Gold cracks $700
May 9th, 2006 | by mbhunter |Much to the joy of gold bugs everywhere, the yellow metal peeked above $700, a high not seen for a quarter century. The main news that got this bull rolling was that China is substantially increasing its holdings.
One thing I’ve found in perusing coins is that common, small denominations seem to command a higher premium above spot price than the more exotic kinds and the higher-denomination kinds. Specifically, 1/10th ounce American and Canadian gold coins seem to have a $10/ounce premium above their one-ounce counterparts. Part of this is probably constant minting costs (the minting cost being the same for the 1-ounce as for the 1/10th-ounce) and also the fact that the 1/10th-ounce coins make “making change” a little easier in a crisis. Such crises occur if there is mass disorder and when the currency is not trusted. Gold represents an internationally, historically-recognized store of value that trumps fiat money when the chips are down.
Twenty-franc coins (specifically French “roosters”) have 0.1867 ounces of gold, so they can make change a little easier than one-ounce coins as well. But try to give this to someone in a crisis, and they’ll be skeptical (unless you’re in France, of course!) These coins trade at a lower premium to spot than the tenth-ouncers.
