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Gold Upside Limited Despite Comex Repositioning
By BullionVault on March 4, 2013 8:20 AM
THE SPOT gold price dropped to $1575 per ounce Monday morning in London, broadly in line with where it ended last week, while stocks ticked lower and the Euro held steady near two-month lows against the Dollar ahead of this Thursday’s European Central Bank policy meeting.
“For gold, the trending and momentum indicators are pointing lower,” says a note from UBS, “indicating any upside in the near-term must be limited.”
Gold in Sterling dipped below £1050 an ounce, while gold in Euros fell back below €39,000 per kilo (€1213 per ounce) this morning as the Euro traded either side of $1.30.
“The political uncertainty in Italy is a good reason to be bearish on the Euro,” says Saxo Bank currency strategist John Hardy.
On New York’s Comex exchange, the so-called speculative net long position of gold futures and options traders – calculated as the overall difference between ‘bullish’ and ‘bearish’ contracts held by hedge funds and other professional money managers – rose in the week ended last Tuesday, a week after hitting its lowest reported level since 2008, weekly data from the Commodity Futures Trading Commission show.
The number of short gold futures positions held by professional money managers fell meantime.
The previous Tuesday saw the highest number of short gold positions held by speculative traders reported this century.
The week ended last Tuesday saw gold fall below $1600 an ounce for the first time since August.
“Clearly, [futures market] participants were encouraged to re-position at these lower prices,” says Standard Bank commodities strategist Marc Ground.
“From a risk/return perspective, we believe that the value in being short gold has declined substantially and that the largest part of the decline in the gold price has taken place already.”
The world’s biggest gold exchange traded fund, SPDR Gold Trust (ticker: GLD), continued to see outflows last week, with the volume of gold held to back its shares hitting a seven-month low at 1253.9 tonnes Friday.
“While ETF investors have been making a significant retreat from the gold market of late, demand for coins has not dropped off,” says today’s commodities note from Commerzbank, citing February’s US Mint sales.
In China meantime, the world’s second-largest gold buying nation, today’s closing price for the Shanghai Gold Exchange’s most popular gold forward contract was 320 Yuan per gram, equivalent to just under $1600 an ounce, a premium of around $20 an ounce over the international spot price.
“Most likely we will see banks bringing the metal onshore to take advantage of the wide spread,” one Hong Kong-based trader told newswire Reuters this morning.
Gold dealers in world number one India meantime reported light demand as the Rupee touched a two-month low against the Dollar.
Silver dipped below $28.70 an ounce this morning, while other industrial commodities were broadly flat.
In the US, interest rates are likely to stay near record low levels until the economic situation improves significantly, Federal Reserve chairman Ben Bernanke said in a speech on Friday.
“In the current environment,” Bernanke told an audience in San Francisco, “both policymakers and market participants widely agree that supporting the US economic recovery while keeping inflation close to 2% will likely require real [inflation-adjusted] short-term rates, currently negative, to remain low for some time.”
In the UK meantime the Bank of England could announce a further £25 billion of quantitative easing when it makes its latest policy decision this Thursday, according to a note from Standard Bank.
The nominee to be next Bank of Japan governor, Haruhiko Kuroda, said Monday the BOJ “will do whatever we can do” to end deflation in Japan.
Speaking at his confirmation hearing, Kuroda added that the central bank has not bought enough assets and should buy longer-dated bonds, saying it should send a clear anti-deflationary message.
Patience Thin for Gold Investors on Worst Price-Drop in 9 Months, ETF Liquidation
By BullionVault on February 28, 2013 8:39 AM
The PRICE of gold slipped again below $1600 per ounce on Thursday – a level first reached on the way up in July 2011 – to head for its worst one-month drop since May as world stock markets rose.
Broad commodity markets were little changed, while silver bullion crept back above $29 per ounce.
Down 4.5% in Dollar terms since the end of January at $1590 per ounce, gold for Euro investors was headed for a 1.8% monthly drop at €1212.50.
The Sterling price of investment gold was 0.9% lower at £1049.
“Patience with gold seems to be wearing thin amongst many investors,” says a note from BNP Paribas, “as illustrated by the low positioning in Comex gold futures and outflows from ETF [trust fund] holdings.”
Exchange-traded trust funds backed by gold – a new vehicle for cash-price exposure when launched a decade ago – have seen their assets shrink by a record 100 tonnes this month to hit a 5-month low of 2,508 tonnes according to Bloomberg.
“We have seen a massive reshuffling [in precious metals investment] in the past two months,” says Commerzbank’s daily note, pointing to the sharp rise in platinum and palladium ETF holdings so far in 2013.
“The gold price is unlikely to make any significant gains for as long as outflows from the gold ETFs continue. Nonetheless, we do not believe the current weakness in the price of gold to be sustainable.”
Turning bearish on gold late in 2012, however, Credit Suisse analysts today write that “For the gold price to perform better than we expect, there needs to be not just an end to liquidation…but a return to net buying by exchange-traded fund investors.
“It is notable, we think, that the liquidation has been spread across funds listed in the USA, London and Zurich.”
European stock markets meantime rose Thursday morning, after the S&P500 index in New York closed last night above 1500 points – a level reached in Jan. 2000 and July 2007, but with near-50% drops in between.
The Euro currency gained and then lost half-a-cent at $1.3100, but Italian bond yields eased back despite there being no progress in Rome building a new government after this week’s national elections.
“Inconclusive result is credit negative,” said the Moody’s rating agency yesterday, as anti-austerity comic Beppe Grille – winner of the popular vote, and speaking only to the BBC rather than Italian media – spurned the idea of dealing with either Democratic Party chief Pier Luigi Bersani or former prime minister Silvio Berlusconi.
