November 28, 2022

Gold Bullion Coin Sales Rise, Silver Bullion Coin Sales Could Hit All Time Record High in 2014

american-silver-eagleGold and silver bullion coin sales by the U.S. Mint during April turned in mixed results with gold sales up and silver sales down.  Despite the fact that gold and silver are in the bargain basement due to price declines, investment demand remains relatively subdued due to tapering of money printing by the Federal Reserve and the apparent recovery of the U.S. economy.

Investor perceptions of precious metals as a safe haven appear diminished despite the ongoing and unprecedented monetary easing by central banks and unrestrained government borrowings.  Gold began the year selling for $1,225 per ounce.  After reaching a high of $1,385 on March 14 gold  declined to a current price of $1,281.25 leaving it up on the year by 4.6%.

The U.S. Mint reported that sales of the American Eagle gold bullion coin in April totaled 38,500 ounces up 83% from 21,000 ounces sold in the previous month but down by a substantial 81.6% from April of 2013 when the Mint sold 209,500 ounces.  After dropping for three years in a row since 2009, sales of the American Eagle gold bullion coins increased in 2013 to 856,500 ounces up by 13.7% from total sales of 753,000 ounces in 2012.

(Sales figures for gold bullion coins on the charts below are as of April 30, 2014.)

 

Gold Bullion U.S. Mint Sales Since 2000
         Year                            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 856,500
2014 182,000
TOTAL                               9,041,000

Total sales of gold bullion coins year to date total 182,000 ounces.  Based on the current sales rate through April 30th, annualized sales of gold bullion coins would come in at 546,000 ounces, the lowest amount of sales since 2007 when only 198,500 ounces were sold.

Silver Bullion Coin Sales Could Reach Another Record in 2014

Sales of the American Eagle silver bullion coins remained strong in April with a total of 4,590,500 coins sold, down slightly from the previous month’s sales of 5,354,000.

The one ounce American Eagle silver bullion coin remains extremely popular with investors.  Total coin sales during 2013 reached an all time high of 42,675,000.  The previous record sales year going back to 2000 occurred in 2011 when investors scooped up 39,868,500 coins.  If the current sales pace continues, total sales of the silver bullion coin during 2014 could reach a record breaking 55 million ounces.

Gold and Silver News and Headlines – Gold Owners Get Nervous

Precious metals advanced across the board today, with palladium the stellar performer with a 2.86% gain.  Gold gained $9.70 to $1685.30, silver tacked on $0.48 to $33.53, platinum rose $18 to $1633.00 and palladium jumped $19.00 to $689.00.

Although precious metals recently hit a selling storm (see The Flash Crash in Gold), precious metals remain up strongly on the year and gold is up $257.20 per ounce or 18% over the past year.  The following chart show the gains for the year on the precious metals group.  All prices per the London PM Fix closing price.

GOLD SILVER PLATINUM PALLADIUM
JAN 3RD $1,590.00 $28.78 $1,406.00 $664.00
MARCH 7TH $1,677.50 $33.17 $1,627.00 $678.00
$ GAIN $87.50 $4.39 $221.00 $14.00
% GAIN 5.50% 15.25% 15.72% 2.11%

Here’s a brief round up of some of the latest thoughtful coverage on gold and silver related news.

Free Von Nothaus from the tyranny of unjust government actions – Judging Silver or Something Else?

As I look at the circumstances, I do not see that von Nothaus or his Liberty Dollar products victimized anyone. In contrast, those who chose to keep Federal Reserve Notes and coinage of the U.S. Mint have been victimized by loss of purchasing power. If anything, and I say this with all due respect, it seems to me that it would be more sensible and appropriate to prosecute those who have victimized American citizens through the depreciation of the “money” issued by the U.S. government.

US Mint Drops Price of Gold Products

With all of the pricing data now available, the US Mint’s gold numismatic products are set for a two tier decrease. This will reduce prices by the equivalent of $100 per ounce of gold content.

Owning gold is a “privilege, not a right”.  Why The US Confiscated Gold in 1933 and Can It Happen Again?

We previously stated that gold ownership was made illegal on 1st May 1933. What we did not tell you was that U.S. citizens, under Order 6102, were allowed to own up to $100 in gold coin [+5 ounces].

Congress could easily revoke the privilege again. In fact, at no time during this century has the U.S. government recognized the right of private gold ownership.

The privilege, not right, to own gold was restored to U.S. citizens on the 15th August 1974 (not 1971, when Nixon floated the USD against gold and stopped foreign central banks from converting USD to gold). It is pertinent to the thinking behind this series, to understand the importance to government of gold and that the right to confiscate may not be restricted to individuals or institutions but could embrace a nation or two.

