GainesvilleCoins Blog

This September after more than two years, the United States Mint lifted the rationing of American Gold and Silver Eagle bullion coins. By law, the Mint is required to produce enough of both type of coin to meet public demand, but when they cannot supply enough coins, they resort to meeting as much demand as possible – by allocating the coins on a weekly basis.

The irony is that time and again the U.S. Mint imposes this limitation until it has sufficient coins to satisfy public need, at which time it ends the rationing, and consumers rush to buy the coins, draining the Mint’s resources within weeks or months.

The first time that the U.S. Mint imposed its ”allocation” program was in February of 2008, following a several-weeks’ suspension of Silver Eagles. This allocation rationed the amount of bullion coins amongst authorized purchasers, and the note of the Mint state simply said, “The unprecedented demand for American Eagle Silver Bullion Coins necessitates our allocating these coins on a weekly basis until we are able to meet demand.”

Last year’s rationing of both the gold and the silver bullion coins ended in June 2009 but, as predicted, demand soon shot up, forcing the November 2009 suspension of sales -soon resumed under the all-too-familiar allocation program.

By March of 2010 the rationing had ended for Gold Eagle coins, and by this September, the Silver Eagle coins became fully available.

It seems unlikely, given the U.S. Mint’s unsteady history, that the allocation program for both Gold and Silver Eagle bullion coins will not soon come around again.

The Swiss Helvetia (1897 – 1949) embodies Switzerland’s status as a financial center of the world. The coin’s long standing reputation among investors and collectors illustrates its outstanding beauty and quality. The Swiss Helvetia, like other European gold coins, has a rich and lengthy heritage.

Ancient Origins

The name “Helvetia” comes from the name of Switzerland during Roman times. Julius Caesar conquered the Helveti in 58 BCE, but the name for the currency was resurrected during the Helvetic Republic, when a standardized coinage was reestablished. Prior to 1798, approximately 75 different entities were minting coins in Switzerland. Each entity had its own corresponding monetary system, so there were at least 860 circulating coins in the country.

The Helvetic Republic lasted from 1798 to 1803. Its goal was the unification of the numerous cantons of Switzerland. During that period the government introduced a normalized currency based on the Berne thaler. These francs were equal to 1.5 French francs. Although the Helvetic Republic soon ended, the new monetary system served as a model for various cantons in the newly formed Swiss Confederacy.

Currency in Transition

The country’s regions readopted their individual currency systems, with some modifications. Between 1803 and 1850, approximately 22 cantons minted coins, but less than 15% of the circulating currency was local. The remaining 85% was foreign, acquired during Swiss mercenaries’ exploits. Private banks started printing currencies to supplement coinage. By 1848 the Swiss monetary system included over 8000 different currency types. This trend of accepting foreign money has endured to this day; many businesses in Switzerland still accept international denominations as payment.

The Swiss federal governments sought to end this complication with a new Federal Constitution of 1848, which specified that only the federal government could produce and issue money. Two years later the first Federal Coinage Act made the franc the official monetary unit for Switzerland. The franc would replace any other currency used by the various cantons. The term “Helvetia” resurfaced as a name for the franc, recalling the country’s ancient origins.

Since 1850, the Swiss Helvetia has undergone only one devaluation, in 1936. The coin’s value dropped 30%, along with that of the US dollar, the British pound, and the French franc. Like the rest of the industrialized world, Switzerland chose to abandon the gold standard that year. The value of the Swiss Helvetia has remained strong ever since.

Swiss Helvetias as Investments

Sometimes called “Vrenelis” after their obverse design, Swiss Helvetias minted in the late nineteenth and mid-twentieth century have gained popularity among investors. Their exquisite design and outstanding condition make them a natural choice.

On the coin’s obverse is a portrait of “Vreneli” the fabled “Swiss Miss” of the Alps. The reverse features the Swiss Coat of Arms and the wreath of the Republic. They are generally available in brilliant uncirculated quality. The excellent luster and engraving of the Swiss Helvetia supplement the coin’s intrinsic value. Investors who seek a unique and historical precious metal will find the Swiss Helvetia a wise and interesting addition to their portfolios. (more…)

Markets await more money printing and key midterm elections

GDP meets expectations

Gold broke $1,350 today just before data showed the U.S. gross domestic product grew by 2 percent in the third quarter on high consumer spending, meeting economic forecasts. In a big meeting Tuesday – also Election Day – the Federal Reserve will discuss the prospect of further quantitative easing, or QE, which will have a major impact on the dollar, inflation expectations, and gold prices. “The Fed meeting next week has been dominating the markets,” said Standard Bank analyst Walter de Wet. “We think the gold market has priced in around a $500 billion QE exercise by the Fed,” he said. “If the Fed comes out with a higher figure, we think gold will move higher.”

The trillion-dollar question: How much money will the Fed print next?

All eyes are on the Fed and its next anticipated round of QE. Most experts agree that some form of QE will be launched at the conclusion of a two-day meeting of its policy-making committee next Wednesday. It’s now just a question of how many billions worth of assets it will purchase and how much the financial markets have already priced in that QE.

“Shock and awe”?: Goldman Sachs thinks the Fed ultimately might buy $2 trillion of assets – a figure close to its “shock and awe” purchase of $1.7 trillion in longer-term Treasury and mortgage-related bonds at the height of the financial crisis. “We expect an announcement of $500 billion or perhaps slightly more over a period of about six months,” said Goldman economist Jan Hatzius. “The key question, however, is not the size of the first step, but how far Fed officials will ultimately need to move to achieve their dual mandate of low inflation and maximum sustainable employment.” The Fed also might announce a monthly purchase rate of perhaps $100 billion that will remain in place until the outlook for jobs and inflation improve “significantly,” he wrote. Goldman thinks as much as $4 trillion of additional asset purchases might be needed to bring inflation and unemployment into line with the Fed’s targets.

Likewise, Bank of America-Merrill Lynch Global Research has forecast $1 trillion in QE, and a Reuters poll showed Wall Street analysts expect the Fed to buy between $80 billion to $100 billion in assets per month.
Or “a measured approach”?: However, on Tuesday, The Wall Street Journal downplayed expectations of a major round of QE: “The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, a measured approach in contrast to purchases of nearly $2 trillion it unveiled during the financial crisis. … Officials want to avoid the ‘shock and awe’ style used during the crisis in favor of an approach that allows them to adjust their policy, and possibly add to their purchases, over time as the recovery unfolds.”

Gold stands to gain: The launch of any significant QE should have an uplifting effect on gold prices. Gold could rise to $1,400 an ounce and the dollar could lose another 2 percent to 3 percent if the Fed buys $500 billion over the next six months, HSBC analysts said Monday. The Fed could eventually buy up to $2 trillion in bonds – way more than the government will issue this year, according to HSBC.

Unbottling the inflation genie

In leading the Fed into uncharted monetary territory, Chairman Ben Bernanke is risking unleashing 1970s-style inflation – against which gold is your best protection. “By reducing real interest rates and trying to break the psychology of ‘Why spend today when I can buy goods cheaper tomorrow,’ they are hoping to drive growth that would be more commensurate with a pickup in employment,” said Miller Tabak & Co. chief economic strategist Dan Greenhaus. “The risk is a late-1970s type of scenario where the inflation genie gets out of the bottle.” (more…)