April 6, 2026

The History Of Silver

November 1, 2012 by Leave a Comment

Silver has been regarded as a store of value and used as a currency for more than 4,000 years.  The role of silver as a form of wealth preservation in a diversified portfolio is likely to grow as central banks suppress real interest rates to below zero while conducting large scale money printing operations.

Investors who harbor major doubts about the integrity of fiat currencies should continue to invest regularly.  Despite being more volatile than gold, until governments regain control of massive fiscal deficits and central banks return to sound money policies, long term silver investment is a sound strategy.

The latest infographic from the Visual Capitalist provides a nice visual history of silver (please click on the image to enlarge).

Filed Under: Featured, Silver Tagged With: , , ,

Gold In The News – German Gold, Gold Confiscation, Technical Charts, New Perth Mint Coins

November 1, 2012 by Leave a Comment

Gold news from around the web-

Gold Confiscation?

Are those predicting the confiscation of gold by the U.S. government simply seeking headlines or seriously misguided?  Jim Sinclair has the answer.

I am sick of all this confiscation talk of gold and even gold companies. It emanates from gold people who do not know or understand the history of gold. We condemn MSM for inaccurate, false and misleading news. I condemn gold writers who practice sensationalism, who offer their opinions as if they were facts and simply make things up out of thin air as if they were insiders privy to things that no one else is. Right now leaders of this community are printing stuff as misleading as MOPE or MSM ever have.

Eric De Groot put what I have been trying to teach you perfectly today. In the 1930s gold was to the monetary system what QE is today, a means of increasing the supply of money for Fed and Treasury discretionary use. The US Secretary of the Treasury and President Roosevelt set the gold price higher at their daily breakfast together arbitrarily. Higher because to create money then the system required a higher value of gold to have more money outstanding. This is why Roosevelt ordered the confiscation of gold in order to unfold his type of monetary stimulation, his QE. This is what confiscationophiles simply do not know.

 Your fears and the outrageous untrue statement by the Scottish hedge fund manager are based on totally wrong reasoning and misunderstanding. Gold was not confiscated because it was going up in price. Gold’s order of confiscation came as a tool of monetary stimulation in order to create monetary creation in order to attempt to increase employment.

So, Exactly Where is Germany’s Gold?

The Germans, tough with monetary policy, turn out to be wimps when it comes to safeguarding their own massive 3,396 ton gold stockpile.  Turns out that the Germans, who allegedly hold most of their gold in French, British and U.S. vaults, never even bothered to conduct a physical audit of their holdings – talk about trusting your neighbors! After severe criticism and a national “Bring Back Our Gold” campaign, the Bundesbank is finally promising to conduct audits and bring their gold back home.  MarketWatch wonders if the expatriation of German gold may be the beginning of a move to a gold backed currency.

Gold and Silver Technical Charts

Some really amazing gold and silver charts suggest that we may be in the initial stages of a massive gold and silver rally.

Gold and Silver – The Ideal Holiday Gift

A stunning selection of new gold and silver coins from The Perth Mint  provides the answer to “what should I get her for Christmas?”  Included in the November product releases are some unique rectangular colored silver coins.

Gold Through the Centuries

One of the largest Roman gold coin hoards every found was discovered in Great Britain.  The coins are approximately 1600 years old.  Any guesses on what $10,000 of U.S. currency buried today would be worth in the year 3612??

Filed Under: Currency debasement, Featured, Gold, Perth Mint, Silver Tagged With: , , , , , , , , , , , , ,

Weak Dollar Policies Could Result In Trade Wars and Higher Consumer Prices

October 31, 2012 by Leave a Comment

By Axel Merk

Our leaders want a weaker dollar and a stronger Chinese renminbi (RMB). That’s our assessment based on recent comments by President Obama, presidential hopeful Romney and Federal Reserve (Fed) Chair Bernanke. If you join them in that call, OK, just be careful what you wish for, or at least consider taking action to protect your portfolio.

In the past few weeks, Bernanke has become ever more vocal in encouraging emerging market countries to allow their currencies to appreciate against the dollar; and Obama and Romney have both been advocating for a weaker dollar versus specifically the Chinese RMB. In the recent presidential debates Romney continued his call for declaring China a currency manipulator, and Obama proudly stated that the RMB had appreciated 11% against the dollar since he took office. It has actually been about 9% according to the data we look at; nevertheless, the point that both were clearly trying to make is that a weaker U.S. dollar is in our economic best interests. Likewise, in an IMF speech Bernanke essentially admitted that accommodative monetary policy in the U.S. causes upward pressure on foreign exchange rates between emerging market currencies and the dollar, and suggested that foreign central banks allow that dollar depreciation to take hold, rather than intervene to prevent it.

