Gold Stater Gold Update: Danger formation in GLD

Gold Stater Gold Market update Market close Feb 28

Technical analysis is a guideline. Nothing is set in stone. However, formations tend to repeat.

Please note in the formation above the similarity to the formations just before the last several gold sell offs. In the small graph above I tried to draw a square around two very similar formations. Please excuse the poor graphics. I'm still learning how to use them. Nevertheless I thought it worth while to point out the current formation to anyone who might want to take a little bit off the table at this point, at least until the uptrend is reestablished. I doubt the sell-off will be deep (if it occurs at all) given the state of the world. But it never hurts to be careful.

Gold Stater Ancient Gold coin Update 4 - Early Greek Gold: Lydia

Gold Stater Ancient Gold Coin Update 4 - Early Greek Gold: Lydia

Croesus of Lydia was the first to separate electrum (the naturally occurring gold/silver alloy) into a bi-metal coinage standard of gold and silver. He determined a weight standard wherein one Gold Stater of about 10 grams would be equal to ten silver staters of about 10 grams - which works out to a roughly 10:1 standard. (The Lydian calculations were much more precise as they dealt in "grains." I won't go into the math here.). A limited quantities of these "Heavy Staters" were produced before the gold stater was reduced to about 8 grams, bringing the ration to about 13:1.

The image on both the gold and silver stater is the Fierce Lion Head attacking the cowering Bull head. I have a personal theory as to the nature of this image. To read it access my Solon Numismatics web page at Gold-stater.com.

The Lydian gold stater was undoubtedly produced in great quantities as Croesus, at the time, controlled most of the extremely rich territory of Ionia (present day Black Sea region of Turkey). Though the image is constant, there were clearly several artists working at the Sardes mint, and the styles do vary. The gold coinage was also produced in fractions: trites (third staters) Hektes (sixth staters) on down to 1/48th.

The early "heavy" staters are very rare. In top grades (close to CH AU) they will bring north of $30,000, even in lower grades they are highly sought after. The prices keep rising.

The "light" staters are more plentiful. Yet even these, in decent quality, appear at auction no more than four to five times a year. They do come in mint state - and now run about $18 -20,000 in that condition. I have one in Choice Mint State (see picture above). I have not idea what that would be worth. These also come in the usual fractions. A very nice trite (Choice AU or MS) example sold at the Triton (CNG) auction in New York this year for $18,000.

It should be noted that the bi-metal coinage standard invented by Croesus endured for close to 2500 years. I have noted in previous articles how this standard transferred enormous power from the Tyrant to the private citizen - who could amass and trade currency at his own discretion, thus acquiring a certain amount of autonomy from the state. When Richard Nixon took the US off the gold standard in 1970, and made coins in worthless base metals that were given arbitrary trade values based on the dictates of the government, that power was taken back from the individual and transferred to back to the ruling Tyrants.

Next: Gold Stater update 5: Persian Coinage.

Gold-Stater Gold Market update: Who Owns Gold?

Gold Stater World Gold market update Sunday Feb 27 2011: Who Own Gold?

Gold Market Trends. World Gold Council report.

The World Gold Council recently released its analysis of the 2010 Gold market. It is no secret in the gold market that Central Banks, for the first time in recent history, have turned from net sellers to net purchasers of Gold, led by the banks of emerging markets:

"First, emerging market economies that have been experiencing

rapid economic growth have been substantial buyers of gold.

The primary reason for this has been a desire to move toward

restoring a prior balance between foreign currencies and gold that

has been eroded by the rapid increase in their holdings of foreign

currencies, principally the US dollar. For this group of countries,

gold has also become an increasingly attractive means of

diversifying their external reserves. As a result, emerging market

purchases of gold have made a significant impact in reducing

the quantity of gold the official sector had been supplying to

the market each year. Second, European central banks holding

a significant amount of gold in their external reserves have had

a reduced appetite for sales in the wake of the financial crisis."

We all know that the central banks of China, India, Russia, Brazil, Saudi Arabia, have been avid purchasers of gold.

But what may surprising is that consumer investment demand for gold is following the exact same trend:

Investment demand in China was UP: 29%, India 66%, South Korea 21%, Russia 12%, Viet Nam 11%

While in the United States of America investment demand for gold was DOWN 12% for all of 2010. For Europe, it was down 9%.

This certainly flies in the face of all claiming that gold is in a bubble. How can a bubble form when everybody in the world's largest and most advanced economy is shunning the investment?

Shunning? Really? Okay, perhaps not shunning. But the World Gold Council statistics speak for themselves.

What could be the reason that investors in China and Russia etc are flocking to gold, and investors in the US and Europe are far more recalcitrant?

If you ask your investment advisor here in the US, he'll patiently explain that the US has much deeper and more complex markets that offer a host of far more stable and reliable investments, such as stocks, bonds. And if you check the asset allocation models that your investment advisor is obliged to push, you'll see that commodities as a group comprise, about 5% of the model, and gold is a subset within that group. Many models are comprised of only Stocks and bonds, with a tiny percent allocated (2-3%) in "Alternative Investments" of which gold, again, would be a tiny subset, along with real estate, art, oil, and commodities in general.

It seems amusing that the same Americans who pride themselves on being Self Reliant Mavericks, who love Maverick politicians, who watch TV shows and movies about Maverick Crime Fighters, when it comes to investing, they will meekly follow the orders of Investment Advisors who act as shills for the stock and bond funds they recommend.

