May 16, 2024

The Bull Market In Gold Is Dead

May 16, 2013 by 1 Comment

Gold coinsApril was a brutal month for precious metal investors.  Gold ended the month down almost 8% and silver prices tumbled almost 13%.   The sell off continued in May with gold down another $60 per ounce to $1,412 and silver down $1.55 to $22.87 per ounce at mid month.

With investors already nervous, two mainstream news organizations today did the equivalent of yelling fire in a theater crowded with gold and silver investors.

Both Bloomberg and The Wall Street Journal published extremely bearish articles on gold which essentially proclaimed the death of the gold bull market.

“Gold is going to get crushed”

Gold will trade at $1,100 an ounce in a year and below $1,000 in five years, according to Ric Deverell, head of commodities research at the bank. Lower prices are unlikely to lure more central-bank buying, said Deverell, who worked at the Reserve Bank of Australia for 10 years before joining Credit Suisse in 2010.

“Gold is going to get crushed,” Deverell told reporters in London today. “The need to buy gold for wealth preservation fell down and the probability of inflation on a one- to three-year horizon is significantly diminished.”

Investors are losing faith in the world’s traditional store of value even as central banks continue to print money on an unprecedented scale. Bullion slumped into the bear market last month after a 12-year bull market that saw prices rise as much as sevenfold. Gold is a “wounded bull,” Credit Suisse said in a Jan. 3 report.

“When gold is going up, it looks like a great idea to buy more gold,” Deverell said. “And when it’s going down, do you really think risk-averse central bankers are going to try and catch the knife? No.”

A surge in demand for bars, coins and jewelry following gold’s drop to a two-year low in April is temporary, Deverell said. The U.S. Mint said April 23 it ran out of its smallest gold coins and Australia’s Perth Mint said volumes jumped to a five-year high. India’s bullion imports may surge 47 percent to 225 tons in the second quarter to meet consumer buying, according to the All India Gems & Jewelery Trade Federation.

“This is bargain-buying,” Deverell said. “It’s like when you have cash for clunkers in autos, you bring forward activity, but it’s not a massive addition to buying.’

Courtesy: kitco.com

Courtesy: kitco.com

“The bears are mauling gold”

The metal fell for a sixth consecutive trading session on Thursday, as investors continue to flee toward assets that promise higher returns.

The characteristics beloved of “gold bugs,” the sizable army of large and small investors who swear by the metal, are precisely what bears are feasting on. Unlike most other assets, gold doesn’t offer a steady return, or yield, and it is often seen as protection against inflation or currency devaluations.

At present, however, global economic growth is sluggish, interest rates in many developed countries are at or near record lows, and investors of all stripes are scrambling to find higher-yielding assets.

“There’s basically no inflation, equities are taking off, and we’ve got a strong dollar,” said Fain Shaffer, president of Infinity Trading Corp. in Medford, Ore. “All of those are just eroding away the investment value of precious metals.” Mr. Shaffer this week recommended his clients bet on lower gold prices.

On Thursday, bears seized on a World Gold Council report showing that total demand for gold fell 13% in the first quarter, to a three-year low of 963 tons in the period.

Other investors are taking the opposite view. John Workman, chief investment strategist with Convergent Wealth Advisors, said the firm late last year recommended that clients trim their gold holdings by about 25%. He cited gold prices that have stagnated despite more stimulus from the Federal Reserve in the form of asset purchases, the same money printing that galvanized gold bugs after the financial crisis. Falling prices were a signal that many investors just weren’t concerned anymore that the stimulus measures would stoke inflation and weaken the dollar.

To sum things up –

  • it no longer matters that central banks everywhere are printing money on an unimaginable scale,
  • the world economy is doing fine and will continue to improve,
  • gold, used as a currency and safe haven for 5,000 years, is inferior to fiat paper currency,
  • returns are better in stocks and bonds,
  • monetary stimulus via central bank asset purchases will propel the world into sustained economic growth,
  • there is no inflation and
  • investors want assets with yields.

Price fluctuations may not make much sense in the short term, but long term precious metal investors know where things are headed – see Why I Will Always Own Gold.