“Italy cannot but follow the European path,” said Italian president Giorgio Napolitano this morning on a visit to Berlin, “taking on its responsibilities and making its share of sacrifices.”
Napolitano set a date of 15th March for “possible consultations” on a coalition solution to begin.
Noting how Pope Benedict has addressed “ethical concerns” about economics during his 8 years in the role, “Catholic Social Doctrine makes absolutely clear,” said European Central Bank president Mario Draghi yesterday, “that subsidiarity has to be paired with support.
“What binds these together is trust…Trust that each will put its own house in order – even if it is politically difficult.”
Pope Benedict was today set to be airlifted from the Vatican to the popes’ summer residence, where he will relinquish the Papal seal and retire as a monk.
Data revisions meantime showed Spain’s economy shrinking faster than first reported at the end of 2012, down by 1.9% in the final 3 months.
Spain’s inflation rate held at 2.8% this month, new data said. Across the 17-nation Eurozone however, consumer prices actually fell 1.0% in Jan. from Dec. according to the Eurostat agency.
Germany’s unemployment level fell this month to 6.9%.
“[In Spain] more than fifty percent of young people cannot currently find jobs,” said Draghi on Wednesday.
“But our answer – both to those who want [the ECB] to do less and to those who want us to do more – is the same: we will preserve price stability. This is our mandate.”
Spain’s giant Bankia group today reported a record €19 billion loss for 2012, when it also received €18bn in aid according to the BBC.
Speaking to the US House Financial Services Committee meantime, Fed chairman Ben Bernanke repeated his comments from Tuesday about the benefits of quantitative easing. But he also spoke at length about potential “exit strategies” from the policy.
Rare Coins, Precious Metals and Paper Money Off site News and Articles this Week
Through CoinWeek’s Content Partnerships and the original articles we produce weekly, Coinweek is able to deliver organic content form over 26 numismatic writers and experts and offer in excess of 50 news stories and featured articles every week. That is in addition to the ONLY numismatic video coverage of virtually every major coin and currency show in the US and Europe, and CoinWeek exclusive features such as “Cool Coins” .
At the same time, there are numerous other news stories related to coin collecting that are posted daily on the Internet that we do not cover or that are presented by other organizations.
This Page on CoinWeek, – RARE COIN, BULLION & PAPER MONEY NEWS THIS WEEK is a compilation of Off-Site news stories with direct links to the sources of these articles. CoinWeek presents these to provide our readers with full access to as much of the news within the numismatic world as possible.
|Bloomberg||- Feb 24, 2013||
|IUPUI Newscenter||- 37 minutes ago||
|Huffington Post||- 22 hours ago||
|GlobalPost||- 22 hours ago||
|Catholic News Service||- Feb 26, 2013||
|StreetAuthority||- Feb 26, 2013||
|East Valley Tribune||- Feb 24, 2013||
|Hurriyet Daily News||- Feb 26, 2013||
|Kingwood News||- Feb 26, 2013||
|News-Antique.com (press release)||- Feb 25, 2013||
|Greater Lansing Business Monthly||- Jan 31, 2013||
|ETF Daily News (blog)||- Feb 26, 2013||
|Huffington Post (blog)||- Feb 12, 2013||
|Bloomberg||- Feb 13, 2013||
Why Hyperinflation is Coming and How to Survive It and Prosper
By Barry Stuppler on February 25, 2013 4:09 PM
By Barry Stuppler, a CoinWeek Contributor …….
I have just completed a 40-page booklet with the same title, which I am proud to say was the completion of a 3-year research project. I believe it is the best study of Hyperinflation, Gold Standard and Gold confiscation that I have ever seen and it’s available to read and download at www.coinmag.com.
This study describes the steps leading up to hyperinflation in the US, from leaving the gold standard domestically in 1933 and internationally in 1971 through the recent and ongoing creation of trillions of fiat dollars through “stimulus” and “quantitative easing” programs.
Hyperinflation has happened twice in the US, during and after the Revolutionary War and the Civil War. Globally, it happened 31 times in the 20th Century. One common prelude to hyperinflation (in addition to creating money to monetize national debt) is financing wars by borrowing money.
Although there are many warning signs, when hyperinflation finally strikes, it strikes suddenly, so it’s imperative to prepare before it’s too late. Iran’s rial recently sank 80% against the US dollar. The Iranian government suspended gold trading and closed access to currency exchanges for ordinary citizens.
Owning gold and silver is the best way for investors to protect their capital and even profit from inflation. However, the federal government may take steps that would adversely affect owners of bars and modern bullion coins.
As chairman of the Gold & Silver Political Action Committee (www.goldandsilverpac.com), I’ve spoken with many federal legislators and regulators. As inflation accelerates, measures that might come into effect regarding the purchase and sale of gold and silver bullion include
• Increased reporting regulations
• An excess profit tax
• Export/import limitations
• Imposition of a value added tax (VAT)
When hyperinflation itself kicks in, there are two more extreme actions the federal government might take: gold and silver confiscation, as happened in the US in 1933, or a return to the gold standard.
Pre-1934 gold coins would almost certainly be exempted from gold confiscation, and would be likely to greatly rise in value if there were a confiscation. In the event of a return to the gold standard, the value of bars and modern bullion coins would be fixed by the government, but pre-1934 coins with numismatic value would have the potential to further rise in value.
Everybody has a picture of hyperinflation—frantic searches for basic necessities and wheelbarrows full of paper money come to mind. In 1956, economist Phillip Cagan famously defined hyperinflation as an average monthly price increase of 50% or more. At that rate, a $10 item would cost $1,946 just one year later. Unfortunately, most of the 31 episodes of hyperinflation in the 20th Century followed the Cagan model.
