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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

June 2019 - Week 3 Edition

Gold Rose to a 14-Month High

Gold rose to a 14-month high of $1,344 on Friday (Flag Day).  After correcting to $1,325 mid-week, gold shot up $20 on Thursday and Friday over concerns about rising Middle East tensions and the sagging health of China’s economy.  Gold has now risen in 12 of its last 13 trading days, reaching its highest price since April 2018, despite a strong dollar – meaning that gold is rising even faster in other currencies. At the same time, copper and other industrial metals are declining in price, due in part to China’s slowdown.

Higher gold and silver prices often lead to increased interest in rare coins in new and older, more established customers alike. It is important for you to call us before prices rise further!

Bitcoin Has Recovered a Bit – But Gold is Still the Real Thing!

In a little under a year, the price for a single Bitcoin declined 84%, from $19,783 on December 17, 2017, to $3,183 on December 14, 2018 – and Bitcoin is the “Cadillac” of Cryptocurrencies. Many lesser-known crypto-currencies have declined even more.  However, Bitcoin has recovered somewhat in the last five months, reaching more than $9,000 in mid-June 2019. Are these phantom coins returning to favor, or perhaps headed for new highs above $20,000? Is it time to take a risk in these new phantom currencies?

When I compare what I call “the real thing” (gold) to the electronically created line of computer code called a “Bitcoin,” there is no comparison. Gold is a rare precious metal that requires highly trained geologists to search the globe for those rare anomalies where a significant amount (over one ounce per ton) of the metal can be extracted from well beneath the earth’s surface at great personal and political risk vs. what some computer jockey “mines” by creating a line of code from the safety of his home office.

The problem with electronic money is that hackers from the dark web have at least as much creativity as those who create cryptocurrencies for the noblest of motivations. As the old saying goes, “What one man can invent another man can circumvent.” If you believe that Russian or Chinese hackers can penetrate our election process or our banking records, they can certainly hack into private crypto-currency banks. Since 2011, according to Autonomous Research, a London-based financial-services research firm, there were 56 cyber attacks directed at cryptocurrency exchanges, initial coin offerings and other digital currency platforms through mid-2018, causing hacking-related losses of $1.63 billion. The two biggest hacks were in Japan at the Mt. Gox exchange in 2014 and Coincheck in 2018, totaling nearly $1 billion.

One cyber-security expert said that cryptocurrency exchanges are “easy to breach, with minimum effort and expense from attackers and with maximum return on investment.” There were five such crypto-bank robberies netting a total of $800 million in early 2018 alone.

With real gold coins, however, you know what you have, if you deal with a coin dealer who is skilled in authentication and can counsel you in storing and preserving your coins in safe deposit boxes near you. While gold coins can indeed be counterfeited, you know you have the real thing if you deal with award-winning dealers who only deal in certified rare coins from the Professional Coin Grading Service (PCGS) or Numismatic Guaranty Corporation (NGC) and bullion from reputable sources.

Gold has at least a 4,000-year track record as a store of value, while Bitcoin is barely 10 years old, created out of nothing in 2009. Ever since a person using the name Satoshi Namamoto invented Bitcoin in 2009, over 1600 other cryptocurrencies have been invented, starting with “Litecoin” and “Namecoin” in 2011. Maybe in 100 or 200 years, one of these volatile 1600+ crypto-currencies will emerge as the “real thing” among computer-coded currencies, but that’s too much of a risk to take at this early stage of their security and development. Until the real thing comes along, the real thing still exists, and its name is spelled G-O-L-D.

A Modest Proposal for Saving the Government $150+ Million Each Year

Abolish the Penny!  Canada did it in 2013 with no regrets and no repercussions, and we can do it, too.  During Fiscal Year 2018, the cost for producing and distributing a copper-plated zinc Lincoln cent was 2.06 cents. That’s right. A cent costs more than two cents to make. The copper-nickel Jefferson 5-cent “nickel” is even more expensive, costing 7.53 cents, or 2.53 cents more than its face value to make.

The cost of manufacturing the penny is up 13% from its 1.82-cent cost of production in 2017 and up 37% from its cost of 1.5-cents in 2016.  The nickel is also 14% more expensive to make in the last fiscal year.

If America stops making pennies – and later stops making nickels – those coins will still circulate as legal tender, but they will no longer cost the Mint more than their face value to manufacture. Vendors can still charge exact prices for credit-card orders or round off prices to the nearest five cents or ten cents for cash orders. There is no reason for most families to stockpile so many unused coins at home if the U.S. Mint stops making those coins.   This process went very smoothly when implemented in Canada in 2013.

The current composition of the penny is a 99.2% zinc and 0.8% copper planchet, plated with pure copper. The price of zinc has risen from a low of $0.65 per pound at the start of 2016 to about $1.18 per pound now.  (The 5-cent “nickel” is composed of 25% nickel and 75% copper and weighs five grams, more than twice the weight of the dime!) The Mint’s research and development team has been working to develop alternative compositions to replace those currently in use, but Mint officials have found no alternative composition that would reduce the cost of producing and distributing the penny to less than its face value.

The Mint struck more than 7.8 billion cents in calendar 2018 and 8.63 billion cents in calendar 2017. That’s $160.8 million for making pennies in 2018 and $157.1 million in 2017. Why not save the federal government over $150 million each year by halting the manufacture of new pennies in 2020 and beyond?

According to Wikipedia, over 30 countries have stopped minting their lowest-denomination coins in the last 35 years, including this partial list:

Maybe we can copy many other nations (like Denmark, Hungary, New Zealand, Norway, South Africa and Sweden) and abolish our smallest coin (the penny) first and, if that goes smoothly, abolish the next smallest (our nickel) a few years later. That would save the Mint hundreds of millions of dollars per year.

 

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All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Publisher's knowledge at this time. They are not guaranteed in any way by anybody and are subject to change over time. The Publisher disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein. Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability. All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions. Arbitration: This company strives to handle customer complaint issues directly with customer in an expeditious manner. In the event an amicable resolution cannot be reached, you agree to accept binding arbitration. Any dispute, controversy, claim or disagreement arising out of or relating to transactions between you and this company shall be resolved by binding arbitration pursuant to the Federal Arbitration Act and conducted in Beaumont, Jefferson County, Texas. It is understood that the parties waive any right to a jury trial. Judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. Reproduction or quotation of this newsletter is prohibited without written permission of the Publisher.

 

 

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