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Provide update on the economy, commodities, and the rare coins market.
- U.S. GDP is on pace for growth of about 2.5% this quarter, a solid figure considering the first quarter growth of only 0.5%.
- The May jobs report indicated the lowest level of Nonfarm Payroll jobs created since the recession at just 38,000. The new jobs created was primarily driven by gains in the healthcare sector. Mining and manufacturing continued to post losses while retail, construction and financial activities were little changed.
- The unemployment rate fell further as people continue to leave the workforce.
- In our April market update, we noted corporate profits as being down 8.4% year over year. This reduction in corporate profits appears to be filtering into employment. Average earnings are rising, news certainly welcomed by employees. But with increased earnings, that means higher labor costs which will continue to put pressure on corporate profits.
- With average earnings on the rise, consumers are sure to save more….right? Unfortunately no. In May, the savings rate declined to 5.4%, the lowest level so far in 2016.
- May retail sales increased 0.5%. E-commerce retail sales increased 1.3% and auto sales while slowing, still increased 0.3%. Building materials and garden equipment sales dropped 1.8%. Overall, the report was seen as positive and one that may indicate an improvement in the household finances of US consumers.
- Auto sales are starting to slow, which should not be alarming given the strong past few years driven primarily by loose lending standards on auto loans and higher employment.
- Consumer prices, as reported by the CPI, remained relatively flat with an overall increase in May of 0.2%. Excluding food and energy, consumer prices also increased 0.2%. Energy costs increased 1.2% (which includes a drop of 10.1% in gasoline prices for the year). Housing and medical care both rose 0.3%. Other categories remained stable.
- The AAII sentiment survey, which surveys the mood of individual investors, ended May as follows:
- Bullish 17.8% (27.4% April, 38.5% avg since inception of survey in 1987)
- Neutral 52.9% (44.0% April, 31.2% avg since inception of survey in 1987)
- Bearish 29.3% (28.6% April, 30.3% avg since inception of survey in 1987)
- Gold weakened in May after a very strong run to start the year due to a stronger dollar. Many argue that the pullback is a healthy one and expect a continuation of the advance after a consolidation phase.
- $1,212.10 spot price May 31, 2016
- $1,294.00 May high
- $1,212.10 May low
- $16.06 spot price May 31, 2016
- $17.51 May high
- $16.06 May low
- Gold & Silver current price in relation to historical prices
* Represents how many ounces of silver 1 oz of gold is worth
Rare Coins Market¹
The U.S. Rare Coins Index is a price index used to track the performance of the underlying coins which comprise the index. As the values of the individual coins comprising the index move, it moves the index as a whole. The index is comprised of 87 U.S. coins. Such an index enables us to track the performance of rare coins over time. As you can see from the table below, while the U.S. Rare Coins Index has not performed as well in 2016 when compared to both gold and silver, it is currently outperforming the S&P 500.
In analyzing the valuation of the U.S. Rare Coins Index, we look at the indexes average multiple using January 2000 as the baseline year. At the end of May 2016, the multiple was 4.5, indicating that, on average, the 87 coins comprising the index cost 4.5 times as much when compared to January 2000. Analyzing such multiples can be valuable in determining whether current market conditions favor buyers of rare coins, or sellers. Right now we are at the historical highs as the multiple has never exceeded 4.5. Historical information as of May 2016 can be seen in the table below.
1 – Special thanks to the team over at U.S. Coin Values Advisor for maintaining the U.S. Rare Coins Index. For additional details regarding the underlying coins comprising the index, please visit them by clicking here.
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