It may be superficially plausible that RMB appreciation is the key to alleviating our economic woes, by promoting exports and therefore jobs in the U.S. However, while lowering one’s currency might give a boost to corporate earnings for the next quarter (as foreign earnings are translated into higher U.S. dollar gains), it is difficult to imagine that the U.S. can truly compete on price – the day we export sneakers to Vietnam will hopefully never come. An advanced economy, in our assessment, must compete on value, not price. Without discussing the merits of this argument in more detail, let’s look at the flip side of a stronger RMB, which is a weaker dollar and potentially higher prices for goods imported from China. Notice that there is a lot of table pounding about China stealing manufacturing jobs, but no protest when it comes to the low prices consumers enjoy as a result of China trade. After all, not all Americans are producers of export goods, but certainly all are consumers of goods in general, many of which are imported from China and emerging Asia.

Even if we accept the argument that a weaker dollar may be good for certain sectors and perhaps for the U.S. economy at large, not all will benefit, in particular, not retirees facing diminished purchasing power. Retirees would not see the nominal wage increases that the active labor force could expect to experience, meaning rising costs of living without an offsetting rise in income, which may only be coming from a fixed-income portfolio still earning zero interest as Bernanke has made it clear that “policy accommodation will remain even as the economy picks up.”

We agree with our policy makers to the extent that the dollar may be generally overvalued and many Asian currencies undervalued; and therefore the path of least resistance may lead to Asian currencies grinding higher across the board. The below chart illustrates this trend. China’s appetite for currency appreciation against the dollar may have a good deal to do with its currency’s relative strength or weakness compared to its Asian neighbors, who are export competitors. As these other Asian currencies appreciate they provide the RMB more room to appreciate as well.

Asian Currency Relative to Dollar

While many Asian currencies may rise over the coming years, we think Asian countries like China, that are moving up the value-added chain, are in a better position to handle more rapid currency appreciation than others. As production processes become more complex, it is harder for low-price competitors to easily replicate that output. As such, higher value-added products provide China’s exporters with greater pricing power in the global market, limiting the need and effectiveness of a cheap currency policy. Additionally, over the medium to longer term, as the Chinese economy continues to grow and the middle class becomes wealthier, domestic consumption will play a larger and larger role in their GDP, and that shift away from economic reliance on the American consumer will also diminish the need for an export oriented currency policy. In fact, we believe a stronger RMB will be beneficial for the Chinese consumer and help that transition along.

The gradual shift towards greater domestic consumption is occurring in many other Asian countries that have been following the export growth model and, as Bernanke puts it, that “systematically resist currency appreciation.” As we can see in the above chart many Asian currencies haven’t been resisting appreciation as much as you might think, and this gets to Obama’s point on the RMB appreciation since he took office. From an investment standpoint, 9% in four years isn’t a bad return in this environment; it would take over 78 years to reach that return rolling 3-month T-bills at their current yield of 0.11%.

American consumers (and Chinese exporters) have been subsidized by the artificially weak Chinese currency, to the detriment of Chinese consumers who have faced stunted purchasing power. However, we believe this dynamic will continue to change and suggest that a stronger RMB is very likely not only on Bernanke, Obama, and Romney’s wish list, but increasingly in China’s own interest. That would mean the tables getting turned on the American consumer.

By the way, there is a good reason no President has called China a currency manipulator. Once China is labeled a currency manipulator, it sets in motion a process in which Congress takes up the matter. Without going into detail, our recent Presidents have preferred to seize rather than delegate power: by calling China a currency manipulator, the President would essentially tell Congress to have a stab at the issue; whereas the President has far more flexibility at the executive branch in dealing with China without consulting with Congress. Once Congress gets involved, the threat of a trade war does become more likely. Even if Romney is correct that China may have more to lose in a trade war, our analysis shows that the currency of a country with a trade deficit may be under more strain in a trade war. That may well be what Romney wants to achieve, but again, be careful what you wish for.

