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Silver Eagle Bullion Sales Break Records
While collectors have recently focused on the collectible proof version of the coin, the American Silver Eagle bullion coins have been breaking records.
The annual sales total for the one ounce silver bullion coins has now reached 32,790,500 based on the latest figures posted on the US Mint’s website. With another month of sales left to go, this will beat the previous record sales of 28,766,500 reached in 2009 by a comfortable margin.
This will be the third year in a row that a new annual record sales total has been set. The sales for 2008 had reached 19,583,500, which at the time beat the previous high of 10,475,500 set in 2002.
1986-2010 Silver Eagle Bullion Coin Sales
| 1986 | 5,096,000 |
| 1987 | 9,420,000 |
| 1988 | 5,869,000 |
| 1989 | 6,166,000 |
| 1990 | 7,247,000 |
| 1991 | 6,952,000 |
| 1992 | 5,544,000 |
| 1993 | 5,890,000 |
| 1994 | 5,540,500 |
| 1995 | 4,590,000 |
| 1996 | 3,466,000 |
| 1997 | 3,636,000 |
| 1998 | 4,320,000 |
| 1999 | 9,008,500 |
| 2000 | 9,133,000 |
| 2001 | 8,827,500 |
| 2002 | 10,475,500 |
| 2003 | 9,153,500 |
| 2004 | 9,617,000 |
| 2005 | 8,405,000 |
| 2006 | 10,021,000 |
| 2007 | 9,887,000 |
| 2008 | 19,583,500 |
| 2009 | 28,766,500 |
| 2010 | 32,790,500* |
*through November 30, 2010
The Silver Eagles sales total for November 2010 will set a record for the highest monthly sales at 4,160,000 ounces. This breaks the previous high of 3,636,500 just set this May.
This monthly sales for November 2010 actually exceed the total annual sales for two years of the program. In 1996 and 1997, sales had reached only 3,466,000 and 3,636,000, respectively.
Silver Eagle 2010 Monthly Sales
| January | 3,592,500 |
| February | 2,050,000 |
| March | 3,381,000 |
| April | 2,507,500 |
| May | 3,636,500 |
| June | 3,001,000 |
| July | 2,981,000 |
| August | 2,451,000 |
| September | 1,880,000 |
| October | 3,150,000 |
| November | 4,160,000 |
| December | - |
| Total | 32,790,500 |
To the US Mint’s credit, the recent surge in silver bullion sales has not yet resulted in a suspension or reimplementation of the allocation program (a.k.a.) rationing. American Silver Eagle bullion coins were last subject to allocation at the authorized purchaser level from December 2009 to mid-September 2010.
2011 Native American Dollar
30/11/10
2011 Native American Dollar
Today, the United States Mint announced the reverse design selection for the upcoming 2011 Native American Dollar.
The design depicts the hands of Supreme Sachem Ousamequin Massasoit and Governor John Carver exchanging the ceremonial peace pipe after the initiation of the first formal written peace alliance between the Wampanoag tribe and the settlers at Plymouth Bay. The reverse was designed by Richard Masters and sculpted by Joseph Menna.
The obverse of the coin will continue to feature the portrait of Sacagawea and child, designed by Glenna Goodacre.
Under the authorizing legislation for the series, the final design selection is made by the United States Secretary of the Treasury, after consultation with the Committee on Indian Affairs of the Senate, the Congressional Native American Caucus of the House of Representatives, Commission of Fine Arts (CFA), the National Congress of American Indians, and review by the Citizens Coinage Advisory Committee (CCAC).
Both the CFA and CCAC had recommended the selected design, out of the six design candidates originally prepared by the US Mint. The design featuring hands exchanging a peace pipe is more symbolic and less literal than the other design candidates. This is a direction that has been urged by the CCAC in their earlier critiques on the quality of the US Mint’s coin designs.
It is worth noting that the CFA had recommended studying the text and placement of the “$1″ inscription on the selected design, noting that it “may convey an inappropriately commercial association with the coin’s theme of diplomacy.” The US Mint did not make any modification to the design from the original presented.
