August 13, 2022

Gold Bulls and Bears, Gold Super Bowl Ad, Global Financial Pyramid Scheme

With gold now at a six month high, here’s a brief round up of some gold stories.

Gold jumps as economy falters

The mainstream press has once again started “name dropping” the $1,000 level for gold in their stories.

Is gold really pausing?

From a few days ago, ironically, some long term gold bulls were wondering if the recent move was just a false breakout that would be suppressed at the $900 level.

Cash4Gold snaps up a slot for Super Bowl XKLL ad

Moving from late-night cable TV advertising to the Super Bowl. The ad will feature Ed McMahon and MC Hammer.

Where did all the money go?

The Gaurdian explains the global financial pyramid scheme. From one of the slides: “Ever since central banks stopped pegging their currencies to the price of gold, money has been a nebulous concept: a promise to pay the bearer, or “cheque” from the central bank, rather than a permanent store of wealth.”

Silver Availability, CFTF Silver Investigation, Morgan Stanley Gold Forecast

As gold closes above the $900 level in US Dollars and reaches new all time highs in the euro, British pound, and Canadian dollar, let’s take a look at some recent gold, silver, and precious metals related stories that are worth reading.

Real Silver Availability

Examining the remarkably small amount of silver bullion actually available in the world, and the even smaller amount that’s available for sale.

Gold ETF inventory at new all-time high

Another day, another new all time high for GLD tonnes in the trust. This is the sixth new all time high in the last eight trading days.

Silver investigation: Stakes are enormous

An interview with former directors of the Division of Enforcement at the Commodity Futures Trading Commission which shed some light on the ongoing CFTF investigation of the silver futures market.

2009 American Gold, Silver, Platinum Eagles Still Missing

The US Mint’s entire slate of collectible 2009 American Eagle and 2009 American Buffalo products are missing. Will the US Mint forego production of these gold, silver, and platinum numismatic products? (Note: this article discusses numismatic products, not the bullion products, some of which are also missing.)

Gold to Gain Through 2012, Morgan Stanley Forecasts

I poked a little bit of fun about Morgan Stanley’s previous forecast that gold would reach $1,000 in 2012. Gold’s recent strength has apparently emboldened them to up their forecast to $1,075, still in 2012.

Actions of the US Mint Discourage Gold Ownership

Over the past several months, the United States Mint has announced a series of actions and policy changes that make it more difficult for the average individual to buy gold. There have always been plausible or semi-plausible explanations, but the consequence of each action has been to limit or discourage gold ownership.

The recent actions of the United States Mint in relation to gold are presented below. I have also included the US Mint’s explanation for each situation, taken from official memorandums or press releases.

August 2008: The US Mint suspends sales of Gold Eagle bullion coins. Sales resume two weeks later on a rationed basis.

On August 14, 2008, the US Mint announced that they were suspending sales of American Gold Eagle bullion coins. The suspension was in place until August 25, 2008, when sales resumed under an allocation program. The program divides available gold coins into two pools. The first pool is divided equally among all authorized bullion purchasers. The second pool is allocated based on past sales performance.

When gold coin rationing (termed “allocation”) was introduced, it was presented as a temporary measure. More than four months later, gold coin rationing continues. There has been no indication when authorized bullion purchasers will be able to order unrestricted quantities of gold bullion coins.

US Mint explanation:

“The unprecedented demand for American Eagle gold one-ounce bullion coins necessitates our allocating these coins among the authorized purchasers on a weekly basis until we are able to meet demand.”

September 2008: The US Mint suspends sales of Gold Buffalo bullion coins. Sales resume more than one month later, but only to clear remaining inventory.

On September 25, 2008, the US Mint announced the sales suspension of 24 karat American Gold Buffalo bullion coins. Sales did not resume until November 2, 2008 when the US Mint was able to offer only its remaining limited inventory on an allocated basis.

