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Metal Market Report January 2018 - Week 5 Edition

January 2018 - Week 5 Edition

With Gold Closing in on $1,400 – Can it Reach $1,500 in 2018?

Gold reached a 17-month high last Thursday, touching $1,365 after U.S. Treasury Secretary Steven Mnuchin told the World Economic Forum in Davos, Switzerland that the U.S. welcomed a weaker U.S. dollar to boost U.S. exports.  In part, he said “Obviously a weaker dollar is good for us as it relates to trade and opportunities” and blithely added that the dollar’s weakness is “not a concern of ours at all.” Commerce Secretary Wilbur Ross basically echoed Mnuchin’s comments. Gold rose to within $1 of a two-year high (at $1,366, set in July 2016).  Going into Davos, the dollar was already at a three-year low.  Silver rose by 50 cents (+3%) through Thursday last week, the biggest percent rise of the precious metals.

Inflows to gold-backed exchange-traded funds (ETFs) rose by 30 tons (+1.4%) the first three weeks of this year, showing that the commercial and institutional investor is turning back toward gold.  Data from Bloomberg shows that gold in the ETF vaults now stands at 2,250 metric tons (72.3 million Troy ounces), the most they’ve held since May 2013. Since the ETFs need to hold a sufficient amount of gold to back the shares of gold ETFs in circulation, the gold in the ETF vaults is a proxy for net gold ETF demand.

Even though gold has declined some since last Thursday, the previous rise has caused some major analysts to revise their 2018 forecasts. Analysts Daniel Hynes and Soni Kumari at Australia & New Zealand Banking Group now see gold “pushing toward $1,400/oz by year-end.” The main driver, they say, would be “further weakness in the dollar and rising risks of a correction in equity markets.” It is refreshing to note that they have finally come to the realization that the expected interest rate increases by the Fed would not tend to send gold back down, saying that “these moves are already priced in.”

The latest Gold Survey from metals analyst firm Thomson Reuters GFMS goes one step further to say that gold could reach $1,500 in 2018 due to a possible major correction in the high-flying stock market. Like the previous forecast, they are ignoring Fed policy, saying “Our forecast discounts three Fed rate hikes.” The main driver, they say, is a flight to safety when the overheated stock market finally turns down: “We continue to believe that the markets need to brace themselves for a sharp correction once the feeding frenzy abates,” they said. “Gold’s role as a risk hedge will remain supportive as rising tensions in Europe and a somewhat spontaneous approach from President Trump are raising uncertainty levels.

As I have been predicting, 2018 will be “The Year of the Gold Coin.” Stay tuned for more exciting news.

Why 2018 Could be “The Year of the Gold Coin”

I began studying the rare coin market over 50 years ago in the late 1960s.  In past coin bull markets, I have noticed the confluence of up to four essential components, which I see three of the four coming together now and perhaps peaking in the period just ahead, 2018 to 2020.  First off the strongest times since 1970 for rare coins have come in: 1972-1974, 1976-1979, 1987-89 and 2005 to 2008.  But most of those four coin bull markets have also been characterized by:

#1: A Weak U.S. Dollar

#2: A Stock Market Correction

#3: Global Uncertainty and Conflict

#4: A Rising Gold Price

Previous rare coin bull markets since 1970 have resulted in increases over several years of 100% to 1100% according to PCGS.  I truly believe that by the end of the decade we could witness the great bull market of this decade and that it will at least begin in 2018, which could go down in history as “The Year of the Gold Coin.”


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