So when you hear commentators wondering whether gold is in a bubble, ask yourself exactly what that means.

Gold-Stater Ancient gold coin update 3: Archaic fractions

Gold-stater Ancient gold coin coin update 3: Archaic Greek Electrum fractions.

Yesterday I posted an article on Archaic Greek electrum staters. As you will recall, electrum is the naturally occurring alloy of gold and silver, found in the rivers of the Black Sea area of what is now modern day Turkey, where coinage was invented around 650BCE.

The largest coins are called Staters (an Indo-Aryan translation of the semitic "shekel.") But Staters, at 14-16 grams (depending on the weight standard) were too large and valuable for most transactions. They were thus minted in fractions: Trites (thirds), Hektes (Sixths) Hemi-hektes (Twelths) on down 1/48 ths.

The earliest and most common of these fractions is the Lydian Lion Head Trite, (See picture above) issued most probably by Alyattes, father of Croesus. This coin must have been minted in great quantities, yet the Stater, to my knowledge is unknown. Trites and hektes are easily found in many auctions. High quality examples are extremely rare. Seven or eight years ago, the top trites ran about $2000. Now the finest examples run up to $8000. And these, at best, only grade about AU.

There are also Lion Head trites with inscriptions. They are currently read as: "Alyates," "Falfel," And "Kalil." These, in top condition, bring closer to $20,000 at auction, though a recent hoard has been discovered with up to 20 or 30 examples of inscribed trites. Perhaps more will come out later. Several of these are running in the current Gorny auction.

Other early trites include the Miletos reclining lion type, a facing lion head from Lydia, and the famous "Phanes" inscribed Dear issue from Ephesus. There are also trites from the Uncertain Ionian mints that include images like archaic heads, as well as Seal issues from Phokia. These are all extremely rare, and as such they can bring very high prices ($10-30,000 - more for the Phanes) if the condition is acceptable.

The most plentiful issues appear later (550-350 BCE) and were minted in great quantities in Kyzikos, and the Kyzikene colony of Lesbos. There, like the staters, changed types every year, so there is a great variety. Some are very common for Greek electrum. Common types include: profiles of nymphs, Zeus, Hermes, Apollo, Hera, facing Athenas, Silenos, lion heads, bull heads, ram heads, boar heads, helmets, hoplites. Also found are sphinxes, griffins, and various winged animals: lions, horses, dear, boars, and various mythological heroes.

Rare types might number as few as 2-10 examples. The most common types might number in the very low hundreds. As always well centered and struck examples are very rare. More common types in high grade now sell for $2500-$5000. Very rare types in very high grade, can run up to $20,000.

For electrum, AU is the highest grade available. Novice collectors may be put off by the AU grade, as they search for Mint State examples. When they realize that well struck AU examples are the best they can find, they will undoubtedly bid up the prices for these.

A note on hoards: The only coins currently coming into the market are being discovered in the Black Sea region of Turkey. These include mostly Hektes and fractions. Smaller quantities of trites are being found and a very few staters. Also included are the coins of the Black Sea capital of Pantipakaion. These include the famous gold staters, as well as later issues by Pharnakes and Asander, though the vast majority of these sell in the Russian market and never get to the west.

Next: Early Greek Gold Issues.

Gold Stater Modern Gold coin update Feb 26, 2011

GOLD-STATER.COM Modern Gold Coin Market update Feb 26, 2011

Chinese gold coins continue a parabolic ascent.

A week ago, I reported prices on the Basel Au and Pt set, from the Basel coin fair. 1ooo were minted with the mintage split between the AU normal coin and the PT (for platinum) error. At that time the set went for 11,500 on ebay. Double the price from two months earlier. Now, one week later, the Pt sold for $8,500 the same day it was listed by a prominent bullion dealer, and the Au just sold at auction in Germany for $7,500. Meanwhile at the same auction a rare Zurich one ounce coin show medal with a mintage of 550 - three examples of which were up for sale - all sold between $7500 and $9000.'

At the same time, investor/collectors are chasing regular issue pandas from years with small mintages, looking for tiny variations that are believed to have occurred on a small number of coins. The 1999 serif (line under the 1) 1 OZ variety is selling between $4000 and $5000. The same for the 2001 - D variety. While regular issue 1998's and 1995's are selling for similar prices. And the entire unicorn series has all but disappeared from the market. 1 OZ unicorns are regularly selling between $8000- $12,000.

I don't know how long these coins can continue to appreciate without a breather. But one thing is for sure: wealthy people with too much paper money are eagerly searching for precious metal investments.

Gold-Stater Ancient Gold Coin Update Feb 26,2008: Archaic Staters

Gold Stater Ancient gold coin update 2. Greek Gold Part 2: Archaic Staters. (next: archaic fractions)

I find tremendous interest on the part of new collector/investors in Greek Archaic coins. The reason is understandable. First, these are the first coins in history. These represent an invention that democratized the economy of the western world. Before this invention, the common man had to barter for, grow and make everything he needed. After coinage the common man suddenly could specialize, amass capital (such as it was) and trade.

Second, the images on archaic coins represent some of the most beautiful work of archaic Greek artists. Mythological creatures, Gods, Goddesses, and occasionally Historical portraits, are engraved, often with superb skill on flans of electrum. (Electrum is a naturally occurring mixture of gold and silver found in the rivers of the Black Sea area of modern day Turkey, then Ionia or Lydia).