It’s believed that some 60% of Germany’s gold is stored outside of Germany and much of it in the Federal Reserve Bank of New York. If this is the case one has to ask, in the light of the massive currency swaps engineered by the Fed and the E.C.B. to raise the two tranches of cheap money for European banks, “Was gold swapped too, or was it pledged as collateral?”

The public pressure to repatriate national gold reserves has heightened considerably in the last year. Should Germany want its gold back home, we ask, “Can it get it back or has it already been used in these ways?

Germany to Review Bundesbank Gold Reserves in Frankfurt, Paris, London and Federal Reserve Bank of New York

German lawmakers are to review Bundesbank controls of and management of Germany’s gold reserves.  Parliament’s Budget Committee will assess how the central bank manages its inventory of Germany’s gold bullion bars that are believed to be stored in Frankfurt, Paris, London and the Federal Reserve Bank of New York, according to German newspaper Bild.

There is increasing nervousness amongst the German public, German politicians and indeed the Bundesbank itself regarding the gigantic risk on the balance sheet of Germany’s central bank and this is leading some in Germany to voice concerns about the location and exact amount of Germany’s gold reserves.

The eurozone’s central bank system is massively imbalanced after the ECB’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31% bigger than the German economy, after a second tranche of three-year loans.

The concern is that were the eurozone to collapse, Bundesbank’s losses could be half a trillion euros – more than one-and-a-half times the size of the Germany’s annual budget.

In that scenario, Germany’s national patrimony of gold bullion reserves would be needed to support the currency – whether that be a new euro or a return to the Deutsche mark.

Bernanke Spooks Gold

Instead, this selloff was sparked not by a development, but a non-development. In his address to Congress, Fed Chairman Ben Bernanke offered no clue as to when the Federal Reserve would unleash its next round of quantitative easing.

The markets took this as a sign that the monetary madness is coming to an end, which would bode poorly for precious metals. Metals are increasingly seen as substitutes for continuously debased fiat money, and tend to do well when new liquidity injections are announced.

Bernanke’s failure to telegraph more printing means nothing. Investors are craving a return to normalcy, which means more prudent monetary policy. As a result, many are grasping at straws. But I believe these hopes are premature, and that gold will be buoyed by easy money for quite some time.

In addition, gold will likely be favored by the greatest financial struggle of the coming decade: China’s plans to replace the United States as the dominant economic power.

Buy Japanese Bonds At 0.05% And Get A Gold Coin

Japan began selling special government bonds Monday aimed at raising funds for reconstruction from the March 2011 earthquake and tsunami, saying it will present buyers with commemorative gold coins imprinted with an image of the “miracle pine” that survived the killer tsunami when the bonds mature in three years.

The coins — worth ¥10,000 each, and silver coins worth ¥1,000 — are engraved with the design of the 30-meter-high pine in Rikuzentakata, Iwate Prefecture, that was the only one of about 70,000 pines on a stretch of coast to survive the massive tsunami.

Peter Schiff on why Buffett is wrong about gold – Buffett’s Bursting Bubble

The gold doomsayers have found their champion in the media’s favorite financial advisor and one of the world’s richest men. Warren Buffett, the man dubbed the “Oracle of Omaha,” has repeatedly and publicly denied that gold is an investment, and called gold buyers “speculators” and people “who fear almost all other assets.” In fact, Buffett claims that gold’s rise has the same characteristics as the housing and dot-com bubbles, and it is only a matter of time before it reverses course. He doesn’t mean that the price will decline because of austerity measures and a free-market interest rate, mind you. He just asserts that because he’s deemed it a bubble, it will inevitably burst.

Gold prices will only go down when governments change course and make significant cuts. Until then, gold is not in a bubble. It’s the only way to protect your wealth; and in the current economic condition, it’s poised to go much higher. I think it’s high time Buffett takes to heart his father’s wise words: “For if human liberty is to survive in America, we must win the battle to restore honest money.”

The Volatile Ride To Higher Gold

Back in 1980, Phase Three only lasted for 21 days, but increased 66% in that time span. Considering the ten year time span of Phase One, and my projection for Phase Two, I feel that Phase Three (which starts in 2015) will last for six months and drive gold up to over $6,000 per ounce. If the world’s financial leaders decide to return to a Gold Standard, or if gold bullion confiscation becomes the government’s reaction to severe inflation, my projections would escalate. Possible other government reactions that can affect my projections negatively are: limiting gold ownership, restrictions on transporting or trading, and any Gold windfall profits tax.

