Indian Head Half Eagle ~ Profile History

The Indian Head gold pieces, including the Indian Head Half Eagle, are unlike any other coins produced before or since by Uncle Sam: their designs and inscriptions are sunken below the surface of the coins, rather than being raised.

Specifications
Designer: Bela Lyon Pratt
Obverse Design:
Reverse Design:
Edge: Reeded
Weight: ±8.24 grams
Diameter: ±21.6 millimeters
Composition: Gold (90%), Copper (10%)
Dates Minted: 1908-1929

Background
In 1908, American consumers must have been truly surprised and baffled when they got a look at the new Indian Head $5 half-eagle gold coin (as well as its identical little sibling, the $2.50 gold piece). Instead of the standard Liberty bust which had adorned the face of $5 gold coins since 1795, there was now the bust of a Indian chief in full headdress. On the reverse was an eagle in repose, instead of the standard spread-winged eagle on the reverses of previous $5 gold coins. But what was more startling than the new designs, was just HOW the new designs were rendered: instead of the standard raised design common on all previous U.S. coins (and pretty much all world coins for that matter), the relief was incuse– as in sunken BELOW the coin’s surface!

Yes, the incuse design of the Indian Head half-eagle was revolutionary, daring, innovative. But that was ok under the Teddy Roosevelt administration. After all, unsatisfied with U.S. coinage up to 1907, Roosevelt called for an artistic overhaul of U.S. coinage. No longer would U.S. coinage take a back seat to the great coin artistry of the European nations. In fact, President Roosevelt wanted coins that would compare favorably with the Greek coin classics of ancient times! So while Augustus Saint-Gauden’s super-bold relief Indian Head $10 gold coin and the Saint-Gaudens $20 gold coin of 1907 were ground-breaking pieces, Bostonian artist Bela Lyon-Pratt’s Indian Head quarter-eagle and half-eagle gold coins were ground-breaking in the low-relief sense!

History
Early on, there were indeed critics. It was said that the Indian chief on the face of the new half-eagle gold coin looked emaciated. There was also concern that the incuse design would be a haven for harmful bacteria lurking in the design crevices, just waiting to attack the fingers of all who held this new gold coin. So far as is known, no one became severely sick or died from handling an Indian Head half-eagle.

Like the previous Coronet Head $5 gold coin, the Indian Head $5 gold coin was 21.6 mm. and 8.3590 grams. In diameter, it was just a bit bigger than the U.S. nickel coin.

After 1929, the Indian Head half-eagle was never struck again. In fact, a circulating U.S. $5 gold coin was never struck again. By 1933, President Franklin D. Roosevelt took the United States off the gold standard, and indeed, it was illegal even to OWN a gold coin (unless its collectible status was apparent).

Collecting
Mintages for the Indian Head half-eagle were robust from the beginning, only falling under 100,000 on three occasions. This coin was struck at the Philadelphia, San Francisco, Denver and New Orleans mints. Only in 1909, however, was there production at the New Orleans mint, and it was a record-low production for the series with just 34,000 struck. It’s one of two key dates in the series, retailing at $2,000 in Very Fine, $3,400 in Very Fine.

Production was consistent from 1908 through 1915, but then the Indian Head half-eagle took a breather until 1929. When it returned, it returned with a vengeance: 662,000 were struck. So why then is the 1929 half-eagle the highest-priced date in the series, retailing $4,200 in Very Fine and $9,600 in Very Fine? Well, that shows how mass melting can affect the value of a particular coin– and the 1929's were apparently melted in huge numbers as our nation entered the Depression Years.

Grading
Besides the 1909-O and 1929, the other dates in the Indian Head half-eagle series cost about the same: $330 in Very Fine, $355-$365 in Extra Fine, $385-$400 in About Uncirculated, and $460-$560 in MS-60. The trick is, grading a coin with an incuse design! After all, unlike the standard raised-relief coin, the design on THIS coin was “worn down” (below sea-level, so to speak) to begin with! Still, there are points on the coin’s design in which to look for wear: the Indian chief’s cheekbones, the headdress feathers, and the feathers on the eagle’s wings.

Mints
Philadelphia Mint (No mintmark)
Denver Mint (D mintmark)
San Francisco Mint (S mintmark)
New Orleans Mint (O mintmark)

See Also
Indian Head Eagle

External Links
CoinFacts.com Indian Head Five Dollars or Half Eagle (1908-1929)
CoinCommunity.com 1908-1929 Half Eagle Indian Head
Indian Head Five Dollar Gold Half Eagles

Additional Facts:

• America in 1908 was a nation in the midst of wide ranging social and economic change. Headlines of the day sound like they were ripped right from todays news. Women were banned from smoking in public in New York City. A car began production that was advertised to get 25 miles to the gallon, Henry Ford's Model T. The first "Round the World" car race was staged. New Years Day was celebrated by the famous ball dropping for the first time in New York's Times Square. And the new $5 Indian Head Half Eagle gold coin, as well as its smaller sibling the Quarter Eagle, debuted in November 1908 to great controversy.
• President Theodore Roosevelt had determined it was time for the nations coinage to change and become more beautiful. The well known sculptor Bela Lyon Pratt designed the obverse and reverse for the Half Eagle as well as the smaller Quarter Eagle. And the design was controversial from the start. It didn't look like the typical American gold coin with its incuse, or sunken, design. Complaints were made that the portrait of the Native American model appeared emaciated. Banks complained the gold coins were difficult to stack and would be too easy to counterfeit. It was even claimed by some that the coins design would harbor dirt, germs and disease making them a hygiene problem, all of which proved untrue.
• Roosevelt let the coins production move forward as planned despite the complaints and the complainers. The $5 Indian Head Half Eagles production lasted only a few, short years from 1908 through 1916. It was resurrected again in 1929 with a production run of 662,000 pieces but the majority of those were destroyed before ever leaving the mint. It was the last time a $5 Half Eagle gold coin was to be minted for circulation in the United States. From the time American gold coins were first minted in 1795 to 1916 the $5 gold coin only missed production in 3 years, 1801, 1816 and 1817. It was one of the most successful denominations produced by the U.S. Mint.
• Today, the $5 Indian Head Half Eagle is one of the most popular collectible American gold coins. It is relatively inexpensive when compared with its big brother, the $20 St. Gaudens Double Eagle.
• The obverse features a proud Native American facing left and wearing a War Bonnet. Around the obverse are 13 stars and the word LIBERTY featured at the top. At the bottom is the year produced and just above the year are the initials of Bela Lyon Pratt. A standing Eagle dominates the reverse of the coin standing on a bundle of arrows. Around the circumference is UNITED STATES OF AMERICA, to the left of the Eagle is E PLURIBUS UNIM, to the right the motto IN GOD WE TRUST. Physically the coin is 21.60 mm in diameter, weighs 8.359 grams and is .900 pure gold. There are key dates that stand out in this series. Obviously 1929 is one, followed by the 1909-O and 1911-D.
• Because of its design it is somewhat difficult to be graded correctly, especially by those unfamiliar with its unique design, because it doesn't have the traditional high spots where you'd normally look for wear. That's why it's important to look for coins that are graded by either PCGS or NGC, or that you know and trust the person from where you are purchasing the coin.
• These beautiful American gold coins enjoy a very strong following and sell quickly, especially in certified mint state or about uncirculated condition. They are a great addition to anyones coin collection. The $5 Indian Head Half Eagle is far more popular today than during the time it was produced.

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Legend Numismatics Early March Rare Coin Market Report

By Legend Numismatics



A MAJOR ROAD BLOCK!
We added up all the numbers for February and were shocked-Legend had its worst February in about 7 years! And we do VERY MUCH feel this is a good market. Understand, this is a slump by Legend standards (most dealers would be thrilled to run half the numbers we do). It ABSOLUTELY was the market that caused our lackluster results-even though there were no negative impacts and Gold actually ran up.


The problem we have been fearing for the past year or so finally nailed us-WE RAN OUT OF NEAT COINS TO SELL. Since the year started, we have SOLD an amazing amount of rare high grade coins. Do not get us wrong, we do indeed have some of the neatest coins for sale in the marketplace at any given time, but what we ran totally dry of was the specific coins, especially for Want Lists. At the end of February in particular (long after our FUN NEWPS were all sold) we could not find anything of significance. Also, having a large amount of NEWPS creates a buzz and interest on our other coins. We realized our NEWPS are coming in at levels of up to 60% of how much we used to post. In the long run, that’s bad for our business. So this week we elected to post a total of 3 NEWPS. 2 coins are “bread and butter” while the 3rd definitely is spectacular. In the future, we will try our best to continue to post NEWPS starting every Sunday night so long as we have at least one killer rarity (we used to post NEWPS if he had at least a dozen or more coins, how the tide has turned).

GOLD
All we can say, gold is being gold. When there is fear, it rises. That’s what just happened. Expect prices for gold to remain strong for a long time (even if the Libyan crisis is resolved soon). People are still buying generics and especially BETTER GOLD coins for their collections. We are more comfortable with gold now. We had predicted and then watched a small ‘correction” happen earlier this year. Now we think the gold market is poised for a rally more so than sharp volatility.

CONGRATULATIONS TO TOM BENDER
We wish to congratulate our friend and long time customer Tom Bender (of Indian Cant and Lincoln Cent fame) on his completion of a spectacular GEM PR $3 Gold Collection. Everyone (including PCGS) was shocked that not only is this set the FINEST KNOWN (beating the estimated sets from years back), but this is the first PR $3 set ever registered (and that’s over 25 years).

Ever since the FUN 2005 gold Rush Collection (when Tom started the set with the 1862 from that sale), we were hard at work helping him build this incredible set. Our fondest memory was of the 3 year intense effort negotiating to buy the 1856 PCGS PR65+ Deep Cameo from a very “value oriented” collector. It happens to be Toms favorite coin. The quality of this set is amazing.

The great thing about this set, besides the fact it will be on display at the PCGS table in Sacramento, Tom is not one of the serial registry wonks who does what we call “makes em and brakes em”. His set will be intact for a long time and his possession as well (don’t think we haven’t already tried to buy it). If you get the chance and are at the ANA Mid Winter, stop by and see his set. Or, check it out on the PCGS Registry.