If part of what investors consume is produced in another region, then holding some local currency or local currency denominated assets may be prudent. American consumers should ultimately not be concerned with the number of dollars in the bank, but rather with what those dollars can buy in terms of real goods and services. We suggest that Bernanke may be the currency manipulator to be more afraid of, and moreover, that our de-facto weak dollar policy may be reason to take the purchasing power risk of the dollar into account.

Please register for our Webinar on Thursday, November 8th, 2012, where we will dive into implications of US policies on China and Asian currencies in more detail. Also sign up to our newsletter to be informed as we discuss global dynamics and their impact on gold and currencies.

Axel Merk

Axel Merk is President and Chief Investment Officer, Merk Investments

Filed Under: Currency debasement, Featured, US Debt Crisis Tagged With: , , , , , , , ,

Big Money Is Bullish On Gold

October 29, 2012 by 1 Comment

Big money managers are bullish on gold according to the pros interviewed in Barron’s latest fall survey.  A resounding 69% of big money managers are bullish on gold and 22% forecast that precious metals will be the best performing asset class over the next six to twelve months.

Courtesy Barron’s

The big money is bearish on Federal Reserve strategy with over 60% of poll respondents disapproving of the Fed’s current interest rate policy.  Reinforcing their low opinion of Fed strategy, an overwhelming 78% of the pros believe that additional Fed easing policies will be counter productive.  Summing up the general opinion on Ben Bernanke’s money printing schemes, one money pro said “The Fed is well past the point of interest-rate policy having any meaningful impact on the economy.  Bernanke & Co. now risk damage to both the dollar and the Fed’s own balance sheet.  This is the biggest misallocation of capital in the history of mankind.”

Not surprisingly, the overwhelming consensus (89%) of the big money pros think that treasuries are severely overvalued.  Although the pros don’t see interest rates rising significantly in the next six months, Barron’s notes that even a small increase in interest rates would result in losses to bondholders.  The Fed has manipulated interest rates to such a low level, that few money pros see any value in treasuries.  One money pro noted that without massive security purchases by the Fed, the 10 year bond would currently yield 5%, representing a real yield of 2% plus 3% for inflation.   Absent Fed efforts to suppress free market yields on treasuries, bondholders would be faced with shocking losses as interest rates rose.

The big money bearish sentiment on Bernanke and bullish forecast for gold tells us that the pros don’t expect implementation of sound monetary policy by the Fed any time soon.

Filed Under: Currency debasement, Featured, Gold, US Debt Crisis Tagged With: , , , , ,

Federal Reserve Policies Have Put The Nation On The Road To Economic Chaos

October 27, 2012 by 4 Comments

By Axel Merk

The FOMC has crossed the Rubicon: our analysis suggests that the Federal Open Market Committee is deliberately ignoring data on both growth and inflation. At best, the FOMC’s intention might have been to not rock the markets two weeks before the election. At worst, the FOMC has given up on market transparency in an effort to actively manage the yield curve (short-term to long-term interest rates):

  • On growth, economic data, including the unemployment report, have clearly come in better than expected since the most recent FOMC meeting. FOMC practice dictates that progress in economic growth is acknowledged in the statement. Instead, the assessment of the economic environment is verbatim. Had the FOMC given credit to the improved reality, the market might have priced in earlier tightening. The FOMC chose to ignore reality, possibly afraid of an unwanted reaction in the bond market.
  • On inflation, the FOMC correctly points out that inflation has recently picked up “somewhat.” However, it may be misleading to blame the increase on higher energy prices, and then claim that “longer-term inflation expectations have remained stable.” Not so, suggests an important inflation indicator monitored by the Fed and economists alike: 5-year forward, 5-year inflation expectations broke out when the Fed announced “QE3”, its third round of quantitative easing where the emphasis shifted from a focus on inflation to a focus on employment. This gauge of inflation measures the market’s expectation of annualized inflation over a five year period starting five years out, ignoring the near term as it may be influenced by short-term factors:
Inflation Expectations

The chart shows that we have broken out of a 2 standard deviation band and that the breakout occurred at the time of the QE3 announcement. In our assessment, the market disagrees with the FOMC’s assertion that longer-term inflation expectations have remained stable. At best, the FOMC ignores this development because they also look at different metrics (keep in mind that the Fed’s quantitative easing programs manipulate the very rates we are trying to gauge here) or has a different notion of what it considers longer-term stable inflation expectations. At worst, however, the FOMC is afraid of admitting to the market that QE3 is perceived as inflationary.