US Mint explanation:

“Demand has exceeded supply for American Buffalo 24-Karat Gold One-Ounce Bullion Coins, and our inventories have been depleted. We are, therefore, temporarily suspending sales of these coins.”

October 6, 2008: The US Mint announces that production will be halted for all but one gold bullion coin option.

Production was immediately halted for one-half ounce and one-quarter ounce American Gold Eagle bullion coins. Production of one tenth-ounce gold bullion coins was halted following depletion of the remaining blank supplies. Production of one ounce Gold Buffalo bullion coins was also halted following depletion of the remaining blank supplies.

These coins represent the US Mint’s only fractional gold bullion coin offerings and the US Mint’s only 24 karat gold bullion offering. The production halt seemed to be a temporary measure that would impact 2008 dated coins. The production halt has continued into 2009. There has been no indication when production will resume.

US Mint explanation:

“The United States Mint has worked diligently to attempt to meet demand, however, blank supplies are very limited and it is necessary for the United States Mint to focus remaining bullion production primarily on American Eagle Gold One Ounce and Silver One Ounce Coins.”

November 10, 2008: The US Mint announces the discontinuation of numerous gold and platinum numismatic products.

The discontinuation of 22 different gold and platinum numismatic products was included as a broader measure to refocus the US Mint’s line of products for coin collectors. Discontinued gold coin products included fractional uncirculated Gold Buffalo coins, one ounce uncirculated Gold Buffalo coins, fractional proof Gold Buffalo coins, and fractional uncirculated Gold Eagle coins.

Although the US Mint has constantly referred to the “unprecedented demand” for gold, they deemed their gold numismatic products to be “unpopular.” Following the discontinuation announcement, sales of the 2008-dated versions of the discontinued coins surged and all numismatic Gold Buffalo and platinum coin offerings sold out in less than a month.

US Mint explanation:

“We are responding to the collector community which has spoken loudly and clearly. Customers have told us there are just too many products.  We agree, and it’s time the United States Mint trims down and concentrates on the products our customers love most.”

November 24, 2008: The US Mint announces the delayed release of all but one 2009 gold bullion coin option.

This delayed release served to prolong the previously announced production halts for fractional gold bullion coins and the 24 karat Gold Buffalo bullion coins. As noted previously, the production halt continues with no indication of when it might end.

The single 2009 gold bullion offering from the US Mint continues to be subject to rationing. As noted previously, there has been no indication of when the rationing will end.

US Mint statement:

“The quantities of blanks that we have been able to acquire from our suppliers continue to be very limited, while demand for bullion coins remains high. As a result, it is necessary for the United States Mint to delay the launch of other bullion coins until later in 2009. We will continue to monitor the situation and keep you informed as additional information becomes available.”

January 6, 2009: The US Mint establishes a new pricing policy for gold and platinum numismatic products.

The new US Mint pricing policy adjusts the prices for gold and platinum numismatic products as often as weekly based on the average London AM Fix gold price. The prices for coins are based on a published table which seems to impute higher premiums than the old pricing system.

In the past, prices were established at the start of sales and remained fixed unless there was a significant move in the price of the underlying precious metal. At times gold numismatic products could be purchased for premiums as low as 10%. Under the new policy, prices are adjusted weekly to preserve permanently high premiums. Current premiums run 30% or more depending on the product.

US Mint explanation:

“Transparency, agility, and customer service are the catalysts for our new pricing method. The volatile precious metals market prompted our customers to suggest that we re-vamp our process, and we listened.”

Conclusion?

The series of incremental changes outlined above has resulted in the following situation:

  • Production was halted for all of the US Mint’s fractional gold bullion and 24 karat gold bullion offerings several months ago. There has been no indication when production might resume.
  • The only 2009 gold bullion coin available from the US Mint is the one ounce American Gold Eagle. Sales of this single bullion coin offering remain subject to rationing.
  • The US Mint’s gold numismatic offerings for 2009 have been significantly reduced from the prior year. The remaining product offerings will be priced at prohibitively high premiums under a newly established pricing policy.

