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Metal Market Report July 2022 - Week 4 Edition

July 2022 - Week 4 Edition

Gold Rallies as Dollar Falls

Gold rose to $1,737 this past Friday on the week’s final London price fixing, up $30, mostly due to a falling dollar, reversing gold’s four previous weekly declines. The U.S. Dollar Index peaked at a 20-year high of 108.54 on July 14, and it has since fallen 2%, giving gold a chance to recover in U.S. dollar terms.

Gold is currently in a “holding pattern” in anticipation of this week’s Federal Open Market Committee (FOMC) meeting, which convenes only eight times each year to discuss monetary policy and set interest rates. Their announcement comes out around 2:15 pm EST Wednesday, at which time they are expected to increase the short-term Fed funds rate by another 0.75%. Since that is already expected, the dollar may not move, but if there are any surprises either way, markets could react rapidly and strongly.

Why is the Dollar Down and Gold Back Up (Since July 14)?

The U.S. Dollar reached a 20-year high in mid-July, simply because the U.S. offers the highest interest rates of any major currency – about 3% vs. negative rates for the euro and near-zero rates for the Japanese yen – the second and third most widely-traded currencies. Investors naturally want to maximize the return on their cash, so they store cash in the currency that offers the most total returns (principal plus interest).

In July, however, interest rates on the dollar began to decline while the European Central Bank (ECB) finally got serious about raising their rates – if you can call moving from negative to zero “raising rates.”

Last Thursday, July 21, the ECB finally raised its key rate to 0%, up from -0.5%. The reason this increase hit the dollar so hard was that this 0.5% rate increase was more than the ECB had previously indicated. They had previously hinted at a smaller increase of 0.25%, so this larger 0.50% increase was welcome as a fight against rising inflation that has spun out of control in Europe – worse than in the U.S., due to their acute energy shortage. This was the first euro central bank interest rate increase in over a decade.

This caused a rally in the euro and a drop in the dollar. The euro had previously reached “parity” with the U.S. dollar, meaning one euro equaled one dollar, after the euro began the year at $1.13.  On July 14, the dollar and euro were equal. Now, the euro is back to $1.022 – over 2% stronger. That’s why gold is currently up about 2% from its recent lows in the $1,680s. It’s all about the dollar vs. the euro, for now.

The Rare Coin Market Remains “Hot”

Whether gold bullion is declining, flat or rising, the rare coin market remains “hot” in our select sectors. Even while the dollar was soaring and gold was falling – from the end of May to mid-July – rare coins were extremely strong.

One of the reasons for this increase is that quality coins remain very hard to find, so their prices rise due to a short supply and rising demand. That’s why we snap up important rarities whenever they come on the market. We strongly advise you do the same by keeping in touch with your account representative to request updates on new coin offerings in your area of interest. We also search for coins with the most attractive toning, minimal bag marks and the greatest “wow” factor for their grade, Mint, year and lower comparative population of surviving specimens. We also only buy and sell certified coins graded by the Numismatic Guaranty Corporation (NGC) or the Professional Coin Grading Service (PCGS).

Some of these special coins we find for our clients may cost a little more than the average sight-unseen, certified coin but bear in mind what one of my great coin mentors has said: “You may pay a bit too much for the right coin, but you always pay too much for the wrong coin.” Remember, these are coins you can hold in your hand and enjoy, for their history and their beauty (try holding a “bitcoin” in your hand!) That’s why we focus on a coin’s “wow” factor of striking beauty.

With most markets down or volatile – including stocks, bonds, real estate, bitcoins, silver and sometimes gold – now is the time to get on board with one of the few markets that seems to keep on rising – rare coins.


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