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

Why I Will Always Own Gold and Silver

May 16, 2013 by Leave a Comment

What I Know for Certain –  By:  GE Christenson

gold-dollar

      • Death and taxes!
      • Fear and greed are powerful motivators.
      • Individuals, businesses, and governments do what they think is beneficial for them.
      • Businesses and governments protect their products and territory and resist competition and enemies.
      • Concentrated wealth creates power and corruption. The greater the concentration of wealth, the larger and more pervasive the power and corruption.
      • Gold and silver have been money for over 3,000 years.
      • Unbacked paper money systems have always failed.

What I Think is True

      • The basic product of a central bank is the unbacked paper currency it prints in ever-increasing quantities.
      • Central banks will fight all competitors to their currencies. The oldest competitor to unbacked paper currencies is gold, ancient money.
      • Politicians want to spend money and increase their power.
      • Bankers want to create money, lend it to governments, and thereby secure a permanent and increasing revenue stream.

What I Think the Consequences Are

      • Bankers use their wealth to “influence” politicians. Politicians respond with favorable legislation. It has worked for centuries.
      • Central banks want an expanding money supply and ever-increasing debt. The consequence is that consumer prices inevitably increase.
      • A currency collapse is like a bank run – everyone scrambles to remove his/her wealth from the currency (or the bank) due to a loss of confidence. In fractional reserve banking systems, bank runs are inevitable. Even though they may last for many decades, unbacked paper currencies inevitably devalue and eventually collapse.
      • Bank runs and currency collapses are feared by bankers and politicians; they do what they can to support confidence in their products and to squash their competitors.

In the United States

      • Debt and government spending seem likely to increase until a crash-reset occurs.
      • The crash-reset will involve a dollar collapse.
      • Gold and silver will eventually reach much higher prices due to the loss of value and confidence in the dollar, the banking system, and the sustainability of the current financial system.
      • “Paper gold” will be seen for what it is – a promise that might not be paid.
      • Physical gold will be seen for what it is – real wealth.
      • The USA and Europe are sending their real wealth – gold – to China, India, Russia, and the Middle East. China, India, and Russia are buying aggressively and know that exchanging paper dollars and euros for gold will strengthen their economies and governments tomorrow.
      • It is openly speculated that much of the sovereign government and central bank gold supposedly owned by the USA and Europe is either gone, leased, or otherwise committed.

Read: The Crash Before the Climb

Accept what you cannot change and act based on facts, not our current financial and economic fictions. Protect your financial well-being with physical gold and silver safely stored in a secure location.

GE Christenson
aka Deviant Investor

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

Gold Demand Drops By 13% In First Quarter Due to ETF Outflows

May 16, 2013 by Leave a Comment

tenth oz gold-eaglesLarge scale liquidation of gold backed exchange-traded products (ETP) sent gold prices into a tailspin during April.  Billionaire investor George Soros, who had sold 55% of his holdings in the SPDR Gold Shares (GLD) during the last quarter of 2012, further reduced his gold positions during the first quarter.  Soros is a legendary trader and investor who has made billions moving ahead of the crowd.

In an interview published by the South China Morning Post on April 8, Soros said that gold was no longer a safe haven after the metal failed to rally last year despite fears of a euro collapse.  Shortly after Soros made his comments, other investors  began to sell and within days gold had tumbled by $200 per ounce.  Northern Trust Corp and BlackRock Inc also made large cuts in their holdings of ETPs, while John Paulson lost about $165 million by maintaining his stake in the GLD.

According to Bloomberg, assets held by ETPs declined in value by $42 billion as gold prices tumbled.

Global ETP holdings have tumbled 16 percent in 2013 after rising every year since the first product was listed in 2003, according to data compiled by Bloomberg. Assets in SPDR have plunged 22 percent, and they will probably drop by an additional 2 million to 4 million ounces after slumping 9.7 million ounces since mid-December, Deutsche Bank AG said in a report on May 14.

