Gold News: Gold Prices Set to Fall
Last week, the news spread throughout the coin industry that National Gold Exchange, Inc. (NGE) had filed for Chapter 11 bankruptcy on July 24. NGE was one of the largest coin wholesalers in the country, with three buying offices in Europe. A number of other coin firms are owed five-, six-, and seven-figure amounts by NGE, which are likely to be settled for just pennies on the dollar. My own firm had done substantial trading with NGE over the past 20 years, but had ceased doing so several months ago when that company’s operations showed signs of financial stress. There are also problems with scrap gold market.
Other than losses absorbed by some coin dealers and banks, I doubt the NGE bankruptcy will ultimately have much effect on the industry. There are multiple other coin wholesalers who have offices or contacts in Europe, so the supply of coins coming back to America should hold steady.
One operation that might be at risk is the Independent Coin Grading Company (ICG). ICG is owned either by NGE or the owners of NGE. Should ICG close, the value of their third-party certification will fall sharply. This is a good time to remind collectors that they should always “buy the coin, not the holder.” If you own a solid quality coin, being in the holder of a defunct grading service will not hurt the coin’s value. If the coin is of marginal quality or worse, all the words on the holder will be meaningless.
At the dinner after the end of the meetings with Chinese officials last Wednesday, U.S. Treasury Secretary Timothy Geithner spoke. At one point, he stated that Americans were going to have to tighten their belts and once again learn how to live within their means. If you need an English translation, here is what he really was saying, “The Chinese did not agree to continue funding the U.S. government’s budget deficits to the degree we want. Hard times lie ahead.”
On Friday, the U.S. Dollar Index fell to settle at 78.34, which was below the June low. This is a sign to technical traders that the U.S. dollar is likely to quickly fall further. Should the dollar continue to drop, the price of gold is bound to rise.