Ordinary inflation precedes hyperinflation. Many politicians, Fed governors, economists and pundits (the same ones that said the housing crisis would be restricted to subprime mortgages and would be over in a year) say inflation is low and under control. They point to Bureau of Labor Statistics (BLS) data showing the Consumer Price Index (CPI) running at 2.2%.
The BLS uses complicated social assumptions and mathematical formulae to arrive at the CPI. These assumptions and calculations have changed over time. Shadow Government Statistics reports that if the rate of inflation were calculated today as it was in 1990, it would be 5.8%. If it were calculated based on 1980 metrics, it would be 10%.
I assume that, like me, you buy food, gas, clothes, health insurance and/or medical care, and pay or have paid for college tuition. Based on real life, do you agree with the official BLS data that the rate of inflation is low?
From November 2002 to November 2012, despite the Great Recession, the index of all commodities (including metals, grains, agricultural products, oil, and coal) is up 202%. Do you believe manufacturers and processors are eating those costs rather than passing them on to consumers?
|Central Bank Gold Purchases|
Are central banks concerned that the US dollar and other major currencies are undergoing devaluation? Until 2010, the world’s central banks were net sellers of gold. Suddenly, they turned into net buyers. Central bank leaders assure us that they have inflation under control, yet they buy gold. Actions speak louder than words.
Central banks, including the Fed, operate on the assumption that their chief weapon for fighting inflation is increasing interest rates. They tend to believe that even tiny increases in interest rates will curb inflation by slowing economic growth and giving investors alternatives to buying gold and silver as inflation hedges. However, in the 1977-1980 gold bull market, the price of gold rose even while the prime interest rate reached 11% and tripled with the prime at over 15%. That bull market ended without hyperinflation. A combination of historically high interest rates and wage and price freezes sent the country into a recession and gold into a bear market.
The United States is in a different place today, facing stiffer global competition, higher federal deficits and national debt, and more committed to stimulating the economy through prolonged low interest rates. In 1980 the US federal debt was below $1 trillion. With its debt now above $16 trillion—and having to constantly borrow money to make debt payments—it’s virtually inconceivable that the federal government would allow interest rates to approach those levels, unless the US dollar were already essentially worthless as a result of hyperinflation.
I talked about the importance of owning pre-1934 gold and silver coins. I also advise my clients to own physical gold and silver as opposed to ETFs or mining shares. My booklet goes into this question in detail. Here, suffice it to say that ETFs are paper assets which, under the social and economic disruption accompanying hyperinflation may well be inaccessible (or, worse, not fully backed by precious metal). As for mining shares, the very factors that cut into mining profits—labor strife and shortage, energy costs, environmental regulation, nationalization, tax increases—make physical gold and silver scarcer and drive their prices higher.
It may take 3-4 years, but as the velocity of money going through our economy increases, it will drive down US unemployment and reenergize our real estate market. However, we will also see serious global inflation with a high likelihood of hyperinflation within the United States. By the time we reach that stage many of the central banks of economically strong nations such as China, India, Brazil and Russia will have exchanged much of their US Dollar holdings for gold, helping push the price of gold to over $6,000 per oz. We are also likely to see some governmental regulations, restrictions, limitations or additional taxes on gold investors by that point, in an attempt to slow the exodus from paper money. The price of silver will be over $100 per oz. How much over will depend on the strength and speed of the global economic recovery and any barriers to ownership implemented by western nations.
For a detailed examination of the evidence for hyperinflation and my conclusions about how to survive it and prosper, please read the full report, available free at www.coinmag.com.
Barry Stuppler has been a professional numismatist for over 50 years and is well known as an advocate for collectors and investors. He has helped thousands of first-time and experienced coin and precious-metals investors and collectors become successful. Barry is the current chairman of the Federal and California State Gold & Silver Political Action Committee (www.goldandsilverpac.com) and is in constant communication with legislators and lobbyists regarding political events that affect the rare coin and precious metals community.
The past president and a lifetime member of the 30,000-member American Numismatic Association, Barry currently serves as president of the California Coin and Bullion Merchants Association. Barry also serves as a board member of the largest association of professional numismatists, the Professional Numismatists Guild. He co-founded and is a current board member of the Industry Council for Tangible Assets, which represents the coin and bullion community in Washington DC.
Barry publishes articles and a daily blog at www.stupplerblog.com, along with other educational materials on Stuppler & Company’s rare coin and precious metals website, www.mintstategold.com. You can reach Barry directly at 888-454-0444 or firstname.lastname@example.org.
Start of slide or opportunity?
By Steve Roach | 02-25-13
Article first published in March 11, 2013, Expert Advice section of Coin World
This Uncirculated 1991-W Mount Rushmore Golden Anniversary gold $5 half eagle is one of the many collectible modern era U.S. Mint issues with a value that is almost entirely dependent on the .24187 ounce of gold it contains.
After enjoying a long period of stability for the past several months at the $1,650 to $1,700 an ounce level, gold dipped below $1,600 on Feb. 20, closing at $1,588.50 an ounce in the London markets. Gold had reached a low of $1,564.30 in London during the day’s trading, and on Feb. 21 gold hovered around the $1,575 an ounce level.
The drop created a seven-month low for gold that represented the worst one-week drop since May 2012. It was also the first time that gold closed below $1,600 an ounce since Aug. 14, 2012, when it closed at $1,597.75 an ounce.
After the most recent dip, Citigroup lowered its ratings on several gold mining companies and wrote in a report, “The problem with gold is that it is a very ‘long cycle’ metal and if it IS in the process of peaking now, then history suggests that it could go into hibernation for a long, long time.”
Under that logic, if gold has already peaked, then it may have further to fall. At this time in 2011 gold was at the $1,400 an ounce level, and back in February 2008 it hovered at the $1,000 an ounce level, reaching a five-year low of $712 an ounce in the fall of 2008.