Of all the mighty sets we have ever built (and as you know, we have built many of the all time best), this set by far ranks as one of our all time favorites! It was fun to help Tom build it-and its even better to view it complete!

THE SACRAMENTO ANA SHOW
Why must they place these events in cities that are impossible to get too??? Our expectations are low for two big reasons: #1 the lack of coins, #2 we expect only a small group of east coast dealers to make the trip. Baltimore, which is a larger and proven show is only 2 weeks away. Still, watch for any nice coin in the Heritage sale to be expensive! The market overall, is strong and even a potentially weaker show won’t slow it down.

We do have a table at the show. As usual we will begin posting our NEWPS from the show Sunday night March 20th.

For the complete Market Report,

 click here:  Legend Numismatics

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Look Carefully for Hairlines on Uncs

By F. Michael Fazzari, Numismatic News
March 07, 2011

This article was originally printed in Numismatic News

I’ve been teaching and writing about coin authentication and grading since 1973. Despite this, a statement by astronaut James Lovell: “Houston, we have a problem” comes to mind. Our problem can be expressed as numismatic ignorance on the part of active coin collectors and dealers.

Let me clarify the correct usage of “ignorance” before readers consider me a pompous old man with access to pen, paper and a computer (I still write my columns by hand).

Ignorance is defined as being uninformed – lacking knowledge about a particular subject. Therefore, on one hand, I’m personally ignorant of brain surgery, the capabilities of the old Los Angeles Class nuclear submarines and card tricks.

On the other, I believe that I am an adequately informed numismatist with respect to authentication and grading who can either prove something by direct observation or knows where to look for answers – you get the idea. I’ll also be the first to admit that I learn many new things about the U.S. and foreign coins I examine each week – but that’s a good thing.

Outside of a teaching situation, it can be frustrating to deal with uninformed collectors, especially those calling themselves coin dealers. It is not hard to learn what genuine, original coins should look like. Four major grading/authentication services have their product all over the place to examine. Unless you live hundreds of miles from state or local coin shows there is ample opportunity to examine slabbed coins. Those of you out of the mainstream can gain invaluable knowledge during one week of classes at the American Numismatic Association’s Summer Seminar. The important thing is that you take that first step to educate yourself.

Recently I sat across the table from a “dealer” who was unhappy with the grades he received on a group of dollars. He kept rocking one slab back and forth in an attempt to figure out why “his MS-65” coin was graded MS-62. After a few seconds of this, I suggested that he look at the coin using the table light (two feet away) and perhaps he might want to try viewing it with a hand lens.

After examining the coin in some fashion, he replied that it had blazing mint luster and no bagmarks so it must be a higher grade. I asked him what criteria he used to grade uncirculated coins. With some coaching, I got him to say luster and marks ,but I had to supply “strike” and then combine everything under “eye appeal.”

When I asked how long he had been a professional coin dealer, he replied “20 years” and that a coin with blazing luster and no marks should grade higher than MS-62. When he handed the slab to me, I agreed that the coin had virtually no marks and blazing luster. Next, I asked him how he would describe the quality of luster on a whizzed coin. We both agreed that the word “blazing” could be used. At that moment, I think the light bulb went on in his head.

I explained that luster is the reflection of light from a surface. Looking around the room, there was luster everywhere – on the wood tabletop, the metal lamp base, my forehead and the plastic slab. The quality of the luster was different in each case. The blazing luster on his coin differed from blazing original mint luster because the surfaces were completely hairlined, possibly from a light cleaning. According to the ANA Grading Standards, a coin with continuous hairlines throughout can only grade MS-62 or lower (Note that the commercial grading standards used by many are less strict in this regard). To a trained eye, the luster on his coin looked unnatural from a foot away.

Other coins can be many times more deceptive. Have you ever encountered a blazing gem coin, possibly an MS-66 or MS-67, in an MS-63 or MS-64 holder? When this is the case, look for a patch of hairlines, especially on the obverse.

The micrograph, taken at 10X using fluorescent light, shows a patch of hairlines on the cheek of a Washington quarter. Patches of hairlines are common on uncirculated Franklin and Walking Liberty halves, Washington quarters and Roosevelt and Mercury dimes. Hairlines such as this are often missed on “raw” coins unless the coin is rotated and tipped in one specific direction to get the hairlines perpendicular to the light source.

If you don’t know the correct way to examine a coin, specifically what to look for when grading an uncirculated coin, let’s just say that ignorance is not financial bliss.

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Daily Pfennig: 03/08/11: Thoughts Of Rate Hikes Fade...

By Chuck Butler
Mar 8 2011 10:34AM
www.caseyresearch.com



In This Issue…

* Euro slips back overnight…
* Oil price pinches global growth currencies…
* Aussie Business Confidence soars…
* China takes another step…

And, Now, Today’s Pfennig For Your Thoughts!

Thoughts Of Rate Hikes Fade…

Good day… And a Terrific Tuesday to you! I saw Chris last night, and he’s doing fine…. His mom appeared to be OK too… but, sometimes, in cases like this, appearances can be just that… That’s one long drive out to near where Chris grew up… I sure wouldn’t want to have to make that drive every day! We have a guy on the desk, Aaron, that drives even further! Whew! Not me… I have a saying when people tell me the marathons they run, I say, “I don’t like to drive my car that far”!

