It was widely reported that on December 11, 2006 the Bank of International Settlements (BIS), the mother of all banks, announced that many of the OPEC nations were Switching Reserves Out Of Dollars and into other currencies. It was also widely reported that Alan Greenspan, speaking at a Tel-Aviv business conference on that same day, said, “I expect that the US dollar will continue to drift downwards until there will be a change in the US balance of payments… There has been some evidence that OPEC nations are beginning to switch their reserves out of dollars and into Euro and yen. It is imprudent to hold everything in one currency”.

These are some heavy weights in the financial world reporting that some of the United States biggest trading partners are switching their reserves out of dollars and into other currencies and they are predicting that the dollar will continue to decline. Although there have been periods over the past few years when gold has risen in conjunction with a rising dollar, gold generally is in its hey day when the dollar is weak or falling! This new philosophy of switching reserves out of dollars and into other currencies should be very, very good for gold!

One other thought regarding this shift from the dollar, unless you own foreign stocks, bonds or mutual funds you are likely in one currency, the dollar.

Furthermore, history tells us that all markets move from extreme undervaluation to extreme overvaluation. Richard Russell says this is the one constant you can count on when dealing with financial markets. From that perspective, think for a moment of the status of each market in relationship to its “extreme undervaluation” versus its “extreme overvaluation.”

With regard to the Dow or the stock market, the excesses of the bull market were never fully eradicated because the Fed, rather than take a recession, lowered interest rates to a 46-year low and flooded the economy with liquidity. This left the stock market historically overvalued. We have already established that the Dow just recently crossed its bull market high, a high that took 18 years to reach if you believe, as many analysts do, that the bull market in stocks began in 1982. (There are also some analysts who have a different opinion. They believe that bull market really began at the end of 1974, some 31 -years ago.)

On the other hand, when the Fed met on December 12, 2006, they did not raise interest rates again; and they changed only one word in their report regarding the housing market – “substantial.” The report stated, “Economic Growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market!” As I commented earlier, I believe the big profits have been taken out of the real estate market for a while, maybe a long while!

In my opinion, the bottom line regarding both of these markets is that they are both many times higher than they were 27-years ago or even 20-years ago and both have had long running bull markets and both have risen to points of “extreme overvaluation, which is never a good time to buy!

The market for gold and silver, however, have not even crossed the highs of their previous bull markets reached almost 27 years ago, and rare coins have not crossed the highs they reached over 16 years ago. This tells us that the bull market for gold, silver, and rare coins is still in the early stages. Precious metals and commodities entered into a new bull market in late 1999 and it is important to note that historically the average bull market in commodities has lasted somewhere between 18 to 40 years. This is another indication that the bull market for gold, silver and rare coins is in the very early stages of its bull market.

Looking at the big picture – or the long-term – the gold, silver and rare coin market is where I believe you want to be with at least a portion of your money, and I believe that better-dated gold, coins like the MS64 $20 Saint-Gaudens 1916S is an excellent value today!

One last thought and when considering value and I don’t think I have seen anyone else write about this, rare coins are a much more popular way of owning gold today than they were in 1980 or 1989. 1 believe this one factor in and of it self will drive rare coin prices to levels that most can not even imagine in this time of nations switching reserves out of dollars!