Silver Repeal Downsized Morgan Mintages
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By Paul M. Green, Numismatic News November 23, 2010 |
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This article was originally printed in Numismatic News.
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The 1894 Morgan dollar is a low-mintage date from the main facility in Philadelphia. With tough dates from Philadelphia being the exception instead of the rule, the 1894 is an interesting story for anyone interested in Morgan dollars.
The story really begins on Nov. 1, 1893, as that was the date when the July 14, 1890, silver purchasing clause was repealed. The clause had been the legal basis for purchasing large amounts of silver to be made into silver dollars. With that clause, the silver to be potentially used to make silver dollars was limited to a number of regular and smaller sources. That meant large silver dollar mintages were a thing of the past, and the impact of the change was seen almost immediately in small mintage totals for 1893 to be followed by other low totals.
At the time of the repeal, the country was almost buried in silver dollars. The June 1893 edition of The Numismatist reported that it “would require 250 freight cars to carry away the $93,000,000 of silver dollars stored up in a single vault of the U.S. Treasury.”
Under these circumstances, it is no surprise that the 1894 would have a mintage of just 110,000 pieces. It is also not surprising that the 1894 was not likely released in large numbers in 1894. In addition to the surplus of silver dollars, the country was also experiencing tough economic times. While the 1893 depression was easing, the economy was still very uncertain. There was also a real weakness in the rare coin market of the day, according to published reports. Even with the second-lowest business strike total in the Morgan dollar set, there was little if any demand for the 1894 from the nation’s collectors and dealers.
Precisely what happened to the 110,000 1894 Morgan dollars is an interesting question. It is possible that some of the mintage might have been destroyed in the Pittman Act melting in 1918.
Thanks to its mintage, the 1894 seems to be a date that was quickly recognized as being better. As bags would appear from Treasury vaults, they were more likely to be noticed and saved. However, the numbers are still sparse.
There are no real supplies of the 1894 in any grade. We can see that reflected in a VG-8 price of $1,425. There are very few other Morgan dollars that top $1,000 in VG-8.
The 1894 does not really get any more available in higher grades. In MS-60, it lists at $3,650. In MS-65, the current price is $49,000. The one good thing is that the 1894 is usually very nice in upper grades.
It may not command the top-grade prices as some others do, but don’t be fooled. The 1894 is tough in any grade and one of the real keys to the set.
Rare Slabs Can Carry Big Premiums!
By Steve Roach on Tuesday, November 30, 2010
Filed Under: Auction News, Coin Grading & Authentication, NGC
By Steve Roach- First published in the December 6, 2010, issue of Coin World
Some collectors wouldn’t agree with the statement, “buy the coin, not the slab,” because to them, the slab is just as important as the coin.
In particular, some collectors have acquired a taste for Numismatic Guaranty Corp. “black” holders.
NGC was formed in 1987 and these holders were used for the first several months of operation, roughly from September through November 1987.
They are similar in shape to today’s NGC slabs, but differ in that the insert securing the coin is black, and the white insert with the coin’s identifying information is on the side that displays the reverse, where the coin seems upside down.
The obverse in black holders is displayed on the side with the NGC stamped logo, which for current holders is on the back of the slab.
Few of these holders remain today. Estimates on the number of surviving black holders range from 35 to 200, and they are collected as novel relics of the early days of third-party coin grading.
Occasionally they turn up and trade at auction.
At a Nov. 14 eBay auction, a New Jersey seller offered a 1924 Saint-Gaudens gold $20 double eagle in an NGC Mint State 62 “black” slab. (Pictured, image courtesy of Danielle’s, on eBay as onionsavenged)
It sold for an astonishing $3,805. In comparison, one major dealer is selling current-holder NGC MS-62 double eagles for $1,600 and MS-66 coins for $2,850.
