Gold and Silver Report by Mike Fuljenz – Universal Coin & Bullion ……
Barron’s “Rediscovers” Gold
Gold has remained within 1% ($12) of $1,200 every day for the last five weeks, unable to rise above $1,212, but also firmly staying above $1,188. This week, the Federal Open Market Committee (FOMC) meets, and they are widely expected to raise short-term interest rates by 0.25%. After the first five Fed interest rate hikes, beginning in December 2015, gold was significantly higher three months later. That wasn’t the case after the last rate increase in June, but perhaps this rate increase will give gold a boost IF the Fed also indicates that this could be the final rate increase during this calendar year or in this cycle.
The current (September 24, 2018) edition of Barron’s features a cover article, “Rediscovering Gold,” which features a line drawing of a lone Western cowboy pausing before a stack of gold bullion bars with a purple sunset in the background. The cover subtitle is “Why the out-of-favor metal should be part of your investment portfolio.” The long article inside, by Andrew Bary, is titled, “Gold Can Start to Shine Again: Why investors should consider shifting part of their portfolio to the metal and mining shares.”
The article basically makes the same points we have been making here – that now is a good time to take profits from the stock market and put them into gold – but the article adds a few new, notable nuggets:
- The main reason gold has declined this year is a rising U.S. dollar. Investors are attracted to the dollar due to its relatively high returns (vs. the euro or yen). Once the Fed stops raising rates, however, the dollar could retreat. Historically, gold and the dollar have a negative correlation of 80% to 85%. The dollar has been energized by expectations that the Fed will keep raising rates – but what if it doesn’t?
- Jeffrey Gundlach, the “Bond King” and CEO of DoubleLine Capital, the big bond-oriented investment firm, said: “In my June webcast, I recommended that gold bugs wait until $1,200 to buy,” because it had just broken below a chart point at $1,290 back then. Gundlach turned positive early in September when gold hit $1,196. Based on the technicals, he just told Barron’s, “I am now bullish.”
- Barron’s added: “Gold has been a traditional hedge against financial and economic crises, playing that role during the 2008-09 meltdown. Gold rallied 17% from the collapse of Lehman Brothers on Sept. 15, 2008, until the stock market bottomed on March 9, 2009—a period during which the S&P 500 fell more than 40%. Cryptocurrencies have lately been touted as taking over gold’s role in a crisis. But a 55% drop in Bitcoin this year to about $6,700, and slumps in other cryptocurrencies have taken the shine off that market. And there is still no easy way to get exposure to Bitcoin.”
- “In the futures markets, speculators, who are normally long gold, are now in the rare position of being net short. Many analysts view speculative positions as a contrary indicator and the current situation as bullish.” Another contrarian sign: “In July, Vanguard announced that the $1.8 billion Vanguard Precious Metals & Mining fund (VGPMX), the largest gold-oriented U.S. mutual fund, would be renamed Vanguard Global Capital Cycles later this month and that its precious-metal mining exposure would be reduced in favor of other commodity-related industries and global infrastructure, such as telecommunications. Gold and precious-metals mining stocks will make up at least 25% of the fund. Gold bulls see the action as a sign of capitulation. Vanguard’s move in 2001 to take ‘gold’ out of the fund name and broaden its mandate coincided with a bottom at about $255 an ounce.”
Barron’s concludes: “U.S. stocks are at record levels exactly at a time when global stress—trade tensions, populist nationalism, and the like—appears to be growing. This may be an opportune moment for investors to shift at least a portion of their portfolios to gold.” Correct! In fact, we said it here first. Call now for a Free Expert Consultation on the gold choices I recommend to diversify your portfolio before prices rise as expected!
Lower-Grade Mint-State $20 Saints and Libs are a Great Alternative to Bullion at Near “Spot” Prices
I believe we have finally reached an important turning point in the decline of the shipment of vintage United States gold coins from Europe. When America sold some of its gold to Europe in the early 1900s to settle debts and other obligations, we often sent $20 and $10 gold coins. These coins were easier to count than the smaller gold denominations of the day, like the $2.50 or $5.00 Indian gold coins. Most of the coins the Treasury sent to Europe were $20 Saint-Gaudens and Liberties as well as $10 Indians and $10 Liberties
In recent years, these $20 Saint-Gaudens and Liberty gold coins have flooded the U.S. market to the point where common-date circulated or lower-Mint State gold coins have approached their melt value in some markets.
That means fewer dealers are going to Europe since common-date gold coins are selling too close to melt. There is no premium to be made. It is not profitable to pay for trips and sort through coins, and it’s not profitable for the European banks to sell them at melt. It’s often easier for everyone to melt these coins than to sell them as rare coins. As a result, a huge amount of these more common-date gold coins has been melted. They have become an alternative to bullion, so you can now buy vintage gold coins at near-bullion prices, a “double play” for both rising bullion prices and added increasing numismatic value. Call or check out our Website for our mint state common-date gold coin page for excellent prices on these coins.
This meltdown has created a future situation where fewer classic gold coins will be available for new buyers entering the coin market. Generations of new coin buyers will be looking for lower mint-state Saints and Liberties and they won’t be available at near-melt prices, so these more common-date gold coins in lower MS-60 to MS-63 grades should return to their historic numismatic value.
I Have Been Invited to the 2018 Numismatic Forum on October 17
For the third year in a row and the fourth time overall, I have been invited to the national Numismatic Forum. This year I was invited by the United States Mint and the Bureau of Engraving and Printing (BEP). The first time I was invited was in 1996 when I was one of only three coin dealers invited. Now there are far more coin dealers and also leaders from many other sectors of the general public invited to this annual event, but this is clearly the place to be each October for input to the National Mint, the U.S. Treasury and the BEP which control our currency and influence our numismatic hobby.
The Numismatic Forum will be held on Wednesday, October 17, 2018, at the Bureau of Engraving and Printing in Washington, DC. As during the last two years, it will be a full educational day of discussions in several panels focusing on current and future Mint products, youth products and ways to battle counterfeit coins in the marketplace. Last year, about 70 industry leaders gathered on the same date. We were welcomed by U.S. Treasurer Jovita Carranza and the Acting Deputy Mint Director Dave Motl. Last year, I brought you a complete report on the proceedings, including a panel which I chaired, and I will do the same this year.
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