Further Drop

While the selloff has been faster than expected, a further drop in ETP holdings will probably mean more price declines, Goldman Sachs Group Inc. analysts including Jeffrey Currie wrote in a report dated May 14.

Northern Trust cut its SPDR stake by 57 percent to 6.9 million shares, according to a filing dated May 1. The asset-management company, as a custodian, holds assets without discretion over how they are invested, Doug Holt, the head of global corporate communications, said yesterday in an e-mail.

“We made one change to our global tactical asset allocation policy this month: eliminating our tactical position in gold,” Jim McDonald, chief investment strategist in Chicago at Northern Trust, which oversees about $810 billion, said in a report on March 13.

BlackRock, the world’s biggest money manager, trimmed its holdings by half to 4.1 million shares, a filing dated April 12 showed. On May 9, Robert Kapito, president of the New York-based company, said that he would still buy the metal.

The large scale liquidation of gold exchange traded funds was confirmed today in the latest quarterly demand and supply statistics published by the World Gold Council.  Overall gold demand for the first quarter declined by a considerable 13% with outflows from gold ETFs accounting for the bulk of the decline.  During the first quarter there were outflows of 177 tonnes from global gold ETF holdings.

The sale by large speculators of the gold ETPs seem to be the trigger that set off last month’s decline in gold prices.  The drop in gold could turn out to be a temporary factor as other buyers eagerly absorb supply by adding to their gold holdings at lower prices.

Aside from the sale of gold by holders of exchange traded products, demand for gold in the first quarter remained robust.  The World Gold Council noted that almost every other category of gold demand increased even as supplies are being constrained by lower mine output.

  • Mine production of 1,052 tonnes during the first quarter showed no growth and supply from scrap gold declined due to the drop in gold prices.
  • Jewelry demand surpassed the previous quarter and hit a new record with sales of $28.9 billion.
  • Demand from India and China, who collectively consume 62% of global gold jewelry sales, increased by 15% and 19% respectively.
  • Physical bar and coin demand during the first quarter increased by 8% and 18% respectively.  Demand for gold bar and coins in China exploded to 110 tonnes, double the average of the last five year quarterly sales.
  • Central banks added 109 tonnes of gold to their reserves in the first quarter, accounting for 11% of total gold demand.  Central banks have increased their purchases of gold for nine consecutive quarters.

Wholesale liquidation of gold positions by very large and wealthy speculators adversely impacted gold prices this year.  As gold demand from virtually every other sector continues to grow, the increased gold outflows from ETFs will eventually be absorbed.  In addition, as central banks continue to print money on an unprecedented scale, it would not be surprising to see large investors once again pour money into the gold ETFs.

Filed Under: Featured, Gold Tagged With: , , , , , , , ,

Gold and Silver Bearish Sentiment Is At Extreme Levels

May 10, 2013 by 3 Comments

By:  John Townsend at The TSI Trader.

The usefulness of sentiment’s stealth crystal ball is about to be revealed to the litany of unsuspecting precious metal bears and skeptics who have convinced themselves that gold’s bull market is either over or, at the minimum, in need of lengthy ongoing retesting, restructuring and consolidation.

This article will bring us up to date as to the degree of current bearish sentiment regarding both gold and silver using no fewer than 5 sentiment indicators (with 9 illustrative charts), as well as provide the reader with an opportunity to observe the price outcome of previous bearish extremes using these sentiment indicators.

But first, let’s briefly consider the concept of investor sentiment.

Sentiment extremes, simply put, tell us that there are too many traders at one end of the boat and therefore the boat is about to tip over. Sentiment can strongly suggest that the trade, as some say, has become “crowded”. When someone finally yells “fire” in the “crowded” room there are so many of the market’s participants motivated to get out the same door and in the same direction that most get trampled – unable to reverse their trade fast enough.

Another way of characterizing a sentiment extreme is to say that the trade simply runs out of buyers or sellers, as the case may be. The extreme price momentum in one direction “exhausts” itself of all available ammunition to continue the trend and is sometimes signaled when someone yells “fire” in the “crowded” room, but often comes to a conclusion unrecognized by most traders as price reverses direction in an unassuming manner.