The problem newer collector/investors encounter in this compelling area of numismatics is that the larger pieces (14-16 grams) that foster the most interest - called Staters - are all very rare - even by Greek Gold standards, and are in grades lower than mint state. The highest graded electrum is currently AU. There might possibly eventually be an Choice AU piece, but that would be like Choice Mint State for later gold.

These early electrum Staters were clearly struck in small quantities on flans of varying shapes, often with glaring flaws: cracks, pits, gouges etc. The images themselves, though often beautiful, tend to be off center and unevenly struck. The fact that each individual piece is very rare (often less than 10 known, many times less than 5 known, makes price discovery impossible. Even if two similar pieces have been sold recently they might well be in vastly dissimilar conditions.

I will say that in AU condition, well centered and struck pieces have been selling in $25-50,000 dollar range. Coins with compelling images often go for much more. Recently in an NGSA auction electrum stater sold for $1000,000 dollars. But this should be discounted as it was sold to an oil Sheik who foolishly announced his interest prior to the auction.

The issues are divided into roughly three catagories:

A) Archaic - from about 650-550 BCE. These are mostly from Lydia (Sardes mint), Miletos, and Uncertain Ionian mints. The images tend to be primitive. The quantities, extremely limited. The most common the Miletos lion stater, probably numbers around 50 in the market, but the vast majority are horribly distressed. Decent examples now go for about $15000. Nice ones are very rare and go north of 20,000.

The prices for rare archaic issues tend to be more in the 50,000 to 100,000 range for nice, well struck examples. There is a famous issue from Ephesus that has an inscription naming "Phanes" (greek for The Noble One). This coin (3 extant as a stater) is now worth about $250,000 as a stater. A recent horde of Lydian pieces included two Double Facing Lion Head staters of primitive design. One in Near VF condition sold for $40,000. One in closer to XF/AU condition is being offered at $130,000. More on this hoard in post number 3.

Catagory B) would be early arachaized (copying or using the archaic style) issues (550-400 BCE) from Kyzikos, Chios, Phokaia, Mysia (all in the Black Sea area). The Kyzikos issues are the most plentiful, yet they changed the design on the coin every year, so any individual design is still very rare. Staters from Chios and Phokaia are very rare. Lampsakos in Mysia produced the famous Archaic Pegasus issue, which, like the Miletos lion is more common (perhaps 50 examples on the market) but again, finding a decent one is next to impossible. They price out like the Miletos lions.

Catagory 3) Later issues from these same mints. The styles are often more elaborate and display great skill. these tend to be somewhat better condition in general. The price structure is similar to the last catagory: ($25,000 - $50,000 for nice AU examples. Much more for highly sought designs.

Because Electrum staters are so rare, price discovery is difficult, which makes this a difficult area for the newer investor/collector. Yet this can be viewed as a blessing, as prices are extraordinarily cheap compared to mintages of coins from all other periods and areas of coin collecting/investing. And clearly, from an historical perspective these coins are the most interesting and important.

Next: Post 3: Archaic Fractions (trites, hektes, etc.)

TWO GRAPHS

Graph 1: What the US Government takes in in taxes. What we spend. Trillion dollars in the hole.

Graph 2. GDP with and without government spending: Blue is with. Red without.

Unfortunately, what this means is that if we get the deficits under control we'll go through a depression. But the longer we wait, the worse the ultimate depression will be. Just forget you read this.

Gold-Stater Ancient Gold Coin Update Feb 25, 2011

PART 1 - Alexander the Great and related issues.

For collectors/investors coming into the Greek gold coin market the task of valuing issues can be daunting. In the US and world markets there are population reports, stated mintages, and historical price structures. In Ancient gold, none of the these things currently exist (though, in time, they will). Meanwhile, in Greek gold, easily the thinnest market, pricing can seem almost capricious.

Therefor, it's not surprising that newer collector/investors tend to move into the most plentiful issues where prices can be tracked, while searching for the highest grades. These tend to be coins issued by or picturing Alexander the Great and his father Philip of Macedon, and his brother Philip III.

Stater issued by Alexander and early posthumous issues (circa 336- 300 BCE) are certainly the most plentiful Greek gold issue. A hoard, numbering about 2000 coins, was discovered about two years ago and has been released onto the market over the last two years. Of these, many have been graded. Mint State coins have settled into the $7500 range, and Choice Mint states have been selling for $30,000. In the latter grade the coin still must be considered very rare, even by Ancient coin standards. What does this mean? I would guess that less than a dozen exist. Mint state versions would still be extremely rare by US and World coin standards. What does this mean? I would guess that less than fifty exist.

If any multiples (Distaters) or fractions were in the hoard they would have been in small numbers and have not hit the market. Distaters are very rare in any condition, as are the fractions (1/2, 1/4, 1/8 staters).

Philip of Macedon staters (circa 340- 330 BCE) used to be most plentiful. A hoard of about 1000 coins were discovered about five years ago. Mint state coins used to be about $5000, but have moved over the last year to upward of $10,000 dollars. I've never seen or heard of a choice mint state example. Even in mint state, the coins is very difficult to find.

Alexander portraits bring us to the next level of collecting/investing.