While grading was perhaps more conservative back in the early days of NGC, and the seller said the coin “looks like a MS64,” the huge premium must be attributed more to the holder than to the coin.
Nine bidders competed for the coin, with the underbidder dropping out at $3,755. The seller set the starting bid at $2,750 – a price nearly comparable to a current holder NGC MS-66 piece.
While the black holders were flattering to brilliant silver coins or lustrous Mint State gold coins, the holders did little to flatter dark coins and copper, and the holder was retired at the end of 1987.
There is even a 420-page book on slabs by Michael Schmidt, Third Party Grading/Certification Services, that covers more than 80 companies that produced slabs and 200 varieties of normal production slabs.
Folks Scurry to Cash in Gold, Silver
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By Patrick A. Heller November 30, 2010 |
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The Michigan State Numismatic Society (MSNS) Fall Convention was held in Dearborn this past weekend. My company occupied two booths, but we were so busy that customers had to wait almost all day long on Friday. Activity slowed down for Saturday and Sunday, but it was the busiest MSNS show we have enjoyed in several years.
Over the years my observation about the typical Michigan collector is that, relative to collectors nationwide, they are more price sensitive than quality-oriented. As the prices of gold and silver dipped on Friday from Wednesday’s closes, I anticipated that there would be limited liquidation of gold and silver bullion-priced items and more interest in buying from us.
My expectations were mostly off the mark. It turned out that the price of silver was high enough, about 60 percent higher than a year ago, that many people were there to cash in their holdings. We purchased a lot more silver and gold than expected.
On the demand side, our retail sales were much lower than anticipated. A surprising number of people stopped at our table to ask if we were selling any of our gold coins and ingots or silver ingots at “spot.” These bargain hunters were apparently not aware that all gold coins and ingots are trading above spot price between dealers as are all silver ingots. Consequently, we had to turn away these prospective buyers.
On the other hand, we sold large quantities of gold coins to other dealers at the show.
There does seem to be some sticker shock among potential small-time silver buyers who just cannot accept (and sometimes aren’t even aware) how much the spot price of silver has increased this year.
Professional traders and those contemplating larger transactions don’t seem to stuffer from sticker shock. On Monday, Nov. 29, my company enjoyed its highest daily volume of retail sales in our nearly 40 year history.
In early November, when the spot price of silver was about $23, I forecasted a more than 50 percent possibility that the price of silver would surpass $30 before the end of the month. Although it hasn’t reached that level, hitting a peak at $29.36 two weeks ago was more than 90 percent of the way from $23. Those who may have traded in early November on the basis of my projection that silver would rise significantly are still happy with the results.
Premiums are little changed in the past week, but I expect them to rise further in the near future. When the U.S. Mint stops accepting orders for 2010-dated gold and silver Eagles to start production of 2011-dated coins, this will almost certainly spark a premium jump on U.S. Mint products and probably other coins and ingots. That day is coming soon. Don’t wait until after premiums rise to make your purchases.
Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at CoinUpdate (http://www.coinupdate.com). His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).
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| November 23, 2010 | |
| URGENT UPDATE TO REPEAL NEW 1099 LAW | |
| YOUR CALLS & EMAILS NEEDED BY MONDAY, NOVEMBER 29THYour Action is Needed: Contact your Senators and urge them to support the Johanns Amendment when it comes up for a vote on Monday, November 29.On Monday, November 29, the Senate will vote on Senator Mike Johanns’ (R-NE) proposal to repeal the new Form 1099 filing requirements. The fully funded proposal will be considered as an amendment to the Food Safety Modernization Act, S. 510. Senator Max Baucus (D-MT) has proposed a Form 1099 repeal that is virtually identical to Senator Johanns’ proposal but lacks an offset to maintain budget neutrality. Senator Johanns’ amendment directs the Office of Management and Budget to identify $39 billion in unspent and unobligated accounts to replace the revenue that might have been generated by the 1099 paperwork mandate.