You may have heard comments when a particular market bottoms and then begins to trade higher and then continues to trade even higher yet, despite “bad” news, the assertion that the bullish price movement seems to make no sense – that it cannot possibly be sustained. At this time it appears to nearly everyone the common sense question to ask is how “bad” news that used to cause a market to go into free fall now seems to have absolutely no negative effect? And to observe that as this market continues higher, it always leaves behind those traders stuck in pessimism to declare that the market is “climbing a wall of worry”. That is, the “bad” news continues in the media, yet this particular market’s price reversal continues upwards.

We will begin with the put / call volume ratio of the options trade of the Silver Trust ETF (SLV) and the SPDR Gold Trust (GLD). Charts courtesy of Schaeffer’s Investment Research.

Click on image to enlarge.

The red line in the charts are the ETF’s price movement over the recent 2 years (GLD above, SLV below). The blue line is the put / call volume ratio. This considers the trading day’s volume of puts traded and is divided by the volume of calls traded. Generally, the higher the put / call ratio, the more bearish traders are about the ETF’s likely price movement, while the lower the put / call ratio, the more traders believe the ETF is bullish and going to rally higher.

Click on image to enlarge.

Undoubtedly you have noticed that both charts reveal that the put / call ratio is at the highs of the past two years; meanwhile price is at the lows of the past two years. I will leave it to you to observe the repetitively flip flop relationship between this sentiment indicator and price movement. For me, anyway, this indicator leaves little doubt as to the upcoming direction of GLD and SLV.

Next up is the Hulbert Gold Sentiment Index. This chart courtesy of Mark Hulbert’s Newsletters.

Click on image to enlarge.

This first Hulbert Gold Sentiment Index chart shows us that gold sentiment at present is even more depressed than at gold’s infamous 2008 low.

So there you have it. Sentiment on GLD and SLV options is crazy extreme, Hulbert’s Gold Sentiment Index reveals sentiment is not only more bearish than the 2008 bottom – it’s more bearish than anytime in the past 17 years (at least).

Read complete article here.

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

Is The Decline In Gold Predicting Deflation?

May 2, 2013 by Leave a Comment

bernanke's paperBy GE Christenson

We all know that our cost of living in increasing, but how much?

The official government statistics assure us that inflation is running around 2% per year. It reminds me of the line attributed to Groucho Marx, “Who are you going to believe, me or your own eyes?”

But, your cost of living increase – your personal inflation rate – may be much larger or smaller than that of the person next door. Your spending choices matter a great deal in determining your personal inflation rate.

  • I think we can all agree that some items are increasing much faster than others. A few that come to mind are college tuition, medical care, hospital costs, and health insurance. Several that increase more slowly are postage and milk. If you spend more on medical care and health insurance than on postage, your cost of living increase will be much larger than the person who buys more stamps than health care.
  • If the official CPI goes up, then social security payments increase and total government expenses increase. Hence, government has an incentive to want low CPI inflation statistics. The US government has changed the process and the formula several times since the 1980s. The result, of course, is that the official CPI is low. Maybe it is fair, maybe not, but it is the official story, and it helps keep social security payments low.
  • The various statistical measures used to calculate the CPI have been discussed and criticized in detail in many other publications. In the opinion of many people, they don’t reflect economic reality for most people.
  • Other writers disagree and assure us the inflation rate is low.
  • John Williams, a competent economist and statistician, computes the annual inflation rate at about 9%. He uses the statistical calculation process that was used by the government in 1980.
  • Dennis Miller did an inflation rate survey. It was not intended to be statistically robust – just practical. His readers responded with an average inflation rate of 8%, but 23% of the respondents thought their personal rate of inflation was over 11% per year.
  • The Deviant Investor did a similar survey and received a large number of responses. Our readers thought their average inflation rate was nearly 8% per year, while 39% thought it was higher than 9% per year.
  • Rex Nutting thinks it is close to 3% per year and that most of us are “CPI Deniers.” Mainstream media mostly agrees – but I can’t find anyone (in casual conversation) in a grocery store who thinks food prices are only increasing 2 – 3% per year.