Whether or not it was the US Mint’s intention, every significant action they have taken since August has either limited gold availability, eliminated gold product options, or increased the cost of acquiring gold. Has it all just been a consequence of surging global demand for gold, supply chain mismanagement, and bad timing for policy decisions? Or is there something else going on here?

Thank you to APMEX for confirming the status of the US Mint’s 2009 gold bullion coins for this post.

Gold and Silver ETF, Gold vs. Platinum, Gold Revaluation Debate

It’s another Gold and Silver Blog Round up, exploring some gold , silver and precious metals related articles and blog posts from around the web.

COMEX commercial positions favor silver: Gold Gold Report

A comprehensive report including premiums on physical gold and silver, positioning of COMEX futures traders, and gold and silver ETF updates. To start of the year, SLV and GLD both reached new highs for tonnes in the trust.

Gold vs. Platinum: Is There a Favorite?

Comparing gold and platinum. Includes a nice illustration on the ratio of platinum to gold. Remember when they briefly reached parity?

Is President Obama Wearing a Giant Gold Mask?

Laying out the case for gold confiscation or really “gold revaluation” as a tool to restart consumer spending and revive the economy.

Gold revaluation – Clutching at golden straws

A response to the gold revaluation theory and the China Gold theory.

Platinum Tops $1,000, 2008 Average Price of Silver, Bearish call on Gold

A brief round up of some of the more interesting gold, silver, and precious metals articles and events from the past week.

Platinum Tops $1,000 on Stimulus Outlook; Gold, Silver Drop

Even as gold and silver fell, platinum continued its recent move and topped the $1,000 mark intraday for the first time since October.

Silver News and Views

Even though silver lost more than 25% during 2008, it’s average price for 2008 posted a gain of nearly 12%. The included chart of the annual average price of silver looks impressive.

Merrill Lynch says rich turning to gold bars for safety

An article on the highly publicized remarks from Merrill Lynch’s chief investment officer regarding gold. Wealthy clients want physical gold.

A Bearish Call on Bullion

The editors of gold timing newsletters are more bullish now than they have been in three and a half years. The author sees this as a bearish sign, even amidst the admission that government manipulation may play a role in the price of gold.

US Mint Unveils New Pricing Policy

The US Mint unveiled a new pricing policy which covers all Gold and Platinum Numismatic Products. This pricing policy does not refer to any of the bullion offerings, but only the numismatic products which the US Mint sells to coin collectors. The new policy represents a significant shift in the handling of collectible coins with precious metals content.

The US Mint cites “fluctuating gold and platinum commodity costs” as the reason for the change.

In the past, the US Mint has announced prices for products one to two weeks prior to release. The pricing was presumably based on the market price of the precious metals content plus production costs and a profit margin. This initial price could only be adjusted via publication of new pricing in the Federal Register. Since this process takes time, price changes were preceded by sometimes lengthy suspension periods. Even during the most volatile years for precious metals, prices were changed only three to four times at most.

The US Mint’s new pricing policy will allow them to change prices as frequently as once per week. Price levels would be set based on the average weekly price of gold based on London Fix prices for the preceding week, Thursday to Wednesday. If the average price moves across certain thresholds, prices will be adjusted up or down on Thursday at 10:00 AM ET. The new policy will go into effect January 12, 2009.

This is a significant change of policy that will make numismatic products seem more like bullion products, albeit with very high premiums. It will be interesting to see how this new policy sits with coin collectors and whether there will be any kinks in the implementation.

Below is the text of the US Mint’s notification published in the Federal Register.