Go to www.senate.gov or www.house.gov to find your Members of Congress and their websites. OR TELEPHONE 202-224-3121. (Thanks to ICTA member Nick Pyle for this “hot off the presses” update.) |
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| IN THIS ISSUE: | |
| November 20, 2010 | |
| CLEARING UP 1099 CONFUSION | |
| We’ve had many inquiries from members about the new 1099-MISC requirement (Section 9006 in the health care bill) which is scheduled to go into effect in January of 2012 (not this coming January, NEXT January.) Of immediate interest is any action that may be taken in this lame duck session of Congress.The new regulation has also caused many coin dealers to become confused about the existing Broker Reporting 1099b reporting requirement, so here’s a recap:Current Broker Reporting Law – IRS Form 1099b. This is in effect NOW (has been since 1983) and is how you report your purchases of certain commodity-related products. [Gold, silver, platinum, palladium bars/ingots; Gold 1 ounce Maple Leaf, Krugerrand & Mexican Onza coins; $1,000 face value bag “junk” 90% silver coins.] Check the ICTA website (www.ictaonline.org) at the “Members Only” tab for a complete listing of the quantities that require reporting of these items (scroll through the “Special Reports”.)
As a reminder, this 1099b reporting is Federal Law — it is not optional. Some dealers seem to think this doesn’t apply to them. Perhaps they weren’t around when others were being audited and being hit with large fines. The original 1983 proposed law was so broadly written that dealers were required to report as little as one 90% silver dime! ICTA negotiated directly with the IRS, and this much-less burdensome regulation was the result. But note that the result is less burdensome, not eliminated! Especially in this active precious metals market, even the smallest coin dealer may be buying enough to trigger these thresholds on some transactions. And with all the talk about the new 1099 law, do you want to run the risk that you won’t be audited? (With the new 1099 law, it is very clear that capturing tax revenues via 1099 information returns is on Uncle Sam’s mind!) Basic penalties include fines of $50 per form not done; $50 per form that was not sent to the customer (which of course you didn’t do since you didn’t fill out the form to begin with); $50 per form that was not sent to IRS (ditto.) If you routinely do not file required 1099b forms, you can be pretty sure there will be other fines and penalties for non-compliance. The NEW 1099 Law - IRS Form 1099-MISC This 1099 law (Section 9006 of the health care bill passed earlier this year) is scheduled to go into effect January, 2012. Under this law you will have to report ALL purchases of goods and services over $600 (including smaller purchases aggregated over the full year.) Yes, that includes your retail clients, your fellow dealers (no more corporate exemption), office supply stores, show travel providers (hotels & airlines), etc. Small businesses and associations (including ICTA) have protested this provision so fervently that Congress – and even President Obama – have acknowledged that it is a problem. Potential fixes include repeal of Section 9006 (ICTA’s strongly preferred solution), raising the dollar amount threshold to $5,000, exempting businesses with fewer than 25 employees, and exempting transactions paid for via credit or debit cards. However, the administration is extremely sensitive to the word “repeal” as applied to any part of the health care bill. What will happen – if anything – during the lame duck session of Congress? Some believe the current lame duck session is a GOOD time to address the 1099 issue before the new session where some (especially new) legislators will be calling for a repeal of the entire health care act. Senator Max Baucus is now entering the fray, as per a quick update from CERT’s lobbyists as of November 20th: Senate Finance Committee Chair Max Baucus, D-Mont., yesterday offered an amendment which would repeal new Form 1099 requirements passed as part of the healthcare reform law earlier in the year. The proposed amendment, which was attached to the FDA Food Safety Modernization Act (S. 510) — now being debated on the Senate floor — would roll back new rules requiring corporations to file a Form 1099 for payments for goods or services to a single business totaling more than $600 annually starting in 2012. Lawmakers could vote on the amendment after they return from the Thanksgiving holiday the week of November 29. Earlier in the month, Baucus introduced the Small Business Paperwork Relief Act (S. 3946), which also would have repealed the provision. We anticipate that the amendment will pass and