A Publication of Austin Rare Coins

A Publication of Austin Rare Coins, Inc. April 2008

Gold Headed to $3,000 an Ounce?

A couple of weeks ago, we sold our first one ounce American Eagle for over $1,000. Wow! Imagine... a plain, ordinary, extremely common ounce of Gold worth over $1,000.
Gold Eagles

You could buy that same coin for under $300 an ounce in 2001. It's interesting to consider that a 2001 American Eagle gold coin has not become any rarer, it did not learn to jump through hoops, nor was there a collector rush to buy one.

Yet, that coin has almost quadrupled in value. Sometimes I go down to the vault just to look at all the gold. There is a roll of American Eagles sitting there in my vault where it has been quietly soaring in value, making me money.

Gold is delightful, unlike a stock, which represents a company that has employees, competitors, and suffers from recessions and Chinese competition. But Gold has–

• No balance sheets.
• No employees or unions to hassle with.
• No technical support department.
• No need for innovation.
• No printing presses.

Gold has inherent value–

• Gold does not go out of business like Enron.
• Gold does not worry about bankers' mistakes or the sub-prime mortgage crisis.
• Gold can never become worthless, perhaps worth less... but never worthless.
• Gold has no recessions, no weeds, no bail-outs and does not suffer from bad management decisions.
• Gold is a permanent asset, wealth that cannot be created or destroyed.

If, and only if, you hold the physical metal Gold in your personal possession are you taking 100% of the advantages of Gold.

Gold the Safe-Haven
Because Gold is such a unique investment, most people do not understand it. In 2008, the rush to Gold has been as a safe haven investment.

Can there really be one single investment that increases in value while all other investments are falling? Yes, and that investment is Gold. You can see here that as U.S. Stocks continue to stall, flutter, and fall, Gold and Silver are going up, up, up.

Gold Outperforming the U.S. Dollar
As the value of the U.S. Dollar hit all-time lows, the value of Gold has soared– first to hit the historic high set back in 1980 of $850 an ounce. And then to move well beyond that level to trade above $1,000 in 2008.

Conclusion: Gold is inversely related to the U.S. Dollar. Gold trends higher as the U.S. Dollar trends lower.

Gold versus Real Estate
The U.S. Real Estate market is in a free fall. While it's very difficult to graph real estate against Gold, one can safely say that Gold is rising today, in part, due to the real estate bust. The home building market today is in dire trouble as a result of the absurd banking policies which created the Sub-Prime Mortgage Crisis. Each week, a new piece of the problem comes to light which continues to send aftershocks into the already beaten down U.S. stock markets.

Here are a few general facts about Gold versus the Real Estate market today. In 2007, Real Estate prices nationwide were down 6.7% while Gold was up 31%. If we consider the statement “all real estate is local” and we look at local prices just through the end of 2007, we really get a feel for how fast home prices are falling–

• San Diego home prices were down 11.1%.
• Miami prices were down 12.4%.
• Tampa, FL declined 11.8%.
• Detroit was down 11.2%.

Everyone Suffers from Bad Banking Decisions
As the values of home loans have been admitted, many U.S. Banks and financial institutions have watched their stock prices crash and their banking business fall into recession. Meanwhile, Gold has gone through the roof!

Things are bad, but they will surely get worse. I am convinced that a severe recession in the U.S. is imminent, a downturn more like a depression is distinctly possible. American businesses are losing their shirts. Goldman Sachs predicted a combined write-off loss of $33.6 Billion for Merrill Lynch, Citibank, and JP Morgan Chase by the end of the fourth quarter.

Citibank alone is already facing $23 Billion write-downs due to the Sub-Prime Mortgage Crisis. UBS, the world’s largest wealth manager, just announced losses of $14 Billion for bad investments in U.S. Sub-Prime Mortgages.

Gold has never been a victim of a rogue trader, but France’s Societe Generale Bank lost $7.2 Billion Dollars in just a few days of bad trading by an unsupervised employee. That leaves us to ask the question, "Have the world's bankers all gone nuts?" Meanwhile, Gold has broken into new highs this year above $1,000, up 295% since the low in 2001.