An impetus for the recent sell-off was the release of the January 2013 meeting minutes of the Federal Reserve’s policy committee. The report suggested that it may scale back its monetary stimulus. This reduced gold’s appeal as an inflation-hedge.
The drop below the psychological barrier of $1,600 an ounce was also caused in part by economic data showing that the U.S. economy is slowly improving and a growing perception that the global economy has stabilized. This stability can lead people away from assets like gold and silver, and toward assets perceived as riskier.
Some people saw buying opportunities in the quick drop. APMEX’s Bullion Center on eBay reported that it enjoyed its second best sales day on Feb. 20, stating in a press release that buyers concluded that “precious metals were on sale and at a discount relative to the expected future values.”
Wild price swings have the greatest impact on coins that trade at levels close to bullion. This group includes both traditional bullion products and many collector coins with values closely tied to bullion.
A quick drop in the price of gold can have a big impact on dealers big and small who are working on a tight profit margin with bullion products. ■
By Gerald Tebben | 02-07-13
Article first published in February-2013, Expert Advice section of Coin World
This 1959 Lincoln cent is from one of three rolls the author bought some years back. Its buying power, and certainly any hope of investment return, is greatly diminished as a result of the number of coins hoarded.
Buying rolls of coins: Why on God’s green earth we ever thought they’d be worth anything above face value is beyond me now.
But at the time — 50 and more years ago — it seemed to make sense. We even had history on our side, or so we believed.
In the late 1950s and early 1960s, collectors weren’t content with just one example of a coin. Better a roll than a single coin. Better a bag than a roll.
The profit potential of one coin could be magnified through the power of multiplication.
Collectors besieged local banks for rolls and bags of new coins. Coin World classified ads were filled with offers to trade Philadelphia Mint bags for Denver Mint ones and vice versa.
Shipping added to the cost of putting away rolls and bags, but history showed profits would soon accrue. Anybody with A Guide Book of United States Coins by R.S. Yeoman could see that.
Uncirculated 1909-S Lincoln, V.D.B. cents were selling for more than $100 each in the early 1960s. Imagine, if a collector had socked away a $50 bag in 1909, he’d have half a million dollars worth of coins. Even a roll would be worth $5,000 or so, enough to buy two new cars.
All you had to do was buy a roll or bag of new coins and wait.
I’m still waiting.
Somewhere in my attic is a box filled with rolls of 1964 Jefferson 5-cent coins that I persuaded my father to “invest” in.
He’s long dead. The coins’ value pretty much is, too. Today, a roll catalogs for $3.50 — less than half its 1964 purchasing power. And, in truth, it would be hard to find anyone willing to pay much more than face value.
Too many were saved. The coins will never be valuable. Enough are stored away to satisfy demand for centuries to come.
That’s the trouble with hoarding. If it’s hoarded, it’s not rare, no matter how long you wait.
I’ve got three rolls of Uncirculated 1959 Lincoln cents on my desk now. I bought them years ago as part of a larger lot and never bothered to get rid of them. They speak, though, to that crazy period of hoarding.
The rolls’ original owner put them up in plastic rolls (which were 10 cents each, as I recall) and sealed them shut some 54 years ago. The coins have toned to an orangish color and for the most part exhibit a typical 1950s mushy strike.
It’s fun to look at them and contemplate them, but there’s no profit it in. Each roll in 1959 had the buying power of what about $4 might buy now. In 1959, 50 cents would buy two 10-ounce jars of jam, a half gallon of milk, a 1-pound lamb roast.
Today, 1959 rolls catalog for about $2.50, but mostly sell for a dollar or so — enough to buy not much of anything anymore.
Gerald Tebben is editor of the Central States Numismatic Society’s Centinel.
SILVER 101: Why Every American Should Own Silver
By Al Doyle on February 4, 2013 7:31 AM
by Al Doyle for CoinWeek ………
Every American should own at least a little silver. No weaseling around, no exceptions.
What kind of radical declaration is that? If it seems like something straight from a Ron Paul rally, keep in mind that what I’m proposing is really a very old and proven idea.. It’s amazing what nearly a half century can do to obliterate the truth.
Regardless of income, just about every American was a silver owner until 1965. Dimes, quarters, half dollars and silver dollars struck in a .900 fine alloy were the stuff of pocket change. Silver coinage was so routine that no one gave it a second thought. Even though gold ownership had been largely banned since 1933, honest silver money was a way of life, and more so in the west.
Montana residents routinely turned down $1 bills and demanded silver dollars in change. What was seen as a convenience (paper money) elsewhere wasn’t sought in Montana, where locals often accumulated cartwheels. Morgan and Peace dollars were also a common item at Las Vegas casinos.
Does it make any difference if the round metal things in pockets or purses are silver or base metal? This very simple example will show what takes place when a nation cranks up the printing presses and abandons sound money for an inferior product.
What would happen if your grandfather placed $2 in a drawer 50 years ago (1963), and the money was just discovered? In this instance, it was a new 1963 $1 Federal Reserve note (the first issue of $1 FRNs) and a circulated, common as dirt 1921 Morgan or 1922 Peace dollar.
Those items were interchangeable in 1963, and the paper currency or the silver dollar bought four gallons of gas during the Kennedy administration. The same $1 would have obtained five McDonald’s hamburgers (15 cents each) and two sodas (10 cents apiece). Round up the 95-cent total to $1 to allow for sales tax. What would Grandpa’s forgotten cash purchase today?
The $1 FRN would buy a third of a gallon of gas. Using the current retail price of $33 to $35 for a circulated Peace dollar as a guideline, let’s put a $30 wholesale price on the found coin, which would be sufficient for nine gallons of unleaded. In this case, the purchasing power of the FRN dropped by 91.7 percent, while the silver $1 gained 125 percent.