we will monitor the FDA bill as well. Congress is serious about repealing the Form 1099 reporting requirements and the issue is now bipartisan. This is a top priority issue for ICTA, and we will be keeping you posted on any changes or proposed changes where we may need you to weigh in with your Members of Congress. Remember, the Congress that convenes in January, 2011 will be a very different one and somewhat unique. There will be a number of “Mr. Smiths” going to Washington as some newly elected Members of Congress have never served in any elected government position before. Any information in this newsletter is provided to assist ICTA members and is not intended to be used as a substitute for actual advice from a professional tax or legal adviser. |
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Featured News
News and Analysis regarding scarce coins, coin markets, and the coin collecting community #28
A Weekly Column by Greg Reynolds
On March 25, 2010, David Hall and Don Willis, the top officials at the Professional Coin Grading Service (PCGS), announced and explained the PCGS SecurePlus™ program, known for weeks before as “The Big One”! For most grades between EF-45 and MS-68 inclusive, the PCGS begin assigning plus grades when warranted, such as 45+ or 63+. As the rival of the PCGS, the NGC, incorporated plus grades into their system two months afterwards, and the PCGS later allowed for standard submissions to be eligible for plus grades, not just coins submitted via the SecurePlus tier, plus grades now seem to be a secondary aspect of the program. In my view, the emphasis should always have been, as it is now, on the ‘Secure’ aspects of the SecurePlus program, which are truly revolutionary and have tremendous implications for the future of markets in rare coins.
I hope that those who are not entirely familiar with the PCGS SecurePlus program find this column (part 1) to be very clear and educational. In my opinion, the explanation of the PCGS SecurePlus program on the PCGS website is not extremely clear and, over the past six months, I have found that many collectors are confused about this program.
Collectors who are already very familiar with the PCGS SecurePlus program, and with PCGS policies in general, may wish to wait for part 2, next week. In part 2, Don Willis, the president of PCGS, responds to my explanation and a proposal for the reform of PCGS submission policies is put forth. The views of John Albanese, Mark Feld and Ira Goldberg are included.
In the first section, I provide a definition of the SecurePlus program. In the second section, I explain the benefits of the coin identification part of the SecurePlus program. In Section III, I emphasize that submitters of coins to be graded by the PCGS may choose between the SecurePlus program and standard submission options.
I. The PCGS SecurePlus Program
The SecurePlus program brings three new technologies to coin grading. (1) The introduction of a new technology for scanning and coin identification, through the use of CoinAnalyzer devices that are produced by Richard Haddock’s CoinSecure firm. An image and data from each scanned coin is entered into a database, and, if the same coin is scanned at the PCGS in the future, it will be identified as a coin that was previously scanned.
(2) The use of ‘Sniffer’ technology to detect added foreign substances and changes in the surfaces, the metal, on coins that have been deliberately harmed by coin doctors for the purpose of deceiving experts and others into believing that doctored coins merit higher grades than were (or would have been) assigned before such coins are doctored. Additionally, the adding of metal to the surfaces and/or the deliberate heating of the metal on the surfaces of a coin will, hopefully, be detectable by ‘coin sniffer’ technology as well. The PCGS has already begun using ’sniffer’ technology to an extent, and will be phasing additional sniffer applications into the PCGS SecurePlus grading program over time. I will devote a future piece to coin sniffer technology. The subject is so complicated that it must really be treated in a long article.
To gain some understanding of coin doctoring and the urgent need to contain the coin doctoring problem, please read five previous pieces of mine. Last year, I devoted a series of three articles to the reasons why naturally toned coins are preferred and the topic of coin doctoring is discussed at length therein (part 1, part 2 and part 3). This year, I wrote two columns that address the PCGS lawsuit against alleged coin doctors, on June 3rd and on Sept. 8th. In these two columns, coin doctoring is defined, the lawsuit is analyzed, and the seriousness of the matter is emphasized.