In our assessment, inflation expectations have clearly become elevated. Ignoring reality by ignoring growth and inflation may not be helpful to the long-term credibility of the Fed. Fed credibility is important, as monetary policy becomes much more expensive when words alone don’t move markets anymore.

Please sign up to our newsletter to be informed as we discuss global dynamics and their impact on gold and currencies.

Axel Merk

Axel Merk is President and Chief Investment Officer, Merk Investments
Merk Investments, Manager of the Merk Funds

Filed Under: Currency debasement, Featured, US Debt Crisis Tagged With: , , , , , ,

Why Are Americans Underinvested In Gold and Silver?

October 27, 2012 by Leave a Comment

Although there are no definitive statistics on how many Americans own gold or silver, the number is certainly small.  A Gallup poll earlier this year showed that 28% of respondents thought that gold was the “best investment” but the actual number of people actually owning some form of gold or silver bullion is far less.  A Kitco poll indicated that the number of Americans owning precious metals may be as low as 1%.

Despite the steady erosion in the purchasing power of the U.S. dollar, Americans retain their faith in paper money, apparently oblivious to the destruction of their wealth.  Monetary debasement is an insidious process that few Americans fully understand as explained by economist John Maynard Keynes in 1921.

“By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some …. Those to whom the system brings windfalls …. become “profiteers” who are the object of the hatred … the process of wealth-getting degenerates into a gamble and a lottery .. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Most Americans don’t bother trying to understand economic theories but it is not hard to understand the following charts.

courtesy: kitco.com

When the average American finally realizes what is happening to the value of the dollar, the rush to gold and silver will result in a massive upward surge in precious metal prices.  That day has not yet arrived and until it does, buy gold and silver with impunity, especially on corrections.

Filed Under: Currency debasement, Featured, Gold, Silver Tagged With: , , , , , ,

Global Gold Production Set For Major Decline As South African Mines Close

October 26, 2012 by Leave a Comment

Global gold production could drop sharply as South African miners plan to dismiss thousands of workers for illegally striking.  South African precious metal miners have been beset by labor unrest for months as workers protest low wages and dangerous working conditions.  The latest disruption came Wednesday as South Africa’s largest gold miner announced plans to dismiss about 12,000 workers.

South Africa’s biggest gold miner by output, AngloGold Ashanti Ltd., said Wednesday it will begin a process to dismiss about 12,000 workers, following in the footsteps of other mining companies desperate to end crippling strikes.

If AngloGold follows through on its threat, it means more than 35,000 mining workers at several companies have been dismissed for illegally striking in recent weeks. The mass firings have prompted criticism from unions and the government, but so far have not provoked a repeat of the violence that sparked national labor unrest in South Africa in August.

Several major South African gold and platinum producers are struggling to end weeks of wildcat strikes that have halted thousands of ounces of gold and platinum production and caused billions of rand in lost revenue.

Gold production problems in South Africa run deeper than merely resolving a labor/management dispute over low wages.  The cost and effort to mine gold has grown exponentially as the easy to reach grades of gold ore have been depleted.  Miners have had to dig much deeper to reach low grades of ore with a corresponding increase in extraction costs.  South Africa, once the leading country in gold production has dropped to fifth place.

Courtesy wikipedia.com

In 2006, South Africa produced 272,128 kilograms of gold, but by 2011 output had plunged by 30% to only 190,000 kilograms.  With workers no longer willing to work for what amount to slave labor wages, along with declining ore reserves, gold output from South African mines will continue to decline dramatically.  SBG Securities analyst David Davis says “Almost all of the gold mines on strike are mature.  These mines were going to have to be restructured and downsized anyhow in the next 12 to 36 months.”

Further reductions in future global gold supply will continue based on the constantly increasing costs of mining lower grade ores and the lack of major new gold discoveries.  According to the US Geological Survey, gold production decreased in every year from 2001 to 2008, a remarkable statistic in light of the huge increase in gold prices during that period of time.  Gold sold for only around $300 per ounce in 2001 compared to today’s price of over $1,700 per ounce.

Over the past three years from 2009 to 2011, gold production increased as miners went all out to take advantage of surging gold prices.  According to the World Gold Council, mine production rose from 2,611 tonnes in 2009 to 2,822 tonnes in 2011.  The previous production peak for yearly gold production occurred in 2001 at 2,600 tonnes.  As the current situation in South Africa shows, much of the recent increase in gold production came as mining companies desperately worked old mines to depletion while paying workers as little as possible.   Those days are now over and South African gold production will continue to plummet.