When it comes to McDonald’s, you’ll have to add a little change to buy a single item from the $1 menu to cover the sales tax with the $1 bill. Decline in purchasing power: 86.7 percent plus the sales tax. The proceeds of $30 from the circ Peace dollar is good for 30 $1 purchases before tax. That’s a net gain of 329 percent.
The obvious increase in value of silver over time (and that includes a dreary 25-year bear market in the metal) has nothing to do with being numismatically savvy or cherry-picking PQ rare coins. The date used in this comparison is as common a lump of silver as you’ll find. Keep in mind that the track record of the U.S. dollar, widely ballyhooed as “the world’s most stable currency” is much better than what most of the world has experienced over the same period, and it’s easy to see the perils of fiat money unbacked by gold or silver.
Sadly, there is widespread ignorance on the nature of money. Being convenient and widely accepted are very important elements, but honest money is also a store of value. Semi-literature farmers and backwoodsmen of the 1800s had a far better understanding of what money should be than the typical 21st century Ph.D.
That’s why early Americans gladly used and accepted Spanish and Mexican silver reales and gold escudos in daily commerce over dubious notes issued by local banks. The coins had a well-deserved reputation for being the proper weight and fineness as compared to fly-by-night con artists who issued worthless notes. Such currency is referred to as “broken bank notes” by modern collectors, and that term refers to the fate of the institutions that issued inflated paper as well as those who ended up holding the bag. Even the copper coinage of the era maintained a relationship between the metallic content and the face value.
Who cares about silver in a world of credit and debit cards and other electronic forms of exchange including e-gold?
Keep this rule in mind when it comes to precious metals: if you don’t hold it, you don’t own it. An ounce of physical silver in hand beats 100 ounces of theoretical silver when you need the real thing right now. Imagine Jews fleeing the Nazis and offering a bribe in e-gold to border guards. In a world drowning in lies, spin and broken promises, silver’s old-school integrity stands apart from the herd.
If every American should own silver, what about gold? At the current spot price of $1662 an ounce, even a fractional bullion piece is beyond the reach of many working folks. A handful of silver dimes or a few one-ounce rounds is something that Ralph Kramden or Ralph Lauren could afford. The current gold/silver price ratio of 53 to 1 also indicates that silver has more upside than the yellow metal.
While some investors buy silver hoping to resell the metal for more paper dollars in the future, that isn’t the main reason for becoming a bullion owner. Think of your silver holdings as financial insurance in an increasingly unstable world.
Futures Market Retreat Good for Gold in the Long Term, Spain Hit by Political Crisis
By BullionVault on February 4, 2013 7:20 AM
WHOLESALE MARKET gold prices hovered just below $1665 per ounce Monday morning in London, having failed to hold onto gains in earlier Asian trading, as stocks and commodities also ticked lower along with the Euro, which retreated from recent highs following news of a political scandal in Spain.
Silver erased most of Friday’s gains this morning, dropping below $31.60 an ounce.
The gold price in Euros meantime regained some ground this morning as the Euro fell against the Dollar. Last Friday, gold in Euros dropped to its lowest level since May last year as Euro-Dollar touched a 14-month high.
In New York, the so-called speculative net long position of Comex gold futures and options traders fell to its lowest reported level since last August during the week ended Tuesday 29 January, weekly data published Friday by the Commodity Futures Trading Commission show.
The spec net long is calculated at the difference between ‘bullish’ long and ‘bearish’ short contracts held by traders such as hedge funds which are classified as ‘noncommerical’, and is regarded as an indicator of short-term sentiment in the derivatives markets.
“The ‘weak hands’ are further retreating from the gold market, which is a good thing in terms of the long-term price prospects,” says today’s commodities note from Commerzbank.
Spanish prime minister Mariano Rajoy, who travels to Berlin today for talks with German chancellor Angela Merkel, denied allegations in the Spanish press over the weekend that he received illegal payments from a slush fund run by his Popular party (PP).
Support for the PP has fallen six percentage points to 24% since the allegations were made, according to a poll published by Spanish newspaper El Pais, while 77% of those surveyed said they do not approve of Rajoy.
The number of unemployed in Spain meantime rose to 4.98 million last month, official figures published Monday show. Last month brought news that the unemployment rate rose to record levels above 26% towards the end of 2012.
In Italy, prime minister Mario Monti today criticized his predecessor Silvio Berlusconi’s proposal to reimburse taxes paid on primary residences that were levied by Monti.
“Berlusconi wants to buy the votes of Italians with the money that Italians had to turn over to cover up the shortfall left in the public accounts by Berlusconi,” Monti said.
A poll published last week showed Berlusconi had cut the lead of front runner Luigi Bersani to five percentage points ahead of elections in three weeks.
Bersani’s Democratic Party (PD) has faced criticism for allegedly receiving funding from Siena-based Monte dei Paschi (MPS), the world’s oldest bank dating back to 1472, which is currently being investigated for covering up losses on derivatives trades and overpaying for its 2007 acquisition of Banca AntonVeneta
MPS lost an estimated €2 billion-plus in 2012, following a €4.6 billion loss in 2011.
In Germany meantime, politicians have expressed skepticism over whether to accede to Cyprus’s request for a bailout from the European Union and International Monetary Fund.
“Without the introduction of effective controls on money-laundering and urgently needed structural reforms, we need not even discuss financial aid,” Rainer Bruederle, a member of the Free Democratic party which shares power with Merkel’s party, said over the weekend.
“Cyprus is based on a business model that damages us all,” added Johannes Kahrs of the opposition Social Democrats.
“Yet it is now supposed to be saved by the EU. The SPD will not support that.”
“There’s general unease…about the fact that Cyprus takes in a good deal of cash from Russians,” explains a note from Standard Bank.
