July 6, 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.

Why Gold and Silver Could Outperform Every Other Asset Class in 2014

gold-buffaloAfter almost a three year bear market in gold and silver it’s safe to conclude that most of precious metal bears have sold out and moved on.  As gold and silver prices corrected sharply over the past three years, the chorus of bearish sentiment in the mainstream press has become endemic, thus setting the stage for a powerful and unexpected contra rally.

What will set off an explosive rally in precious metals remains to be seen but there are plenty of potential triggers including war in the Ukraine or South Korea as well as the significant financial risk of collapsing asset bubbles engineered by the extremely loose monetary policies of the world’s central banks.

Here’s some of the most interesting recent commentaries on why 2014 could be a big year for gold and silver.

Gold and Silver Are Almost Ready to Rally

While every journey does begin with the first step, we need more evidence than a minor rally day to declare that a bull market has arrived. For the SPDR Gold Trust ETF (ticker: GLD), the April 24 rally was not very remarkable other than the fact that the day started with a loss and ended with a gain.
Now let’s talk about what it was rather than what it wasn’t.

For starters, it was an encouraging hold of short-term support from March. And the failure to set a lower low for the current two-month decline also falls on the bullish side of the ledger.

But more importantly, it was a suggestion that prices will not travel to the bottom of a giant year-long trading range again. In other words, any further strength now would tell us that investors are ready to buy. They will not wait for “better” prices to buy at the bottom of the range, and that means a shift in sentiment for the better.

Finally, the gold market has a “golden cross” in place. This is a condition where the 50-day average crosses above the 200-day average, and while it is really a stock market indicator, the macro look and feel are the same to me. After a long decline and period of sideways movement, this is the market’s first sign it has had enough healing. As long as the sideways trading range is not so long that the averages are completely flat, I think the signal is worthy of respect.

We can also we look at rising momentum indicators as bullish. Weekly charts show the relative strength index (RSI) setting higher lows between June and December even as prices set equal lows. This means the bears were tired as 2013 ended, and the fact that this indicator continued to rise this year suggests the bulls are starting to wake up.

Silver also had a bullish short-term reversal last week, but it has a lot more technical damage to repair. It does not have a moving average golden cross in place, and has already fallen rather close to its previous major lows from last year. Generally, that’s not a good sign, but in this case it’s not so clear cut.

When we look at the bigger picture using the iShares Silver Trust (SLV), we will see something really interesting. Recall 2010, when both gold and silver shot higher, but silver moved at a much faster pace than gold did. On the charts, we can see the technical launching point and breakout in August of that year.

As we see in many markets that appear to be bubbles, with such steep gains and ever-accelerating trends, the “bubble” part of the rally is often completely erased before conditions stabilize and then improve. Silver’s rally is now erased, which means the market is likely washed out and left for dead. Even so, there is a bullish RSI condition in place for the white metal, just as there is for gold.

 The Long Goodbye – by Andy Xie

The recent tumbling of Internet and biotech stocks may indicate that the speculation in such stocks has peaked. But, unlike in 2000, the bursting will occur in slow motion. The financial market structure has radically changed in the past 15 years. Too many money managers have a one-sided incentive to long such stocks.

The global financial system has experienced one bubble after another because major central banks have kept monetary policy loose. Prolonged loose monetary policy has made the financial system extraordinary large relative to the real economy. This change forces central banks to respond to negative shocks, like the bursting of a bubble, from the financial system. Such responses make the financial system even bigger. This vicious cycle explains why speculation has become such a powerful force.

A bubble cannot expand forever, even in an environment of loose monetary policy. The balance between fear and greed can tip over when the price of an asset becomes too high, like Internet stocks now relative to the average. The subsequent deflating bubble, in a continuing environment of loose money, just shifts air into other assets.

The talk of monetary tightening in the United States or China will not be followed up with strong enough actions. Real interest rates will remain negative until another crisis, like high inflation or hyperinflation or political crisis, force the hand.

Gold is the safe asset in today’s environment. As paper currencies lose credibility, the demand for gold will surge. The alternative digital currencies are fool’s good, really scams to take advantage of people’s fear over the potential collapse of paper currencies.

Two changes in the past 15 years have made bubble formation a constant feature of financial markets around the world. The inefficiencies in capital allocation and income redistribution to finance are the main reason for today’s sluggish global economy.

At the macro level, globalization has made inflation slow to emerge, as multinational companies can shift production around the world in response to cost pressure. This force has given central banks more room in increasing money supply without facing the inflation consequences for years. Hence, central banks around the world have become more active in response to economic fluctuations. The consequence is a rising ratio of money supply or credit to GDP. By definition, this means a bigger and bigger financial system, which needs more and more income to survive.