Ironically, gold production soared from 1981 to 2000 as gold declined in price from $750 per ounce in 1981 to under $300 by the turn of the century.  Gold miners were forced to produce as much gold as possible to stay in business as revenues constantly declined due to the drop in the price of gold.

Absent major new discoveries of large gold deposits, gold mining production could decline substantially in future years.  Declining supplies, along with massive currency printing by central banks worldwide, will create the perfect storm for a continuation of the decade long bull market in gold.  Note to Ben Bernanke – no, you can’t print gold.

Filed Under: Currency debasement, Featured, Gold, Platinum Tagged With: , , , , , , ,

Would A Romney Victory Cause Gold To Collapse?

October 25, 2012 by Leave a Comment

By Axel Merk & Yuan Fang

Monetary Cliff?

As the presidential election is rapidly approaching, little attention seems to be getting paid to the question that may affect voters the most: what will happen to the “easy money” policy? Federal Reserve (Fed) Chairman Bernanke’s current term will expire in January 2014 and Republican candidate Mitt Romney has vowed that if elected, he would replace Bernanke. Given the tremendous amount of money the Fed has “printed” and the commitment to keep interest rates low until mid-2015, the election may impact everything from mortgage costs to the cost of financing the U.S. debt. Trillions are at stake, as well as the fate of the U.S. dollar.

Should Obama be re-elected, Bernanke might continue to serve as Fed Chairman; other likely candidates include the Fed’s Vice Chairman Janet Yellen and Obama’s former economic advisor Christina Romer. With any of them, we expect the Fed policy to be continuingly dominated by the dovish camp, and moving – with varying enthusiasm depending on the pick of Fed Chair – towards a formal employment target, further diluting any inflation target. We are not only talking about Bernanke and the other two candidates’ individual policy stances (though all three are known as monetary “doves”, i.e. generally favoring more accommodative monetary policy), but also the composition of voting members of the Federal Open Market Committee (FOMC), as we will discuss below.

If Romney were to be elected, a front-runner for the Fed Chairman post is Glenn Hubbard, Dean of Columbia Business School and a top economic adviser to Romney. Hubbard has expressed his skepticism about the mechanism that Bernanke used to boost the economy. In our analysis, an FOMC led by Hubbard (or another Romney appointee) will be leaning toward mopping up the liquidity sooner. Extending forward guidance to mid-2015 will also be under question. It will no doubt add uncertainty to monetary policy and increase market volatility.

More importantly, however, a “hawkish” Fed Chair, i.e. one that favors monetary tightening, might put to the test Bernanke’s claim that he can raise rates in “15 minutes”. Technically, of course, the Fed can raise rates by paying interest on reserves held at the Fed or sell assets acquired during various rounds of quantitative easing. The challenge, no matter who the Fed Chair is going to be, is the impact any tightening might have on the economy. Bernanke has cautioned many times that rates should not be raised before the recovery is firmly “entrenched.” What he is referring to is that market forces may still warrant further de-leveraging. If the stimulus is removed too early, so Bernanke has argued, the economy might fall back into recession. A more hawkish Fed Chair, such as a Glenn Hubbard, may accept a recession as an acceptable cost to exit monetary largesse; however, because there is so much stimulus in the economy, just a little bit of tightening may well have an amplified effect in slowing down the economy. Keep in mind that European countries are complaining when their cost of borrowing rises to 4%, calling 7% unsustainable. Given that the U.S. budget deficit is higher than that of the Eurozone as a whole, and that our fiscal outlook is rather bleak, it remains to be seen just how much tightening the economy can bear. Our forecast is that with a Republican administration, we are likely to get a rather volatile interest rate environment, as any attempt to tighten may have to be reversed rather quickly. Fasten your seatbelts, as shockwaves may be expressed in the bond market and the “tranquility” investors have fled to by chasing U.S. bonds may well come to an end. Foreigners that have historically been large buyers of U.S. bonds may well reduce their appetite to finance U.S. debt, with potentially negative implications for the U.S. dollar.

Let’s dig a little deeper and look at who actually decides on interest rates: it is the voting members of the FOMC that ultimately make the imminent monetary policy decisions, rather than the noise creating pundits and non-voting members.