Over in India meantime, traditionally the world’s biggest gold buying nation, Rupee gold prices fell to five-month lows Monday as the Rupee touched its highest level against the Dollar since October.
As the start of the year Indian gold dealers imported increased quantities of gold ahead of a rumored import duty hike, with the authorities duly raising the duty from 4% to 6% last month.
“Not many deals are happening [at the moment],” one dealer at a state-run bullion importing bank told newswire Reuters this morning.
“[The] market has to clear the old stocks, which could finish this week.”
Safe Haven Assets Under Pressure: Gold & Silver Fall as Stock Markets Hit 5-Year Highs
By BullionVault on January 28, 2013 7:22 AM
THE U.S. DOLLAR gold price extended its losses from last week Monday, dipping to a near-three-week low below $1655 per ounce during London’s morning trading, as stock markets ticked higher, with the FTSE 100 hitting its highest level since May 2008.
The S&P 500 meantime climbed above 1500 last week for the first time since December 2007.
Silver this morning dropped below $31 an ounce to hit a two-week low, while other commodities were broadly flat and US Treasuries gained.
Last week saw spot gold fall 1.5%, while silver was down 2.1%.
“It seems that a number of safe haven refuges like gold, the Japanese Yen, US Treasury bonds, and the Swiss Franc have all been under pressure lately,” says Ed Meir, metals analyst at brokerage INTL FCStone.
“Investors [are becoming] more comfortable parking their capital in riskier asset classes like the Euro and equity markets.”
“The Franc is still very strong,” Swiss finance minister Eveline Widmer-Schlumpf told reporters at the World Economic Forum in Davos the same day.
In September 2011, the Swiss National Bank announced a peg of SFr1.20 to the Euro in September 2011, following several years of Franc appreciation. The Swiss currency has weakened in recent weeks against the Euro, trading above SFr1.24 this morning, as the Euro has strengthened on the currency markets.
On Friday, SNB chairman Thomas Jordan told Davos he expects further weakening of the Franc.
A campaign to force a referendum on Switzerland repatriating all its foreign-vaulted gold bullion and increasing its gold reserves is nearing its target of 100,000 signatures.
Britain’s chancellor George Osborne would prefer to see the bank of England continue with its current inflation target policy framework rather than shift to targeting a nominal level of economic output, according to a report in the Financial Times Monday.
In a speech last month, Bank of Canada governor Mark Carney, who takes over at the Bank of England this summer, suggested a role for so-called nominal GDP targeting. When he spoke in Davos on Saturday however Carney “went out of his way not to mention nominal GDP”, the FT reports, but instead praised “flexible inflation targeting”.
Since the start of this month, Sterling has depreciated 4% against the Dollar and more than 5.5% against the Euro, which climbed to a 14-month high against the Pound this morning.
The gold price in Sterling meantime is up more than 2% from where it started January, while the Dollar gold price is flat on the month and gold in Euros is down 3%.
The so-called speculative net long position in Comex gold futures and options – calculated as the difference between ‘bullish’ long and ‘bearish’ short contracts held by noncommercial traders – ticked higher in the week ended last Tuesday, weekly data published Friday by the Commodity Futures Trading Commission show.
The world’s biggest gold exchange traded fund meantime continued to see outflows of bullion held to back its shares on Friday. The volume of gold held by SPDR Gold Trust (GLD) fell by nearly two tonnes from a day earlier to 1329.9 tonnes, its lowest level since the start of October.
The world’s largest silver ETF also continued to see outflows, with the volume of silver held by iShares Silver Trust (SLV) falling to 10,468.8 tonnes Friday – though this was still more than 300 tonnes above where it was 10 days previously following strong inflows.
“For the first time in eight weeks, ETFs‘ commitment to silver has wavered,” says Standard Bank commodities strategist Marc Ground.
Kazakhstan and Russia both added to their gold reserves last month, International Monetary Fund figures show. Kazakhstan’s reserves rose 1.7% to 115.3 tonnes, the figures show, while Russia grew by 2.1% to 957.8 tonnes.
Russia’s central bank intends to continue buying gold, its first deputy chairman Alexei Ulyukayev said earlier this month, although he denied there is a target for gold to make up 10% of reserves.
Despite a flurry of new regulations to control “speculation” in Vietnam’s gold market, unlicensed trading of bullion continues, according to local press reports.
Some dealers and consumers have switched to trading rings and other jewelry pieces instead of gold bullion bars. This weekend, the State Bank said it will become the sole point for import and export of gold
Bullion Sure; Eagle Also Collectible
|By Paul M. Green, Numismatic News
January 24, 2013
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This article was originally printed in Numismatic News.
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What’s the key to a set of silver American Eagles? If you said the proof 1995-W you would be right.
The silver American Eagle series began in 1986 as a supposedly convenient method of trading silver bullion in a convenient weight of 1 troy ounce.
But naturally collectors being collectors, they want to grade them and assemble them into sets over the years. And the Mint being the Mint, it made collector versions to sell to hobbyists to pad its profits.
So is the American Eagle a collectible coin or a bullion coin? It is both, but naturally in these pages the collectible aspect takes priority.
Of course, with any new series, it takes a while for a set to grow to include enough coins to become interesting. The silver American Eagle definitely reached this point in 1995 or shortly thereafter.
A proof 1995-W silver American Eagle was created to mark the 10th anniversary of the program. The only way collectors could buy the silver coin was to buy the full proof set, which included West Point gold coins in the ounce, half-ounce, quarter-ounce and tenth-ounce sizes. The original issue price was $995, quite a chunk of change for average collectors.
As a consequence, only 30,125 were sold. After months of doing nothing, the price of the set and the proof silver 1995-W began to rise in price.