The real economy, as the previous analysis indicates, can only bear so much. Bubble formation has become central to supporting a bloated financial system. A large and bubbly financial system is unstable. Its periodic collapse brings down the economy, which triggers more monetary stimulus. Hence, constant monetary stimulus and an ever-expanding and bubbly financial system have formed a vicious cycle.

What’s Up With Gold and Silver? (Market Anthropology)

Anecdotally, we are seeing and hearing from those anxiously long the precious metals sector and contentiously short. With gold and silver down sharply in the early morning session – then reversing violently higher, the emotional spectrum in the market is likely diverged at or near another extreme. Over the past 10 months, both bulls and bears alike have been waiting for the next leg to commence. Instead, the market has played the jester – traversing a narrowing range and taking turns at frustrating both sides.

When will the argument resolve itself ?

Although it’s felt like a standing room only performance of Waiting For Godot, we expect long-term yields still hold the key to the next chapter for precious metals and the broader market story. We continue to view the move in 10-year yields as historically stretched to a relative extreme (see chart), a notion apparently lost on many participants as the Fed tapers their way to the end of QE and through an esoteric Fed cycle.
Just this week we saw that a Bloomberg survey of 67 economists unanimously expected 10-year yields to rise over the next six months (see Here). From a contrarian point-of-view, this should wake up participants that underlying sentiment is dangerously listing towards one side and the downstream and kinetic effects could be severe in many markets. The ratio chart below depicts the relationship between gold and 10-year yields, which as we noted last December had also reached a historic extreme. If and when long-term yields breakdown, we suspect a much stronger tailwind to develop behind precious metals.

As the Nikkei was breaking down at the start of the 1990’s, risk appetites changed and developed a palette for the Nasdaq. After the Nasdaq cracked going through the Millennium, investors turned to precious metals. The cycle can also come full circle, as we believe the performance and seasonal presentments of the current risk du jour describes. As the biotech index now turns down just past its zenith, we expect silver and the precious metals sector to begin making their way materially out of the trough they have trended towards over the past three years.

The Reformed Broker

Jeff Gundlach looks at the gold market. He’s not a big gold guy, but says that if you’ve held it this long (and through this much pain), “for god’s sake don’t sell it here!” He thinks the holders who remain are the quintessential, proverbial “strong hands” and that gold miner equities are completely underpriced for the potential of the metal running back up again. He’s more positive on commodities now in general, given how uninterested the investment community seems to be.

http://www.thereformedbroker.com/wp-content/uploads/2014/04/25.jpg

Silver Supply Glut Weighs on Silver Price – Time for Some Contrary Thinking?

proof-silver-eagleAnyone who has purchased silver in the past three years is now holding a losing position.

The price of silver soared from its low of around $10 during the height of the financial crisis to almost $50 per ounce in May 2011.  Since that time silver has had intermittent rebounds but the price trend remains in a distinct downward channel.  Is it time to double down or wait until silver breaks out of its current downtrend?

Contrarian minded thinkers may do well to keep in mind that the in and out speculators in silver are long gone and that there is still a steady worldwide demand for silver by both industrial users, jewelry makers, and investors.  Although it is easier psychologically to buy anything when the price is sharply increasing, that is not the road to big gains.  Most investors will admit that their biggest winners came from buying something when every “logical instinct” was telling them to sell.

kitco.com

kitco.com

Barron’s added some anxiety for silver bulls this week with commentary about the apparent supply glut in silver production that could keep a lid on silver prices.

Prices are sliding toward 10-month lows, as supplies of the metal are set to outpace demand for the sixth straight year.

For investors, that means betting on lower prices or picking another metal entirely. “Silver has the worst story of all the metals,” says Adam Klopfenstein, a senior market strategist with Archer Financial Services, citing the bountiful supplies and silver’s tendency to move in tandem with gold.

ON TOP OF THE POTENTIAL for higher interest rates, the silver market has been inundated with supplies of the metal. HSBC expects a 3.4% increase in the silver supply to 1.09 billion troy ounces in 2014, while demand will remain nearly unchanged at some 938 million ounces. Part of what’s fuelling that growth is that prices remain above the cost of production. On Friday, silver for June delivery settled near flat at $19.718 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices are down 10.6% off their Feb. 24 high of $22.051 an ounce.