Auto Industry Sustains Huge Losses
Not just the home building, mortgage companies, and banks are caught up in the problem of consumer over-spending, over-borrowing, and failure to continue spending as we head into a recession.

You can see from the graphs that Ford and GM's stock prices are barely recovering after a major dip in March. (During the same time that Gold prices have been skyrocketing to new highs daily.)

• I'm ashamed to report that Ford lost $2.7 Billion in 2007. But, that was much better than the whopping $12.7 Ford lost in 2006.

• But Ford's losses are nothing compared to GM. General Motors just reported staggering losses– $38.7 Billion in 2007.

As U.S. car companies continue to lose Billions of Dollars each quarter, you have to wonder what companies are left from the historic days when the U.S. industrial engine led the world.

Automobile manufacturers have Japanese competitors that are relentless. Gold has no Japanese competition, no Chinese worries, and no problem at all competing against the Yen, the Yuan, the Euro, the U.S. Dollar or any other paper currency in the world.

Where's Gold Headed in 2008
We have repeatedly based our confidence in Gold because of the systemic weaknesses we see in the world banking system. Three years ago we first learned about the questionable business practices of hedge funds, bankers, and the mortgage industry. We warned our readers repeatedly of the coming problems. Now, they have arrived. Once again, The Austin Report will ask the most important question of all–

CAN GOLD DOUBLE AND TRIPLE IN VALUE AGAIN?

A Repeat of the 1970’s?
We feel confident that the bull market for Gold, Silver, and other precious metals has hardly begun. While the price of Gold has tripled from lows, prices rising three times does not, in our opinion, indicate the Gold Bull Market is over.

In the 1970’s, the last bull market for Gold, the price soared 24 times.

$100,000 invested in Gold in 1970 turned into $2,364,700 by the high in 1980.

Should we be looking at a rise of 12x, 15x, or more from the $255 lows? If so, our expectations of Gold surpassing the $2,000 to $3,000 level in the coming months may look foolishly low in the years to come.

Buy Gold Now
In the negative investment climate we see in 2008, we continue to believe that "Now is the time to add Gold to your portfolio." This year alone, Gold has already soared to a new all-time high over $1,000. Gold's bull market run, only in the seventh year, may see Gold blasting through new highs in the thousands– $2,000, $3,000, or much, much higher. It's not our job to forecast the future price of precious metals, but only to comment on the environment we see today and report the facts as we see them. It is entirely up to our readers to draw their own conclusions.

However, as long as the Fed keeps cutting rates and the Sub-Prime Mortgage Crisis continues affecting every asset you own, the outlook for Gold has never looked better, in our humble opinion. Will we see a repeat of the 1970's? Although we cannot guarantee that past performance is no promise for future gains, we feel that Gold is still a bargain and a few years from now, Gold at $1,000 per ounce may seem very inexpensive.

Questions? Call a Gold Specialist at 1-800-928-6468

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Austin Rare Coins, Inc.
Serving Investors & Rare Coin Collectors since 1989
7200 North Mopac • Austin TX 78731

Disclaimers: Austin Rare Coins & Bullion has prepared information on this site for the private use of our readers. It should not be taken as personal financial advice. The information herein is obtained from a variety of sources that we believe to be reliable, but we cannot guarantee the accuracy or that information has not been condensed or may be incomplete. All opinions expressed by the editors of The Austin Report and those expressing opinions are subject to change without notice. We are not financial advisors. The information about future predictions, projections, or financial advice could prove to be unprofitable. This firm is specifically in the business of selling gold, silver, platinum and rare coins to the public and offers its opinions from that viewpoint. We generally make available news and opinions that relate positively to our markets and do not seek to present a balanced view of the investment markets. We advise that you seek out information from a variety of news sources before making any investment decisions. It’s important to always remember that past performance is no guarantee of future value. These products may not be suitable for every individual as the value of gold, silver, and rare coins go down as well as up in value.