Well… it appears that the driver of the higher priced euro, the threat of a rate hike, is beginning to fade, as the single unit really slipped overnight. Now, wait a minute, Chuck… “really slipped overnight?” that doesn’t appear to be a proper statement, my friend! OK… let me amend that by saying there was some “slippage” by the euro overnight, from the 1.40 level to 1.3945, so about 1/2 – Cent. I look at this as a “pause for the cause” because it’s been a real shot upward for the single unit lately. And so, I turned to the charts to see if there was anything there for me…

So… here I go again with my attempt to be more versatile and use charts too… Remember about 6 weeks ago, when I told you about the dollar index getting to a tipping point, then it was 78.25, and if it traded through that level, and remained there for a close, we could very well see another dollar rout… And that played along pretty well… So… my charts friend, sent me a note yesterday, and said the dollar index was nearing another tipping point, this time at 76.20… a daily close below this figure could bring about a significant shift in positive sentiment toward the dollar… ( the dollar index is around 76.67 this morning, and got as low as 76.40 yesterday)

You may recall me telling you in the past that the dollar index is not a true indication of currency moves against the dollar… But, since the markets use this index as a pulse to dollar health, we use it… The dollar index indicates the general international value of the dollar by averaging the exchange rates between the dollar and 6 major world currencies… The euro, yen, pound, loonie, franc, and krona (Sweden)… The problem as I always point out here is that the euro is so heavily weighted in the index, representing 57.6% of the index… Notice that such currencies like Aussie, and Norway aren’t here… Which is why I tend to overlook the dollar index…

I talked to a reporter from Reuters yesterday, and he wanted to know my thoughts on why the euro was still in rally mode, with the announcement from Moody’s of a 3-grade, downgrade to Greece’s debt. I said that I thought that the markets were giving the potential interest rate hike by the European Central Bank (ECB) a ton of credit… It’s been so long since a major country, (U.S. , Japan, Eurozone) raised interest rates. And now that it looks like the ECB is going to hike rates, and they’ll get the “street cred”…

But, there are other things helping the euro… Remember, the euro is the offset currency to the dollar, so dollar selling reflects favorably on the euro’s value. Commodities continue to rise in price, which erodes dollar sentiment. The potential for yield spreads VS the dollar, erodes dollar sentiment, and then there’s the fact that the U.S. stock market isn’t the only stock market in rally mode these days… in fact, some of them are outperforming the U.S. Stock markets!

The “global growth” currencies of Australia, & Brazil, are feeling the pinch of the higher Oil price, while the Canadian dollar / loonie loves the higher Oil prices… But, think about this for a minute folks… the soaring Oil prices will squash the global growth that’s going on right now, especially in the Emerging Markets. So… I’m a bit concerned about global growth right now. And not just global growth… Shoot Rudy, the nascent economic recovery going on here in the U.S. will also be squashed. I see that the price of Oil dropped a bit yesterday, after climbing to $107, it has dropped back to $104… I would think just on the thoughts that the U.S. could tap the oil reserves they have to stem the rise of the price of Oil… Hey! I just want it to keep dropping!

With the euro slipping a bit overnight, the rest of the currencies that follow the Big Dog, are also slipping… Like I said above, it appears to me as though it’s just a “pause for the cause”, but then, maybe the fact that Moody’s dropped a led balloon on Greece yesterday, downgrading their debt by 3 grades, has finally sunk in, and outweighing the thoughts of a rate hike in the Eurozone. I guess we’ll have to see how this plays out today and tomorrow, eh?

A reader sent me a note yesterday, after I mentioned that I would be speaking to a reporter today about China… And the note was a link to a story that got very little air play by the markets, as if, it slipped by them in the dark of the night… Apparently, China made some announcements over this past weekend, about how they intend to allow a greater distribution of the renminbi…. (remember, renminbi and yuan are interchangeable, like dollar and buck) Here’s what can be found in the story, that received but a blurb on Reuters….

“China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role. In a statement on its website www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily."

So… now, who out there has laughed and scoffed at my calls for the Chinese renminbi to be the next reserve currency of the world? I have to think that by China making a vocal call like this, they are bound and determined to move along this road to reserve currency status, right now!


And No… it’s not going to take place this year, or next year, or even the year after that, but it’s coming, and in the scheme of things, when it happens, it will appear to have happened overnight… Remember what I said above about appearances…. For, it will not have happened overnight, it will have been going on with baby steps, like the currency swap agreements, where dollars were taken out of the terms of trade, between China and the counterparty they signed the currency swap agreement with… or like China repeatedly calling for a change in the reserve status for the dollar… and now this statement by the Chinese… it will creep up on you, and then one day, bite you in the …. Only if you have allowed yourself to become someone that did NOT diversify their investments so that their entire investment portfolio wasn’t dollar denominated!

