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Are You Getting Gold for the Holidays or Giving it?

December 24, 2010 by Leave a Comment

We’ve mentioned the French company that has recently launched a line of gold mini bars in an attempt to increase revenue. Just in time for the year’s gift giving season, CPoR is making the argument that its ingots are an essentially recession proof gift—the ultimate stocking stuffer, in fact.

There are two different principles at work. The first is the fact that gold is a solid investment at the moment. The precious metal is experiencing an amazing market high and many signs point to its continuing growth.

Continued concerns about the economy and the effects of inflation have done much to encourage an investor interest in the metal as a save repository for their funds. This marketing idea is not simply about giving the gift of a solid investment, however. It’s also about the intrinsic allure of the metal itself.

Currently that allure is reflected in the fact that gold bar hoarding is on the rise. According to the World Gold Council it has increased 44% since 2009 and that was an increase of 42% over the numbers from 2008. The fact is people who buy gold can get a deep satisfaction out of having physical access to their purchase. If they take delivery of the precious metal and secure it themselves, then they retain access to it in all its many charms. Just holding or even looking at the bars can be a powerful experience.

The gift of a gold bar for the holidays offers the recipient a chance to have their own powerful moment with the metal. It’s a gift that combines and appeal to the senses, the height of luxury, and sound financial planning in one tidy package.

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America the Beautiful Silver Bullion Coin Distribution

December 23, 2010 by 12 Comments

Nine out of eleven of the US Mint’s authorized purchasers have decided to go along with the new terms and conditions covering the distribution of the America the Beautiful Silver Bullion Coins.

The 5 ounce silver bullion coins featuring duplicate designs of the circulating quarter dollar series became hot items once collectors learned of the limited mintage of just 33,000 coins per design. Based on the high demand and limited supply available, one of the US Mint’s primary distributors began accepting orders for the coins at a premium considered to be excessive.

Complaints from customers caused the US Mint to halt and relaunch the program with price controls and other measures to ensure broad distribution to the public. In order to participate in the distribution of the America the Beautiful Silver Bullion Coins, the primary distributors had to agree to sell all coins directly to the public, limit premiums to 10% above acquisition cost, and impose household ordering limits. The rules seemed problematic for some of the distributors who generally only sell in bulk quantities to other dealers.

The US Mint’s eleven primary distributors were able to place orders with the United States Mint from December 10 to 17. The nine who purchase their allotments of 3,000 coins of each designs are included below:

  • A-Mark Precious Metals (Los Angeles)
  • Coins ‘N Things (Massachusetts)
  • MTB (New York)
  • American Precious Metals Exchange, Inc. (Oklahaoma)
  • Dillon Gage Incorporated of Dallas (Texas)
  • Prudential Securities Inc. (New York)
  • The Gold Center (Illinois)
  • Jack Hunt Coin Broker (New York)
  • Fidelitrade (Delaware)

The coins allocated to the two primary distributors who did not place orders will be reallocated to active sellers this week.

In the first quarter of 2011, the United States Mint plans to offer numismatic versions of the 2010 America the Beautiful Silver Bullion Coins. These would be limited to 27,000 coins per design and sold directly to the public via the US Mint’s website and by telephone.

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

$11 Million Christmas Tree Includes Gold and Jewels

December 23, 2010 by Leave a Comment

Christmas is a time for giving, certainly, but it is also a time to dress up in our best clothes and our best decorations in order to celebrate. Most of us deck the halls with a bit of tinsel and ribbon. Our trees are covered in sparkling ornaments, but for the most part they are made of painted glass and plastic. No so everywhere though. One hotel in Abu Dhabi is taking their holiday decorations very seriously.

A Golden Tree

At the Emirates Palace Hotel in Abu Dhabi, where you can actually purchase your gold from the world’s first gold vending machine, Christmas is celebrated in style. This year that style includes a forty-three foot high faux fir tree studded with gold as well as bejeweled ornaments.

The hotel’s general manager states that the tree is decorated with one hundred and thirty one of these ornaments—each created with care by one of the hotel’s jewelers. Manager Hans Olbertz states that he and the jeweler worked together to produce what he calls a “unique tree and experience for [his] guests this year.”

A World Record

The tree is certainly unique. It’s current estimated worth is somewhere in the neighborhood of 11 million US dollars for the gold alone. The jewels on the ornaments include diamonds and sapphire. There has even been some discussion among hotel officials about contacting the Guinness World Record office regard in the record for most expensive tree.