 

Demand For Silver Bullion Coins Hits Record High On Bargain Prices

Sales of American Silver Eagle bullion coins hit an all time record high during 2011 according to production figures from the U.S. Mint.

Sales of the Silver Eagle bullion coins increased by 13.3% in December to 2,009,000 compared to last year’s sales of 1,772,000.  For all of 2011, total Silver Eagle sales came in at an all time record high of 39,868,500 ounces, up 15.0% from the prior year’s total of 34,662,500 ounces.

In addition to the silver bullion coins, the U.S. Mint also produces proof and uncirculated American Eagle silver coins which can be purchased by the public directly from the U.S. Mint.  Commencing in 2010, the U.S. Mint began producing the America the Beautiful Silver Bullion 5oz coin.  During 2011, the U.S. Mint sold 397,700 of the 5oz coins, which represents almost another 2 million ounces of physical silver demand during 2011.

The U.S. Mint does not sell the American Silver Eagle bullion coins directly to the public.  The bullion coins are purchased from the U.S. Mint by a network of authorized purchasers who in turn resell them to secondary retailers for public sale.

Monthly sales of the Silver Eagle bullion coins during 2011 are shown below.

Silver had a volatile year during 2011, reaching a high of $48.70 in April and then dropping to a low of $32.50 in May after the COMEX repeatedly raised margin requirements on silver futures (see How the COMEX Crashed The Silver Market).  After recovering to $43.49 in August, silver declined to end the year at $28.18, off 8.1% for the year.

Despite the volatility in silver prices during 2011, investor demand for physical silver remained exceptionally strong.  After the significant price pullback from the April high, many analysts and armchair commentators who never owned an ounce of silver in their life were predicting a plunge in demand for silver.  The exact opposite occurred as long term investors took advantage of what is another historic buying opportunity comparable to 2008.

The case for buying silver remains rock solid and patient long term investors have been well rewarded.  As opposed to buyers of paper silver products such as the iShares Silver Trust ETF (SLV), holders of physical silver are invested in precious metals as part of a long term wealth preservation and appreciation strategy.  While speculators in paper silver products trade in and out, usually winding up with losses from my observations, long term holders of physical silver have seen the value of their holdings rise significantly.

Silver - courtesy kitco.com

As central banks of the world continue to print money at an accelerated rate, 2012 should be a year of strong gains for both gold and silver.  A steady plan of silver and gold bullion accumulation remains a no-brainer decision.  Since 2008, sales of silver eagle bullion coins have soared.  Last year, extremely heavy demand for silver resulted in periodic product allocations by the U.S. Mint.

In an excellent article by Steve Angelo, it was shown that massive physical demand for both the American Silver Eagles and Canadian Maple Leaf coins resulted in official coin sales surpassing the total silver production of both the United States and Canada.

Expect demand for silver bullion products during 2012 to surpass the record year of 2011.  Shown below are the yearly sales figures since 2000 for the American Silver Eagle bullion coins.

American Silver Eagle Bullion Coins
YEAR OUNCES SOLD
2000 9,133,000
2001 8,827,500
2002 10,475,500
2003 9,153,500
2004 9,617,000
2005 8,405,000
2006 10,021,000
2007 9,887,000
2008 19,583,500
2009 28,766,500
2010 34,662,500
2011 39,868,500

 

Gold Bullion Coin Sales Jump 9% In December, But Decline 18% For The Year

Demand for physical gold increased in December as buyers took advantage of a recent pullback in gold prices.

According to production figures from the U.S. Mint, sales of American Gold Eagle bullion coins in December totaled 65,500 ounces, an increase of 9.2% from December 2010.  Total sales of gold bullion coins for 2011 declined by 18% from the prior year.  For all of 2011, a total of 1,000,000 ounces were sold compared to previous year sales of 1,220,500 ounces.

The sales figures cited above do not include gold numismatic coins sold by the U.S. Mint.  Collector versions of gold coins such as the American Buffalo Gold Proof Coin can be purchased directly by the public from the U.S. Mint.

The American Gold Eagle bullion coins cannot be directly purchased by the public from the U.S. Mint.  Instead, a network of authorized purchasers (AP’s) buys the coins in bulk from the Mint at a fixed markup.  The AP’s in turn resell them to secondary retailers for public sale.  The AP distribution system established by the U.S. Mint was determined to be the most efficient method for selling gold bullion coins to the public at competitive prices.

Although sales of gold bullion coins increased during August and September when gold was soaring to all time highs, the largest  monthly sales of gold bullion coins occurred in January when gold was trading in the $1,350 range (please see chart below for monthly sales figures).