Three factors will further boost the dovish camp, which already dominates the FOMC committee:

    • Two previously vacant seats on the Fed’s Board of Governors were recently filled by Jeremy Stein and Jerome Powell this May. Like other board governors, both Stein and Powell appear to be in favor of Bernanke’s dovish policy. Stein was a Harvard economics professor and used to be more ‘hawkish’ before he took office. But in his first keynote speech as a board governor on Oct. 11, Stein openly supported QE3 and called for continuing asset purchases in absence of a substantial improvement in the labor market. Jerome Powell was a lawyer and private equity investor as well as an undersecretary under George H.W. Bush. Powell has also expressed support for more easing, with inflation an afterthought. Their appointments not only fill all voting seats at the Fed for the first time since 2006, but also further increase the board’s dove-hawk ratio from 9-1 to 11-1. The influence will also carry on to the following years, as board governors hold non-rotating voting rights.
    • Additionally, four current voting members will be replaced next year, including Richmond Fed president Jeffrey Lacker, who has dissented in every FOMC meeting this year. Regional Fed Presidents, unlike Governors, vote on a rotating basis. In 2013, Kansas Fed president Esther George is likely to be the only voting member who appears to hold a hawkish stance. George has expressed her opposition to QE3 and the Fed’s balance sheet expansion, echoing her predecessor Thomas Hoenig’s hawkish tone. But given that she is not a Ph.D. economist, her passion and influence is likely to be more on regulatory than monetary issues; we doubt she will be as vocal as Hoenig or Lacker. In our assessment, the FOMC committee may be “über-dovish” in 2013.
    • Finally, Minneapolis Fed President Narayana Kocherlakota, who was known as a monetary policy hawk, has recently shifted to a more dovish stance. He surprised the market with remarks supporting the Fed’s decision to keep rates extraordinarily low until the unemployment rate has fallen below 5.5%, as long as inflation remains below 2.25%. Kocherlakota will be a voting member in 2014, but his shift of stance will weaken the hawkish voice. With fewer dissidents on the board, the Fed may continue to err firmly on the side of inflation and stick to to its mid-2015 low rate pledge.

No matter who wins the election, we will see a policy dilemma for the Fed in the coming years: On the one side, should economic data continue to surprise to the upside, it will be increasingly difficult for the Fed to carry on its dovish policies. On the other side, if the Fed were to abandon its current commitment, we foresee rising market volatility. The U.S. economy is likely to face a “monetary policy cliff” in addition to the “fiscal cliff”. With easy money, inflation risks may well continue to rise, possibly imposing higher bond yields (lower bond prices) and a weaker dollar. With tight money, the Fed may induce a bond selloff. Historically, because foreigners are active buyers of U.S. bonds, the dollar has weakened during early and mid-phases of tightening, as the bond bull market turns into a bear market. It’s only during late phases of tightening that the dollar has historically benefited as the bond market turns yet again into a bull market. We encourage investors to review their portfolios to account for the risk that bonds may be selling off, taking the U.S. dollar along with it.

Please sign up to our newsletter to be informed as we discuss global dynamics and their impact on gold and currencies. Please also register for our Webinar on Thursday, November 8th, 2012, where we will focus on implications on China and Asian currencies.

Axel Merk

Axel Merk is President and Chief Investment Officer, Merk Investments

Yuan Fang is a Financial Analyst at Merk Investments and member of the portfolio management group.

Filed Under: Currency debasement, Featured, Gold, US Debt Crisis Tagged With: , , , , , , , ,

U.S. Mint Numismatic Precious Metals Sales Decline

October 25, 2012 by Leave a Comment

According to Coin Update, sales of numismatic precious metal coins showed weekly sales declines.  Future sales, however, may increase due to an upcoming price decrease based on the recent correction in precious metal prices.

The latest report of the United States Mint’s numismatic product sales shows mostly lower numbers for precious metals products. Elsewhere in the report, the Chester Arthur Presidential $1 Coin and Alice Paul Bronze Medal Set makes its debut.

Ten out of sixteen gold numismatic products showed weekly sales declines compared to the prior period. The US Mint currently has these products priced based on an average gold price within the $1750 to $1799.99 range. With the market price of gold below this range for the entire reporting period, buyers may be showing restraint as they await the next weekly pricing adjustment.