The all-in cost of production for silver falls somewhere between $15 and $17 a troy ounce, making the metal highly profitable when the price hovers around $20 an ounce or above, according to Howard Wen, a precious-metals analyst with HSBC. This creates an incentive for producers to continue ramping up silver output, even while prices slip to much lower levels than a year earlier, he says.

In all probability, the so called over supply in silver has already been priced into the market and silver looks like it’s making a triple bottom in the $20 area.

1 year silver

Over supply situations can quickly turn to a shortage when investors recognize that the current price of silver is at bargain levels.  Meanwhile, purchases of U.S. Mint silver bullion coins continue at very strong levels with March sales up by 43% from the previous month.  Investors eager to scoop up silver at bargain prices bought an all time record amount of almost 42 million ounces of American Eagle silver bullion coins in 2013 and this year could see another record based on year to date sales.

Precious metal investing should not be a short term trade but rather a long term wealth preservation strategy.  A quick glance at any long term debt chart shows that the false prosperity of asset appreciation that occurred since the U.S. went off the gold standard was built on the shifting sands of credit creation and liquidity.  How long the Fed can keep the Frankenstein credit machine going is anyone’s guess but parabolic increases of debt (or anything else for that matter) become mathematically impossible to continue at some point.

CONSUMER CREDIT

Royal Canadian Mint Precious Metal Coins a Hit with Investors and Collectors

Maple Leaf goldThe Royal Canadian Mint has a rich history, striking its first gold sovereign coin back in 1908.  The Mint began production of the world renown Canadian Gold Maple Leaf in 1979 and introduced the 99.99% pure Silver Maple Leaf in 1988.

Investor demand for both the gold and silver Maple Leafs has remained strong year after year.  According to the Mint’s latest third quarter 2013 report, sales volume of the Gold Maple Leaf coins increased during the quarter by 17.5% to 195,000 ounces and sales of the Silver Maple Leaf coins increased by a very robust 40% to 6.7 million ounces.

In addition to gold and silver bullion coins, the Royal Canadian Mint produces a wide variety of stunning coins for collectors and investors including such innovative coins as the $20 for $20, a silver coin that has both a face value and a price of $20 (see How to Buy Physical Silver with a Zero Chance of Loss).

Here is a look at some of the most popular and unique coins currently being sold by the Royal Canadian Mint that are a representation of Canada’s rich culture and history.

1 oz. Fine Silver Coin - 100th Anniversary of the Royal Ontario Museum - Mintage: 8,500 (2014)

1 ounce silver coin commemorating the 100th anniversary of the Royal Ontario Museum.

Fine Gold Coin - Pope John Paul II - Mintage: 1,500 (2014)

Pope John Paul II fine gold coin with a mintage of only 1,500 pieces.

Pure Gold Ultra-High Relief Coin - Matriarch Moon Mask - Mintage: 500 (2014)

Matriarch Moon Mask ultra-high relief pure gold coin.

$20 for $20 Fine Silver Coin - Canada Goose

Fine silver Canada goose coin with $20 face value and a price of $20.

$20 for $20 Fine Silver Coin - Bobcat (2014)

$20 for $20 Bobcat coin made of fine silver.

Silver Bullion Coin Sales Soar In March, Gold Coin Sales Slump – Are Coin Buyers Stupid?

2014-proof-gold-eagleThe March sales report of American Eagle bullion coins by the U.S. Mint showed a large drop in gold bullion coins while sales of the ever popular silver bullion coins soared.

Sales of the American Eagle gold bullion coins in March totaled 21,000 ounces, down by 32% from February’s total of 31,000 ounces and down by a dramatic 66% from March 2013 when 62,000 coins were sold.  Year to date sales through March of 143,500 ounces of the American Eagle gold bullion coins plunged 51% from the comparable period last year when the U.S. Mint sold 292,500 ounces.

The decline in sales of gold bullion is in marked contrast to last year when sales boomed despite an almost 30% decline in gold prices, the worst performance since 1981.  Investors in physical gold across the globe viewed the decline in gold as a buying opportunity.  Sales of gold coins in 2013 by The Perth Mint soared over 40% while sales by the Royal Canadian Mint surged over 80%.  Sales of American Eagle gold coins by the U.S. Mint in 2013 jumped by 6.3% to 800,500 ounces.

Are Gold and Silver Bullion Coin Buyers Stupid?

While gold rebounded in 2014 from a low of $1221 to as high as $1385 before pulling back to a current price of $1284, perhaps buyers are waiting to see if the rally in gold will continue or if gold will decline again in 2014 as predicted by the likes of Goldman Sachs.  Long term it does not matter since the entire concept of fiat money has never ended well over the long term.  According to Bloomberg, the “long term” may be upon us sooner than many think.

