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2007 Additions to the Gold Menagerie
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(January 15th, 2007) In the worldwide zoo of gold bullion choices for 2007, the Panda is stronger than ever, the Kangaroo finally makes a striking impression, the Buffalo will return, the Pig completes Lunar Series I, and so far the Cat is missing. And the Krugerrand started it all.
In 1974 the late President Gerald Ford signed a bill restoring U.S. citizens’ right to own gold in bullion form, a right which had been suspended some 40 years prior during the Great Depression. So when gold trading opened on January 2nd, 1975 (at $175.00/ounce), Americans were finally, legally able to buy gold in any form. Unfortunately, the forms of gold available were gold bars (mostly kilogram and larger), odd-weight bullion coins (such as the 100 corona, 50 peso, 20 franc, and 4 ducat, which were official ‘restrikes’ of older-dated coins with the awkward actual gold weight numbers of .9802, 1.2057, .1867, and .443 respectively), and a newly introduced coin, the 1-ounce gold Krugerrand from South Africa.

The Krugerrand was first launched on a trial basis in European markets in 1967. The idea was a one troy ounce (net gold content 31.1 grams) bullion piece, produced and guaranteed by a major government mint, dated in its true year of issue, produced in unlimited quantities, and sold for gold spot plus a small markup.

In 1975, backed by a huge advertising campaign in major U.S. print media, the Krugerrand quickly ran away with the lion’s share of the U.S. gold bullion market. Its biggest advantage was that its one-ounce size made it easy to price without a calculator (which were large, awkward, and expensive back in 1975).

As a popular bullion choice, the Krugerrand wasn’t even challenged until Canada launched the Maple Leaf in 1979, and later when the Treasury introduced the U.S. gold Eagle in 1986. Ironically, in the short time span between 1974 and 1986, the U.S. Treasury went from enforcing the prohibition against gold ownership, to enabling gold ownership by providing a bullion coin for U.S. consumption.

But in 1982 China entered the gold bullion market with its gold Panda, and the modern gold bullion coin era really began. Today, many gold bullion coin choices offer changing designs, limited editions, and possibilities for numismatic appreciation.

It all started with the Panda, and the 2007 China gold Panda represents the 25th new design in the Panda series. This year’s offering portrays an adult panda and cub munching on some bamboo. The China Mint pioneered the idea of a bullion coin with a yearly design change, the intent being to expand demand beyond bullion investors, creating and capturing a collectors market for a modern gold coin. Although in 1982 the market for Pandas was primarily in the US, in this decade there has been great interest in the series in China itself and among expatriate Chinese gold buyers around the world.

This year, the Australian Kangaroo (Formally known as the Nugget) transcends the program’s usual design parameters. The Perth Mint is the source of some of the most interesting and cutting-edge coin designs in many of their collector coin offerings, but many of their previous efforts on the ‘roos have resembled zoology text illustrations.

The year 2007 seems to have changed all that, bringing us a fresh and dynamic Kangaroo-themed coin which finally shows Kangaroo coin buyers what the designers and engravers at Perth can do.

As for the old reliable U.S. gold Eagle, it continues to be the most popular bullion coin sold in the U.S. As of the first week in January, we have 2007 U.S. gold Eagles in stock in all sizes, from the 1-ounce down to the tenth-ounce. The gold Eagle has become the default choice for U.S gold buyers – convenient to buy, easy to store, and simple to re-sell.

U.S. Mint Buffalo gold bullion coins are a different story.

The U.S. Buffalo coin was a hit when introduced in the summer of 2006. A faithful reproduction of the original Buffalo 5c design in a 1-ounce .9999 pure bullion coin, the new Buffalo has a rugged, detailed appearance with a lot of all-American appeal. On their launch, sales were very good, mostly in 10 and 20 coin lots.

But the Buffalo has not caught on with those who buy their gold by the hundreds or thousands of ounces, and it's probably fair to blame the packaging. The Mint was required by the wording of the Buffalo’s authorizing legislation to release the pure gold Buffaloes sealed so as to prevent damage to the soft gold surfaces. Obeying the letter of the law, the Mint chose to issue the coins sealed in flimsy plastic 16” by 12” sheets of 20 coins, sheets which are awkward to store and prone to coming apart. As long as the Mint sticks with this flawed and bulky packaging, the Buffalo is not likely to become a competitive choice among bulk bullion investors.

The U.S. Mint plans to release the 2007-dated 1-ounce Buffalo sometime in February, and we are taking advance orders for them at this time. We understand that the smaller size Buffaloes (presumably tenth, quarter, and half-ounce sizes) are to be marketed as collector’s items through the U.S. Mint’s own website, but final plans on that have not yet been announced.

The Perth Mint’s Lunar Series I is now complete with the issuance of the 2007 Pig coins. Before 2007 is over, we expect the first issue of Series II with new designs, starting with the Year of the Mouse coin of 2008. Whether the Perth Mint intends to stick with Series I’s 30,000 mintage limit on the 1-ounce issues of Series II is not known at this time, nor do we know what sizes of gold coins will be available in the series. Stay tuned for details as we learn them.

Since 1988, the Isle of Man, in conjunction with the Pobjoy Mint, has issued a regular series of gold bullion coins picturing different breeds of cats. The series has huge following among cat-fanciers, who are at this time awaiting some word as to the issuance of the 20th year of the series for 2007. But, as of this writing, we don't yet have an announcement by the the Pobjoy Mint as to the design or particulars for the series in 2007. We expect some word in February, and we will stock the coins as soon as available.

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Where gold prices will go in 2007 is, of course, anyone’s guess, although our bets are on ‘higher.’ Michael Metz, the chief investment strategist at Oppenheimer & Company, agrees with us. He was quoted in the business section of yesterday’s New York Times as predicting a 20% rise in value in 2007, to about $750.

In a 1/14/07 NYT article by J. Alex Tarquinio entitled “How to Catch a Falling Dollar (and Even Make a Profit),” Mr. Metz speculates that a weakening dollar will encourage central banks to reduce their dollar holdings and add to their gold reserves, and that higher personal incomes in the booming Asian nations will add to gold demand.

The great theme of this century,” Mr. Metz is quoted, “will be the enormous transfer of wealth to developing nations, where they have traditionally used gold as a store of value.”

 

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