I estimate my personal inflation rate at about the average found in the surveys – around 8% per year. I am one of those “CPI Deniers.” Most people I know are “CPI Deniers.”

So How Important is a Few Percent Per Year?

A few percent seems unimportant, but over a decade it becomes very important. Let’s assume in this very simple example that your expenses increase 8% per year, and your income increases 3% per year. In year one your income was much larger than your expenses, and you saved the difference.

Sample Inflation Calculation

Year Income Expenses Net to
Savings
1 80,000 60,000 20,000
2 82,400 64,800 17,600
3 84,872 69,984 14,888
4 87,418 75,583 11,835
5 90,041 81,629 8,411
6 92,742 88,160 4,582
7 95,524 95,212 312
8 98,390 102,829 (4,440)
9 101,342 111,056 (9,714)
10 104,382 119,940 (15,558)

By year 8, in this simple example, the cost increases overwhelmed your income, and you were forced to withdraw from savings. Of course, in the real world, there are more variables and adjustments. We cut back on expenses, increase credit card debt, take a second job, win the lotto, file for bankruptcy – whatever. But the critical point is that your personal inflation rate is important, and a few percent over a decade can make a huge difference.

What to Do?

      • Cut back on expenses.
      • Get out of debt, and stop paying interest.
      • Increase your income.
      • Start a business, or take a second job.
      • Make investments that pay more than the minimal interest provided by savings accounts and certificates of deposit.
      • Invest in real things – gold, silver, diamonds, land, rental property.
      • Invest in “ABCD,” which for David Stockman is “Anything Bernanke Can’t Destroy.” We Have Been Warned!

According to the surveys, real people think their personal inflation rate is around 8% per year with a significant percent of the responders claiming 9 – 11% or more per year. Are you going to believe what the government is telling you or your own experience?

GE Christenson, aka Deviant Investor

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

US Mint Gold and Silver Bullion Sales Soar In April

May 1, 2013 by 1 Comment

geThe exploding demand for physical gold and silver has become a worldwide phenomenon.  Shortly after the price plunge of early April buyers rushed in to take advantage of bargain prices.  Dealers and mints worldwide have reported off the charts demand for physical gold and silver.

Intense demand across Asia has resulted in shortages of gold and silver in both India and China as dealers struggle to keep up.  Singapore’s largest supplier of coins and bars reports depleted stocks of silver and long delivery delays.

The surge in physical demand is also rapidly depleting U.S. gold inventories according to Reuters.

Physical gold held at CME Group’s Comex warehouses in New York have dropped to a near-five year low in a further sign that gold’s price crash unleashed a frenzy of demand as investors scramble to buy bars and coins.

U.S. gold stocks, comprised of 100-troy ounce COMEX gold bars, have fallen almost 30 percent since February, as dealers have switched to selling into the burgeoning Asian market, where prices and demand are higher than in New York.

But the pace of the outflows from vaults has accelerated since bullion’s historic sell-off, falling more than 7 percent last week for its biggest weekly drop since 2005.

The latest sales figures from the U.S. Mint for April are further confirmation of  the voracious demand for physical gold and silver.  Sales of both the America Eagle gold and silver bullion coins skyrocketed in April.

According to the US Mint, sales of the American Eagle gold bullion coin totaled 209,500 ounces in April, up a stunning 948% from the previous year and up 22% from the previous month.  The gold bullion coins had the largest amount of sales since December 2009 when 231,500 ounces were sold.

Gold and silver bullion coin sales have soared since the financial crash of 2008 and the subsequent repetitive use of the print button by the world’s central banks.  In order to get a perspective on the flight to precious metals, consider that over the entire year of 2007, the US Mint sold a total of only 198,500 ounces of gold bullion coins – less than montly sales during April 2013.

Sales of the American Eagle silver bullion coins were also very strong.  During April 2013, the US Mint sold 4,087,000 silver bullion coins, up 169% over April of last year and up 22% from the previous month’s sales.  The US Mint has struggled to keep up with demand even before the April surge.  Sales of the American silver eagles was recently suspended twice and in late April the US Mint suspended sales of the one-tenth ounce American eagle gold bullion coin due to inventory depletion.

