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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

February 2019 - Week 1 Edition

Gold Rises for Four Conservative Months

Gold closed at $1,323.50 in London last Thursday, January 31, its highest close since May 11, 2018 and capping a 3.25% gain in January 2019. Silver closed January up 3.52% at $16.01. Stocks also surged in January, up over 7%, but nowhere near their 7-month price peaks, which gold and silver have surpassed.  In the futures market, gold for April delivery closed January at $1,325.20 an ounce, the highest level since last April 24. Silver for March delivery ended January at $16.072 per ounce, the highest since July 10, 2018. Stocks rose 7%+ in January, but gold has risen for four consecutive months now – October through January – while stocks declined nearly 20% from the start of October to Christmas Eve, 2018.

Central Bank Gold Buying Reached Record Highs in 2018

While stocks were careening down in the fourth quarter of 2018, central banks (notably Russia and China) were unloading their U.S. dollar holdings in favor of gold. Several other smaller nations were doing the same thing on a smaller scale, but 2018 was a record for central bank gold purchases.

According to the World Gold Council (WGC), central banks added 651.5 metric tons* of gold (worth over $27 billion at $1,300 per ounce), a huge 74% increase over 2017 and the largest amount since at least 1971, when President Richard Nixon “closed the gold window” and effectively took America off of the gold standard. Gold purchases accelerated rapidly in the second half of the year. In the final quarter of 2018 alone, central banks purchased nearly 200 metric tons of gold, the most for any quarter on record.

Central banks have been net buyers of gold every year since 2010, mostly due to a desire to diversify their reserves away from the U.S. dollar, which peaked in 2010 and fell until 2014. The dollar has since rallied, but gold has rallied faster than the U.S. dollar since late 2015. Most Western (U.S. and European) nations already have a large portion of their total foreign reserves in gold, so the recent gold demand (since 2010) is mostly from emerging (poorer) nations. The biggest buyers in recent years (including last year) were Russia, China, Turkey and Kazakhstan, along with some smaller buying in Poland, Hungary and India.

As a result of its regular gold purchases, Russia is now the fifth largest holder of gold with 2,066.2 metric tons and China is #6, with 1,842.6 tons. Russia is undergoing a long-term policy of “de-dollarization.” According to the WGC, Russia bought 274.3 tons of gold in 2018, a record – their fourth consecutive year of buying 200+ tons. Russia has now sold its entire position in U.S. Treasuries to fund this gold buying.

*A metric ton (also called “tonne”) amounts to 1,000,000 grams, or 2,205 pounds, or 32,150 Troy ounces.

Another Billionaire Becomes a Gold Bug

Another billionaire has joined the gold bandwagon. According to Bloomberg TV, real estate tycoon Sam Zell, the creator of the real estate investment trust (REIT), recently said that he has purchased gold for the first time, citing decreasing supply and gold’s role as a hedge against falling currencies and global crises.

In the January 17 interview, Zell said, “For the first time in my life, I bought gold because it is a good hedge,” He added that “Supply is shrinking and that is going to have a positive impact on the price.”

Then, on January 30, Jim Cramer of CNBC said, ‘We are big gold believers here,” adding that “we think gold is going to $1,400-$1,500. We suggest that everybody have a little bit of gold in their portfolio.”

U.S. Mint Bullion Sales Explode in January

U.S. Mint bullion sales surged in January, across the board:

  • American Eagle Gold coin sales reached 65,500 ounces – a two-year monthly high. That’s 12% above January 2018 and 2,083% above the volume sold last December.
  • American Eagle Silver coins hit 4,017,500 ounces, up 24.2% from January 2018 and 720% above December 2018. The monthly total was also the highest of any single month since January 2017.
  • American Eagle Platinum sales reached 27,100 coins. Last year’s edition launched February 12, 2018 garnered first-month sales of 20,000 coins.

The 2019 .9995 1-ounce platinum American Eagles went on sale to authorized purchasers on January 7.  (The United States Mint does not sell bullion coins directly to the public.)  The Mint is planning to produce 40,000 coins, which is 10,000 more than were offered in 2018.  As of January 31, sales reached 27,100 coins, or 68% of the maximum authorization for 2019.  If you collect these beautiful $100 face value legal tender coins you may need to buy them soon, as they could quickly sell out.

Also, we and other dealers have noted that sales and prices of many bullion coins and bullion-related numismatic gold coins have been increasing weekly.  Don’t wait too long to buy as we and other dealers are now scrambling to find certain coins for customers at reasonable prices.

 

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