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Thursday, June 2, 2011

Historic Gold Medals bring historic prices

Above is a reverse of a William and Mary gold coronation medal (18 grams) minted in 1689 by the artist John Rottiers to celebrate the coronation of William and Mary. 505 pieces were minted in gold and given out to the dignitaries attending the celebration. Many more were minted in silver and distributed to judges, members of parliament, and divers notables. Copper examples were tossed to the rabble lining the streets for the coronation procession.

Back when gold was money Gold medals were minted by court artists to commemorate all momentous occasions.

Only a year ago this same exact same medal went unsold in a French auction with an estimate of $5000. Yesterday it sold in an LA auction for over $10,000.

Only a year ago on television Larry Kudlow, a TV personality on a game-show like economic revue show mocked gold as the dumbest of all investments. A barbarous relic unworthy of attention by serious investors and economists. Yesterday Larry Kudlow announced on the same television program that the dollar should be returned to a gold standard, and that gold linkage was the only way to tame the debt problem.

Now my point is not the Larry Kudlow has suddenly become someone who understands anything at all and should be accordingly respected. He has spent all his life in politics and like all political animals (yes I know what Aristotle said about that) the only thing he understands is popular sentiment. But, like all political animals able to command their own TV program, he is extraordinarily attuned to popular sentiment.

Thus, my point with both examples above is that Gold is now creeping into the popular imagination. This is not a culmination. It is the beginning of what gold analysts call PHASE 2 of the gold bull. Phase 1, was where "smart money" ahead of the curve accumulated. It was a stealth phase that saw gold move from about 300 to 1500 over ten years.

Phase 2 is when institutional money begins to get involved. When central banks become net buyers rather than sellers. When TV commentators and politicians begin to discuss things like a return to the gold standard, which they had mocked in the recent past. It's happening now.

Somewhere ahead lies PHASE 3. That's when everyone you know wants to own some gold. When everyone you know talks about gold the same way they talked about internet stocks during the internet boom. When mindless Hollywood celebs and mindless politicians talk about their personal savvy gold investing. When Donald Trump has a new show called the Gold Apprentice, and he claims he left real estate not because his company went bust but because he was always secretly dealing gold.

Funny right? It will happen.

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