Based on sales to date, it would not be surprising to see an all time record high amount of the American Eagle silver bullion coins sold in 2013.

 

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

The Gold Crash – Why It Doesn’t Matter

April 30, 2013 by 1 Comment

Physical-GoldBy:  GE Christenson

The NASDAQ 100 index peaked at 1,485 in July 1998. It subsequently crashed to below 1,070 in October 1998, a loss of about 28%. But, it climbed back to nearly 5,000 in March 2000, a rally off the low of over 350% in 17 months.

The S&P 500 index peaked in October 2007 around 1,575. It subsequently crashed below 670 in March 2009, a loss of about 57%. But, it climbed back to nearly 1,600 in April 2013, a rally off the low of over 135% in 49 months.

Gold was priced at nearly $200 in January 1975. It subsequently crashed to about $100 in August 1976, a loss of about 50%. But, it climbed back to over $850 in January 1980, a rally off the low of over 750% in 41 months.

Crude oil peaked at over $147 in July 2008. It subsequently crashed to under $36 in December 2008, a loss of about 75%. But, crude climbed back to over $114 in May 2011, a rally off the low of over 210% in 29 months.

Natural gas exceeded $15 in December 2005. It subsequently crashed to under $5.50 in September 2006, a loss of over 64%. But, natural gas climbed back to over $13 in July 2008, a rally off the low of over 130% in 22 months.

Gold was priced at about $1,920 in August 2011. It subsequently crashed to about $1,350 in April 2013, a loss of about 30%. Gold will probably climb back to a large number in the relatively near future, a rally off the low that will be really impressive.

Silver climbed to over $48 in April 2011. It subsequently crashed to under $23 in April 2013, a loss of over 52%. Silver will probably climb back to a very large number in the relatively near future, a rally off the low that will be quite impressive.

Markets rally, correct, rally, and correct again. Some of the corrections are so severe we call them crashes. In the big picture, it hardly matters whether the crashes were accidental, encouraged, manufactured, or all three. In the big picture, what matters are the market fundamentals. After the correction, have the fundamental drivers of the market changed?

Important Questions for Gold & Silver Investors

    • Are the central banks of the world still rapidly expanding the money supply?
    • Are the derivatives and currencies bubbles in danger of crashing?
    • Are governments still spending much more than their revenues?
    • Are central banks, governments, and wealthy individuals continuing to buy gold?
    • Is total debt rapidly increasing?
    • Is consumer demand for gold and silver increasing?
    • Is faith in unbacked paper money decreasing?
    • Are faith and trust in banks and politicians decreasing?
    • Does the financial world appear to be more dangerous and unstable each year?
    • Are the above imbalances unlikely to improve in the next few years?

If YOUR answer to most of the above questions is “yes,” then regarding YOUR big picture perspective, gold and silver are probably very good investments, in addition to being valuable insurance in case some or all of the above imbalances do NOT resolve favorably and safely. Yes, this is likely to end badly.

The recent crash in silver and gold was one of many for the record books. But, gold is not the same as Enron stock. Tangible physical metals that have been a store of value for over 3,000 years are not the same as a paper promise made by less than reputable individuals and organizations. In the world today, it seems there are many disreputable individuals, corporations, and governments, all pushing paper. We have been warned!

History suggests we should side with 3,000 years of history during which gold and silver have been a store of value and the ultimate real money. History suggests that we should not trust our savings with either the paper pushers or their unbacked paper money.

For silver and gold investors, there are 3,000 years of history supporting your viewpoint and your commitment. There have been many rallies and crashes in both markets; but, even at their recent crash lows, the price of both is over five times higher than their lows in 2001. New highs will occur. Don’t let the paper pushers frighten you out of your investments.