According to Guinness, the current world’s most expensive Christmas tree is a 10.8 million dollar tree from Tokyo in 2002. That tree was adorned with approximately 83 pieces of jewelry from Piaget Japan. The gold alone on the Abu Dhabi tree makes it a more than likely contender as well as a stylish example to potential guests and investors.

image via Flickr user Lars Plougmann

Filed Under: Gold Tagged With: , , , ,

US Mint American Palladium Eagles

December 23, 2010 by Leave a Comment

Palladium EaglesPrecious metals investors and coin collectors may soon be able to purchase American Palladium Eagle coins from the United States Mint. The bill H.R. 6166 was passed in both the House and Senate and signed into law by the President on December 14.

The .9995 fine, one ounce palladium coins will be produced provided that a required marketing study demonstrates sufficient demand  for palladium bullion coins produced by the United States Mint exists. The first coins are required to be minted and issued within one year of the submission of the study.

Specific guidance is provided regarding the sourcing of palladium for use in the new bullion series. It must be purchased from palladium mined from natural deposits in the United States within one year after the month in which the ore is mined. If no such palladium is available or it is not economically feasible, other available sources may be utilized.

Designs for the Palladium Eagle will be high relief likenesses of Adolph A. Weinman’s Mercury Dime obverse and 1907 AIA medal reverse. Both bullion and collector coins would feature these designs, although the collector coins could be issued in proof and uncirculated versions, with different surface treatments.

The bill authorizing the Palladium Eagles was introduced by Denny Rehberg of Montana, the only state in the U.S. where palladium is mined. The Congressman had presented the program as a way to fill a niche for investors and collectors, and to counterbalance the effects of General Motors decision to end its supply agreement with Montana’s Stillwater Mining Co.

Today, it was announced that General Motors decided to renew their supply agreement with Stillwater in a three year deal. Stillwater also supplies palladium to Ford Motor Co. until a contract due to expire at the end of the year.

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Chicago’s Field Museum Sponsors a Gold Exhibit

December 20, 2010 by Leave a Comment

There’s a new exhibit in town at The Field Museum. This exhibit, arranged by the American Museum of Natural History, New York and the Huston Museum of Natural Science, Chicago, focuses on the sheer allure of this very precious metal. It is also the last stop on the exhibition’s tour.

“Gold” looks at the metal’s history as a symbol of power, mystery, and wealth while placing it in a wider historical context, according to the museum. It’s a fascinating journey.

From Prehistory to the Gold Rush

As the first metal worked by mankind, gold is inextricably tied to the rise and fall of prehistoric societies. Its ownership could make or break a community and it has been a part of human mythology almost as long as it has been a part of human society.

This is especially true in our society and the exhibit takes a close look at “how the fever for gold really spurred the development of our country.” To that end, the exhibit displays the largest gold bar ever found in the California Gold Rush. It’s the 100 pound Eureka bar. There are also gold bars that were used to finance wars and pay debts.

From Bars to Jewelry to Investments

The collection includes gold bars of many different shapes as well as exotic and beautiful items from around the world. Among the most notable are “a pendant from Ghana in the shape of a mask, a gilded Buddha from Tibet, a rare Peruvian vase, a Japanese sword sheath and beautiful Persian earrings.”

The collection as whole is designed to lead visitors from the geological process that creates this precious metal through its long history shaping and influencing, and in turn being influenced by human society. It’s a relationship that carries on into the current socioeconomic situation, as gold has reached some of its highest prices in the last year alone. No one knows what the future may hold for our relationship with this bewitching metal.

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Gold and Silver Recap: Precious Metals Prices Mixed

December 19, 2010 by Leave a Comment

Another Precious Week: Unsettled

Despite the general downward appearances, this was a very mixed week for precious metal prices.  Business Week, that fantastic contrarian indicator has announced that gold is in a  three month slump.  As Christmas is coming, there does not tend to be the large buying from India and (increasingly) China that there is over the autumn wedding season.  Unlike the three wise men, westerners don’t tend to give each other as much gold as the Indians do, although this may change if the expected retail gold breakthrough happens.  It has not happened (if it ever does) and so it’s still cheap Chinese electronics that are waiting for you under the tree, rather than discrete pieces of gold jewelery.  Sorry about that.

Precious Metals Prices
Fri PM Fix Weekly Change
Gold $1,368.50 -6.75 (-0.49%)
Silver $28.78 -0.01 (-0.03%)
Platinum $1,696.00 +23.00 (+1.37%)
Palladium $738.00 +1.00 (+0.14%)

Gold-Silver Ratio: 47.55 (was 47.77)

The Central Banks and investment funds also seem to be winding down for Christmas, and there is no discernible activity from these two sources. As they have been net buyers for the year, this is going to have a softening effect on prices.  The Central Banks of countries with sovereign wealth funds still think of themselves as being underweight in non-paper money, so they are likely to kick off buying in January, or if there is a dramatic dip.