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The silver coin alone is now at $3,600 in Coin Market.
The price increase had to be caused by added demand from collectors and dealers and not silver speculators.
The 1995-W is certainly a special case, but the fact is that an assortment of other dates have also shown price increases. They are certainly not on the same level as the 1995-W, but realistically if any business strike silver American Eagle is priced at more than its silver value you have to pause and consider the reason as the only good reason is that the date is tougher and demand from collectors is forcing the price to higher levels. That would mean that at least some are approaching the silver American Eagle not as a collection of bullion coins but rather as a collection of silver dollars, which is technically what history will suggest that they are.
In fairness it is certainly not surprising that many have approached the silver American Eagle as simply a bullion coin and not as a collection of silver dollars. After all, the silver American Eagle was introduced as a bullion coin and very few hobbyists during their early years of production took the time to consider the bullion coins (as opposed to the proof collector versions) as anything more than speculation on the price of gold and silver.
Realistically, the silver American Eagle had been something of a surprise addition to the bullion coin program in the first place. The big news in 1986 was gold as except for commemoratives the United States had produced no gold coins since 1933 and even the idea of gold commemoratives was new, having been introduced in 1984.
The American buyers of gold had in particular been troubled by their inability to purchase any gold coin dated after 1933 for decades. That had changed with the legalization of gold ownership on Dec. 31, 1974, but the idea of having an American gold bullion coin as opposed to one from Canada or South Africa or China was appealing to many.
Things had not been as difficult in terms of silver. There had never been restrictions on the buying and selling of silver. As silver rose to $50 an ounce in 1980 Americans cheerfully traded in U.S. 90 percent silver coins and even 40 percent silver half dollars and 35 percent silver war nickels.
There were also privately produced silver rounds, bars and ingots so it would have been hard to make the case that there were no options in silver. That said, the experience of silver rising in price over the course of a few years to a price of $50 had certainly made many Americans far more conscious of the possibility of silver investments and that almost certainly helped to set the stage for the idea of a silver American Eagle in 1986.
Even though the stage was set, it still was something of a surprise to learn that the United States would be offering not just gold bullion coins but also silver. The primary political motivation in Washington, D.C., was to provide Americans an alternative to the gold South African Krugerrand, which because of apartheid policies, that country was being pressured to change policies. These politicians even copied the .9167 fineness of the Krugerrand for the American Eagle so nobody would miss the point rather than adopt a .999 fine composition.
The American Eagle gold ounce, one-half, one-quarter and one-tenth ounce coins would be the prime focus of the program..
Silver was not involved in international relations, so fortunately the specified fineness was .999, which is what investors were used to trading in a weight of one troy ounce. There had been some talk of simply reviving the Morgan dollar as a bullion coin, but its odd weight of .7734 ounce of silver and a fineness of .900 was just what the doctor ordered for the 19th century and not modern silver investors. Fortunately, the Morgan suggestion didn’t get far.
The coin was given a face value of one dollar to make it a coin rather than a medal. The face value chosen was much lower even then than the price of bullion, but that was the intention. To have given the coin a face value of $5 or $10 would have opened the door to people trying to spend them and the U.S. Treasury did not want the confusion that this might cause.
A national retailer doesn’t need a frazzled mom trying to buy baby formula with a coin unfamiliar to cashiers and be forced to put up signs “No $10 coins accepted.” That would be no way to launch a new bullion coin.
Rather than give the new coin a completely new design, the Mint selected the A.A. Weinman Walking Liberty half dollar obverse design. That added to the interest as the Weinman Walking Liberty half dollar design is enormously popular. It had been the result of a design competition in 1916 when the Mint director described the design as, “The half dollar bears a full-length figure of Liberty, the folds of the stars and stripes flying to the breeze as a background, progressing in full stride toward the dawn of a new day, carrying branches of laurel and oak, symbolical of civil and military glory. The hand of Liberty is outstretched in bestowal of the spirit of liberty.”
If getting attention from the nation’s coin collectors was the goal, the use of the Weinman Walking Liberty half dollar and the Saint-Gaudens double eagle obverse on the gold coins was possibly the best idea that could have been used as when those two designs are concerned collectors tend to get interested in a hurry.
The annual offering of a proof silver American Eagle was also clearly geared for the nation’s collectors and there were simple mathematical considerations. If you want the nicest possible examples of the Weinman design on a Walking Liberty half dollar for an MS-65 you will pay well over $100 for even the most available date and in the case of a Proof-65 the cost is likely to be closer to $800. Certainly for those simply wanting a nice example of a famous design the silver American Eagle was an immediate alternative and one that would appeal to collectors.
Even with the attempts to interest collectors, the fact that the silver American Eagle was being called a “bullion coin” was not something that would encourage much interest on the part of collectors as bullion coins historically are seen as having basically no numismatic value with in some cases extended mintages (and restrikes), making their only value the metal they contain.
What the whole matter was overlooking was U.S. history. Basically all U.S. silver and gold coins were bullion coins, which simply worked a different way. In the case of early U.S. history, the face value was fixed but the amount of gold and silver could change. That was seen in the 1834 reduction in the weight of gold coins and later in the 1853 weight reduction of silver coins.
Interestingly enough, in 1873 as the price of silver declined because there was too much thanks to the Comstock Lode the amount of silver in silver issues was actually increased.
The modern bullion coins simply work a different way as the amount of the precious metal whether silver or gold is fixed but the price is not as it can go up or down based on the price of silver or gold at that time. That said, it is awfully hard to make the case that the historic coins of the United States were anything other than a different type of bullion coin and that was seen repeatedly in U.S. history as the first Bust dollars were exported for their silver. Later in the 1820s no gold coins were circulating as they were all being sold to brokers who would export them for their bullion and similar patterns were regular parts of the history of gold and silver coins.