GE Christenson
aka Deviant Investor

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

Worldwide Buying Frenzy of Gold and Silver Continues

April 25, 2013 by Leave a Comment

Liberty EagleDon’t precious metal investors read newspapers?  Despite proclamations from the mainstream press that the bull market in gold and silver is over, a buying frenzy in precious metals is occurring worldwide.  The gold rush mentality to buy gold and silver at bargain prices has resulted in stock out conditions for many retail sellers of precious metals, including the U.S. Mint.

Intense gold demand in India has lead to shortages as Gold Buyers Throng Indian Stores for Second Week on Rally.

Gold consumers in India, the world’s biggest importer, thronged jewelry stores across the country for a second week on speculation that bullion may extend a rally after the biggest plunge in three decades.

“We waited for sometime to see if prices will fall more but when we saw them moving up again, we decided it’s time,” said Sripal Jain, a 77-year-old silver dealer who came with his younger brother, daughter and daughter-in-law to buy gold necklaces at Mumbai’s Zaveri Bazaar. “We don’t have any wedding or occasion coming up. The rates fell, so we decided to buy.”

Bullion slumped 14 percent in two days, reaching the lowest price in two years on April 16, triggering a frenzy among coin and jewelry buyers from the U.S. to India, China and Australia. The surge in demand has helped prices rally 11 percent since April 16, and jewelers in India are paying premiums of as much as $10 an ounce to secure supplies, according to the Bombay Bullion Association.

Gold will rally to $1,800 an ounce by December as skepticism over the global recovery increases demand, billionaire Indian jeweler T.S. Kalyanaraman said on April 19.

The rush to buy has led to a shortage in India and jewelers are paying premium of as much as $10 an ounce compared with $2 just 10 days earlier, said Bipin Jain, owner of Vimalson Jewellers and a vice president of the bullion association.

The Perth Mint reports that while the media is talking about the bear market in gold, bullion buying has soared as bargain hunters move in.  As gold and silver prices corrected, Perth Mint buyers viewed the situation as a perfect buying opportunity and stepped up their purchases of gold and silver.  Activity on the Perth Mint website was so intense, that some buyers experienced long delays.

As the central bank of Japan continues its unprecedented experiment in massive monetary expansion, the Japanese Seek Refuge in Bullion as Yen Slumps, Inflation Looms.

Japanese consumers are poised to become net buyers of gold for the first time in eight years as the yen’s decline and looming inflation drive them to seek refuge in bullion, according to Standard Bank Plc.

Net sales of gold bars and coins by Japanese individuals shrank to 10.1 metric tons in 2012, the smallest amount since 2005, data from the World Gold Council show. A surge in purchases this month and the chance to buy after bullion slumped into a bear market foreshadow a turnaround in 2013, said Bruce Ikemizu, Standard Bank’s head of commodities trading in Tokyo.

The currency has depreciated 13 percent against the dollar this year and is trading near a four-year low after the central bank’s pursuit of unprecedented monetary easing to end deflation was unopposed by Group of 20 nations. Inflation may rise above 1 percent in the 12 months starting April 2014 and approach a 2 percent target as early as that year, Bank of Japan (8301) policy board member Ryuzo Miyao said April 18.

“The time has come for Japanese to buy gold with the government trying to engineer inflation,” Ikemizu, who has traded commodities for almost three decades, said in an interview in Tokyo yesterday. “Retail investors are turning from sellers to buyers of bullion.”

In India and China, the biggest gold-consuming nations, shoppers last week lined up in bazaars from Mumbai to Shanghai to buy the metal for brides, babies and strongboxes after prices fell. Indian consumers bought a net 312.2 tons of gold bars and coins in 2012, while purchases by individuals in China reached 265.5 tons, according to the World Gold Council.

The long term rationale for owning gold and silver remains intact.  The reasons for the recent smash-down in gold and silver may never be known but it has provided a gift opportunity to increase positions in gold and silver.

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

U.S. Mint Runs Out of Gold Bullion Coins

April 23, 2013 by Leave a Comment

tenth oz gold-eaglesWe already knew from numerous previous reports that demand for physical gold and silver has soared since the early April precious metals crash.  Further confirmation of vanishing physical gold and silver inventory was provided today by the Untied States Mint.  Authorized purchasers of gold and silver bullion coins were informed by the U.S. Mint that sales of the one-tenth ounce American Eagle bullion coin would be immediately suspended due to depleted inventories of the coin.

