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Sounds Like Broken Records
By Jon Nadler

A year best-forgotten in many ways, finally comes to a close today. Many on Wall Street as well as Main Street wish they had windows that open, so that they could throw some investment account statements out of them, along with the desk calendars that normally fly at this time of the year. This was a year of unsavory records, to say the least. Some 30 trillion dollars were wiped off the slate of market valuations. The year-end tally for crisis-related write-offs came in at $720 billion. The average US home fell nearly 20%.

And then, to cap the list of such dubious records, there was Bernie "Made-off" who may go down in the books as the biggest swindler in history. The list of failures or near-failures includes the very pillars of the financial Parthenon: Bear, Lehman, Merrill, Goldman, Morgan Stanley, WaMu, Citi, AIG, GM, Chrysler, UBS, and then some. The list is too long to recall them all. Other spectacular failures include commodities such as crude oil (down 64%) and copper (down 56%). Add China's Shanghai Composite (off 65%) the S&P (lost 39%) and the Nikkei 225 (fell 42%), and record drops in the Aussie, New Zealand, and Canadian dollar versus the greenback and you are starting to get a fairly good picture of what the past twelve months have wrought.

Against this bleak background, we superimpose gold. While eking out a near- 3.00% gain after eight continuous years of far better showings may not make it into gold's own record books, the metal did that which we had theorized about for some time now; preserve capital by becoming a reverse hedge and falling less than other assets. Should the deflationary maelstrom intensify in the coming year, gold will not remain immune from price declines. Our hope is that it repeats this year's trend of becoming a reverse hedge. Any combination that includes the word "hedge" when it comes to describing gold is just fine by us.

That said, herewith the projections for gold prices in 2009. The trading range will likely remain as wide as this year's $350 while volatility will remain an integral part of daily, weekly, and monthly swings. Prices might touch $630 on the low side and $980 on the high side - however, factor in some imponderables (severe deflation and/or catastrophic geopolitical developments) and one could augment either end of the scale by $100. Barring the latter, the average gold price will likely register near $810 per ounce, following its $871 average for the current year.

Silver is projected to trade in a wide range as well, almost as broad as that seen in 2008. Lows could come in in the mid- $6 range, and highs near $14 per ounce, with an average closer to $10.50 for 2009. This year's cumulative average was $15 per ounce.

Spot dealings in New York aimed significantly lower as the final session of 2008 ran its last lap before an early close. Bullion started with a $16 loss at $858.30 this morning, pressured by a surge in the dollar to 81.21 on the index and a sharp drop in crude oil to under $37 per barrel. Silver lost 17 cents to start at $10.75 while platinum hovered at $900, losing $11. Palladium fell $1 to $183 per ounce. Initial jobless claims fell by 94000 last week, although overall unemployment remains at a 26-year high.

Thus, we close the chapter that was 2008. Grateful that the core insurance position of 10-15% in gold remains as justifiable as ever, and that the metal acquitted itself honorably during difficult times.

We close with - what else? The list of 10 worst predictions for 2008. No, these are not the broken-record/broken-clock starry-eyed declarations of $1200 or $2200 gold or $200 silver that we were once again guaranteed in 2008. Those were not worth mentioning when they first saw the light of day. The list is a smorgasbord of really bad calls, ranging from politics to markets. Courtesy of Foreign Policy.com. Enjoy!

http://www.foreignpolicy.com/story/cms.php?story_id=4569&page=0
 



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