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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

September 2019 - Week 2 Edition

Barron’s Online Quotes Me Concerning Gold IRAs

I was quoted in this weekend’s Barron’s (dated September 8, 2019) regarding setting up gold IRAs and they acknowledged that physical precious metals are a legitimate and suitable long-term investment. It’s very important that investors follow the IRS rules and not fall for ads talking about “home storage” IRA gold or any other short-cuts. The types of eligible products are specifically determined by law, as well as the place of storage. American Eagle bullion coins are the most popular IRA choice. I told the Barron’s reporter it’s important to check credentials.  Counterfeit coins and bars can be a serious problem.  I warned that it can be difficult to get money back from someone who sells fake products if the company isn’t a longtime reputable company. I recommended contacting local law enforcement and the Numismatic Crime Information Center.  

In addition, I teach continuing education classes to law enforcement on consumer fraud and counterfeit detection for the Numismatic Crime Information Center.  I am also a member of the National Anti-Counterfeiting Task Force.  Customers should always buy from a recognized expert to avoid counterfeit bullion and rare coin products.

Do Not Be Surprised if Precious Metals Take a “Breather” Before Returning to New Multi-Year Highs

Gold reached $1,555 last Thursday, September 4, its highest price since early 2013, but it has since retreated to around $1,500. The highest London price setting was $1,546 on September 4th. Likewise, silver reached a three-year high of $19.30 last Wednesday in London – the highest price setting since September 2016. Last Wednesday, September 4, former Federal Reserve Chairman Alan Greenspan said it was “only a matter of time” until the United States, like Europe, had negative interest rates and that investors are rushing to gold as a hard asset for real returns.

In the 14 weeks between May 30th and September 4th, gold rose from $1,280 to $1,546, up 21%, while silver rose even faster, from $14.40 to $19.30 – up 34%.  It’s only natural that the metals take a breather before staging their next rally.

First, gold is entering its best time of the year – from September through February – when a rolling series of holidays in various cultures spurs jewelry fabrication for gift giving. Those holidays begin in India, especially for Diwali (October 27 this year), when gift-giving is considered auspicious, followed by Christmas, and the Chinese New Year. Historically, virtually all of gold’s price gains have come in this September through February period.

Second, there is the continued “race to the bottom” in both interest rates and currency values as most major countries try to compete in global trade by lowering the value of their currency (to favor their exports) and also by lowering interest rates to boost their sputtering economies during a global economic slowdown. Super-low interest rates favor gold, and the gradual devaluation of nearly all currencies increases the comparative value of gold.

Third, the U.S. government has abandoned all spending restraint. Both Parties have abandoned debate over the “debt ceiling” until 2021. On August 1, Congress passed a deal that increased an already-bloated budget by $320 billion for the next two years while allowing continued borrowing as needed. Basically, it’s an open checkbook. There is bi-partisan support for $3 trillion in infrastructure spending and the Treasury is mulling over a new $10 trillion line of credit!  There are $1 trillion-plus annual deficits as far as the eye can see, even before the fantastic spending plans by Democratic candidates – like Medicare for all, a $16 trillion Green New Deal or free college.

On top of all that, there could be new global unrest spurred by a “hard” Brexit in Europe, hot wars in the Middle East, nuclear testing by Iran, Russia or North Korea, riots in Venezuela or myriad other hot spots. So far, the U.S. Dollar has been a “crisis haven” to the world, as it has enjoyed a positive interest rate vs. negative rates in Europe and Japan. Imagine when the dollar weakens, as it inevitably will with growing deficits and lower interest rates.

Gold has several reasons to rise again, but don’t be surprised if the metals take a “pause that refreshes” first.

New Silver Dollars May Come in 2021 –
The Centennial Year of the Morgan/Peace Dollar Transition

In 1921, the final peace treaty for World War I was signed between Germany and the United States. In honor of that event, the final Morgan silver dollar was minted, and the first Peace dollar was minted. The year 1921 is the only year in which both a Morgan and a Peace dollar were minted. And now Congress may be considering a bill to mint limited-edition Morgan and Peace dollars possibly with a Carson City (Nevada) mint mark on the centennial of that event in 2021.  At a U.S. Mint forum I was invited to last year, Mint representatives expressed interest in some form of this project if Congress doesn’t act.

Silver dollars are one of the most popular coin series on the market and the coinage transition year of 1921 is one of the most significant dates in our country’s history, as well as numismatic’s history. The issuance of a new Morgan dollar with a proposed Carson City mint mark, and maybe others, should stimulate not only Morgan dollar sales but also the Carson City series, including the popular Carson City silver dollar-size gold double eagles.

House Bill 3757 was introduced on July 16 to authorize production of “no more than 500,000” Morgan and Peace silver dollars in their original designs by George T. Morgan and Anthony di Francisci, respectively.  Many believe this proposed program has the potential to do more for the overall Numismatic market than any other U.S. Mint product ever released.

The use of the Carson City mint mark is significant, since the “CC” mint mark helped launch the silver dollar boom in the late 1970s, when about 3,000 bags (about three million silver dollars – many of which were Carson City silver dollars) were turned over by the Treasury to be sold by the General Services Administration.  Many of these were in uncirculated condition.  The Carson City dollars were sold in 1973 and 1974 and again in 1979-1980. Their sales helped fuel rare coin bull markets and that could happen again!

The most important point to remember now is that this legislation must pass, and for that it needs co-sponsors. The numismatic community is currently getting behind this legislation by contacting Congressional representatives to become co-sponsors.  I hosted a lunch meeting with two area Congressmen last week.

Gold Benchmarks in American History in Mid-September

Gold has always played a central role in American history – more so than in any other nation. Columbus and most of the subsequent explorers from Europe were lured to the New World in a search for gold. Our country was founded with gold in the Constitution, due to the failure of paper money during our Revolution. Gold was responsible for our largest expansion during the California Gold Rush, followed by several other gold and silver discoveries, capped by the Klondike Gold rush in 1897. Depressions were created out of gold shortages – then solved by gold transfusions.

Here are a few of the benchmarks in U.S. history that happened near this date in Mid-September:

On September 12, 1857: The U.S. Central America sank off the coast of South Carolina, at the cost of 423 lives and a cargo of $1.6 million in gold coins, mostly from the San Francisco Mint.  The dollar loss, which may seem small by today’s standards, caused a credit crunch and deepened the Panic of 1857. Many of those coins surfaced in the last few years and were available to collectors and investors through our company (call for more information).

On September 21, 1931, Great Britain repealed its link to the gold standard and devalued the pound by 20%.  This caused a panic withdrawal of gold from U.S. banks.  As a result of this new gold rush, 305 banks failed in the U.S. in September 1931 and 522 more U.S. banks failed in October, leading to the closure of most banks in March 1932.

On September 13, 1983, the U.S. Mint struck its first gold coin in 50 years (the Olympic Eagle).  In 1933, FDR had banned gold, and most U.S. gold coins, under threat of fines and jail.  For almost 50 years, holding gold bullion or many common-issue U.S. and foreign gold coins was punishable by up to 10 years in prison – until December 30, 1974.

 

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