Sound money and sound banking policies of governments have always been suspect but since the financial crisis of 2008, the entire concept of sound money has been utterly abandoned on a global basis as central banks printed trillions of dollars to support a financial system that imploded due to over indebtedness.  “Curing” the problem of too much debt with more debt and printed fiat money has in many people’s mind saved the world financial system, a tenuous theory at best.

1881-CC-Morgan-Dollar

According to the Bank for International Settlements, the amount of global debt (primarily government borrowings) has soared by a staggering 40 percent to $100 trillion since 2008 with the U.S. in the lead increasing the national debt to $12 trillion from $4.5 trillion at 2007 year end.  Fast forward to the next recession which could have its roots in a variety of events from the collapse of Japan’s epic empire of debt to the start of a serious military conflict over Ukraine driven by the warmongering military industrial complex in the U.S.  Another serious economic crisis, whatever its genesis, will result in money printing on an unimaginable scale as central banks do the only thing they can do which is to print more money.

Buyers of physical bullion are long term investors who understand what’s happening and are buying the only true money that cannot be debased by government profligacy and rapacious tax policies.  In the meantime, fluctuations in the price of gold caused by speculators such as hedge fund operators who can push around the price of physical gold without ever owning it through the use of futures contracts or options merely provide fantastic buying opportunities when they slam down gold prices.  Long term gold and silver are the only protection to preserve wealth against governments determined to debase fiat money to keep the highly leveraged financial system from imploding.  Current gold buyers will at some point will be holding an asset that soars in value as confidence in central banks completely evaporates as the value of paper money collapses.

American Eagle silver bullion coins meanwhile continue to soar and are a much more affordable option for many buyers compared to gold.  March sales of American Eagle silver bullion coins soared in March to 5,354,000 ounces, up by 43% from the prior month’s sales of 3,750,000 ounces and up by 60% from the March 2013 sales of 3,356,500 ounces.   Sales of silver bullion coins also increased dramatically in 2013 to a new record high of almost 42 ounces, up from almost 34 million ounces in 2012.  Based on annualizing the year to date sales of silver bullion coins, 2014 could turn out to be another block buster year with sales approaching another record of over 55 million ounces compared to 42 million ounces in 2013.

Buyers of physical gold and silver are long term investors who are intelligently protecting their wealth against governments hell bent on inflation and debasement of the currency in order to keep the house of debt cards from collapsing.  Accordingly, short term declines in the sale of gold bullion coins is totally irrelevant.

The Rationale for Owning Gold and Silver Is Stronger Than Ever

1933-double-eagle1By: GE Christenson

Consider our economic world from two perspectives:

The Deviant View – as represented by those who visit deviantinvestor.com, read alternate media, are skeptical of the “official” news, and who critically examine the financial world.
or
The others – call it the mainstream media view.
Deviant readers are more likely to believe:

  • The US government gold supposedly stored in Fort Knox and at the NY Federal Reserve is mostly gone. (Deviant Investor survey showed that over 81% believe that less than 20% of the gold is actually available.)
  • The Federal Reserve will eventually be forced to increase QE instead of reducing it. (Deviant Investor survey showed that 62% believe that QE will be increased to $100 Billion per month, or more, by the end of 2014.)
  • Gold bottomed in December and is going to new highs. (Deviant Investor survey indicates that 92% believe that gold has bottomed and is going to new highs.)
  • The Federal Reserve has, over the past 100 years, debased the dollar, produced inflation, and substantially increased the profits for the financial industry mostly at the expense of the American people.
  • Dollars are unbacked debt based Federal Reserve Notes that work well for daily commerce. However, they have no intrinsic value and, in terms of decades, been not been a good store of value.
  • Gold and silver are excellent for savings and investing at the present time, have intrinsic value, and are a store of value over the long term.

SILVER DOLLARS

Mainstream Media View

  • Of course the gold is still physically stored in Fort Knox and at the NY Federal Reserve! Why would it not be there?
  • QE will be reduced, the economy is beginning to grow, and the economy will appear much healthier in time for the 2016 elections.
  • The Syria intervention that did not happen was mostly about human rights, not gas pipelines or control over energy markets.
  • The stock market is a good measure of economic health, even though it primarily benefits the upper ten percent of the US populace.
  • Pension funds are seriously underfunded, but they will be fine – with only a few exceptions – as always.
  • Social Security is a “pay as you go” retirement plan for Americans; and even though it is a legally sanctioned “Ponzi Scheme,” it is a solid system.
  • Politicians will be politicians, but for the most part, the US political system works with only a modest amount of corruption and inefficiency.
  • If you like your health plan, you can keep it. If Crimea votes to join Russia, they can. If you don’t want to pay taxes, … well, that is a different issue.
  • If you run a too-big-to-fail bank, you need not worry about breaking the law or prosecution, since the bank is necessary for the survival of the economy.
  • Stocks are good, gold is bad. Per Warren Buffett, “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it.” From Charlie Munger, “Civilized people don’t buy gold.”

