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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

January 2019 - Week 3 Edition

 Political Crises in Britain and America are Sending Gold Up

Over the weekend of January 12-13, The Wall Street Journal’s headline on gold said this: “Gold is Threatened as Fear Abates: Economic optimism and rising stocks take a toll on haven metal; ‘cautious’ buying now.” As it turns out, a small $5 drop on Friday all of a sudden caused America’s leading financial newspaper to declare a new trend of “fear abating,” which “threatened” gold’s price rise.

Amazingly, this headline was written amid a near record-long U.S. government closure, impeachment threats and two days before a vote which might throw Great Britain’s Prime Minister out of office! That doesn’t sound like a world of peace and political harmony – in fact it reflects a world of unprecedented political turmoil in America and parts of Europe, along with the long-term plague of war and violence in the Middle East and a new threat of recession in debt-heavy China, as many multinational companies are leaving China in order to avoid the tariffs which the Trump administration has levied against China.

Newspapers need new headlines every day, so a one-day “trend” has turned into “news” of some sort by ascribing a “reason” for gold’s one-day $5 decline, but serious investors don’t care about one-day or one-week declines or increases. Serious investors look toward the long-term fundamentals for gold.

As we begin this week, gold has come within $4 of $1,300, due to the long-term unknowns of the U.S. political division, plus the Brexit uncertainty, which may lead to the end of PM Theresa May’s attempt to engineer Britain’s exit from the European Union, depending on a critical U.K. Parliament vote. Analysts at Commerzbank said over the weekend, “At present, it looks as if the House of Commons will reject the deal with a relatively clear majority. Gold should remain in demand as a safe haven, given that it is not clear what would then happen next.” Commerzbank added that gold ETFs have been a safe haven so far in 2019: “So far this year, they have seen inflows on every day of trading.”

Gold remained above $1,290 most of last week, including a $1,292.80 morning fixing in London on Friday, but the London pm fixing was $1,288.95, and the U.S. close was around $1,287. On Monday morning, January 14, gold shot up again past $1,290, reaching $1,295 before retreating to $1,292. Since November 30, 2018, Gold is up 6% and Silver is up 10%, while stocks are down about 6% (in both the Dow Industrials and S&P 500), although stocks slightly lead gold in the first two weeks of 2019.

Goldman Sachs Predicts $1,425 Gold by Year’s End

Last Thursday, January 10, the U.S. investment bank Goldman Sachs raised its gold forecasts to $1,425 over the next 12 months. They see $1,325 within three months, $1,375 within six months and $1,425 within 12 months. Those predictions are up $75 per ounce from their previous predictions of $1,250, $1,300 and $1,350 per troy ounce for the same time spans, respectively. Based on a beginning price of $1,279 in 2019, an increase to $1,425 represents an increase of over 11% for the coming year.

In explaining their move, Goldman analyst Jeffrey Currie said, “Going forward, gold will be supported primarily by growing demand for defensive assets. The same is also true of central bank buying, with rising geopolitical tensions incentivizing more central banks to re-enter the gold market.” They also cited the double threat of a weaker economic outlook on top of the Fed’s uncertain statements about whether or not they will raise rates further in 2019. Currie said that gold will begin “to price much more off fear of the next recession than off the opportunity cost of holding gold,” as most other investments have fallen.

Goldman Sachs recognizes the “rising geopolitical tensions” and a “weaker economic outlook,” even though the weekend Journal spoke of gold’s decline due to “fear abating” and “economic optimism.” Sometimes it seems like the writers of gold articles don’t look at the other articles in their own paper!

A Run on Common-Date Gold Coins Could Push Rare Coin Prices Up Next

Over the last few months, with gold moving up and demand increasing for gold “starter coins,” like the American Gold Eagle, we have seen a bigger movement in the next-step up in rarity, the common-date MS-63 gold coins, especially the $20 Liberties.  For instance, a recently advertised common-date $20 Liberty Double Eagle in MS-63 has risen $120 while gold moved up $60.  Many dealers without a generous inventory of available coins have seen how supplies can dry up quickly and they must resort to filling orders with lower quality coins.

A word to the wise: It behooves you to start accumulating rare gold coins now. When gold and common-date gold coins move up, the rare dates and types tend to soon move up too! It often only takes a relatively small percentage move in the gold market to eventually generate a larger percentage gain in the rare coin market. We maintain a multi-million-dollar inventory of rare gold and silver coins, so we already have the expert selected coins you need on hand. Very few dealers have a strong inventory like ours. Others may take your order, only to find there is a delay in making the delivery, due to shortages from suppliers or have to settle for other dealers rejects.

Call us. Our experienced account representatives can counsel you on the best mix of coins for the 10% to 25% portion of your portfolio you should place in precious metals. Very few dealers have an experienced and award-winning numismatist on board with my kind of experience and expertise in coin grading, authentication and award-winning book-writing on the leading U.S. gold and silver coin types, as well as my 40+ years of hands-on experience and networking in the rare coin market.

The Current Political Crisis is Helping to Push Stock Prices Down and Gold Prices Up

As we have been saying for the last couple months, the drive toward impeachment is helping to push stock prices down and gold coin prices up, just like in 1972-74 and 1987 when impeachment threats faced Presidents Nixon and Reagan. President Nixon resigned before facing impeachment, and stocks fell 45% in 1973 and 1974, while gold and rare coin indexes soared. President Reagan was able to avoid any strong impeachment threats but there was still a major stock market crash during the hearings over the Iran-Contra scandal during most of 1987 and rare coin indexes again soared.  The scandal over Russia meddling in the 2016 election will probably amount to nothing when all is said and done, but all the press scandal-mongering has helped send stocks down and gold up since November 30, 2018.  This high drama will probably not let up in the New Year. As this is written, the government is shut down. Europe is in chaos over Brexit, and a fuel tax in France, plus a banking crisis is occurring in Italy. We have entered an era in which chaos has become the norm, at home and abroad. You can expect to see the stock market in panic some days and gold rising more days than it falls, so make sure you plan your investment portfolio accordingly, with a 10% to 25% position in precious metals and rare coins.  Please call us today!  It is more important now to do so!

 

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