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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

January 2019 - Week 4 Edition

IT’S A BOY - Dean Michael!

On Tuesday, January 22, I became a grandpa.  I will be called Pops, but still do not know what Karen will be called.  She does not want to be called Grandma.  We have decided to let YOU help choose her name.  Please call your Account Manager with your grandmother name suggestions (only one suggestion per customer please).  The first 10 customers that suggest the chosen name will be given a free 2019 Silver American Eagle, one of my autographed books and an epic thank you card!

Gold Hit a 7-month High

Gold hit a 7-month high of $1,294 last Thursday before retreating slightly to $1,285, but gold is still up over $100 from its 2018 low of $1,176 last August 17, so gold actually gained 10% in just five months (August 17, 2018 to January 17, 2019) while stocks were mostly trending down. Stocks have trended up in the New Year, but stocks corrected on Tuesday due to renewed bickering in Washington, D.C. and in the Brexit debates. For instance, Donald Trump is not the only world leader bypassing the annual summit in Davos, Switzerland. Britain’s Prime Minister Theresa May and France’s President Emmanuel Macron are also missing-in-action in Davos due to the political headaches they face on the home front in Europe.

Gold is at (or Near) All-Time High Prices in Over 70 Global Currencies

While U.S. investors may be frustrated at gold’s narrow trading channel in recent months, investors in dozens of foreign nations are very pleased that gold has not only kept its purchasing power but has far exceeded their home currency in value over the long term. In late 2018 and early 2019, gold has reached (or is about to reach) an all-time high price as measured in 72 global currencies.

Among those currencies with gold at or near a record high are the Argentine peso, Australian dollar, Brazilian real, Canadian dollar, Chilean peso, Indian Rupee, Iranian rial, Japanese yen, Mexican peso, Norwegian krone, Russian ruble, South African rand, Swedish krona and Turkish lira.

Even in U.S. dollar terms, gold has averaged 8% annual gains since the year 2000, a rate of increase which far exceeds inflation, interest rates, or any major stock market index. Over the last 19 years, gold is up 343% vs. only 79% for the S&P 500 or 112% for the Dow Jones Industrial Index. Stocks and gold will go up or down vs. each other in any given year but history shows that it pays to own gold in a well-balanced portfolio. Many experts recommend between a 10% and 25% position in precious metals.

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 “Golden Constant” in U.S. History

Roy Jastram wrote a book called “The Golden Constant,” in which he showed how gold retains its value over time in purchasing power. A fine suit of clothes, for instance, would cost about one ounce of gold in medieval times, or last century, or today. This is also evident from the constant role of gold in American history – as dramatized from a few key dates in late January in American history, beginning in 1848.

On January 24, 1848, James Marshall discovered gold on John Sutter’s mill, at the junction of the American and Sacramento rivers in California.  In 1847, the year before the California gold strike, the total U.S. production of gold was only 43,000 ounces, mostly as a by-product of base metal mining.  But 1848 yielded a 1,000% gain, to 484,000 ounces.  That total quadrupled again in 1849, to 1,935,000 ounces, and it peaked in 1853, at 3,144,000 ounces.  This changed American history and eventually gave birth to the San Francisco Mint. This sudden influx of gold brought prosperity, but also price inflation. In the 1850s, we suddenly had a glut of gold, but by the 1890s, the nation was running out of gold:

On January 24, 1894, the Treasury’s gold reserve dipped dangerously below $100 million, the warning bell for the upcoming Panic of 1894, so Wall Street investment banks underwrote a $50 million issue of gold bonds, selling them to the public and restocking gold in the Treasury back to $107 million.  Later in 1894, another $50 million bond issue was underwritten by Drexel Morgan but then, on January 24, 1895, gold reserves hit a new low of $68 million, then $45 million in the following week.  This caused a gold shortage which was remedied in the nick of time by a new gold discovery up north: Klondike Gold!

On January 30, 1934, Congress passed the Gold Reserve Act, giving President Roosevelt authority to set the price of gold, on his birthday no less.  On January 31, he pegged the dollar at 59 cents, by raising the price of gold 69% from $20.67 to $35.00 per ounce. FDR also nationalized gold supplies, including coins, bullion and gold certificates.  For the next 41 years, it was a crime punishable by up to 10 years in prison and fines of $10,000 to hold pieces of this inert gold metal that was slowly rising in price.

On Friday, January 18, 1974, the first gold-oriented investment conference debuted in New Orleans, under the sponsorship of the late Jim Blanchard.  Bunker Hunt attended that seminar.  According to Jim Blanchard’s memoirs, “Confessions of a Gold Bug,” Hunt probably hatched his idea of cornering the silver market at that seminar, though the plan took six years to reach fruition in early 1980. On the following Monday, January 21, 1974, gold hit a record $161.31 and silver hit a record $3.97 an ounce in London, but it was still illegal for Americans to own gold, until it was legalized on December 30, 1974.

On Friday January 18, 1980, silver hit $50 an ounce for one day, resulting partly from inflation fears, but mostly from a cornering of the silver market by the Hunt brothers.  On the same day, gold hit $750, on its way to an all-time record high of $850 on Monday, January 21. 1980. Gold would not exceed $800 for 28 years, but gold was over $800 for that single day back then, and it was over $700 for only three or four days.  This one-day spike to $850 was gold’s one-day bull market peak, a typical “spike” peak, so anybody who analyzes gold’s performance by starting with this spike-price is trying to mislead you!

 

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