(3) The third ‘Security’ issue relating to the PCGS SecurePlus program is the anti-counterfeiting technology incorporated into the new inserts. In each PCGS holder, there is a paper insert that provides information about the coin contained therein. A gold eagle with a shield is pictured on an insert in the PCGS holder that houses each coin that has been graded under the PCGS SecurePlus program. Unethical businesses in China have produced forgeries of PCGS holders with misleading grades printed on fake inserts. New anti-counterfeiting features are important, though less so than the coin identification and sniffer technologies that constitute the core of the PCGS SecurePlus program.
CNBC Senior Energy
Gold prices have risen the most in two weeks as investors seek a safe haven, but it’s hard to tell whether today’s gains signal a short-term bounce or continuation of the momentum that has driven prices up more than 25 percent so far this year.
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Anthony Bradshaw | Photographer’s Choice RF | Getty Images
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Traders were liquidating positions last week ahead of today’s options expiration and as the rollover continues from December futures into 2011 contracts.
But yesterday’s late day rally continues today as concerns over Europe, North and South Korea and the U.S. economy push investors into this precious metal.
Eurozone Uuncertainties
Credit markets are now focused on deficits in Spain and Portugal after Ireland’s rescue package. Yet growing concern the bailout was really just “a hidden rescue of banks” not only in Ireland but in continental Europe is pervading the markets.
The euro/dollar continues to plummet, breaking below $1.34, a key support level, falling to a nearly two-month low. Investors are seeking a safe haven in the U.S. dollar, but gold—the “alternate” currency—has posted even greater gains.
Meanwhile, gold and gold receivables held by euro zone central banks rose by 2 million euros to 334.412 billion euros last week, according to the European Central Bank. The ECB said it was trades in gold coins from one eurozone bank in particular that contributed to the rise.
U.S. and Russia Assess Korean Firefight
As traders continue to assess the potential impact, MF Global precious metals analyst Tom Pawlicki points out that “looking at history between North and South Korea, this one looks like nothing compared to some of the other provocative acts.
Fighting between the Koreas has seen far more deaths in the past: 115 killed in a bombing in 1987, 46 dead after an explosion earlier this year. Pawlicki says “a couple of artillery shells won’t seem like much in a couple days. I wonder how long the safe haven bid in gold will be maintained.”
Housing Data Disappoints
Finally, we can look right here at home for economic uncertainty adding to the investment demand for gold. The release of October’s existing home sales data, still at record lows, also coincided with the jump in gold to session highs. The housing data implies ongoing weakness in the economy and gold serves as a safe haven from those woes as well.
Traders are also anxiously awaiting the latest FOMC minutes (release schedule for 2pm ET today) to find out how much support there was for QE2 at the last meeting. Also, “if there is a downward revision in GDP forecast, then this could indicate more low inflation, low growth and more QE which is positive for bullion,” says HSBC precious metals analyst Jim Steel.
Some bullish factors may remain into the long weekend, but once options expire—as traders say there is a great deal of open interest hinging on this expiration—gold prices could trend lower.
On the heels of long liquidation in the gold futures market last week, demand for gold exchange traded products has been steady for most of the month, but fell slightly on Monday. A sign, perhaps, that the momentum that has spurred this year’s gold rush may slow down as investment funds close their books and wrap up trading in the final month of the year.
Higher premiums don’t seem to hinder demand for Silver American Eagle Coins
By Steve Roach on Tuesday, November 23, 2010
Filed Under: General Collecting, Gold & Silver Bullion, US Coins, US Mint, bullion coins
By Steve Roach – the Rare Coin Market Report – Coin World
While bullion markets continue their wild fluctuations, demand for American Eagle 1-ounce silver bullion coins remains vibrant.
In October, the United States Mint increased the premium charged to its authorized purchasers for American Eagle silver bullion coins from $1.50 to $2 per coin. The premium was increased in 2009 from $1.40 to $1.50 per coin and in 2008 from $1.25 to $1.40 per coin.