U.S. Mint Gold Bullion Sales By Month

 

2011 marks the third year in a row of reduced purchases of gold bullion coins but this is not indicative of an overall reduction in investment gold demand.  Competing investments such as gold trust ETFs may be responsible for a large part of reduced demand for physical gold.

Besides much lower transaction costs, investors in gold ETFs or other paper gold products do not have to worry about security and storage costs.  Since their launch in 2005, investors have poured billions of dollars into gold trust ETFs.  For example, the SPDR Gold Shares Trust (GLD) and the iShares Gold Trust (IAU) now hold gold bullion valued at over $82 billion.  By contrast, the approximate value of all American Eagle Gold bullion coins purchased last year amounts to only $1.6 billion.

The all time record sales of American Eagle gold bullion coins occurred in 2009 when 1,435,000 ounces were sold.

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
Total 7,249,500

 

Will gold bullion sales continue to decline?  The recent implosion of MF Global along with unrestrained money printing by central banks should provoke some clear headed thinking by investors.  Customers of MF Global who thought they had warehouse receipts for physical gold and silver were shocked to find that the bankruptcy trustee put all assets into a single pool to cover  claims of all customers who have lost billions of dollars.

Paper assets can be vaporized in an instant, even those that are allegedly backed by physical assets such as gold and silver.  A question well worth pondering is “Could what happened at MF Global also happen to investors in the gold trust ETFs”?

 

Will Central Banks Continue To Increase Their Gold Holdings?

FORT KNOX

Central banks continued to add to their gold reserves in August with three countries adding a total of 643,000 troy ounces to their reserves.

According to the Wall Street Journal, the largest central bank purchaser of gold during August was Thailand which purchased 300,000 troy ounces, bringing their total gold holdings to 4.4 million ounces.  The Bolivian central bank purchased 225,000 ounces increasing their total reserves to 1.36 million ounces and the central bank of Russia purchased 118,000 ounces which increased total reserves to 27.2 million troy ounces.

After selling gold reserves for many years, central banks began purchasing gold around 2000.  Over the past several years central banks have sharply accelerated their purchases of gold to diversify away from the U.S. dollar which is no longer considered to be a safe asset.  China and Russia, large buyers of gold, have been particularly critical of U.S. monetary and fiscal policies and are actively seeking to reduce their reserve holdings of U.S. dollars.

Will central banks continue adding to their gold reserves?  For some insight on this matter, consider the following facts.

In August Russian Prime Minister Putin said that the United States is “not living within its means, shifting the weight of responsibility  on other countries and in a way acting as a parasite.”  Putin also said that a new reserve currency is necessary to protect against a “systemic malfunction” of the U.S.  Putin has reason to worry since Russia has almost half of its reserves in U.S. dollars.  In 1998 Russia had gold reserves of 14.7 million ounces compared to 27.2 million ounces after its latest purchases.  Despite the fact that the Russian central bank has the eight largest official gold holdings in the world, gold amounts to only 8.2% of total reserves.

China, which holds $1.2 trillion of U.S. treasury debt, has the most to lose from the continuous debasement of the U.S. dollar and has become harshly critical of U.S. economic policies.  After the U.S. debt downgrade in August, China said that America must “cure its addiction to debts” and “live within its means.”   China is actively seeking to diversify its reserves and reduce its holdings of  U.S. dollars.  The latest reports show total Chinese gold reserves at 1,054 tonnes compared to 395 tonnes in 1988.   Gold holdings amount to only 1.6% of total Chinese reserves.  China’s 33.9 million ounces of gold is currently valued at only $54.2 billion.  By comparison, the gold holdings of the SPDR Gold Shares ETF (GLD) total 39.9 million ounces valued at $65.6 billion.  Expect China to add dramatically to its gold reserves in the future.

Gold purchases by central banks during 2011 are forecast to be 336 metric tonnes, approximately 13% of total yearly gold mine production.  Central banks during  the second quarter of 2011 purchased four times the amount of gold purchased during the comparable quarter of 2010.  Given the fragile state of the world fiat money system, it is likely that central bank gold purchases could expand dramatically going forward.

Only 7 countries or institutions currently hold more than 1,000 tonnes of gold – the United States, Germany, the IMF, Italy, France, China and Switzerland.

Total official world gold holdings by central banks and the IMF currently total 30,707 tonnes, valued at approximately$1.6 trillion which, coincidentally, is the size of this year’s budget deficit for the United States.  Total gold holdings of the world’s central banks amount to only a fraction of the value of paper currencies that have been exponentially created.