On the currency side, it must be said that the fundamentals for precious metals are looking a lot more solid.  The European Central Bank is talking about printing a whole load of new Euros now that Spain looks very wobbly, and they realize that the stabilization cupboard is particularly bare.  The United States is also seriously unimpressive with benefits being extended for the poorest and tax cuts being extended for the richest.  This looks like a really nasty deficit in the making and so default by printing.

It must also be remembered that the Chinese are suffering some very real inflation, as even the People’s Daily has noticed. It is still a bit weird to realize that the Chinese press is quite free, by despotic communist standards, and that these pieces of news are getting reported.  There is also talk of the Chinese shifting some of their massive US government bond holdings into gold, which even at the margin will be massive.

If the big Asian buyers, particularly the private buyers, start to get as interested in silver, then 2012 could be a real bull market.

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Did JP Morgan Jump or Were They Pushed?

December 14, 2010 by Leave a Comment

JP Morgan has “quietly reduced” their short silver positions. So is this going to take off the block on the silver market?

In the short term then yes it will, but it is probably a good idea to be a bit wary, even while accepting that silver has a good way to go up.

So what was the issue with JP Morgan?  In essence JP Morgan had what was known as “naked shorts” which means that JP Morgan was essentially selling what it didn’t have.  JP Morgan would sell you forty pieces of silver, or whatever, in three months time in the hope that the silver price would go down from the price that was agreed. If the price went down then JP Morgan would make a small profit as you didn’t exercise the option that it sold you.  If the price went up, you’d make the profit and JP Morgan would make a loss.  This is fairly standard practice.

The problem that JP Morgan had was that they sold a significant market moving amount of silver options.  This was, so some more excitable silver followers claimed, lowering the price of futures which meant that the current price of silver could not help but be affected.  It also put JP Morgan into a tight spot as they were in beyond their means.  There were so much silver futures that JP Morgan would not be able to redeem it all meaning that it would have to scramble in the markets to buy the silver, meaning that it would be bankrupted.

Well that doesn’t seem to be happening.  This looks like part of a staged withdrawal, orchestrated by the major players.  The first step was a rise in the required margins on the options, which meant that all players had to have more silver on their balance sheets before playing with margins – and so cutting some of the frothiness out of the market.  This is stage two.

JP Morgan was sailing far too close to the wind, even if they were not going to go bankrupt, and this quiet withdrawal means that their losses are real but limited.  So there will not be that sudden spike as JP Morgan is held hostage by holders of physical silver that many silver bulls were expecting.

Silver is a really good inflation play, as well as being a reasonable industrial metal.  In the long term its fundamentals have improved thanks to the excitable statements being safely out of the way.

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

Signs of Chinese Demand for Gold

December 13, 2010 by Leave a Comment

China is the world’s second largest consumer of gold, so their interest in the metal is understandable. It is also the world’s largest producer of the metal. Still, the country is exhibiting a newly invigorated consumer and investor interest in the metal that is bound to capture some attention.

The Gold Reserves

Notoriously secretive, China rarely either publishes gold trade figures or comments on its reserves. It came as a shock, therefore, to find out from the State Administration of Foreign Exchange that state reserves of gold have increased to a jaw dropping 1,054 tonnes. The last time that reserve figures were made public was in 2003 when they equaled 600 tonnes. But that only one sign of the current Chinese interest in gold.

Consumer and Investment Interest

Chinese officials have indicated their interest and support for increasing the country’s gold reserves even further. Gold imports in the country have reached 209 tonnes, an impressive amount considering the high for 2009 was only 45 tonnes.

Experts speculate that though there has been no formal announcement, the government is approving these imports in an effort to encourage private gold investment in the country. Either way, investors and consumers are turning to the precious metals to provide themselves with an alternative to the threat of inflation.

The Future is Golden

Representatives for the World Gold Council have speculated that the investment demand for the metal could reach to 150 tonnes. The retail and jewelry demand for the metal, traditionally the driving force behind the metal’s prices, may even double in the next ten years.

The metal’s rise has been meteoric, but there’s no reason to believe that this level of interest will not continue. Predictions state that China will lead a worldwide demand for gold in the next year.

Filed Under: Gold Tagged With: ,

Gold and Silver Recap: Silver Price to $50?

December 11, 2010 by 3 Comments

Another Precious Week

Usually we start this column with some guff about gold.  And then after talking mostly about gold we may hit the other metals.  Let’s face it, gold is usually the most exciting metal there is.  If the world collapses about us, we will be using gold as the currency that helps us rebuild civilization.  And after all, what could be more exciting than that.

But the real action has been in the silver market.  Not all up, it must be said as silver took a real pounding on some days, but there’s some real excitement that J.P. Morgan may be about to bite it on silver.