[Federal Register: January 6, 2009 (Volume 74, Number 3)]
[Notices]
[Page 493-496]

DEPARTMENT OF THE TREASURY

United States Mint

Notification of New Pricing Methodology for Numismatic Products
Containing Platinum and Gold Coins

SUMMARY: The United States Mint is implementing a new pricing methodology for its numismatic products containing platinum and gold coins to mitigate the effect that fluctuating gold and platinum commodity costs has on the pricing of these products. The new pricing methodology is based primarily on the London Fix weekly average (average of the London Fix prices covering the previous Thursday a.m. Fix through the Wednesday a.m. Fix) platinum and gold prices, which reflect the market value of the platinum and gold bullion that these products contain. As required by law, the prices of these products also must be sufficient to recover all other costs incurred by the United States Mint, such as the cost of minting, marketing, and distributing such products (including labor, materials, dies, use of machinery, and promotional and overhead expenses). This pricing methodology will allow the United States Mint to change the prices of these products as often as weekly so they better reflect the costs of platinum and gold on the open markets.

DATES: The new pricing methodology, as further explained in the SUPPLEMENTARY INFORMATION section, will go into effect on January 12, 2008.

SUPPLEMENTARY INFORMATION: Pursuant to the authority that 31 U.S.C. 5111(a)(3), 5112(i), 5112(k), 5112(o), and 5112(q) grant the Secretary of the Treasury to mint and issue gold and platinum coins and to prepare and distribute numismatic items, the United States Mint sells to the public numismatic products containing American Eagle Gold and Platinum Coins, American Buffalo Gold Coins, First Spouse Gold Coins, and the 2009 United States Mint Ultra High Relief Double Eagle Gold Coin. In accordance with 31 U.S.C. 9701 31 U.S.C. 9701(b)(2)(B), the United States Mint is changing the prices of these coins to reflect a new methodology in pricing.

Effective January 12, 2009, the United States Mint will commence selling numismatic products containing American Eagle Gold and Platinum Coins, American Buffalo Gold Coins, First Spouse Gold Coins, and the 2009 United States Mint Ultra High Relief Double Eagle Gold Coin at prices established by using the new pricing methodology. Specifically, each Wednesday, the United States Mint will apply the average London Fix for platinum and gold (average of the London Fix prices covering the previous Thursday A.M. Fix through the Wednesday A.M. Fix) to the below pricing schedules. Price adjustments as a result of this process, if any, will be effective at 10 a.m. E.S.T. on the immediately following Thursday.

The pricing charts included with the release follow. Click for large version.


Investing in Rhodium, GLD ETF Holdings, COMEX Delivery

I haven’t had a round up in some time, so here’s one to bring us up to date with some of the most interesting gold, silver, and precious metals related stories found around the internet.

Rhodium: The Ultimate Reflationary Trade

After reaching a high of $10,010.00 per ounce, rhodium collapsed more than 90% to a low of $760 per ounce. As one of the rarest metals on the planet, is it time to buy?

Don’t Miss the Coming Gold Bull

A well written article, which gives an excellent outline of the bullish case for gold.

Biggest Gold ETF Holds Its Weight

Holdings of the SPDR Gold Shares exchange traded fund (GLD) held record levels of gold at the end of 2008, signaling firm underlying demand for gold.

A Nevada Town Escapes the Slump, Thanks to Gold

Quote from the story: “Times are good around here. People are happy.” When’s the last time you heard someone say that?

Is the Comex Doing Fractional Reserve Delivery of Gold?

A small precious metals fund reports that they were promised delivery of certain weights and serial numbered gold bars from the COMEX. The following day they were informed that they would instead be issued a “Warehouse Delivery Receipt” in place of the gold bars. Is something fishy going on?

2008 Gold, Platinum & Silver Performance

As trillions of dollars in equity values were vaporized this year, a strong November and December performance pushed gold into positive territory by year end. Gold’s annual gain was 4.32%. This marks gold’s eighth consecutive annual gain. The “lost decade” for stocks, has been quite the opposite for gold. Silver and platinum were less fortunate, posting losses of 26.90% and 41.31% respectively.