I’m not kidding around, folks… I know tons of people that who have not taken the steps to diversification and an allocation of currencies & metals for their dollar denominated portfolio. So, when it happens, and the dollar is reduced to second place status, and we as an economy become dragged down by the fact that our dollar is no longer the reserve currency of the world… If you want to hear more, come to Las Vegas, where I’ll be talking about this, and the affects of not having the reserve currency of the world, at the Las Vegas Money Show, May 5-9, at Caesar’s Palace… (did Caesar really live there? HA!)

Whew! I was really pounding away at the keyboard there for a minute… I can get so riled up about this stuff, but then I realize that, for the most part, I write this stuff, and people read it, and delete the email, and go on with their lives, and I think, Shoot Rudy, no reason to get your blood pressure rising, and ruin another keyboard! I’ve slowed down the ruining of keyboards… but there for awhile a few years ago, I was going through them like a hot knife goes through butter! The IT people always had extra ones, for me, because they knew… But like I said, I’ve gotten better, and have only needed to replace 1 keyboard in the past couple of years!

OK… let’s go on to something else… Hey! For a chuckle… did you see what Bernie Madoff said? He said the “U.S. Government was a Ponzi Scheme” I guess the phrase about how it takes one to know one, comes to mind here, eh? I also saw a quote from the well known and respected analyst, Marc Faber, who said something about how another crisis will happen once the Fed stops their bond purchases…. I would agree with that, which is why, I think that the even though the Fed Heads are making some noise about not supporting more bond purchases, I think it’s all window dressing, or rearranging the deck chairs on the Titanic… More Quantitative Easing is in our future, folks… Can you say QE3, or QE4?

Have you seen that commercial that the U.S. government wants to ban, that shows the Chinese laughing about owning us now? Pretty truthful… They talk about how the U.S. took the road to spend and stimulate to get out of their recession, and now are saddled with exploding debt… It’s all true stuff, it’s just hard to swallow, as an American…

As I said above, the Aussie dollar is feeling the pinch of the higher Oil price… That’s pretty evident in the price action this morning, with the A$ slipping, after the news that Australian Business Confidence rose to the highest level in almost a year during February! I’m hearing reports from “on the ground” people in Queensland, where not only floods but a cyclone the size of the U.S. ripped through, leaving devastation all around, that… the business community is looking forward to reconstruction, and thus the rise in confidence… So, if we can get the price of Oil to stabilize, the A$ can get back on the rally tracks!

Then there was this…from a trader friend at RBC….

“If the Fed truly is concerned with the employment backdrop, they will most likely refrain from tightening policy until the unemployment rate enters a given sweet spot. In the past two post-recession tightening cycles, the Fed waited for the unemployment rate to get relatively close to the so-called natural rate before raising rates (within 1.13ppt in 1990s and 0.60ppt in 2000s). Several Fed officials have brought up the notion of a higher natural rate of unemployment(between 6.5-7.0%). Comparing this with our forecast of the unemployment rate suggests we will not be within this sweet spot until late 2012 to early 2013.”

Chuck again… yes… I agree, but we have to keep an eye on those Fed Heads, for they could throw us a curve at any time…

To Recap…. The rate hike talk in the Eurozone appears to have faded as the euro slips to 1.3920 in overnight trading, dragging all the currencies that follow the Big Dog, downward VS the dollar. The price of Oil also slipped downward overnight by $3, probably on the jawbone effect of tapping our Oil reserves. The global growth currencies of Aussie and Brazil are feeling the pinch of the higher Oil prices and their affect on global growth. The Emerging Markets are really feeling queasy about the higher Oil prices! And China makes a Big Announcement, that received very little air play… doesn’t that tell you the announcement is worth reading?

Currencies today 3/8/11… American Style: A$ $1.0110, kiwi .7405, C$ $1.03, euro 1.3920, sterling 1.6180, Swiss $1.0725, … European Style: rand 6.9070, krone 5.5785, SEK 6.3460, forint 195.25, zloty 2.8550, koruna 17.3975, RUB 28.25, yen 82.45, sing 1.2675, HKD 7.7890, INR 45.09, China 6.5687, pesos 12.05, BRL 1.6550, dollar index 76.60, Oil $105.28, 10-year 3.52%, Silver $36.39, and Gold… $1,435.30

That’s it for today… Man, am I tired of this cold weather! We did have March come in like a lion, so let’s hope it goes out like a lamb, especially since Opening Day here in St. Louis is going to be March 31st! My beautiful bride, who is already in Florida, tells me the weather is nice and warm there… (I think she’s rubbing it in!) I’m running a bit late today, so I need to wrap this up, and get it out the door, so I can get ready for work, and get Alex to school… Our little Christine’s youngest son, Eddie, had a fall yesterday, and used his forehead to stop himself, which caused a gash, and lots of fear for Christine… But he’s fine… a badge of honor for a boy… and with that, let’s go out there and have a Terrific Tuesday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

****

Two decades ago, Chuck Butler embarked on his extensive career in foreign investments as the Director of Operations for the Fixed Income Division of the Mark Twain Bank. He oversaw the clearing and custody of all bond department trades and Mark Twain portfolio transactions.