All of the gold mined throughout history totals only 178,000 tonnes or about 6 billion ounces valued at $9.6 trillion.  Central bank holdings amount to only 17% of the total gold supply available.

Despite increasing gold prices, gold mine production has been stagnant.  Most of the easy to mine, high grade ore deposits have already been exploited.  New total yearly gold production adds only 1% per year to the existing supply of gold.  Increasing demand and limited supply result in higher prices.

Only 34 central banks currently hold over 100 tonnes of gold and only 12 central banks or institutions hold more than 500 tonnes of gold.

Ironically, the United States, the most indebted nation in world history has decreased its gold reserves.  In 1962, the United States owned 14,269 tonnes of gold or almost 39% of all gold held by central banks.  By 1972, the United States held only 8,584 metric tonnes of gold.  Currently, U.S. gold reserves allegedly total 8,134 tonnes but the amount remains in question since the government will not allow an independent audit of the actual amount held.

Considering the relatively small amount of gold held by central banks and the exponential increase in the creation of paper money, gold demand by central banks should  increase dramatically in the future.

 

 

A Perspective On The Plunge In Gold and Silver

Fed Chairman Ben Bernanke set the world on fire this week as his latest scheme to “twist” long term interest rates lower pleased no one and triggered a 737 point drop in the Dow.  In addition, the Fed panicked investors by admitting that there were “significant downside risks to the economic outlook”.

Virtually every asset class except U.S. treasuries went into full scale meltdowns.  The U.S. stock market registered its worst weekly drop since the dark days of October 2008 when the  U.S. banking system was collapsing.

The rush to liquidity and forced margin selling sent precious metal prices into a tailspin. London silver plunged by $7.07 or 18%, to $32.90, the biggest decline since 1987.  Gold, as measured by the closing London PM Fix Price, dropped $105 on the week to $1,689, the largest weekly decline since 1983.  Spot prices for both gold and silver continued lower in New York afternoon trading with gold settling at $1658.20 and silver at $31.03.

Platinum dropped by $147 on the week to $1,651 and palladium dropped by $73 to $659 for losses of 8.18% and 9.97%, respectively.  Silver, with 60% of its demand relating to industrial use,  took the largest plunge in the precious metals group as economic indicators pointed to a rapidly slowing economy worldwide.

Precious Metals Prices Sept 23
9/23PM Fix Weekly Change
Gold $1,689.00 -105.00 -5.85%
Silver $32.90 -7.07 -17.69%
Platinum $1,651.00 -147.00 -8.18%
Palladium $659.00 -73.00 -9.97%

Although the sharp declines in gold and silver are unsettling, the fundamental reasons for owning gold and silver remain intact.  The rapid price increases in gold and silver since July attracted large investment flows from hedge funds and other short term speculators, who rapidly liquidate large positions based on short term technical sell signals.

Despite this week’s panic selling, long term gold investors have seen their investment rise from $1,405.50 at the beginning of the year, for a gain of $283.50 (20.2%).  Silver, despite this week’s painful sell off, is still higher by $2.23 or 7.3% from the beginning of the year, as measured by the closing London PM Fix Price.

For additional perspective on the relative performance of the gold and silver markets, here’s the record for various stock indices and the 10 year bond since the beginning of 2011.  (Note that the 10 year bond shows yield, not price.)

Asset Performance - courtesy schwab.com

Meanwhile, as the global financial system rapidly moves towards the precipice, faith in the ability of governments to contain the crisis is quickly eroding.  2011 is not a replay of the 2008 financial meltdown – it’s much more dangerous.  The sovereign governments that “saved the system” in 2008 incurred massive amounts of debt which have brought them to the brink of insolvency.  The bankruptcy of one country could ignite a financial firestorm that world governments cannot contain.

The inability of European leaders to effectively act in concert to resolve the Euro debt crisis has drawn the United States into the center of the crisis.  According to The New York Times, the U.S. is pushing Europe to mount a massive bailout to avoid financial Armageddon.

The Obama administration, increasingly alarmed by the spillover effects of Europe’s financial crisis, has begun an intensive lobbying campaign to persuade Chancellor Angela Merkel of Germany and other leaders to ramp up efforts to stem any contagion from the debt crisis in Greece.

In phone calls and meetings over the last week, President Obama urged Mrs. Merkel and President Nicolas Sarkozy of France to take coordinated measures — including spending billions in additional funds to bail out Greece and bolster European financial institutions — to prevent Greece’s debt woes from spreading to its neighbors.

