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Metal Market Report February 2018 - Week 2 Edition

February 2018 - Week 2 Edition

Gold Recovered Strongly

Gold recovered strongly, while the stock market is still slightly below zero, despite a strong recovery on Monday.  As of last Friday, the S&P 500 had fallen 11.8% from its peak just two weeks before.  As a result of that sharp collapse in stocks, some investors had to sell their gold (or other appreciating assets) in order to meet margin calls on their leveraged stock investments. That’s why gold fell a bit late last week, before recovering strongly on Monday and Tuesday. In the 18+ years since the start of the new century, gold is up 359% vs. only 114% for the Dow Jones stock index and 81% for the S&P 500.

Gold Prices Now Projected to Reach $1,450+ by Year’s End

An informal survey of some of the country’s leading precious metals dealers reveals that they have raised their year-end projections for gold to $1,461, on average, and $20 for silver.  According to the survey, conducted between January 16 and 24 by the Professional Numismatists Guild (PNG) of the members of the Guild’s Accredited Precious Metals Dealer (APMD) program, these dealers raised their year-end gold price from their original (December 29, 2017) forecast based on speculation about additional Federal Reserve interest hikes, potentially higher oil prices, higher inflation and a weaker U.S. dollar.  I was a part of that APMD survey and made price predictions pretty close to the average: $1,460 gold and $20 silver.

Skeptics might argue that these dealers have a vested interest in gold prices rising, but look at who agrees with them – the previously perma-bear analysts at Goldman Sachs!  Even as gold continued to rise over the last two years, Goldman Sachs continued to publish bearish forecasts of gold going below $1,000.   Now they seem to have suddenly changed their tune. Goldman Sachs analysts Michael Hinds and Jeffrey Currie just issued a report that raised their 3-, 6-, and 12-month forecast for gold to $1,350, $1,375, and $1,450 per ounce respectively, up significantly from $1,225, $1,200, and $1,225 (for 3, 6 and 12 months).

These Goldman Sachs analysts say that gold will benefit from stronger emerging market growth, a weaker U.S. dollar and a potential for hedging against a choppy U.S. stock market environment. They also see risk of higher inflation, reflected in rising oil prices that will help boost gold prices.  So, former bears like Goldman Sachs and “permanently bullish” gold dealers seem to agree on $1,450 gold within 12 months!

Expect Greatly Increased Interest in $2.50 and $5.00 Indian Gold Coins

The Royal Canadian Mint has just come out with a limited edition “double incuse” $5 Silver Maple Leaf coin, marking the 30th anniversary of the Silver Maple Leaf.  According to the RCM, the incuse (or sunken) format was first made famous by the legendary $2.50 and $5.00 Indian gold coinsstruck by the United States Mint over a century ago.  These Indian gold coins were born in controversy.  Since their design was recessed into the coin – as opposed to the standard raised relief – people were scared to save them in fear of germs spreading from the coin’s recessed reservoir.  These coins were smaller than the $10 Eagles and $20 Double Eagles, so they were less often shipped overseas to banks and used more often in circulation and less often saved in collections, so the fear of germs and the practicality of their lower denomination has created a series with relatively few examples surviving in higher grade. In addition, these coins offer a series of famous firsts.

  • The first $2.50 design to bear the motto “In God We Trust”
  • The first U.S. coin design that used a Native American model
  • The first coin struck with a fascinating new “incuse” design
  • The first coin designed by Bela Lyon Pratt, pupil of Augustus Saint-Gaudens

Their rarity, along with this historic list of unprecedented “firsts,” is driving investors and collectors to add Indian gold to their portfolios and collections.  And now, with the promotions of the new Canadian incuse design, there will be more ads and references to the $2.50 and $5.00 Indians in the Canadian and American press, pushing up demand for these classic century-old U.S. gold coins, minted between 1908 and 1929, now available in choice uncirculated condition, as graded by PCGS or NGC, while inventories last.


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