Eighteen out of twenty-seven of the silver numismatic products showed weekly sales declines compared to the prior period. The US Mint raised prices for many of these products earlier in the month when the market price of silver was approaching $35 per ounce. Silver has since fallen back from this level, although the higher product prices remain in effect. The America the Beautiful Five Ounce Silver Coins showed sales declines across all nine options currently available. Gains were seen for the 2012 Proof and 2012-W Uncirculated Silver Eagles compared to the prior period.

The 2012 Proof Platinum Eagle, which is the only available platinum product, showed negative sales on the week.

See the full sales report for U.S. Mint numismatic products here.

Month to date figures for U.S. Mint gold and silver bullion coins remains strong.  Through October 24th, the U.S. Mint sold 2,584,000 one ounce American Eagle Silver Bullion coins.  If the current sales pace continues, monthly sales could exceed 3.5 million ounces which would be the second best monthly sales total after January when 6,107,000 silver Eagles were sold.

Sales of the American Eagle Gold Bullion coins also remain strong through October 24th with 48,500 ounces sold.  If the current pace of sales is maintained, total sales of the American Gold Bullion coins should reach almost 65,000 for October which would be the third highest sales month of the year.  In January the U.S. Mint sold 127,000 ounces of gold bullion coins followed by 68,500 ounces in September.

Although gold prices have soared over the past decade and the purchasing power of the dollar has collapsed, the American public still does not recognize the value of gold and silver as a store of wealth.  Expect this to change as the bull market in precious metals continues.

Filed Under: Bullion Sales, Currency debasement, Featured, Gold, Platinum, Silver, US Mint Tagged With: , , , , , , , , , , ,

Sound Money Advocate Faces Terminal Jail Sentence

October 25, 2012 by 2 Comments

The New York Times reports on the “domestic terrorism” case of Bernard von NotHaus who awaits sentencing for minting private money known as the Liberty Dollar.  At the age of 68, Von NotHaus is facing the equivalent of a terminal jail sentence since he faces 20 years in prison.

By Alan Feuer, New York Times

Prison May Be the Next Stop on a Gold Currency Journey

MALIBU, Calif. — High above the cliff tops and the beach bars, up a winding mountain road, in a borrowed house on someone else’s ranch, an unusual criminal is waiting for his fate.

His name is Bernard von NotHaus, and he is a professed “monetary architect” and a maker of custom coins found guilty last spring of counterfeiting charges for minting and distributing a form of private money called the Liberty Dollar.

Described by some as “the Rosa Parks of the constitutional currency movement,” Mr. von NotHaus managed over the last decade to get more than 60 million real dollars’ worth of his precious metal-backed currency into circulation across the country — so much, and with such deep penetration, that the prosecutor overseeing his case accused him of “domestic terrorism” for using them to undermine the government.

Of course, if you ask him what caused him to be living here in exile, waiting with the rabbits for his sentence to be rendered, he will give a different account of what occurred.

“This is the United States government,” he said in an interview last week. “It’s got all the guns, all the surveillance, all the tanks, it has nuclear weapons, and it’s worried about some ex-surfer guy making his own money? Give me a break!”

The story of Mr. von NotHaus, from his beginnings as a hippie, can sound at times as if Ken Kesey had been paid in marijuana to write a script on spec for Representative Ron Paul. At 68, Mr. von NotHaus faces more than 20 years in prison for his crimes, and this decisive chapter of his tale has come, coincidentally, at a moment when his obsessions of 40 years — monetary policy, dollar depreciation and the Federal Reserve Bank — have finally found their place in the national discourse.

A native of Kansas City, Mr. von NotHaus first became enticed by making money while living with his companion, Talena Presley, without a car or electric power in a commune of like-minded dropouts in a nameless village on the Big Island in Hawaii. It was 1974, and Mr. von NotHaus, 30 and ignorant of economics, experienced “an epiphany,” he said, which resulted in the writing of a 20-page financial manifesto titled “To Know Value.”

In it he described his conviction that money has a moral aspect and that any loss in its value will cause a corresponding loss in social and political values. It was only three years after President Richard M. Nixon had removed the country from the gold standard, and Mr. von NotHaus, a gold enthusiast, began buying gold from local jewelers and selling it to his friends.