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Let's Get Physical. Just not Yet. By Jon Nadler

Mar 8 2011 10:07AM
www.kitco.com

The action in Tuesday morning’s markets was still largely defined by the gyrations in crude oil and attentive to Libyan developments. Gold prices fell in Asia during the overnight hours as yesterday’s rally to new peaks prompted some profit-taking selling by regional players. Meanwhile, OPEC was thought to be considering ratcheting up its output of black gold not only in an effort to fill the small gap that has been created by the disruption in Libyan flows, but mainly to cool prices which have gotten clearly ahead of themselves on the back of intense speculation lately.

Spot precious metals dealings opened on a weak-to-lower note this morning, as recurring rumors of a deal between Mr. Gaddafi and Libyan rebels continued to pressure oil prices and bolstered the US dollar. Gold opened at $1,432.90 with a gain of $1.80 per ounce, while silver advanced 30 cents to start the session off at the $36.27 mark per ounce. Spot gold went into negative price tick territory within 90 minutes of the open, as a 0.40 gain in the US dollar index (to 76.92) and steadiness (but not gains on the horizon unless Tripoli trips up the market) in crude oil prompted some light selling in a market that RBC metals analysts have labeled as “crowded” and having difficulty “enticing new longs” this morning.

The noble metals however declined some more, with platinum showing a $24 loss out of the starting gate (quoted at $1,795.00 the ounce) and with palladium recording a $12 per ounce decline, easing to the $774.00 level per troy ounce. Profit-taking and some automotive sales-related fears (on the back of surging crude prices) have been manifest in the complex in recent days.

Contrary to recent, highly optimistic quotes seen the media and also contrary to popular perception, the recent rallies in gold prices have been largely built on speculative investment demand by hedge funds, rather than any significant physical offtake by average individual investors. The most recently published physical market flow analysis by Standard Bank (S.A.) corroborates this assertion. SB analysts point out that “while the political turmoil in the MENA region is inflating investment demand for gold, physical demand for the metal has been lacklustre.”

As mentioned in yesterday’s article, the main focus of funds (speculation) has been reflected by the rise the net long non-commercial gold position in the market over the past 4 weeks. On the other hand, the physical market is still in a seasonally weak time period, and with gold prices having approached $1,440 per ounce, dealers have begun to see physical selling on a consistent basis, and such selling has been outpacing physical buying, even as Mr. Gaddafi continued with his antics.

Standard Bank’s analytical team observes that “the move in the physical market, from providing support in January and early February, to providing resistance, is evident in our Standard Bank Gold Physical Flow Index (GPFI) which has recently declined from close to all-time high levels during the middle of February to negative territory last week. A negative value indicates we observe a physical market that is on net a seller of gold, while a positive value indicates we observe a physical gold market which is on net a buyer.”

The SB research team also notes that current physical gold demand is on the weak side as the market is now entering a phase wherein further rallies in gold are more likely to attract more scrap gold tonnage. While SB maintains its projections for gold to possibly reach $1,500 sometime in Q3 of this year, (or sooner, if MENA developments warrant), the seasonal weakness in physical demand is seen as assisting the capping of any gold rallies (as it has in the past two weeks) for “a few more weeks.”

MENA news will, of course, continue to impact oil (and gold) prices and keep central bankers, politicians, and military folk plenty busy over those coming weeks.
Fed officials (and probably other central bankers as well) have basically affirmed that $150 oil would represent a significant enough pivotal level; one at or near which, monetary authorities would be prompted to take some kind of action. No one, anywhere, at this juncture, wants to place the emergent global economic recovery at risk. The risk, however, may be transitory, as a CNN Money survey reveals that most market experts think oil and gold prices will settle down after Mr. Gaddafi suffers Charlie Sheen’s “employment fate.”

Still under consideration by the White House, is the plan to release some supplies of crude from the US Strategic Petroleum Reserve; this, as $3.50 per gallon US gasoline prices have angered the consuming public and are threatening to send it back into a state of “hibernation” in terms of overall consumption, not just that of gas. As well, still under review, is a NATO plan to impose a no-fly zone in Libya that is intended to avert Mr. Gaddafi from carrying out air strikes on the rebels.

At any rate, whether or not the Libyan situation does not come to a quick resolution, the attitude on display by the US Fed is that it (or at least four of its member presidents) is in no hurry to extend or expand the QE2 program. Messrs. Fisher, Plosser, Lockhart, and Evans are all of the opinion that every good thing eventually does come to an end, especially if the risk it entails outweighs its benefits. The FOMC meets one week from today to discuss all of this, and more. The post-meeting language is likely to be parsed with at least as equal a degree of intensity as was the one that was issued in early November of last year, when the good ship QE2 was set sailing on the US economy’s rough (at the time) seas.

The trend towards hiking interest rates is hard to miss, (but by a few holdout commentators who envision “easy money” as basically an everlasting proposition, and one which will perpetually fuel “To Da Moon!” spikes in commodities). Bloomberg reports that The Bank of Thailand and Bank of Korea will each raise key interest rates this week by a quarter percentage point. As well, Malaysia may also be approaching the end of its pause in boosting borrowing costs.

Such moves will come on the heels of seven already-in-place hikes by India’s central bank and by a recent string of similar tightening actions by China’s PBOC. This coming weekend may also bear watching as China announces inflation levels and possibly what it might do about them. Of course, the 900-lb gorillas at the moment remain the ECB and the Fed. When they too commence this campaign, well…let’s let someone with long-standing market experience frame that concept at this time: Value View Gold Report’s Ned Schmidt.

