How Gold Performs During A Financial Crash

How Gold Performs During A Financial Crash
September 23, 2011

Over the past couple weeks, gold has fallen from a high of around $1920/oz to an intraday low of around $1730/oz (about a 10% drop). On Sept. 22, 2011, alone gold fell about 3.7%. This has happened as the global economy marches ever closer to Lehman 2.0 – a three-pronged collapse of the European banking system, the US economy and the Chinese economy. I am being inundated with questions from people wondering why gold is falling as the financial crisis worsens. After all, isn’t gold some sort of safe haven?

The first thing investors need to understand is that gold is priced in US dollars. This means that as the dollar rises the price of gold falls, all things being equal. The dollar is quickly rising because it is a safe haven (US Treasuries are a safe haven that must be purchased in US dollars) and because asset liquidations around the world are gaining speed causing a growing shortage of dollars.

The second thing investors need to understand is that gold, as an asset that has performed well, is a source of funding for margin calls made on declining assets. This means that gold is undergoing a degree of "forced selling."

One only has to go back a couple years to see how gold reacts during a financial crisis. The chart below shows the price of gold during the financial crisis that arguably began with the collapse of Bear Stearns in March 2008. (There are multiple ways to define the true start, but I had to draw a line in the sand and the first major i-bank collapse sounded like a good place to start.) During this time, gold prices fell by about 25% and subsequently recovered all losses. This was a scary ride for anyone holding gold at the time, but it’s an incomplete view of gold’s performance during the crisis.

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Goldline.com

Goldline is pleased to offer a variety of gold coins dating from the 1800s to today's Proof Gold American Eagles. Browse the categories below to learn more about the gold coins you can acquire:

Numismatic Gold Coins
Refers to coins whose value is principally based upon such factors as condition, grade, scarcity and demand, rather than their precious metals content. Read more

Semi-Numismatic Gold Coins
Contain precious metals that generally move up and down with the spot price of the precious metals but also contain additional value above their precious metal content. Read more

Gold Bullion
Value is principally based upon its precious metal content plus the cost of fabrication. Read more

Goldline’s classification of coins is based upon the definitions provided. Other dealers and organizations may define these terms or classify these coins differently.

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Gold Eagle Coin

Product Details
Format 1 oz.
Weight 33.933 g
Face value USD 50
Diameter 32.7 mm
Thickness 2.87 mm
Fineness .9167

First released by the United States Mint in 1986, the American Eagle Gold Bullion Coin is guaranteed by the United States Government for its weight, content and purity. Considered by many to be one of the United States' most beautiful bullion coins, the American Eagle contains the stated amount of gold plus small amounts of alloy to help create a harder and more scratch resistant coin. It is also the only gold coin approved for precious metals IRAs.

Ways to Hold Gold

Ways to hold gold.

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http://dailyreckoning.com/the-5-best-ways-to-invest-in-gold/

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