Precious Metals

Gold outperforms other investments to start 2016

A 2013-P 5-Star Generals $5 gold half eagle graded MS-70 First Strike by Professional Coin Grading Service sold for $732 at an April 3 GreatCollections auction.

Original images courtesy of GreatCollections

In the first quarter of 2016, gold notched its largest quarterly gain in three decades, rising 16 percent in the first three months of the year. This type of gain had not been seen since 1986 (which also marked the start of the American Eagle silver and gold bullion coin program).

An April 1 story in The Wall Street Journal called the rally “a rare bit of good news for a metal that has been in retreat for much of the past five years, a period when U.S. economic activity picked up and the dollar surged,” before concluding, “many investors remain skeptical that gold will go much higher unless the global outlook dims considerably.”

Gold was second only to lean hogs in the Journal’s ranking of the winners and losers for the first quarter of 2016. Hogs marked a gain of 35.2 percent with gold following at 16.5 percent. Next was the Dow Jones Utility Average gaining 15.7 percent, Brazil’s stock index rose 15.5 percent and silver moved up 12 percent. At the bottom was Italy’s stock index measuring a 15.4 percent loss, natural gas at a 16.2 percent loss, and rough rice losing 18.1 percent.

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Those who have gold holdings are reluctant to begin taking their profits, while at the same time, many collectors, if not facing a major life event or with a need for immediate cash, are choosing to keep their collections. This results in a shortage of fresh material in the rare coin market.

The U.S. Mint is banking on collectors having a continued interest in gold with its April 21 launch of the gold 2016-W Winged Liberty Head, or Mercury, dime.

It is the first gold issue in recent memory that has such broad collector appeal, with a classic design combined with a relatively affordable price point since it is a tenth-ounce coin. The mintage limit of 125,000 and the ordering limits of 10 per household should provide for broad distribution.

A gold quarter-ounce 2016 Standing Liberty quarter dollar and half-ounce 2016 Walking Liberty half dollar will follow.

Modern gold issues from the U.S. Mint have been hit and miss of late. The First Spouse gold $10 coin program is nearing its conclusion, though it has been fading for the past few years as collectors fatigue from a series that feels unending and expensive to complete. Recent commemorative gold coin sales — save the 2014 Baseball Hall of Fame program — have been modest.

At 5,667, the final but unaudited sales of the Uncirculated 2013-P 5-Star Generals gold $5 half eagle rank it as the second lowest among all the gold $5 commemorative coins produced by the U.S. Mint, behind only the 5,174 1997-W Jackie Robinson half eagles reported sold.

Initially priced at $480.50, the Uncirculated 5-Star Generals gold $5 coin today trades for less than its issue price when offered in original packaging, even graded Mint State 69 by third-party grading services. Slabbed MS-70 examples can bring as much as $750.   

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