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Gold About to Drop?
November 12, 2008

When will gold drop below $700 an ounce? It could be soon.

Gold is an inflation hedge and right now inflation is disappearing.

Oh, I know that that the Federal Reserve has created a lot of new money. But the offset to that is a lot of old money has been destroyed by falling house prices, soured mortgages, falling stock prices, rising credit card defaults and failing businesses.

The dollars lost in the current economic recession are every bit as important to the total demand that puts the price level where it is. If they outnumber the new dollars created by the Fed, well, then deflationary or disinflationary forces are stronger than inflationary forces.

Right now gold is the exception. Copper has retreated so far that even the old copper-zinc cents of 1982 and before are not worth melting. The metal value in a nickel has gone from almost twice face value to half face value, a decline of roughly three-quarters.

Silver is down. Platinum is on its back because of the near shutdown of the auto industry.

Only gold remains. Is it a forecast of things to come, or the last stronghold of wishful thinking?

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About the Author
David C. Harper has been a coin collector since 1963. He joined the Krause Publications editorial staff in 1978 and is currently editor of Numismatic News and World Coin News. He also edits two books annually, North American Coins & Prices and Coin Digest. He is the author of the Class of '63 column that runs each week in Numismatic News. His first bylined numismatic article appeared in the June 1971 issue of Coins Magazine and his various Krause Publications assignments included a stint as editor of the magazine 1980-1983. Harper received a bachelor of science degree from the University of Wisconsin-Oshkosh in 1977. He had a double major of journalism and economics.

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