And there you have it – a simple summary of the Deviant view versus the Mainstream view.

Implications

Suppose that 50% to 80% of the gold in Fort Knox and the NY Fed is either gone, leased, or rehypothecated. Suppose that China has amassed the largest horde of gold in the world. Do these suggest the price of gold is likely to increase over the next few years?

Suppose that the Federal Reserve is forced via market conditions (interest rates rising, the S&P crashing, war, dollar collapse, financial melt-down, or other possibilities) to expand the QE program and to “print and purchase” $100,000,000,000 or more per month of distressed paper, damaged derivatives, flaky mortgage-backed securities, and increasingly large quantities of dumped T-bonds and notes. Do you think this will support the price of gold over the next few years?

money printing

Suppose that gold double bottomed in June and December 2013 after being crushed by the naked short sales in April and June of 2013. Suppose that the unintended consequence of that market take-down was increased demand for physical gold, particularly from Asia and the Middle East. Does the new uptrend and increasing world-wide demand for gold suggest higher prices in the next few years?

Suppose that, for whatever reason, the world launches into another cycle of war, several countries send troops to various spots around the world, and the US engages in one or several hot wars. Will this increase the deficit, increase the national debt, increase financial and social anxiety, upset the stock market, and suggest higher gold prices?

Summary

The Deviant View: Gold has bottomed, the US deficit will expand, the national debt will continue its exponential increase, and consumer prices for the things we need, such as food and energy, will substantially increase. War, fraud, and corruption will increase prices more rapidly.

The Mainstream View: You can keep your health plan, NSA spying on everyone is mostly good, wars keep the economy healthy and moving, the stock market will continue to roar higher, and, as former Vice President Dick Cheney stated, “Reagan proved that deficits don’t matter.”

Another View On Gold: The following are comments that I have paraphrased from another site that dislikes gold. (I disagree with all of these comments.)

  • If and when humanity advances, the value of gold will be zero.
  • The problem is that gold is not an asset because it produces no return.
  • Gold is not only high-risk but also costly since it pays no return.
  • Gold is not a savings vehicle.

I express my opinions, and I expect others to do the same. There will be disagreements. We all experience the consequences of our thoughts and actions. This is why it is so important to perceive economic reality clearly. A belief in current delusions and the uselessness of gold will be expensive.

Additional Reading

Andrew Hoffman: “Deflation,” and Why You Must Own Precious Metals – Now!

Hugo Salinas Price: We Cannot Get Away From Gold or Silver

GE Christenson
aka Deviant Investor

Gold Bear Forecasts $500 Price Plunge Even as Gold Prices Climb

Physical-GoldWhen gold was hitting new highs during 2011 the mainstream media was full of articles with “experts” predicting further price gains but the exact opposite happened.

As speculators, short term traders, and price manipulators  took the price of gold down by over $600 an ounce the experts switched their tune and the chorus of gold bears grew steadily.  By the end of 2013 when declining prices had shaken out all the weak hands in the gold market and all the experts were bearish, prices had nowhere to go but up.

With the start of the new year gold ignored the bears and has been on a tear in 2014.  Two months into the new year with gold bullion and gold stocks far outpacing the gains in stocks and bonds, the “experts” still insist that it’s time to bail out of gold before prices collapse.

Gold vs stocks and bonds

Courtesy: yahoo finance

The Top Two Gold Forecasters selected by Bloomberg remain steadfast in their views that gold is undergoing a dead cat bounce that will soon run out of steam.

“I just see this as a corrective move,” said Robin Bhar, the head of metals research at Societe Generale SA in London and the most-accurate forecaster tracked by Bloomberg in the past two years. “We would still want to be bearish gold,” said Bhar, who expects a fourth-quarter average of $1,050.

“Haven demand plays well when gold is cheap, but it’s no longer cheap,” said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp. and the second most-accurate forecaster tracked by Bloomberg in the past two years. “I’m a little surprised by the volatility in the market, but it really doesn’t change my overall view,” said Smirk, who expects a slide through the year to a fourth-quarter average of $1,020.