“The biggest single risk to the United States today is that the European situation will spiral out of control,” said Edwin M. Truman, a former Treasury official who is now at the Peterson Institute for International Economics. “Europe is not going to save the U.S. economy, but it could be the straw that breaks it.”

Kenneth Rogoff, a Harvard economist who has written about the history of financial crises, puts Europe’s effect on the United States in blunt political terms. “The downside scenario is awful,” he said…

American officials have also emphasized the Fed’s outsize role in responding to the financial crisis here and urged Europe to view the Fed as a model. It made trillions of dollars in loans so that investors remained able to buy and sell a wide range of financial products.

Given the risks to the United States economy from a banking collapse and sovereign defaults in Europe, anyone who thinks that the United States will not be getting deeply involved in the financial bailout of Europe is delusional.  The “rescue” of Europe will ultimately involve the same techniques (zero interest rates and money printing) used by Bernanke in the United States.  The resulting negative interest rates and worldwide debasement of paper currencies will ultimately send gold soaring to new highs.

Gold And Silver ETF Holdings Remain Steady As Gold Plunges

Gold’s non stop advance since early July saw a rapid reversal on Wednesday as gold lost $104.20 to close at $1,752.30 in New York trading.

Gold prices have soared this year on fears of another financial crisis and the continual debasement of paper currencies by governments that are tottering on the brink of default.  Gold began the year at $1,388.50 and by early May traded over $1,550.  After consolidating for two months, gold broke out of its trading range in early July and breached the $1,900 level earlier this week.  Despite today’s sharp sell off, gold is still up $363.80 or 26% for 2011.

As short term trend traders, hedge funds and speculative buyers jumped into gold, prices became overbought with gold trading $423 above its 200 day moving average.  The same traders playing gold for short term profits jumped out just as quickly when prices started to reverse.  Two factors that encouraged profit taking in gold were reports that the Fed would not immediately announce another round of money printing and the sharp hike in margin requirements on gold futures by the CME Group.

On a short term basis gold was overbought and due for a correction after an almost vertical rise from $1,500 as can be seen below.

 

Gold - courtesy stockcharts.com

A view of a longer term chart gives a different perspective – the long term bull market in gold remains intact and the fundamental reasons for owning gold have not changed.

 

Gold - courtesy stockcharts.com

The non stop “gold bubble” chatter by talking heads who missed participating in the decades long gold rally are focusing on a short term price movement instead of the fundamentals that will continue to drive gold prices higher.  Every bull market has corrections and are an opportunity to add to positions.  As a long term investor in gold since the early 1990’s, I have seen other investors trade in and out, losing money each time, instead of simply going with the long term bull trend.

Many analysts have expressed concern that investors might be panicked out of the GLD causing the price of gold to plunge.  This does not seem to be the case despite the large drop in gold prices this week.  As of Wednesday, the GLD gold holdings declined by only 39.67 tonnes.  In addition, when silver spiked in early May, trading volume in the SLV exploded by 750% above the daily average trading volume.  Despite the volatility in gold this week, trading volume in the GLD expanded by only 350% above average trading volumes.  This would seem to indicate that investment in the GLD is a core holding by long term gold investors who are not inclined to sell on normal price corrections.

The SPDR Gold Trust currently holds 39.6 million ounces of gold valued at $70.1 billion.  There has been much hype about the value of the GLD exceeding that of the SPDR S&P 500.  A more proper context for comparison is to compare the value of the GLD to the increase in sovereign debt and money printing.  Bernanke’s latest episode of QE2 money printing was 850% larger than the entire value of the GLD and you can count on additional Fed currency debasement in the future.

GLD and SLV Holdings (metric tonnes)

August 24-2011 Weekly Change YTD Change
GLD 1,232.31 -39.67 -48.41
SLV 9,836.18 +109.08 -1,085.39

The iShares Silver Trust holdings gained 109.08 tonnes for the week ending August 24, despite the slide in silver prices.  The SLV has been building a base in the $35 to $40 range since the May correction.   Many analysts proclaimed that the “bubble” in silver prices had burst after the sharp price correction in May.  From a long term perspective, the May correction did little to diminish either the bullish fundamentals or the long term upward trend in silver prices.

 

SLV - COURTESY YAHOO FINANCE

The SLV currently holds 316.2 million ounces of silver valued at $13.3 billion.

SPDR Gold Trust And iShares Silver Trust Holdings Decline

Gold holdings of the SPDR Gold Trust (GLD) declined slightly on the week by 24.54 tonnes after a gain of 10.22 tonnes in the previous week.   GLD  gold holdings have declined by 8.74 tonnes since the beginning of the year.   The all time high holdings of the GLD occurred on June 29, 2010 when the Trust’s holdings reached 1,320.47 tonnes.