The one major difference, of course, in the coins of the past and today’s bullion coins is simply that today’s silver American Eagle does not circulate. That, however, does not mean they could not circulate. They are legal tender for one dollar and if you are willing to take one to Pizza Hut or anyplace else, they will almost certainly be glad to credit you with one dollar. But because people are not fools, this is not likely to happen often.
In fact there is one very clear case in U.S. history where a coin of the United States worked exactly the same way as today’s silver American Eagle would work. That was the Trade dollar. The Trade dollar was never really intended to circulate in the United States as its prime purpose was to be exported to China. They did, however, circulate for a couple years as silver dollars.
In 1876, however, the Congress revoked the legal tender status of the Trade and that technically made them no longer one dollar but rather simply 420 grains of .900 fine silver. Of course they said “Dollar” and although in theory they were not to be produced for domestic use that happened.
A number of people accepting them as one dollar only to be told when they went to use them that they were not good for full stated value, but something less. That something less became less than 90 cents and in at least one case there is a report of banks only taking them at 75 cents. In fact the owner of a silver American Eagle is at least protected in that they are legal tender for $1. That said, at least for a time the Trade dollar actually was circulating in precisely the way a silver American Eagle might with a value based on the price of silver at the time it is used.
The initial sales of the silver American Eagle reflected that the idea was popular with just under 5.4 million business strikes selling along with nearly 1.5 million proofs. The following year the proof total would drop to just over 900,000 while the business strike total soared to over 11.4 million. The proof decline probably showed that at least some initial buyers simply wanted an inexpensive nice example of the famous Weinman design.
The initial demand was a typical manifestation of what happens with the first years of many other issues. The drop in collector proof demand during the second year is also fairly typical. The doubling in the regular bullion coin mintage shows it caught on as a bullion investment vehicle . That said the collecting opportunity was possible as at least initially the proof silver American Eagles came from San Francisco as well as the business strikes, but the business strikes did not have a mintmark.
Certainly some fluctuation in collector demand for silver American Eagles was to be expected. After all, this was the experience of the Eisenhower dollar series of less than a decade earlier. However, where the Ike series featured an assortment of changes as it went along, the American Eagle was much more stable in its early years. It found a place with collectors even as they were distracted by large numbers of commemoratives and other offerings.
Over time, it would also have become much more clear at least to some that not all silver American Eagles were created in equal numbers. In fact that was quickly apparent with the decline in proofs and the rise in business strike mintages in the second year, but additional years saw additional numbers thrown into the mix better enabling potential collectors to determine which dates were likely to be better over the long haul.
It should not be too surprising that the first indication that some dates had the potential to rise to higher prices came in the proofs. After all, sold at premium prices, the proofs were clearly the one silver American Eagle potentially of interest to collectors as silver buyers are not likely to pay a premium for their silver.
Some of the lower mintage proofs have now safely moved to much higher prices. Good examples are the 1993, 1994 and 1995 which have traded as high as $200-$230, though they did not remain that high.
The 1995-W is a unique story as it was basically ignored by many at the time of issue because they weren’t expecting it, couldn’t afford it, or simply were mad at the Mint for creating it. It should be remembered that in 1995 collectors were being bombarded with offers, especially for the huge Atlanta Olympic Games commemorative coins.
The low 30,125 number that sold made the 1995-W something of the modern day equivalent of the 1895 proof-only Morgan dollar. It has a literally 100 percent survival rate, but those who did not include it as part of their regular collection are now regretting that decision and the more the price of the 1995-W increases the more many can no longer simply ignore that it exists as it is easily the key to a silver American Eagle collection.
The real question in the case of silver American Eagles has been the business strikes and would collectors turn to them as a potential collection. The jury is technically still out on that question because prices vary so little despite large swings in mintages. There are some indications that some of the business strikes are slowly climbing to premium price levels.
Certainly from the start with the comparison between the 1986, which had a mintage roughly one-half the size of the 1987 total, there was the potential that some dates would be seen as better than others. While there is little difference between the two dates pricewise, a look at the 1996 at $62 shows that there is a point at which collectors will pay significantly more than what they will pay for a common piece.
Over the years we are likely to see such trends continue if collectors increasingly treat the business strike silver American Eagles as a collection. In theory their prices should be directly related to their mintages although we cannot be 100 percent certain of that fact as the vast majority of the coins have had no special care, but also because they are bullion coins, they are not likely to be banged around, but instead spend their times in plastic tubes. They have not actually circulated. Some have been handled and dumped in display cases and treated in other ways that a grading service is not likely to view kindly. That may eventually see some dates being tougher or more available than expected at least in some grades.
Right now if you check to find out what grade you might want in a business strike silver American Eagle you will learn that virtually every date is available in MS-65. The prime grade for collecting seems to be MS-69. In grading population reports the numbers slabbed with this grade vastly outnumber those in MS-68 or MS-70. In the case of the MS-70, it can be expected that they indeed are much scarcer than MS-69, but in the case of MS-68 you cannot help but conclude that the lower numbers of slabbed MS-68 coins is not because they are scarce so much as they are mistakes where those who submitted the coins to the grading services expected that they would earn an MS-69 label.
If you really want the best in a silver American Eagle collection the grade you need is MS-70 as they likely will be the premium coins in the future based on the results of those that have already been graded.
Collecting trends are certainly clear. The proof silver American Eagles along with the 1995-W already appear to have a solid collector base. The business strikes are still finding their way as collectibles, but it does appear that some collectors have reached a very logical conclusion and that is that the silver American Eagle is a desirable modern day silver dollar. That makes a collection but only possible but one that might well prove to be a surprisingly good idea to pursue in the future, especially if you are demanding in the grades of the coins you choose to put aside.Newer Posts »