As short term paper speculators run from the precious metals markets, long term investors have been lining up around the block to buy physical gold and silver.  Numerous coin and bullion dealers have reported growing shortages of gold and silver and premiums have expanded as demand overwhelms supply.

Based on mid month sales reports for the American Eagle gold bullion coins, it looked like monthly sales would exceed 167,000 ounces, the highest since December 2009 when the financial system was still in a meltdown.  As of today, U.S. Mint sales of gold bullion coins has reached 183,500 ounces, an astonishing increase of 818% over the prior year’s monthly sales of 20,000 ounces.  April sales to date have increased by 196% over March sales.  For all of 2012, average monthly sales of the American Eagle gold bullion coin were 62,750 ounces.  Gold bullion coin sales by the U.S. Mint are shown below; figures for 2013 are through April 23rd.

 

Gold Bullion U.S. Mint Sales Since 2000
Year Total Ounces Sold
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000
2007 198,500
2008 860,500
2009 1,435,000
2010 1,220,500
2011 1,000,000
2012 753,000
2013 476,000
TOTAL                                      8,478,500

Sales of the American Eagle silver bullion coins, which had already been selling briskly before the April silver smash-down, continue to sell at a rapid pace.  Total monthly sales as of April 23rd have reached 3,232,000 ounces, almost as much as the previous month’s total and 112.6% higher than the comparable month of 2012.

The steep correction in gold and silver prices that occurred in early April has certainly not disturbed the fundamental long term reasons for buying precious metals.  Expect the buying stampede to continue.

Filed Under: Bullion Sales, Gold, Silver, US Mint Tagged With: , , , , , , , , , , , ,

Physical Demand For Gold and Silver Skyrockets – Gold Bullion Coin Sales Highest Since December 2009

April 17, 2013 by 3 Comments

1881-CC-Morgan-DollarWe have probably all heard enough already from the mainstream nitwits who are forecasting the end of the gold bull market and further price declines.  Funny thing though, most precious metal investors don’t need advice from self proclaimed experts on how to invest their money.  The explicitly stated goal of central banks to increase the rate of inflation through currency debasement is blatantly obvious.  Investors are acting accordingly by taking advantage of the recent decline in precious metal prices.

A look at product availability and pricing at some major coin and bullion dealers shows spot shortages of gold and silver as well as large premiums as investor demand overwhelms supply.

The Perth Mint reports that retail customers are increasing purchases at a record rate even as gold slumps to a 21 month low.  As the experts were proclaiming the “Death of Gold”, the Perth Mint website recorded the highest activity of the year and one of the best days of the past year.  Bargain prices on gold and silver have greatly increased the demand for physical gold and silver by the public.  Demand for gold coins have skyrocketed with sales of Australian gold bullion coins increasing by 48% in the first quarter over the comparable prior year period.

2013-Australian-Kangaroo-1oz-Gold-Bullion-Coin-Reverse-S

Buying by U.S. investors of the American Eagle gold and silver bullion coins has also increased dramatically.  Through April 16th, sales by the U.S. Mint of the American Eagle gold bullion coins have already exceeded total monthly sales for the previous two months.  At the current sales pace, sales of the gold bullion coins in April will total over 167,000 ounces, an increase of over 260% from the prior month.  The last time sales of gold bullion coins exceeded 167,000 ounces was in December 2009 when the U.S. Mint sold 231,500 ounces.

Sales of the American Eagle silver bullion coins are also strong in April, continuing a trend that began with the financial crisis in 2008.  Sales of the silver bullion coins through April 16th total 2.2 million ounces.  If the current sales pace continues through the end of April total sales of the Silver Eagle coins will increase by 31% over the previous month.

Short term speculators may be crashing the precious metals markets, but long term investors in gold and silver see this as the ultimate golden opportunity to increase positions.

 

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