Market Report: Storm Clouds & Gold


It looks like all of the stars are aligned for the storm clouds to form over the global financial horizon. But these are clouds with golden linings.

We’re seeing rising interest rates and rising oil prices. Plus, there is a looming banking crisis. There is global uncertainty now in Russia, China and elsewhere. And the huge deficit spending, as never before, puts gold on the radar of every forecast.

With all of these factors in the mix, I like the idea of holding some gold and rare coins to ensure that I have a plan in place to secure my financial future as these financial uncertainties play out.


Rare Coin Bull Markets Since 1970

During the 1971 through 1974 period, the gold window closed with President Nixon on August 15, 1971. That window slam was followed by Watergate, the OPEC oil embargo, high inflation and a 45% stock market crash that was the worst since the 1930s. The end of the Vietnam conflict marked a milestone for the nation, but during that time frame, silver rose 250% and rare coins 348% (source: PCGS 3000 Rare Coin Index). But that was just the start.

The 1976 through 1980 time period saw inflation continue to rise under President Carter. The Soviets took control of nations around the world; Iraq and Iran went to war; and Iran captured 54 American hostages. In that time, silver shot up 2,300%; gold rose 800%; platinum was up 400%; and the PCGS 3000 Rare Coin index had its greatest surge of the decade, up 1,195%, to reach $40,000 – a40-fold increase since its launch.


Rare Coins Soar From 1986 Through 1990

Beginning in 1986 and ending in 1990, despite relatively low inflation, we experienced a huge bull market in rare coins mostly because of the avalanche of failing banks and savings and loan institutions. A massive 1987 stock market crash added insult to injury.

One-third of all S&Ls failed, and over 2,000 banks (out of about 14,000, or 15%) also collapsed financially, driving investors into bullion and rare coins. From 1983 to 1989, the PCGS 3000 Rare Coin Index gained 603%.

The 2001 through 2009 period encompassed the horrific 9/11 terrorism tragedy and the subsequent war on terror, followed by the great recession financial crisis of 2008-09. There were two deep recessions and record-high deficit spending.

Gold soared from $255 per ounce before 9/11 to break $1,000 in 2008 and then reach a record high of $1,800 in 2011. Rare coins also surged from 2002 to 2009, although, in this case, gold bullion was the clear winner, up 600% in the decade from 2001 to 2011.

There are two other remarkable similarities from those past rare coin bull markets and now. The first was a rapid increase of interest rates by the Federal Reserve during these past rare coin bull markets.

• From the end of 1971 to July 1, 1974, the Fed Funds rate shot up from 3% to 13.5%.

• From the end of 1977 to December 1980, the Fed Funds rate soared, from 4.6% to 19.2%

• From October 1986 to March 1989, the Fed Funds rate rose from 5.84% to 9.87%

• From June 30, 2004, to June 30, 2006, the Fed Funds rate rose sharply, from 1% to 5.25%.

• And now, from March 2022 to March 2023, the Fed Funds rate has risen from zero to 4.6%.

The second similarity was that oil prices were also rising rapidly during these past bull markets in rare coins and precious metals.

• Due to the OPEC cartel, oil prices rose from $23.30 a barrel (March 1973) to $63.30 a year later.

• Oil prices doubled again from $65.40 in January 1979 to $143.79 in June 1980.

• Oil prices collapsed, but then surged again from $28.81 in March 1986 to $90 a barrel in September 1990.

• Oil surged after 9/11, from $33.79 in December 2001 to an all-time high of $177 in May 2008

• Oil surged from $22 per barrel in April 2020 to over $110 in May 2022.

This Market Report previously appeared in COINage magazine. To subscribe click here. Article by Mike Fuljenz.


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