Says Mr. Schmidt in his latest “Gold Thoughts” issued on Monday: “Gold is today the preferred precious metal when compared to Silver. That might not, and likely will not, prevent it from going down when the Federal Reserve folds in June. That June time period is becoming of increasing importance. The current era of free money, quantitative easing, by the Federal Reserve is scheduled to end in June. Should the ECB raise rates in April, Federal Reserve will come under increasing pressure to abandon free money policy.

Mr. Schmidt, a 30+ year veteran observer of precious metals markets (and one whose ultimate price targets for gold are actually quite lofty, BTW) also correctly notes that: “Free money has been driving financial markets. Should that era of free money begin to end in June, considerable realignment of investment market values seems likely. Silver is simply the most obvious one. Deferring the investment of idle funds, and perhaps taking some profits, might be wise until the June poker hand has been played.”

Such level-headed caution is closely related to the observations tendered to the UK’s Telegraph this morning by at least a couple of UK financial advisers; Messrs. Patrick Connolly, of AWD Chase de Vere, and Martin Bramford of Informed Choice. Mr. Connolly notes that "there continue to be bullish statements and bold predictions about gold and the assumption that the returns seen over the past decade are now the norm. There were similar sentiments in 1999 about technology stocks, and the belief that the only way was up. It's easy to forget that gold prices can go through prolonged downturns. During the Eighties and Nineties, the price of gold fell by 70 percent" while Mr. Bramford opines that "investors are understandably concerned about inflation at present. But there is a real risk that those now buying gold are doing so at the top of the market and will end up making losses when prices fall."

So much for the “this time it’s different” propositions in (over)abundant supply out there. The only difference is that the Internet has now made it possible for practically everyone to be heard, whether or not they have something of value to offer, or are just possibly hiding a self-serving commercial agenda behind putatively erudite “opinion.” One might do well to filter out some of that type of “noise” and stick with the prudent, time-tested, core, ten percent gold “just-in-case” insurance position we continue to advocate, price explosions or implosions of the future notwithstanding.

Until tomorrow, remain calm

Jon Nadler
Senior Analyst
Kitco Metals Inc.North America

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Coin Doctoring Presents A Moral Imperative to the Coin Industry

Richard Schwary – California Numismatic Investments

It would be a great deal more fun to consider what R.W. Julian has to say about Gobrecht dollars but at this point in time the consideration in front of us is the rather murky numismatic subject called coin doctoring. I have talked with both David Hall of the Professional Coin Grading Service (PCGS) and Mark Salzburg of Numismatic Grading Corporation (NGC) about this problem and believe these folks along with other industry leaders understand that not taking unilateral action against the growing danger of radical coin doctoring will at some point come back to haunt us all. And in the bargain we will be criticized historically for a simple lack of leadership within the rare coin industry.

 

Fortunately for all of us there is still time for aggressive action but let’s not put this issue on the back burner because the window of opportunity we now enjoy will shrink as fast as this extreme danger expands. I applaud both PCGS and NGC as well as the Professional Numismatists Guild (PNG) for working toward an understanding as to what criteria should be used when considering coin doctoring. And it is not my intention to solve this Gordian knot in a few paragraphs but I do see a problem if we do not insure progress from this point forward. There must be a tipping point for this industry when we all come together on this definition or forever be condemned as showing great promise but failing to deliver on difficult issues.

A review of Vic Botharth’s well developed statement Coin Doctoring and the PNG Decision (Coinweek.com) will help greatly because it clearly states what I believe is the professionally safe position many dealers have adopted now that the initial smoke has cleared. And at the same time it raises questions which will move the discussion forward, like the notion that the grading services did not equivocate on their expertise and in fact guaranteed the product. So as the stated experts they led the way into this mess and so the problem is theirs to fix and the trade should not be concerned. Fair enough but certainly not comprehensive especially when dealer and consumer organizations like the PNG and ANA place themselves in positions of authority.

Let me also add a general feeling I think every dealer has to some degree but was raised nicely by a friend of mine and old time PNG member at the last Long Beach Show. He admitted the obvious in that we all face this coin doctoring problem but said he did not want to get involved as he did not trade in the stealth damaged goods and his hands were full with regular day to day business. I was not at the PNG General Meeting when the modified definition of coin doctoring was not accepted but I talked with members who were and appreciate the difficulty of trying to parse words when it comes to doctoring. What is and what is not has been a part of the industry dialogue for as long as I can remember and the PNG already includes in its ethics rules an admonition concerning doctored coins.

I have also talked with Laura Sperber on the subject and believe she deserves not only trade recognition but an award from the American Numismatic Association (ANA). ANA President Cliff Mishler and ANA Executive Director Larry Sheperd are great leaders and will not cut and run on this subject so public recognition from the ANA can only serve to move this discussion forward.