Barron’s took note this week of The Gold Rally’s Fatal Flaws forecasting that a tighter Fed policy, low inflation along with an easing of investment demand from China and India will send gold prices lower.

Another concern is that gold prices are already up so much that investors in China and India are suffering sticker shock. The two nations together account for roughly half of the world’s gold demand, buying gold gifts to celebrate weddings, birthdays, and religious festivals. These regular purchases help create a floor for the market and were instrumental in stemming the violent sell-offs that gold suffered last year.

BUT WHILE SOME Indian and Chinese buyers felt they were getting gold on sale in December, when prices dipped below $1,200 an ounce, this is no longer the case. “For gold, physical demand keeps slipping as the price moves up,” says Walter de Wet, head of commodity strategy at Standard Bank.

Even more bearish was commentary by respected analyst Mark Hulbert who notes that the sentiment among short term gold market timers has soared to the bullish side in the past month, typically a contrary bearish omen.

Even more wildly bearish is Claude Erb, a professor at Duke University interviewed by Hulbert who is forecasting a major crash in the price of gold.

 

Erb, along with Duke University finance professor Campbell Harvey, was the co-author of a January 2013 study published by the National Bureau of Economic Research — which I featured in a February 2013 column for Barron’s on the price of gold. The study suggested that gold remained significantly overvalued, even though its bear market at that point was already 16 months old. By the end of the year gold had shed nearly $500 an ounce.

Unfortunately for the gold bulls, Erb’s and Harvey’s study suggests gold is still overvalued. One valuation indicator they point to is equivalent to a stock’s price/earnings ratio: It is the ratio of gold’s price to the Consumer Price Index. According to their calculations, and given the historical average level for this gold/CPI ratio and where the CPI index currently stands, gold’s “fair value” today is around $820 an ounce — about $500 lower than where it now trades.

The reasons articulated above for being bearish on gold and silver have already been well advertised and discounted by the markets which is probably why gold and silver have been soaring this year.  It wouldn’t be surprising if the “experts” are wrong and gold and silver turn out to be the best place to keep your money this year.

U.S. Mint Bullion Coin Sales for February 2014 Show Silver Up, Gold Down

2013-w-gold-eagleSales of bullion coins by the U.S. Mint were mixed in February with silver bullion coins showing an increase and gold bullion coins a decline.

After hitting all time record sales in 2013 sales of the American Silver Eagle bullion coins are off to a slower sales pace in 2014.  According to the U.S. Mint a total of 3,750,000 silver bullion coins were sold in February, up by 381,500 ounces or 11.3% over the comparable prior year period.  February 2014 year to date sales of silver bullion coins total 8,525,000 ounces, down by 2,341,500 ounces or 21.5% from the previous year.

Retail investors have long regarded silver bullion coins as an excellent investment.  The price pullback in silver since 2011 provided an excellent opportunity to make additional purchases at bargain prices and investor took advantage of the situation.  Silver bullion coin demand soared last year to almost 42 million ounces and the U.S. Mint could not keep up with demand.  Demand for silver coin was so great that the U.S. Mint ran out of coins and suspended sales for most of December and part of January 2014.

Sales of silver bullion coins are shown below by year.  The sales for 2014 are through February 28th.  Sales of silver bullion coins have exploded since the financial meltdown of 2008 when the Federal Reserve began printing trillions of dollars out of thin air, a program which continues to this day.

Sales of the American Eagle gold bullion coins slowed dramatically in February compared to last year.  Total sales of gold bullion coins was 31,000 ounces compared to 80,500 last February.   2014 year to date sales through February totaled 122,500 ounces compared to 230,500 ounces for the comparable prior year period.

Gold coin sales can fluctuate considerably from month to month but sales have exploded since the financial crisis in 2008 and remain very high by historical standards.  After declining for three years in a row, sales of gold bullion coins strengthened during 2013 with sales above 2012 levels.

2014 totals through February 28th.

According to Reuters the decline in gold bullion coin demand was due to large sales of coins by hedge fund speculators and other large investors.  As the sale of these coins flooded into dealer vaults they had less need to purchase coin from the U.S. Mint.

american-silver-eagle

The American Eagle silver bullion coins cannot be purchased by individuals directly from the U.S Mint.  The coins are sold only to the Mint’s network of authorized purchasers who buy the coins in bulk based on the market value of silver and a markup by the U.S. Mint.  The authorized purchasers sell the silver coins to coin dealers, other bullion dealers and the public.  The Mint’s rationale for using authorized purchasers is that this method makes the coins widely available to the public with reasonable transaction costs.

