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Metal Market Report April 2019 - Week 1 Edition

April 2019 - Week 1 Edition

The Press Ignores a Troubled World Around Us

Gold fell below $1,300 last Thursday, March 28, closing the quarter up less than 1% at $1,293.  Silver closed the first quarter down a little over 2%. There seems to be a general consensus that the fear of an impeachment of a sitting President is now “off the table,” since the Mueller Report seemed to clear the President of any charges of collusion with Russia in the 2016 elections. We won’t know for sure until more of the report is released later this month, but that is only one small part of current global troubles!

It’s fair to say that the majority of our national press has obsessed about President Trump and the Mueller report (even if polls show that the average American doesn’t care much about the subject!) Most major TV news networks and national newspapers, like the Washington Post and New York Times, have focused their coverage almost entirely on negative views of the President, while ignoring the world around them.  The global economy has been slowing rapidly in the last year. On CNBC last week, President Trump’s economic advisor Larry Kudlow said, “Globally, there's a lot of weakness out there. Europe is virtually in a recession. China [is] very, very soft as we negotiate on trade.” The reason the world is slowing down is tied to four economic problems summarized in the 4 D’s: Demography, Debt, Deflation and Disruption.

(1) Demography (fewer children born) is creating a long-term economic problem where fewer younger workers are coming on board to fund the social safety net for rapidly-aging societies in Europe and Asia.

(2) Debt in many countries has surpassed annual GDP. In the U.S., the debt-to-GDP ratio has just climbed over 100%, but Japan’s debt-to-GDP ratio is twice as bad at 223%, and many nations in Europe are also sky-high in debt, including the “PIG” trio – Portugal (127%), Italy (131%) and Greece (180%).  China doesn’t release reliable statistics, but “shadow” data shows their debt-to-GDP ratio is almost 300%.

(3) Deflation results when Quantitative Easing (QE) policies can’t generate any meaningful growth or inflation. As a result of deflationary expectations, European and Japanese government bonds now offer Treasury bond rates below zero. This leaves their central banks with policy options to stimulate growth.

(4) Disruptions come when Europe is overwhelmed with a wave of new immigrants who refuse to be assimilated and become huge new drains on their social safety net. Also, China is now swamped with debts due to over-expansion and sudden lower profits from tariff battles with the stronger U.S. economy.

Disruptions can take on a larger meaning when you consider the continuing 18-year American military presence in Afghanistan, Pakistan and Iraq after 9-11, plus civil wars in Syria, Yemen and Libya and potential unrest in China and North Korea, plus increasing violence in Mexico and our southern border.  The world may seem “quiet” at any given moment, but when disruptions strike, gold and gold coin prices can soar. This has happened once or twice per decade since the late 1960s, when I started collecting coins.

Counterfeit Coins (Even in “Authorized” Grading Service Holders) are Proliferating

In the past year, I have reviewed several customers’ coin collections and sadly detected one or more counterfeit coins. In one instance, the majority of one person’s collection was counterfeit proof Buffalo one-ounce gold coins, with all coins appearing in what looked like authorized NGC holders, so that the holders themselves were fraudulent. Many of these counterfeits seem to have been “Made in China.”  Other collectors I helped had counterfeit American Eagle gold coins, counterfeit Morgan, Peace and Trade dollars.  Some counterfeit Trade Dollars were easily spotted in that they used dates when no Trade dollars were minted.  In other cases, the counterfeit Morgan and Peace dollars were made of nickel, copper and zinc and rang with too high a pitch compared to a real silver dollar when tapped with a pen.

I reminded this collector that it’s always important to know the reputation of the dealer from whom you buy coins. Does the dealer have multiple industry awards for industry service and contribution to the numismatic literature? Does the dealer have a long-term track record of honest dealing -- a reputation that must be maintained by continuing to deal honestly? Does the dealer know how to spot counterfeits?  These are the instructions I provided the Attorney General of Texas when I helped him with his gold coin Consumer Protection Alert.  I have taught counterfeit-detection classes for a major grading service and worked with law enforcement agencies and consumer protection agencies in helping to stop counterfeit operations. I am also part of the Anti-Counterfeiting Task Force supported by the Anti-Counterfeiting Educational Foundation.

If you are offered rare coins and bullion at too low a price, be careful as you may be buying either a mis-graded coin or an outright counterfeit coin like my doctor friends.

Let Us Prey

One day in 1984, a physician walked into my office, blood and amniotic fluid all over his surgical greens, and dropped a big safety deposit box on my desk.  “Tell me these are not counterfeit,” he implored.

I opened the box and pulled out ten coins.  After I had looked at them, I said, “Four of these are butter, six are Parkay.”  He did not think it was very funny.  He wanted me to examine more coins.  For almost two years, I had worked for a major grading service, teaching grading and counterfeit detection.  We sent the coins to them, and they validated my original judgment.  The man who had sold these coins to the doctor (and many of his physician friends) was a local attorney.  Because he was making so much money selling counterfeits to these unsuspecting doctors, he had practically shut down his practice.  He haunted coin shows under the cover of buying counterfeits “for jewelry.”  Dealers knew him as “the guy from the south who buys counterfeits.”  Nobody suspected he was selling them to the medical profession as genuine.

The lawyers’ deception went further than bogus coins.  He went to mass together with my friend.  His brother was the monsignor at one of the local Catholic churches, they went to a Medjugorje retreat together, the doctor delivered his children, and they stood godfather to one another’s children.  When the attorney had triple bypass surgery, the doctor had left his own work to stay by his bedside through the ordeal.  All the while, the lawyer had been selling the doctor counterfeits and using him as a shill to hoodwink his doctor friends as well.  The religious masquerade was the final twist of the knife.

When the Secret Service confronted the lawyer with his crime, he broke down and assumed a near fetal position right in front of them.  Eventually, the attorney restored almost a million dollars to all the doctors he had defrauded.  In the process, he threatened me over the phone (as the bearer of bad tidings, I suppose).  But, in the end, he turned practically everything over to the doctors.  After everything was settled, one of the physicians in the group said to me, “Mike, if there is anything I can ever do for you, please just ask.”  For my services in helping them recover their money, they paid me nothing.  I did it for free, because it was the right thing to do.  I just wanted to help get rid of this crook, and in the process, clean up my industry’s own nest, so to speak.

In the process, I became lifelong friends with the doctors.

Remember, if you are offered rare coins or bullion at too low a price, check with one of our trained representatives. Our team can help you verify the value and authenticity of your bullion coin or rare coin purchases.


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