In some ways Sperber reminds me of the heroine Calamity Jane played by the beautiful Robin Weigert in the famous HBO Series “Deadwood”. Laura’s fire breathing oratory in the middle of a mostly male audience should be admired. If we were honest with ourselves her “over the top” approach to this danger should be seen as the most important tactic ever used in moving this nightmare out of the closet. Some might believe she is grand standing but when we talked Laura came across as sincere and hardly out of gas on this controversial subject. She also has a wonderful regard for rare coins and continues to warn readers about treasures at risk in the name of raw profit and greed.

Ultimately I choose to believe the PNG will once again address this growing problem and take a stand which better defines coin doctoring if only to state the most obvious cases. I do not want to speak for PNG President Paul Montgomery even though he is a great friend of mine. But as a Past PNG President I can say with certainty that leadership always comes at a premium especially when “no one is happy”. And it seems to me that true leadership, especially in the face of hostile fire is never easily accepted. But great leaders tough it out and understand the mission and are willing historically to be applauded after the fact.

In the meantime let’s appreciate one of the most important gains this industry has made regarding coin doctoring: We all can now talk openly about this problem and so it is forever outside the numismatic shadows. Most of us know that progress is often tedious but because of this discussion we will eventually get a sense of where improvement makes sense.

No coin professional needs to be told that radical doctoring of coins is a pathetic reality so I hope we all applaud PCGS and NGC for constant vigilance. And the PCGS attempt at scientifically killing this monster with new technology like the Shield or the Sniffer is certainly a numismatic milestone. But we should understand the trade is now facing a new and much more virulent twist to an old numismatic problem so creative work and probably a great deal more money will be needed to tame this creature.

Perhaps policing it is not the job of the PNG but taking no action must prove ultimately dangerous. For you academic or religious readers doing nothing would be a violation of what German philosopher Immanuel Kant (1724–1804) called the Categorical Imperative. And so my contention is simply that taking no action is not rational for any group which makes a rightful claim to be good for the rare coin industry.

Let’s make sure the coin industry does not stand in the way or worse tacitly contribute to this abuse while claiming the problem either cannot be defined or is not our business. No industry action or worse vague definitions fail to protect the good people who turn to rare coin professionals for proper advice and an honest deal. Inaction will also cost the industry its moral high ground and we will have no one to blame but ourselves. So in the end let us solve this problem while there was still time to set the record straight.

Posted by Richard Schwary on March 8, 2011 8:26 AM

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A.M. Kitco Metals Roundup: Comex Gold Prices Trade Near Steady; Bulls Still Strong

08 March 2011, 08:04 a.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/




(Kitco News) - Comex gold futures prices are trading near unchanged price levels Tuesday morning, as the market pauses following Monday's record-setting gains. Middle East uncertainty and European Union sovereign debt concerns are supportive fundamental factors for the precious metals. Meantime, the technical postures for gold and silver remain fully bullish. Comex April gold last traded unchanged at $1,434.50 an ounce. Spot gold last traded up $2.70 at $1,434.25.

Crude oil prices are trading weaker Tuesday morning, but are still above $104.00 a barrel, as there were no fresh, major developments in the Middle East overnight. Crude oil prices Monday hit another fresh 2.5-year high near $107.00 a barrel. The stronger crude oil prices are bullish for the precious metals due to the inflationary implications and the related geopolitical uncertainty that invites safe-haven demand. Precious metals traders and other traders will continue to look to the crude oil market as a gauge of tension in the Middle East.

Moody's ratings agency Monday downgraded Greece's sovereign debt rating. While this move was not a surprise development, it reminded the market place of the serious problems the European Union is facing with its smaller countries' sovereign debt. Gold and silver bulls realize these problems cannot be quickly solved and will continue to work against the Euro currency, with the possibility of the problem spreading to a worldwide debt contagion. This will limit selling interest in precious metals for at least the near term.

The U.S. dollar index is trading firmer Tuesday on short covering after hitting a five-month low Monday. Dollar index bears still have the technical advantage, which continues to be bullish for the precious metals markets.

U.S. economic data due for release Tuesday includes the NFIB small business index, the Goldman Sachs weekly chain store sales index, the Johnson Redbook weekly retail report and the IBD/TIPP economic optimism index.

The London A.M. gold fixing was $1,435.00 versus the previous P.M. fixing of $1,437.50.

Technically, the gold market bulls still have the strong overall technical advantage as prices hit a fresh all-time high of $1,445.70 Monday. Gold prices are in a steep six-week-old uptrend on the daily bar chart. Gold bulls' next near-term upside technical objective is to produce a close above psychological resistance at $1,500.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,410.00. First resistance is seen at the overnight high of $1,437.20 and then at $1,445.70. Support is seen at the overnight low of $1,426.10 and then at $1,420.00.

May Comex silver futures last traded up 41.0 cents at $36.275 an ounce Tuesday morning. Prices hit a fresh 31-year high of $36.745 on Monday. Silver bulls have the strong overall near-term and longer-term technical advantage. Prices are in a steep six-week-old uptrend on the daily chart. The next downside price breakout objective for the silver bears is closing prices below solid technical support at $35.00. Bulls' next upside price objective is producing a close above solid technical resistance at $37.50 an ounce. First support is seen at $36.00 and then at the overnight low of $35.51. Next resistance is seen at the overnight high of $36.55 and then at $37.00.



By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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