(Figures calculated from Kitco’s London PM Fix prices)

The headline numbers only tell part of the story. I rounded up a bit more data which paints a more complete picture of the 2008 performance of gold, silver, and platinum.

Gold Silver Platinum
Dec 31, 2007 Close 833.75 14.76 1530.00
Dec 31, 2008 Close 869.75 10.79 898.00
Annual Change +36.00 -3.97 -632.00
Percentage Change +4.32% -26.90% -41.31%
2008 Low 712.50 8.88 763.00
Change from start to low -121.25 -5.88 -767.00
Percentage Change -14.54% -39.84% -50.13%
2008 High 1011.25 20.92 2273.00
Change from start to high +177.50 +6.16 +743.00
Percentage Change +21.29% +41.73% +48.56%

The first section of the table above shows the performance of gold, silver, and platinum from start to finish during 2008. The second section lists the lowest closing price for each metal during 2008, and calculates the percentage change from the start of the year to the low price. The final section lists the highest closing price for each metal during the year, and the percentage change from start of the year to the high price.

Some observations:

Often when the mainstream press writes about gold as a potential investment option, they usually caution that prices are “extremely volatile.” A look at the figures above shows otherwise. While it seemed like a year of extremes for gold, at its lowest it was down 14% and at its highest it was up 21%, probably making it one of the least volatile investments of 2008.

Platinum, which is starting to draw my interest, basically went straight up during the month of February to its peak price of $2,273 per ounce. Then it experienced three months of nearly continuous declines from mid-July to mid-October where it reached its low of $743 per ounce. At its high it was up nearly 50%, at its low it was down more than 50%. Briefly, the price of gold exceeded the price of platinum, but the situation has now reverted to the norm.

Silver experienced a similar plight, up more than 40% at its peak and down more than 40% at its low. The period of decline also took place from mid-July to mid-October. Many have pointed to the enormous concentrated short position taken by a handful of banks in July as responsible for the decline.

On a housekeeping note:

Sorry for the lack of posting on Gold and Silver Blog during the end of December. I should be back on a regular schedule for the new year. I aso plan to add some new sections to the site, which compile historical data relevant to gold and silver watchers. Thanks for reading and let’s make 2009 a great year!

Two Milestones for Gold

In the past week, gold quietly marked two important milestones.

First, as of Monday the price of gold is now showing a gain for the year. The closing price of gold on December 31, 2007 was $833.75. The price of gold today is $854.60.  That makes gold up 2.5% for the year to date. If gold can hang onto this gain into the end of the year, this will also mark the eighth year in a row that gold has had a positive return. For the year and for this decade, gold has humbled its naysayers and rewarded its investors.

Second, on Tuesday the price of gold exceeded the price of platinum. The two metals now trade within a few dollars of each other with gold at $854.60 and platinum at $858. This is a big change from earlier in the year when platinum was trading over $2,200 per ounce, more than double the price of gold. If I’m not mistaken, the price of platinum has been higher than the price of gold for this entire decade. Not since the 1990’s has gold been more expensive than platinum. Considering that platinum is thirty times scarcer than gold, this makes a strong statement about the demand for gold.

Gold Backwardation, Tracking COMEX Depletion, Banks’ Gold and Silver Short Positions

Red Alert: Gold Backwardation

Posted late last week explaining the how gold went to backwardation for the first time in history. The implication is that backwardation will lead to a breakdown of the delivery mechanism for gold, which takes us to the next link…

Vaporize the COMEX

Tracking gold and silver deliveries from the COMEX versus registered inventory in COMEX warehouses. After today, gold is 43% depleted and silver is 37.1% depleted.

“On the fly” Gold and Silver COT Information

A small number of US banks continue to hold an ever increasing porportion of all commerical net short positions for gold and silver futures. Three US banks accounted for 66.97% of the net short gold positions, and two banks accounted for 98.64% of the net short silver positions.

Gold shines on

A brief piece published on Fortune outlining the bullish case for gold.