The rest of the rise is the expansion in the collector's premium.
So Brian's up 50%. Is it time to sell gold?
Time to Sell? Consider This...
In mid-2002, gold was trading around 320 an ounce... That was $320 dollars, AND 320 euros. Since then times have changed...
Gold has soared by $130 in the last two and a half years, to $450 dollars. Judging by that run, you might think that gold's run is done - that's there's no room left to run.
You'd be mistaken. I'd like to strongly suggest that investing in gold coins is still a smart move...and that gold's bull market hasn't even really begun. Let me explain...
While gold has soared to $450 dollars in the last two and a half years, in terms of euros gold is only up by 20 Sign up for the free Investment U Newsletter, headed up by Dr. Steve Sjuggerud.
euros, to 340 euros - barely any move at all. Since gold hasn't really moved in terms of euros, or Australian dollars, or even South Africa's rand, it's hard to say that it's a true bull market in gold. See for yourself: Investing in Gold Coins in Euros. These charts compare gold's price per ounce in U.S., Euro, Australian, and South African values.
In a true bull market in gold, gold rises versus all currencies. We're not there yet.
We are not fully into a major bull market in gold. This is a bear market in the dollar in the last few years. Gold hasn't been soaring - it's been the dollar that has been crashing.
Gold's bull market is in the very early stages. I'll consider investing in gold coins a bull market "in full force" once it hits new highs in all the currencies I mentioned. We're getting close on the euro.
Until we see gold rising in terms of all major currencies, it's a big dollar bear market - not a big gold bull market.
Brian hasn't sold a single gold coin yet, and neither have I.
Today's IU Cribsheet
Of course, gold's straight-up rise (the dollar's straight-down crash) has to see a correction sometime soon, so no doubt gold will see some near-term dips. Looking farther out, could a gold bull market continue if the dollar strengthens versus the euro? And could investing in gold coins, for example, continue to do well? I believe they can... Again, in a true gold bull market, gold will rise against dollars AND euros. And I think we'll see that happen over the rest of this decade, as I've written over the last few years in my True Wealth newsletter.
Good investing,
Steve