From there collectors tend to move on to tougher issues that are still plentiful enough to afford some sort of price discovery. Alexander portraits include coins issued by Alexander's brother Philip III, and coins of Lysimachos, and Lysimachos posthumous types.

There was a hoard of Philip Alex portrait staters (Circa 320 BCE) about 10 years ago numbering about 50 - and all of superb style from dies done by the same artist. Before that the coins was extremely rare. Now it is still extremely rare by any standard but that of Greek gold. The hoard was well preserved, and when they do appear they are often AU condition (quite a good grade for coins that are 2300 years old.) In mint state they are extremely rare and the price is tending to follow that of mint state Caesar portraits (which are far more common), moving up noticeably each successive time they appear. The last mint state example went for 25,000 in New York. I've never seen or heard of a choice mint state. At the NY auctions, a mint state Caesar went for $100,000.

Lysimachos (323-281 BCE) Alexander portraits are more plentiful, but they vary greatly in style. Superb style examples in mint state are extremely rare and go for as much as the Philips. Lesser styles and lesser grades command less. But nice Au coins of pleasing style are now in the 10-15,000 dollar range. I'd guess the numbers are similar to the Philip Alex portraits. In mint state and fine style, the prices can be north of $20,000.

Posthumous Lysimachos types (281-66BCE) were minted from the time of Lysmachos death all the way down to the Mithridates types. These are plentiful as a group, though any given type (a portrait by any given artist) might be extremely rare. A huge hoard of Mithridates types was discovered many years back, numbering probably around 2500, and these tend to be low quality, and horrible style. But even these in mint state are quite rare. However, the horrible style tends to hold down the price to around $2000. Again, I've never seen a Choice mint state.

World and US collectors will be struck that common Greek gold coins number in the very low thousands (Perhaps 2 - 3000). It should be noted that this is similar to the rarest World and US mintages. And because Greek coins are at least 2000 years old, mint state examples are always very rare.

Finally a note on hoards. As time goes on, less and less is being found. Now we are in an environment where much of the known Greek and Roman world has been thoroughly excavated, and aggressive import and export restrictions are being implemented worldwide. Very little is coming on the market. Dealers who used to publish annual and semiannual fix price lists have ceased doing so, saving their material for high profile auctions. This is the reality of the current market, and it is not likely to change.

NEXT: PART TWO: ARCHAIC COINS

Gold-stater monthly gold chart update feb 24, 2011

Gold-Stater.com monthly gold chart: the chart clearly shows the breakout on the gold chart. The monthly chart show a clear retest of the breakout level and now a new push towards the old high. However, it often takes several tries to break to new highs after the initial breakout. If this rally fails to establish a new high (three consecutive closes above the old high) look for a re test of the breakout. Eventually gold will go higher. This is clear from the above chart as a new upward channel is being forged: the old resistance line becomes the new support line.

Gold-Stater gold market comment Feb 24, 2011

Gold and oil are clearly moving together right now in response to the ongoing Mid East crisis. Gold crossed $414 as crude crossed the $100 mark.

As per usual, theories abound. The theory most bandied about is that gold moves with oil because rising oil is inflationary and gold is an inflation hedge. Both propositions are wrong.

First, rising oil can be inflationary when it is rising because of industrial demand in an expanding economy. In a sluggish economy with wide spread unemployment, such as we are now experiencing, rising oil is deflationary. This is because every cent oil rises is a cent taken out of consumer discretionary spending. In fact for every dollar oil rises, the economy is depressed by a factor of between 90 and 100 billion dollars. Yes that's billion. Massively deflationary.

Second, Gold can serve as a hedge against inflation, but then during periods of inflation almost any commodity will serve as a hedge. Oil, cotton, copper, sugar, lumber, etc. So then why are we seeing reversals in many of the commodities? Copper had an outside reversal day two days ago and continued to fall yesterday as gold and oil rose.

The fact is that oil is rising right now not because the economy is recovering but because the oil producing states of the Mid East are going up in flames - as anyone can see. Gold is going up because the world economy is oil dependent (addicted if you like), and when the supply of oil is disrupted the world economy will experience tremendous deflationary pressures.

So does that mean gold is a deflation hedge? No! Gold is a monetary instability hedge. Why? Because gold is a stable currency. It is a currency because the Central Banks of the world use it as such. It is stable because it cannot be printed at will.

Therefor, we see, in this case, gold and oil are rising together, but for different reasons. Do they often rise together? Yes! Do the always rise together? No! See the chart above.

This little exercise points out the futility of reversion-to-mean theories. They work when the variables upon which they are created are constant. They don't work when the underlying conditions in the real world change.

Nassim Taub destroys the fallacy of Reversion to the Mean theory in his book the Black Swan. His idea is that Black Swan events - extraordinary events - occur regularly. So regularly, in fact, that they constitute the norm of human experience. It's just that each one is different.

Few people foresaw that the Mid East would go up in flames right at this point in time. But everyone should have expected that something would happen to rock the world economy. The question is always this: How stable are current economic conditions in the face of the next Black Swan Event. Everyone should have foreseen that the answer to that question, is: Not Very Stable.

How unstable are current economic conditions? Interest rates, at Zero, are functionally negative. Bank balance sheets are still largely unrepaired except for the illusion of mark to model accounting. And the Fed is carrying trillions in bad debt on its balance sheet. Real unemployment is at about 20 percent. The Federal deficit is over 14 trillion dollars ( not counting another 70 trillion of unfunded liabilities) while the US consumer is 11.4 trillion dollars in debt.