One day, he recalled, “we were all sitting around thinking, ‘Wow, we ought to do something with this gold.’ And I said: ‘Yeah, we could make coins. People love coins. We could have our own money!’ ”

Within a year, he had established the Royal Hawaiian Mint, a private — not royal — producer of collectible coins. Hitchhiking to a library in the county seat of Hilo, he said, he looked up “minting” in the encyclopedia and soon was turning out gold and silver medallions with images of volcanos and the Kona Coast.

So went the better part of 20 years. Then came 1991, which saw the emergence of a successful local currency in Ithaca, N.Y., called the Ithaca Hour. The 1990s were a time of great ferment in the local-money world with activists and academics writing books and papers, like Judith Shelton’s “Money Meltdown.” Mr. von NotHaus, traveling with his sons, Random and Xtra, to adventuresome locations, like Machu Picchu, read these seminal works.

“I had been working on it since 1974,” he testified at his federal trial in North Carolina. “It was time to do something.”

The Constitution grants to Congress the power “to coin money” and to “regulate the Value thereof” — but it does not explicitly grant an exclusive right to do such things. There are legal-tender laws that regulate production of government currency and counterfeiting laws that prohibit things like “uttering” gold or silver coins “for use as current money.”

Mr. von NotHaus claims he never meant the Liberty Dollar to be used as legal tender. He says he created it as “a private voluntary currency” for those conducting business outside the government’s purview. His guiding metaphor is the relationship between the Postal Service and FedEx. “What happened in the FedEx model,” he testified, “is that they” — a private company offering services the government did not — “brought competition to the post office.”

To introduce the Liberty Dollar in 1998, Mr. von NotHaus moved from Hawaii to Evansville, Ind., where he joined forces with Jim Thomas, who for several years had been publishing a magazine called Media Bypass, whose pages were filled with conspiracy theories and interviews with militia members, even Timothy McVeigh.

Working from the magazine’s office, Mr. von NotHaus lived in a mobile home and promoted his nascent currency to “patriot groups” on Mr. Thomas’s mailing list while reaching an agreement with Sunshine Minting Inc., in Idaho, to produce the Liberty Dollar. His marketing scheme was simple: he drove around the country in a Cadillac trying to persuade local merchants like hair salons and restaurants to use his coins and to offer them as change to willing customers.

Banks, of course, did not accept his money; however, to ensure that it found its way only into hands that wanted to use it, Mr. von NotHaus placed a toll-free number and a URL address on the currency he produced. If people mistakenly got hold of it, they could mail it back to Evansville and receive its equivalent in actual dollar bills.

Now jump ahead to 2004. A detective in Asheville, N.C., learned one day that a client of a credit union had to tried to pass a “fake coin” at one its local branches. An investigation determined that some business acquaintances of Mr. von NotHaus were, court papers say, allied with the sovereign citizens’ movement, an antigovernment group.

Federal agents infiltrated the Liberty Dollar outfit as well as its educational arm, Liberty Dollar University.

In 2006, with millions of the coins in circulation in more than 80 cities, the United States Mint sent Mr. von NotHaus a letter advising that the use of his currency “as circulating money” was a federal crime.

He ignored this advice,and in 2007, federal agents raided the offices in Evansville, seizing, among other things, copper dollars embossed with the image of Mr. Paul.

Two years later, Mr. von NotHaus was arrested on fraud and counterfeiting charges, accused of having used the Liberty Dollar’s parent corporation — Norfed, the National Organization for Repeal of the Federal Reserve — to mount a conspiracy against the United States.

At his federal trial, witnesses testified to the Liberty Dollar’s criminal similitude to standard American coins. They said his coins included images of Lady Liberty and cheekily reversed “In God We Trust” to “Trust in God.” Then again, his coins were made of real gold and silver, as American coins are not, and came in different sizes and unusual denominations of $10 and $20.

In his own defense, Mr. von NotHaus testified about a “philanthropic mission” to combat devaluation with a currency based on precious metals and asserted that he was not involved in “a radical armed offense against the government or their money.”

It was, of course, to no avail; and in 2011, a jury found him guilty after a 90-minute deliberation.

These days, Mr. von NotHaus paces shoeless in a mansion, in the hills above the ocean, that was lent to him by a friend. His sentencing has yet to be scheduled, and this leaves time for reflection. He feeds the hummingbirds outside his window. He reads books on fiat currency. He is even writing a book — on the gold standard, of course.

“The thing that fires me up the most,” he will say, “is this is what happens: When money goes bad, people go crazy. Do you know why? Because they can’t exist without value. Value is intrinsic in man.”

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