As measured by the closing London PM Fix Price, gold started the year at $1,388.50.  Gold closed in Wednesday trading at $1,790.00 for a gain of $401.50 or 28.9% on the year.  Gold has been in a steady, virtually uninterrupted uptrend since late 2008.  At the beginning of July, the price trend of gold entered an accelerated uptrend.

 

GOLD - COURTESY KITCO.COM

Although a pullback is possible after an almost vertical rise of $256 since July 1st, it is just as likely that gold could confound the skeptics and continue to rise.  The increase in gold prices for the past  decade has reflected widespread apprehension over the value of paper currencies.  The world economy never recovered from the financial crisis starting in 2008 despite the borrowing and printing of trillions of dollars by world central banks and governments.  The increase in the price of gold is reflecting the growing realization that governments and central banks no longer have the ability to contain a second full blown financial crisis.  Under this scenario, gold effectively has no ceiling price.

The GLD is the largest gold exchange traded fund with 40.9 million ounces of gold.  According to Bloomberg, the total holdings of all  major gold  ETFs worldwide amount to 70.7 million ounces of gold.  Holdings of all gold ETFs worldwide have increased by 4.1 million ounces or 6.2% since the beginning of the year.

The SPDR Gold Trust currently holds 40.9 million ounces of gold valued at $73.2 billion.  For perspective, the entire value of the GLD would fund less than 18 days of US Government deficit spending which is projected to exceed $1.5 trillion this year.

 

GLD - COURTESY YAHOO FINANCE

The GLD closed the day at $174.42, fractionally below its all time high of $175.13

GLD and SLV Holdings (metric tonnes)

August 17-2011 Weekly Change YTD Change
GLD 1,271.98 -24.54 -8.74
SLV 9,727.10 -45.46 -1,194.47

Holdings of the iShares Silver Trust declined by 45.46 tonnes on the week after a decline of 86.36 tonnes in the previous week.  Since July 1st, the SLV has gained 190.95 tonnes.

After a price correction in early May, silver has recovered in price and is building a base in the $40 range before the next move up.  Silver has gained $6.17 or 18.2% since July 1st, rising from $33.85 to $40.02.

 

SLV - COURTESY YAHOO FINANCE

The SLV currently holds 312.7 million ounces of silver valued at $12.5 billion.  Investors in the SLV have had an annual rate of return of 25% over the past three years.

Gold ETF Holdings Hit All Time High As Silver ETF Holdings Decline

The SPDR Gold Shares Trust (GLD) added 10.22 tonnes of gold since last week as gold prices continue to surge higher.  The GLD now has a net gain in gold holdings of 15.80 tonnes since the first of the year.  The all time high holdings of the Gold Shares Trust was 1320.47 tonnes reached on June 29, 2010.

The value of the GLD during August has increased by 12.1% to $73.9 billion on high volume.  During July, the highest volume day for the GDL was on July 13th when 25.2 million shares traded.  On August 8th, 9th and 10th, volume on the GLD exceeded 40 million shares.  On previous occasions when trading volume in the GLD surged, gold prices either pulled back slightly or consolidated in sideways trading before continuing higher.

All of the fundamental factors that have been pushing gold prices higher for the past decade are now being amplified by a looming currency collapse and sovereign debt crises.  Adding to concerns is the apparent inability of central banks and governments to contain the rapidly expanding financial crisis.

As measured by the closing London PM Fix Price, gold started the year at $1388.50 and closed Wednesday in New York trading at $1796.50, up $51.30.  Gold has gained $407.90 or 29.4% since the first of the year.

Total holdings of all gold ETFs recently reached a record of 2,276 tonnes of gold, valued at $130 billion.  The GLD currently holds 41.7 million ounces of gold valued at $73.9 billion.

GLD - COURTESY YAHOO FINANCE

 

The GLD hit a new all time high in Wednesday trading, closing at $174.58, up $5.97.

GLD and SLV Holdings (metric tonnes)

August 10-2011 Weekly Change YTD Change
GLD 1,296.52 +10.22 +15.80
SLV 9,772.56 -86.36 -1,149.01

Holdings of the iShares Silver Trust (SLV) declined by 86.36 tonnes on the week but have gained 236.41 tonnes since July 1st when silver prices began rallying.

Silver prices have not kept pace with the increase in gold prices as investors worry about reduced industrial demand for silver in a severe economic downturn.  Silver closed Wednesday at $39.39, up $1.58.  Silver began the year at $30.67 and is now up by $8.72 on the year returning investors a gain of 28.4%.