How extreme is this Mid East black swan event? Who knows. We'll soon find out.

But count on this: gold has only just begun to rise.

Gold-Stater: Gold Market Update Feb 23. 2011

Gold-Stater: Gold Market Myths and Fallacies

When investing in gold, one will encounter all manner of theories, claims and promotions. They can be confusing. When investing, the more confusing something is, it's a good bet the confusion is there for a reason. Generally, it's not because you're stupid. It's because the proponent of the theory is trying to mask nonsense.

First some myths.

Myth 1: The Gold silver price ratio must return, over time, to the naturally occurring silver:gold ratio of 17:1. This makes no sense. During periods of speculation silver outperforms gold. Period. Hot money puts pressure on silver because it's a thinner market. During periods of deleveraging silver will get crushed. So will gold at first. But gold will recover and make new highs because gold is the ultimate safety play, while silver will languish.

Right now the whole market is in a speculative frenzy because of Bernanke's hot money scheme (Bailouts 1,2,3 etc, QE 1,2 etc). So silver is outperforming. When the hot money delevers, conditions change.

Myth 2. As the price of gold rises, eventually gold stocks will become so profitable they vastly outperform the bullion price. This makes no sense. The price of stocks is dependent on the Price to Earnings ratio the market is willing to award stocks. During periods of deleveraging the PE ratio can contract into the low single digits. If this were to happen gold could soar and gold stocks could still collapse. Another way to say this, is that gold stocks are paper. If people come to mistrust paper, paper will get hit, even if it has some relationship to gold.

Some analysts point to the post 1933 period of deflation when gold stocks soared. What they forget is that there was a gold confiscation, so the only way to own gold during that period was through stocks.

Myth 3. If gold goes up over time, you should take advantage of this fact by levering your position. There are various leverage schemes out there. Beware. Leverage is another word for risk. The more leverage, the more risk. If someone claims risk-free leverage, they're saying risk free risk. That certainly sounds like nonsense.

Myth 4. Bullion is for the End of the World, bunker mentality investor. Nonsense. It's true that it takes some thought and effort and perhaps expense to store bullion. But the whole point of owning bullion is not to prepare for the end of the world. It's to prepare for the growing public distrust of paper. As the public comes to realize the Ponzi scheme nature of the Western Banking system - wherein debt crises are papered over with more and more debt, and the banking class grows richer and richer while everybody else languishes, the distrust for paper understandably grows.

This doesn't mean the world collapses. It means that paper investments are looked upon with ever increasing distrust. Right now, as I write, the bullion premium over the spot price is widening. It has been widening for many years. During periods of intense deleveraging, the bullion premium tends to blow out.

Paper gold, including GLD and CEF are perfectly good tracking stocks. I use them myself with great confidence. For now. At some point if accounting problems are discovered there, those prices too can collapse while the price of bullion soars.

Final note. I use the terms lever, and delveraging a lot. What does this mean? Leverage is essentially taking on risk in order to boost your returns. Risk is taken on by going into debt in order to buy more. It's that simple. Our entire fractional reserve banking system is built on the principle of going into debt to boost returns. I won't go into the history of the Fed here, but the basic idea of the Fed is that in good times the banks will make fantastic profits because of leverage. In bad times the Fed will bail them out with tax payer money. They always win. We always lose.

In Peter Bernstein's fantastic "The Story of Risk" he puts forth the argument that risk awareness and risk management is what has made the modern economy so wonderfully productive. He also posits that Trust is the engine that makes the entire system run. When risk is perverted by a system that rewards triumph and bails out failure - Trust is lost.

Do you trust your banker? Do you trust your broker? Do you feel they have your best interests at heart? Or do you suspect they're just trying to make a buck off you? These are the most vital questions in determining the health of the economy - which it to say in determining the health of risk assets. All paper assets are risk assets.

When trust is lost investment turns away from risk. Gold bullion is the ultimate risk free investment. It's that simple.

Gold-Stater: Ancient Gold coin commentary Feb 22, 2011

Gold-Stater comment: The Invention of coinage was central to the creation of Democracy.

Ancient coins are generally divided into three categories: Greek, Roman, Byzantine. Of these three Greek, to my mind, is the most fascinating because the Greeks invented coinage, just as they invented Democracy - and civil law.

This isn't to say that civil contracts hadn't existed for thousands of years prior in Mesopotamia and the fertile Crescent. They had. But they were administered by Divinely appointed Judges, rather than civilian advocates - or rhetors - who persuaded committees of citizens by the eloquence of their arguments.

It is easy to forget that this Rhetoric was, in fact, the basis of Democracy. This Greek invention changed the fabric of the world in that, for the first time in history, Government was instituted wherein private citizens would persuade each other through the eloquence of argument rather than by Divine Right, or the force of arms.

Rhetoricians would persuade by Reason. The Greek word for "to reason" is Nomizo. The Greek word for "law" is Nomos. And the Greek word for "coin" is Nomos (hence "numismatics.")

It is only by considering this linguistic connection that we can truly appreciate the absolutely central role the invention of coinage played in the creation of Democracy.