U.S. MINT BULLION COIN SALES
MONTH GOLD SILVER
2014 2013 2014 2013
JANUARY       91,500   150,000    4,775,000     7,498,000
FEBRUARY       31,000      80,500    3,750,000     3,368,500
TOTALS     122,500   230,500    8,525,000   10,866,500

With economic and political turmoil spreading across the globe and central banks standing ready to flood the world with paper currencies, gold and silver continue to remain a safe haven for many investors.  It would not be surprising to see gold and silver surge in price this year in defiance of the bearish calls of many analysts.

17 Questions About Gold and Silver The Federal Reserve Needs to Answer

Yikes!  We Have to Look at This for the Next Four Years

Yikes! We Have to Look at This for the Next Four Years

By: GE Christenson

1.  Germany requested that the NY Federal Reserve return the gold that Germany shipped to the United States decades ago. If the gold were physically in the vaults, it would be relatively simple to ship the gold back to Germany. It has not been returned, which begs the question, where is Germany’s gold?

2.  If Germany’s gold is “missing,” what about other gold from other countries that is supposedly stored at the NY Fed?

3.  Does the U.S. gold supposedly stored at Fort Knox and at the NY Fed still exist in those vaults?

4.  The U.S. believes in paper dollars and an unbacked debt based currency. Such currency can be created with little more than a few keystrokes on a Federal Reserve computer. Would the Fed and the U.S. government sell gold into the world market to slow the inevitable weakening of the U.S. dollar? Would the Fed and the U.S. government ship (via intermediaries) substantial quantities of gold to China to prevent dumping of T-bonds and dollars? Are gold sales a “delaying action” to extend the reserve currency status of the U.S. dollar?

CPI INFLATION

5.  If China is converting their excess of dollars and T-bonds into gold, buildings, land, businesses, mines, and so much more, what do they believe is the real value of those dollars and T-bonds?

6.  If much of the German, Italian, French, English, and U.S. gold is “missing” and is now in very strong hands, is the price of gold too low and likely to rise?

7.  What will happen to world bond and stock markets if confidence in the financial system evaporates? Would confidence in the financial system be damaged if the world became aware that most of the gold supposedly stored in government and central bank vaults in the western world is “missing?” Is this the primary reason why the U. S. gold vaults have not been audited for over 50 years?

8.  Why are China and Russia buying large quantities of gold from the western world as well as all of their domestic production?

9.  Paper dollars were, years ago, backed by gold or silver. They are no longer backed by either. Why?

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10.  JP Morgan testified before congress in 1912 and stated, Gold is money. Everything else is credit.” Do you understand what this means?

11.  You have $100,000 to invest today into either gold or S&P 500 Index ETFs. Which investment do you believe will purchase more gasoline in three years?

12.  If you had $100,000 to invest into either gold or Confederate paper money and Confederate bonds in 1862, which would have been the better investment 20 years later?

13.  Voltaire stated about 3 centuries ago that “paper money eventually returns to its intrinsic value – zero.” Most paper money systems throughout history have failed. The current paper systems seem likely to fail in the future. What is the intrinsic value of 80 ounces of gold (about $100,000 at today’s prices)? What is the intrinsic value of 5,000 $20 bills ($100,000)? Which seems likely to purchase more food in three years?

14.  Mayer Rothschild supposedly stated, “Give me control of a nation’s money and I care not who makes its laws.” Was he thinking that if he can create the currency and the legislature can be “influenced” with currency, then he can buy the legislation that his banking interests needed? Was he also thinking that if he can create the currency and he can trade that currency for physical gold, he had procured real wealth for his family?

15.  Nixon closed the gold window in 1971 and assured us that it was only temporary. Since then the (official) U.S. national debt has increased from approximately $398 Billion to over $17 Trillion – up by a factor of over 40. Interest must be paid on that debt. Was the creation of $17 Trillion in debt beneficial for the majority of the people and the economy of the U.S. or only for the political and financial elite?

FEDERAL DEBT

16.  Is the current U.S. paper money experiment going to end differently from any other failed fiat currency system?

17.  In 1971 gasoline in the U.S. cost approximately $0.35 per gallon. Today it costs approximately $3.50 per gallon. The rising national debt correlates with the rising prices of gasoline, tuition, health care, postage, coffee, stocks, gold, copper, rent, food, and so much more. Some of those prices have risen faster (others slower) than the debt, but the trend is the same since 1913 and especially since 1971 – all up substantially. Do you think this is a coincidence? Do you think the ongoing increase in national debt will continue to cause consumer price inflation or that it will, somehow, miraculously, cause prices to go down, in spite of 40 + years of contrary experience?