The SLV peaked in late April at the $50 level before prices corrected to the low 30’s.  The SLV has had an average annualized total return of 25% over the past three years.

The iShares Silver Trust currently holds 314.2 million ounces of silver valued at $12 billion.

 

SLV - COURTESY YAHOO FINANCE

As the world economy marches off the edge of the cliff and many wonder why, we look back at some prophetic  thoughts from Bill Murphy, co-founder of the Gold Anti-Trust Action Committee (GATA) in an interview with The Motley Fool in June 2010.

“What’s important for your readership to understand is that the markets have been made dysfunctional by U.S. policy and what these bullion banks are doing. Even Alan Greenspan said recently that interest rates were left too low for too long. Had the gold price been allowed to trade freely, interest rates wouldn’t have been able to stay down as low as they were. It would have been a warning sign for people not to get involved in the behavior that they did … not to go with all of the risks that developed. And there’s a good likelihood that the disaster would have been nowhere near as bad as it was.

“Alan Greenspan called gold a “thermometer.” So they diffused the thermometer by keeping the gold price managed. And what’s important for people to understand now is that the same thing is going on. If we’re correct, it’s going to lead to a bigger catastrophe, because no one has learned any lessons.”

 

 

Gold Prices Skyrocket, Stocks Plunge – Looking Like 2008 On Steroids

As politicians celebrated the debt limit increase and congratulated themselves for “saving” the nation that they destroyed, collapsing stock markets and soaring gold prices told a different story.  The public spectacle of a dysfunctional Congress debating the debt limit exposed to the world the horrendous extent to which the US government is addicted to endless deficit spending.

Republican presidential candidate Ron Paul summed up the outcome of the debt limit fiasco best:

This deal will reportedly cut spending by only slightly over $900 billion over 10 years. But we will have a $1.6 trillion deficit after this year alone, meaning those meager cuts will do nothing to solve our unsustainable spending problem. In fact, this bill will never balance the budget. Instead, it will add untold trillions of dollars to our deficit. This also assumes the cuts are real cuts and not the same old Washington smoke and mirrors game of spending less than originally projected so you can claim the difference as a ‘cut.’

The plan also calls for the formation of a deficit commission, which will accomplish nothing outside of providing Congress and the White House with another way to abdicate responsibility. In my many years of public service, there have been commissions on everything from Social Security to energy policy, yet not one solution has been produced out of these commissions.

Ron Paul also provided an explanation of what constitutes a “spending cut” in the bizarro world of government accounting and why, in the end, spending and debts will not decrease.

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the “cuts” being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family “saving” $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

The world was finally tuning in to the reality of the desperate financial condition of the United States.  The mainstream press was predicting a plunge in gold prices and soaring stock prices after Congress agreed to increase the nation’s debt limit.  Instead, the opposite happened as markets reflected underlying economic reality.

Since mid July, the Dow Jones Industrial Average has plunged by 858 points.  Since July 1st, gold has gained $178 per ounce.  Meanwhile, the debt crisis in Europe continues to intensify with bond yields soaring in Italy and Spain.  The world economy is marching off the edge of a cliff as governments lose the ability to contain the spiraling debt crisis.  It’s starting to look like a replay of 2008 on steroids.

Gold  soared by $39.80 on the day to close in New York trading at an all time high of $1,661.10.  Silver more than paced the gain in gold, adding $1.61 to close up 4.1% at $40.95.

SPDR Gold Trust Holdings Increase, Silver ETF Holdings Decline

Holdings of the SPDR Gold Shares Trust (GLD) gained almost 37 tonnes on the week.  For the first time this year, holdings of the GLD are greater than they were at the beginning of the year.  The record holdings of the GLD occurred on June 29, 2010 when the GLD held 1,320.47 tonnes of gold.

The SPDR Gold Trust currently hold 41.2 million ounces of gold valued at $67.5 billion.  Shares of the GLD hit an all time high, closing at $161.52.

 

GLD - COURTESY YAHOO FINANCE

Holdings of the iShares Silver Trust (SLV) declined by 90.93 tonnes after an increase of 112.15 tonnes in the prior week.  Since the beginning of July, holdings of the SLV have increased by 288.28 tonnes.

The SLV currently holds 315.9 million ounces of silver valued at $12.5 billion.

GLD and SLV Holdings (metric tonnes)

August 2-2011 Weekly Change YTD Change
GLD 1,281.75 +36.95 +1.04
SLV 9,824.93 -90.93 -1,096.64