Coinage, to be sure, was invented by Tyrants in Lydia (the black sea area of modern day Turkey). Allyates: father of Croesus, was responsible, in the late seventh century BCE, for minting the first series of ingots of precious metal stamped with seals that identified them as being of a certain weight and provenance.

But the invention transformed his country into a cauldron of private enterprise. Herodotus famously referred to Lydia as a "nation of shopkeepers." It should be understood that this term also comprised the idea of merchants and traders. Though the process is largely undocumented, we can infer that a tremendous amount of power and freedom was transferred from the Tyrant to the populace through coinage. That Croesus himself was described by Herodotus as a great patron of the arts, a lover of poetry, philosophy, sculpture and music lends credence to the idea that an empowered populace would not have been anathema to him

The mainland Greeks too were ruled by Tyrants during the seventh century BCE. But by the mid sixth century, as coinage spread down through Greece, so did Democracy.

In fact, the famous Athenian law-giver: Solon, visited the court of Croesus of Lydia and warned him of the dangers of confusing wealth with happiness. When Croesus was later conquered by Darios of Persia, he cried: "Oh, but I should have listened to Solon." When Darios asked what he meant, Croesus explained Solon's rationale for happiness existing at the heart of the Greek concept of the Private Citizen living a productive life of virtue, temperance and freedom. Darios spared his life.

In Athens Solon was responsible for laws governing the rights and responsibilities of the private citizen, as well as reforms of weights and standards governing the issuance of coinage. According to Aristotle, he legislated for all citizens to be admitted into the ecclesia (council) and for a court to be formed from all the citizens. By giving common people the power not only to elect officials but also to call them to account, Solon appears to have established the foundations of a true democracy. And though there are no contemporary records regarding Athenian coinage of the period, it speaks volumes that historians like Herodotus and Aristotle assumed that democratic standards of coinage and law (both described by the same word: Nomos) were equally central to Solon's reforms.

The Greek invention of coinage lasted about 2600 years - from the seventh century BCE all the way until 1970 when Richard Nixon abolished the precious metal standard of coinage and replaced it with pure fiat money issued and controlled by central banks - thus returning Political power back into the hands of Tyrants.

Gold-stater Gold market update feb 21, 2011

Gold-stater advice: INVEST LIKE SOROS, PAULSON and CHINA:

George Soros’s Biggest Buy is Gold - $64 Million in the Last Quarter

Many of those calling gold a bubble have done so simply on the basis of George Soros’s recent comments regarding gold being the ultimate asset bubble.

George Soros said subsequently “It’s all a question of where are you in that bubble ... The current conditions of actual deflationary pressures and fear of inflation is pretty ideal for gold to rise.” This would suggest that he is bullish on gold, contrary to much of the media headlines and commentary.

As ever with hedge fund managers and large investors it is important to watch what they do rather than what they say. In the last quarter, Soros's biggest buy wasn't actually a stock. His firm spent $64 million on shares of the iShares Gold Trust (IAU).

Hedge fund manager John Paulson also continues to buy gold. He personally made $5 billion in 2010 on a massive bet on the price of gold.

His firm, Paulson & Company, owns securities that represent the rough equivalent of 96 metric tons of the metal.

Also, over the last five years these countries have increased their sovereign gold reserves:

1. Saudi Arabia: 126% increase to 323 tons of gold reserves.

2. China: 76% increase to 1054 tons of gold reserves.

3. Russia: 72% increase to 664 tons of gold reserves.

4. India: 56% increase to 558 tons of gold reserves.

Meanwhile, on the other side of the bet are the geniuses at CNBC, Fox News and the Wall Street Journal all claiming gold is in an unsustainable bubble.

CNBC correspondent Bob Pisani recently made such a claim when he gave his 2011 stock predictions , including the statement, "the gold bubble will pop."

Fox News' Dave Ramsey pontificates just last week: "

A bubble is when an investment is no longer based on numbers, but on greed or fear. So, you’re right on about it being a gold bubble. That’s exactly what’s happening at this point. Now, should you take advantage of that? Absolutely not. You never know when a bubble will burst, but trust me—the bubble will burst on gold.

Wall Street Journals Alan Mattach quips: "You know something funny’s happening in the gold market when the page three girl in the Sun newspaper starts quoting the shiny metal’s futures price," as evidence of gold imminent demise.

Agreeing with Fox, the WSJ, and CNBC are the following countries that have reduced their gold holdings over the last five years"

1. Spain: 46% decline to 282 tons of gold reserves.

2. European Central Bank: 35% decline to 501 tons of reserves.

3. Sweden: 26% decline to 126 tons of gold reserves.

4. Switzerland: 19% decline to 1040 tons of gold reserves.

5. France: 18% decline to 2435 tons of gold reserves.

So you decide with whom you'd rather bet. Soros, Paulson and China? Or Pisani, Ramsay and Spain?

Gold-stater comment on gold and The Budget Debates Mon Feb 21, 2001

Debt, both worldwide and US, is the number one reason gold is in an inexorable uptrend. In the history of the world, sovereign debt has never been repaid. It is rolled over, renegotiated, and inflated away. Or simply repudiated.

Why is the current struggle to get the National debt under control such a joke? Because the most fiscally aggressive group, the Tea Party, wants to be fiscally responsible with less the 10 percent of the budget. Republicans and Democrats want far less than that.

