Investors went crazy for gold the week starting Aug. 7, building on
the last decade of gains to an explosive high of $1,801 an ounce in
the futures markets while reaching a New York intra-day high of
$1,799.20 an ounce on Aug. 10.
The Aug. 5 downgrade of the United States debt by Standard &
Poors Corp. from AAA to AA+ shocked the financial markets, culminating
in a 634-point drop in the Dow Jones Industrial Average on Aug. 8.
Amid this uncertainty, investors have turned to gold as a safe haven.
It has been an amazing 12 months for gold. In August 2010 its price
was at $1,200 an ounce, moving to $1,300 an ounce in September 2010.
Gold started 2011 at the $1,400 an ounce level, reaching $1,500 in
late April and then $1,600 in late July.
This increase in demand was partly fueled by optimistic gold
forecasts by major banks including JP Morgan, which announced that it
expected gold to reach at least $2,500 an ounce by the end of the
year, upping its prior estimate of $1,800 an ounce, citing the
possibility of another global financial crisis.
Goldman Sachs also raised its forecast on the possibility of a U.S.
recession, raising its 12-month target on Aug. 8 from $1,730 to $1,880
an ounce while lowering its outlook for U.S. economic growth in general.
The market for all gold coins rises with the gold tide. Proof
American Eagle gold bullion coins are trading on the secondary market
at the $1,870 an ounce level as of Aug. 9. Also on Aug. 9, the Mint
temporarily suspended the sale of several gold coins including Proof
American Eagle 1-ounce gold coins for repricing, moving them up to
$1,985 by Aug. 10.
The premiums between grades of generic gold coins have shrunk
dramatically in recent weeks. For example, while a “Jewelry” grade
Saint-Gaudens $20 double eagle — the lowest commercial grade, reserved
for coins that are heavily polished or with other substantial
impairments — is $1,830, a Mint State 63 example is just $120 more as
of Aug. 9. Last year this gap was more than $300.
What impact this wild gold fluctuation will have on the upcoming
American Numismatic Association World’s Fair of Money is to be
determined. While record gold prices bring out a curious public, many
coin collectors may be worried at investing in their collections when
a dreaded “double dip” recession may be looming. ■