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Metal Market Report August 2022 - Week 1 Edition

August 2022 - Week 1 Edition

Coins Usually Hold Up Better Than Most Paper Investments

While most investments in paper money, bonds and stock certificates have fallen in 2022, rare coin demand and values have risen. If you have specific needs or a wish list in mind, be sure to communicate those needs to your account representative so you can be first in line when these rarities become available. I am constantly searching for “Wish List” coins for you.

From as far back as we can measure time, coins made of precious metals have held their value better than paper receipts for wealth. In the July 15 Wall Street Journal, two economists (Alexander Salter, professor at Texas Tech, and Dylan Pahman, executive editor of the Journal of Markets & Morality) wrote an op-ed, “In God – and Sound Money – We Trust,” showing that “Scripture is replete with teachings about the importance of sound money. The Torah, the first five books of the Hebrew Bible, contains 25 references to the ‘shekel of the sanctuary,’ a coin of a fixed weight placed in the Tabernacle of the Lord to ensure that all commercial transactions took place on the basis of a ‘perfect and just weight’ (Deuteronomy 25:15).”

These economists (and many others) point out that the poor are hurt most by inflation, since prices rise fastest in the necessary home purchases of food, shelter and energy for transportation and home heating. The impact is compounded because wages and bank savings can’t keep up with rising inflation. The Federal Reserve, Congress and the U.S. Treasury knowingly engineered today’s inflation through $6 trillion, or more, in profligate printing press money in 2020 and 2021 – far more than was needed to help those they cruelly threw out of work in unnecessary lockdowns, and then they paid workers for staying out of the labor force for up to two years.

In addition, we are now trying to fund a war in Ukraine and perhaps a new one brewing in Taiwan. Wars always add to inflation. We saw massive inflation in the Revolutionary War – when a wagonload of our paper “Continentals” wouldn’t buy a wagonload of provisions. In the Civil War, Union “Greenbacks” and Confederate dollars both became slowly worthless. Then, the World War I inflation directly resulted in a massive Germany hyper-inflation of 1923 – and the post-World War II inflation in southern Europe was even worse. The 1970s “Stagflation” was launched by Vietnam spending. Now we may see a repeat of the 1970s due to trillion-dollar deficits every year, plus money creation and no Congressional spending cuts.

This is the type of scenario when the three precious metals of freedom – gold, silver and lead – show their importance and value.

Gold and Silver Rising Again

Gold rose in the second half of July after falling in the beginning of the month, and each move was mostly based on the rise or fall of the U.S. dollar. As the dollar soared in the first half of July, gold fell over $100 per ounce. Then, as the dollar fell in the second half of July, gold rose $60 in basically a mirror image of the dollar.  In addition, gold often rises on recession fears, or it falls if it appeared the economy was recovering. As usual, silver moved more rapidly than gold, with silver shooting back above the $20 level on gold’s recent rally. 

Month-End Review: Annual Report Through July 31

It’s been a pretty bad year for most investments, except for some commodities and the U.S. dollar. In fact, commodities are up more strongly in most other currencies because of the strong dollar.  (If a currency is weak, one of the payoffs is that gold tends to rise faster in terms of a weak currency than a stronger one.)

The big news in July was that the stock market finally began to recover, with a 12% gain in NASDAQ and +9% in the S&P 500 in July, as corporate earnings came in better than expected. Over in Europe, the situation is not so positive. The energy supply situation is drying up in Europe as Russian natural gas is only flowing at 20% of capacity, so energy costs have recently soared at a stratospheric pace in Europe.

U.S. Mint sales of gold bullion coins were down slightly in July 2022 over July 2021, but they were up for the year-to-date through the first seven months of 2022. American Silver Eagle coin sales are still down while their premiums are up substantially because the Mint cannot find enough silver blanks to mint the coins needed to meet customer demand.

 

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