What won't the Tea Party, et alii, touch? Defense, Medicaire, Medicaid, Social Security. These comprise 60 percent of the budget. They want to get tough on entitlements. Just not their entitlements.

They also don't want to touch: Verterans Affairs, Homeland Security, State Programs (in their own states), and Energy.programs (In their own states).

So what will they cut? Education and Housing which comprised 200 billion dollars in a 3.7 trillion dollar budget.

To give you an idea how little this will effect the budget consider this: Starting in 2014, net interest payments will surpass the amount spent on education, transportation, energy and all other discretionary programs outside defense. In 2018, they will outstrip Medicare spending. Only the amounts spent on defense and Social Security would remain bigger.

Let's be clear, even if you took out all those horrible greedy teachers who are destroying our budget, and chained them ankle to ankle and forced them to teach our children for the price of a dry cracker and a glass of water a day, you wouldn't make the tiniest dent in our budget deficit.

Not that we can't have a reasonable discussion about the absurdly wasteful fiscal policies of public education's ensconced bureaucracy. And we certainly have to get the bloated federal pension system under control. But let's not pretend that teacher pay has much to do with the national budget.

Further, you have to wonder: From where does the current "Conservative" animosity towards Education derive? There was a time, not so long ago, when conservatives prided themselves on a first rate education. Remember William F. Buckely? But now, in a sad sign of the times, a host of top "Conservative" opinion makers never earned so much as an undergraduate degree (you know who I mean), and they wear their lack of education as some sort of badge of courage. These opinion makers continually bash the rest of us who bothered to get an education. They use phrases like Ivy League and PHD's, as if they were saying Crack Heads and Terrorists. And since when is "elite" a term of villification? Could you imagine defunding the Marines because they are an elite fighting force? Wouldn't you just die of embarrassment to have a bunch of elite athletes represent our country in the next Olympics? It would be so much better to be represented by a group of fatties who never so much as bothered to stretch their legs: good solid regular folk.

Only in government and political punditry do we strive to denigrate excellence. Let me suggest that excellence is not the problem of our moribund political system and its attendant parasite class of pundits and commentators.

Partisan Politicians - and their media mouthpieces in both parties - care for nothing but the preservation of their own personal power. We all know that. But as long as they spend their time bickering over fiscal irrelevancies like Teacher Pay, the budget will continue to spiral out of control, and gold will continue to rise.

Gold-stater Ancient Gold Coin market update Feb 20, 2011

It has been my observation that the Ancient Gold coin market acts as a leading indicator for the gold market. It can be no coincidence that the ancient coin market came alive back in 2002-3, just as the price of gold starting moving up. The reason for this is that the same "smart money" that foresaw the imminent problems with paper reserve currencies such as the dollar, the euro and the yen, sought to move into bullion and collector coins for exactly the same reason: diversification of capital into easily stored commodities with established intrinsic value.

However, anyone following the ancient (and world) coin market has noticed how gold issues in general have far outperformed silver issues. Why?

The naturally occurring ratio of Silver to Gold is 17:1. The current gold to silver price ratio is about 42 down from a high of 50 a month ago and 80 at the peak of the financial crisis back in 2008. The reason that gold bullion outperforms silver is clear. Central banks use gold as a reserve currency. They buy silver to mint silver coins. But they only hold gold in their vaults. During periods of monetary instability they typically seek to increase their holdings of the one stable currency: gold.

But why should ancient gold coins that have about the same rarity as a silver coin trade at a premium. Clearly, what Marx termed "fetish value" would be one important reason. Gold has historically commanded a strong fetish value. But perhaps there are other reasons.

In a typical ancient Greek coin auction you find a ratio of silver to gold/electrum occurring at somewhere between 7:1 and 15:1 depending on the auction. However, if you strip out the most common gold issues: Philip, Alexander and late Lysimachos staters and electrum trites, hektes and fractions, you find the ratio comes down to about 25:1. Then strip out darics and carthaginian electrum and you're at about 40:1. So what's the point?

The point is, that after acquiring a nice Philip, Alexander and late Lysimachos stater, a couple of nice hektes, a daric, a Lydian trite and an electrum Carthaginian horse stater - as nice as these issues may be, it becomes relatively difficult to find gold coins in any condition in any auction. And in high grade even these issues are extremely difficult to locate - after 2500 years of storage, excavation, and cleaning.

You may object that the same may be said for rare and sought after silver issues, especially large pieces like Dekadrachms, medallions and signed issues and the like. And these rare issues do command prices similar to those of rare gold coins.

But the simple fact is that whereas every Greek city state minted its own run of silver drachms and multiples and fractions, only the most powerful empires were able to acquire gold in sufficient quantities to produce a standard (or perhaps reserve) currency. Thus we find gold issues of Croesus, then Darios, then Philip and Alexander, then Lysimachos (and types) dominate the world of Greek gold down to the time the Romans launched their empire.

Carthage and Syracuse, though not empires, were powerful enough to dominate trade in their spheres of influence and both produced meaningful runs of gold coins - though in far smaller numbers than the great empires. The same can be said for the Ptolomies who dominated Egypt, and to far more modest degree the Tarantines who conquered much of Italy under Pyrrhos. In fact finding issues of Tarantine gold is becoming next to impossible. Moving on from there we find gold issues so small that coins in nice condition routinely bring high five to six figures: Rhodes, Athens, Abydos, Pantikapaion, Pre Ptolemaic Egypt, etc.