While Proof American Eagle silver coins may be purchased directly from the Mint, the Mint sells the silver bullion coins only to dealers in minimum 25,000-coin shipments.
However, the premium increase seems to have had no noticeable impact on demand, as the Mint has sold more than 30 million silver American Eagles thus far in 2010, eclipsing 2009’s sales record of 28,766,500 pieces.
Surely silver hitting 30-year highs including a flirtation with $29 earlier in November has helped keep demand for the attractive and easily portable silver American Eagles robust. Demand for the coins throughout the holiday gift-giving season will mean that 2010 sales figures will continue to climb.
Proof 2010-W American Eagle silver coins went on sale Nov. 19, priced at $45.95, with a 100-coin household limit.
The Mint’s Web site already warns customers of possible ordering delays on Nov. 19, due to the deluge of customers who are likely to order in light of “unusually high demand.”
Until Proof 2010-W coins enter the marketplace, wholesalers are paying up to $57 for earlier Proof American Eagle silver coins in original Mint packaging.
Grading service population reports show that 2010 American Eagle silver bullion coins are extremely well-produced. Of the 44,160 graded by Professional Coin Grading Service so far this year, a whopping 36,470 pieces have received Mint State 70 grades. Currently PCGS MS-70 2010 silver American Eagles are selling in online auctions for $60 to $100, while certified MS-69 representatives can be found for around $35 and uncertified examples are seen at $30.
In large quantities, 2010 American Eagle silver bullion coins are available from wholesale dealers at silver spot price plus $2.60 per coin.
November 22, 2010 16:44 GMT
Oil prices moved modestly higher in European session as an EU/ECB/IMF bailout for Ireland may help ease risks of contagion to peripheral countries. Currently trading at 82.82, the front-month contract for WTI crude oil rose after recording 2 consecutive weekly losses. Fuel prices also climbed as weakness in USD drove demand for commodities. Precious metals traded within narrow ranges with a positive tone. Both silver and palladium gained more than +1%, outperforming slow crawls of gold and platinum.
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The program to fund Ireland would be financed from the European financial stabilization mechanism (EFSM) and the European financial stability facility (EFSF). It would also possibly be supplemented by bilateral loans to be negotiated by EU Member States with the UK and Sweden standing ready to consider a bilateral loan. The IMF also said it ‘stands ready to join this effort, including through a multi-year loan’.
Market confidence has been boosted today but some investors, including us, worried that sovereign crisis in peripheral European economies will not be resolved after the rescue plan. The next country in focus is Portugal. Although the EU denied that Portugal may need to tap external funds as does not have the same size of problems in the banking sector as Ireland. However, the problem in Portugal is slow growth and high deficits. More importantly, if Portugal is unable to regain market confidence, it will eventually have the same fate and Ireland and Greece.
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Societe Generale said palladium, gold and silver will extend their rallies in 2011 and precious metals will outperform agricultural products. The investment bank forecasts gold price will rise to 1500 to 1600 in 2011 while silver and palladium will rise 19% and 21% respectively.We are also bullish on precious metals and believe palladium will be the best performer in the complex. As we mentioned in the weekly report, Johnson Matthey estimates palladium demand will jump +12.26% y/y in 2010, following contraction of around -8% over the past 2 years. Although supply will increase for the first time in 3 years, surplus will only be around 45K oz, the small level since 2000. Potential supply shortage supply in Russia may result to significant palladium deficit in 2011. We find ourselves more optimistic on palladium’s outlook than Johnson Matthey, especially on Chinese demand. In the interim report, Johnson Matthey said that ‘the demand outlook for palladium is so strongly weighted towards Chinese economic and industrial growth that any softening of that growth could reduce demand, moving the market closer to balance’. While we agree that acceleration in China’s tightening measures to curb inflation and asset bubbles will slow demand for palladium, rise in living standards will increase domestic demand for vehicles. Moreover, new emission regulations will also stimulate uses of palladium as autocatalysts.