Precious Metals Prices
Fri PM Fix Weekly Change
Gold $1,375.25 -28.25 (-2.01%)
Silver $28.79 +0.05 (+0.17%)
Platinum $1,673.00 -45.00 (-2.62%)
Palladium $737.00 -21.00 (-2.77%)

Gold-Silver Ratio: 47.77 (was 48.83)

First let’s look at some history.  Bunker Hunt and a few friends tried to corner the silver market by buying silver and buying silver futures.  They drove the silver price skywards, to a level that’s not been reached since.  Then the authorities did some dirty tricks with the silver futures contracts, the price of silver fell, and everyone brushed themselves off and got on with life.

Now J.P. Morgan has been accused of doing the same thing, but in reverse.  Instead of buying silver they are selling it short, that is they are selling it now to buy in six months time.  They have, it has been alleged, sold far more silver than they can possibly have.  This has meant that the rise in the silver price is going to kill them if we all buy physical silver.  You see, someone may want to see all this silver they’ve been sold, and then J.P. Morgan will have to buy it and up shoots the price.

The core idea here is that the gold silver ratio is ridiculously high.  Historically (going back to Biblical times) it has been 16:1, now it is around 48:1, although this week it fell quite fast.  A return to historical norms would mean that silver would get to $87 per ounce.

So there’s some correction that’s due.  Now, this doesn’t necessarily mean that silver has to go up.  There could be a new paradigm, or if not, the correction could be postponed for a very long time. If the correction does happen, then it could be that gold would go down to around $500 – where it was only a few years ago.

Gold could keep going down, but there’s enough uncertainty and inflation to suggest that it won’t get all the way to $500 per ounce.  The correction could be delayed by decades or muted, but the collection will come.  You could still lose money betting on it.

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

America the Beautiful Silver Bullion Coins Relaunch with Price Controls

December 10, 2010 by 2 Comments

After putting the program on hold earlier this week, today the United States Mint has relaunched the eagerly awaited America the Beautiful Silver Bullion Coins. If primary distributors wish to purchase the coins from the Mint, they must agree to a new set of terms and conditions, which includes price caps and very specific guidelines for distribution.

Despite extremely limited mintages of only 33,000 coins per design, the coins technically represent a bullion series. By law, the coins must be distributed through the United States Mint’s authorized purchaser network. A small group of 11 primary distributors are able to purchase the coins directly from the Mint based on the market price of silver plus a mark up of $9.75 per coin.

When one of the distributors started charging considerably more than their cost, customer complaints prompted the US Mint to put the program on hold.

The series has relaunched today with a new set of terms and conditions for authorized purchasers.

1.  Authorized Purchasers shall make available for sale to the public all 2010 America the Beautiful Silver Bullion Coins that they acquire.  The intention of this condition is to ensure that all 2010 America the Beautiful Silver Bullion Coins minted and issued by the United States Mint are sold to the public.

2.  Authorized Purchasers may charge to their customers a price no higher than ten percent above the price at which the Authorized Purchasers acquire 2010 America the Beautiful Silver Bullion Coins from the United States Mint.  Authorized Purchasers may charge their customers a reasonable shipping and handling fee; however, Authorized Purchasers may not charge any other fee, premium, or other expense to their customers to circumvent this ten-percent markup limitation.  The intention of this condition is to ensure that members of the public can obtain these coins at a reasonable and affordable purchase price.

3.  Authorized Purchasers must establish and enforce an order limit of one coin of each design for each household.  A household is defined as all persons of a family, or living as a family, at a single mailing address.  The intention of this condition is to ensure the broadest and fairest public accessibility to 2010 America the Beautiful Silver Bullion Coins, which are limited-mintage United States Mint products.

4.  Authorized Purchasers may not sell, either directly or indirectly, 2010 America the Beautiful Silver Bullion Coins to their officers or employees.  The intention of this condition is to ensure that 2010 America the Beautiful Silver Bullion Coins are available to the public and that Authorized Purchaser officers and employees do not have an unfair advantage over members of the public.

Although there was definitely a problem with the distribution system in this particular situation, by imposing price controls, the US Mint is treading into dangerous waters. There may be future implications for the authorized purchaser system and average consumers seeking to invest in gold or silver bullion.

Back in late 2008, the price of silver had plummeted to less than $10 per ounce. The rush to buy physical silver resulted in supply shortages, which pushed premiums to around 50% even for typically low premium products like 100 oz. silver bars. The United States Mint’s American Silver Eagle bullion coins were typically sold for a $4.50 per coin premium or more.

This represented a mark up greater than 10% above the cost to the primary distributors who, at the time, were able to buy the coins directly from the Mint at a $1.40 per coin premium. There weren’t many complaints to the Mint, presumably because all silver bullion products were priced at similar premiums.

The next time there is a silver supply shortage and premiums start to rise, will the US Mint seek to impose price controls for Silver Eagle bullion coins? How do you think that will work out?

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