But over the last two or three years the explosion in the price of rare ancient gold coins seems to have accelerated. I believe two factors to be largely responsible. And I believe these factors will become ever more determinative as time passes.

The first factor is the internet. All major auctions are now listed on Sixbid. Many have online bidding platforms. Obviously many more collectors/investors/speculators are now aware of every coin coming to auction. Thus even dealers save their best coins for auction (rather than dealing them to private customers); and each successive high profile auction is bringing higher and higher prices.

The second factor is grading/slabbing. Though still quite controversial in some circles, the fact that ancient coins can be certified as genuine and unaltered is an enormous boon to many world and US collectors who have been covetously ogling the ancient coin market from a safe distance. These collector/investor/speculators are now jumping into the market. Many of them are used to purchasing US coins that minted (and available) in thousands are considered extremely rare. They are finding that extremely rare ancient gold coins are numbered in the dozen (s). And they are thrilled to purchase them for a fraction of what they are accustomed to paying for "rare" coins.

Veteran ancient dealers and collectors are concerned that at the grading companies one person (no matter how talented and knowledgeable) may be imposing an arbitrary grading standard on an entire industry. And over time collectors will have to learn to trust their own eyes along with the grades. But the certification process - like the internet - will come to dominate the coin market in time.

And these processes should help ancient gold coins lead the price of bullion for years to come.

Gold-Stater weekend Gold commentary Feb 19

Gold-stater weekend commentary for Feb 19, 2011.

Chinese bullion continues to outperform all other forms of modern bullion. Last night on ebay, a 1988 Hong Kong expo commemorative 1 ounce gold coin with a mintage of 500 sold for $8600. It was purchased by a buyer with only 30 feedbacks spread over a variety of collectible areas. Three days earlier a Basel Expo gold set, (two coins, 1 oz each) mintage 1000 divided evenly between the normal coin and an error coin with "PT" for platinum printed in the field, sold for 11,500. One month ago, the same set sold on ebay for $7000.

Judging by the results from a run of sycees (stamped ingots) in the recent Goldberg auction, these results can not be considered a fluke. Several 1 tael (1.2 ounces) sycees from the early 1900's sold at between 5000 and 20,000 each; with items listed later in the auction going for more as the bidding heated up in the room.

What's going on? China is actively encouraging its population to acquire gold. And China numbers the fastest growing population of millionaires anywhere on earth. It has just passed Japan as the number two largest economy in the world. By 2020 it will be the largest.

China also holds about a trillion and a half dollars of US debt. If it held an auction for that debt tomorrow, interest rates would spike in the US and our economy would crash. This is why defense spending makes so little sense in an era when war is fast becoming a purely economic enterprise. Of course, China won't do that (unless we piss them off) because it would hurt the value of their own asset (The 1.5 trillion dollars of US debt). However, China is certain to slowly retire the debt by not purchasing as much as the debt rolls over. This will have the same dampening effect on the US economy - but slowly, over time, as well as the same depressive effect on the value of the US dollar.

All of the above points out a major cause for the inexorable rise that is taking place and will continue to take place in the value of gold bullion. With Chinese bullion leading the way.

http://www.gold-stater.com: gold commentary for Feb 18, 2011.

Gold continued its climb on Friday, floating on the back of a mass speculative hysteria in stocks and commodities fueled by the Feds massive injection of cash into the system. Silver continues to lead gold, a sign the current rally may still have legs. The Fed continues to purchase treasuries from primary dealers who in turn invest (read: gamble) the proceeds into risk assets. Funds follow along, betting that the game should last until QE2 is set to expire in June.

The question now is at what point do market pros start to unwind speculative longs in advance of the Fed's June end date? Do they wait until May - or does smart money start to pull out well in advance?

Given the shaky nature of the recovery, the persistent - perhaps structural - unemployment, and the fact that retail investors are largely out of this market, if a couple of big players begin to unwind positions, it could easily set off a lemming-like stampede back out of speculative positions and into the illusory safety of cash.

Any pullback of this nature, no matter how swift and deep, should be looked at as a Godsend to both bullion buyers and traders alike. Because, when the Fed sees the effect of their easing off the cash pump, they'll be revving up the printing presses for QE3. If Bernanke's clear about anything it's that there won't be another serious round of deleveraging on his watch if he can possibly avoid it.

Gold market update Feb 18, 2011

Gold is starting to pull away from daily support line. In a bull market this type of action can go for quite a while. However eventually it will pull back to support, and if broken it will pull back towards initial breakout.

From Forbes Magazine: Even US banks now consider gold to be a currency:

JP Morgan Accepts Gold As Collateral For Stock Purchases

Comes the revolution!. You can use your non-income producing gold as a way to buy other securities yielding some income return or as a way to post money with counter-parties.

This means gold holdings of hedge funds or wealthy investors will be treated as the equivalent of treasury bonds or other securities that can be used to leverage other investments. Another imprimatur for gold being treated as a normal credit substitute in financial markets.

Gold Market Update Feb 17, 2011

http://Gold-Stater.com is now providing daily gold market and gold coin updates. Here below is a weekly chart for GLD the gold tracking stock. We see that gold has broken out nicely from the recent downtrend, and is nearing short term resistance. We should soon experience a retest of the breakout. If higher lows are established we should thereafter make new highs.