Conclusions

Is this the end of the world? No! But it is past time to realize that a debt based financial system is largely detrimental to most of the people outside the political and financial elite. Such a debt based system has a limited lifespan and a reset seems both imminent and inevitable. Actions to consider:

  • Eliminate non-mortgage debt and reduce the amount of other debt.
  • Convert variable rate mortgage debt to fixed interest rate debt.
  • Be wary of a stock market that has risen for almost five years and seems to be based more on QE, hope, and artificially lowered interest rates than upon earnings and the health of the economy.
  • Convert paper and digital dollars to gold and silver and store them in a safe depository outside the banking system.
  • Be careful in this increasingly dangerous world.

GE Christenson, aka Deviant Investor

14 Tough Questions Gold Investors Have for the Federal Reserve

Liberty-EagleBy: GE Christenson

“Those who cannot remember the past, are condemned to repeat it.” George Santayana.

1. What mistakes from the past are we condemned to repeat?

2. Since unbacked paper currency systems have always failed in the past, why have bankers and economists promoted an unbacked paper currency system since 1971?

3. Would the Federal Reserve, which is owned by private banks, seek to enrich its member banks and the financial elite by implementing monetary policies such as QE that purchase distressed bank assets and boost the stock and bond markets?

4. Janet Yellen is the new leader of the Fed and new leaders are almost always confronted with a financial crisis early in their term. What should we expect during the next 18 months?

economic collapse

5. ALL paper money systems have eventually failed due to excessive “printing” of the paper currency. How many years of “printing” $85 Billion per month qualifies as excessive “printing”?

6. Human nature changes very slowly if at all. Politicians have lied to most of the people most of the time during the past several thousand years to serve their own self-interest. Are politicians currently lying about ObamaCare, strength of the economy, employment, the NSA, big banks, the IRS, Syria, and so much more?

7. Why does gasoline currently sell for approximately $3.50 per gallon even though it cost only $0.15 per gallon about 50 years ago? Why does a cup of restaurant coffee no longer sell for $0.10? Why do $20 gold coins containing nearly an ounce of gold now sell for over $1,250?

8. The S&P 500 Index is trading near an all-time high and is by most measures and sentiment severely over-bought on a weekly and monthly basis. Is it ready to correct downward?

9. Why is the official unemployment rate falling even though fewer Americans are working and the labor participation rate is at 30 year lows?

10. The Federal Reserve has been levitating the stock market and bailing out banks. Is it possible the Fed policies will backfire and those policies will eventually accomplish the opposite of what the Fed wants?

11. If the national debt of $17 Trillion can never be repaid, and if the U.S. government must borrow to pay the interest every year, and if the Federal Reserve must “print” those dollars, what is the real value of that debt? Is it $17 Trillion or perhaps a great deal less? The economist Hyman Minsky called this “Ponzi Finance” – the final stage of a debt based economic system when payments on the debt must be made from additional borrowing.

money printing

12. If a soaring gold price encouraged people to question the value of the U.S. dollar, and if the U.S. government had the means to suppress the price of gold, would the U.S. government manipulate the price of gold lower?

13. Germany requested their gold be returned from the NY Federal Reserve vaults about a year ago. It has NOT been returned. What happened to the German gold? Further, how much, if any, of the gold supposedly stored in Fort Knox is physically there and not “leased” or otherwise encumbered?

14. Gold has been money – a store of value, divisible, a medium of exchange, a unit of accounting, and intrinsically valuable – for 5,000 years. Paper money has usually been little more than a politician’s promise of integrity and responsibility. Which do you trust – gold or a politician’s promise?

These questions and their answers suggest that:

Drastic restructuring of the current monetary system seems inevitable, whether or not it is imminent.

Before the system resets it seems likely that governments around the world will scramble to locate and nationalize assets in order to maintain their power for a while longer. Capital controls and financial repression via artificially lowered interest rates are already in place. Pension plans, savings accounts, and IRA and 401(k) plans seem vulnerable to partial confiscation, bail-ins, or mandatory investment in government bonds. Such confiscations and bail-ins have already occurred in other parts of the world and could easily happen in the United States.

toned-morgan-dollar

Gold and silver have protected purchasing power and assets for 5,000 years. In this twilight period of the current debt based monetary system it seems likely gold and silver will increasingly be necessary for protection of purchasing power and assets. Are you prepared?

GE Christenson

aka Deviant Investor