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Metal Market Report April 2020 - Week 3 Edition

April 2020 - Week 3 Edition

More Common Gold and Silver Coins are Becoming Harder to Find – Pushing Prices Up

Last year, many European suppliers began to melt down many common-date circulated gold coins and the more common-date MS-60 through MS-62 $20 Liberties and $20 Saints because the premium over melt for many lower-grade uncirculated common-date $20 gold coins had become so small. They figured it was more efficient to sell the gold in bullion form rather than encased in a slab. In some cases, they even melted MS-63 Saints, even when certified by PCGS or NGC. Now, as a result of that massive meltdown, there are rising premiums on the remaining coins due to higher demand and a population shortage. Premiums are rising on both the $10 and $20 certified gold coins.  Call an account representative ASAP!

The same is true with American Silver Eagles.  Due to the threat of coronavirus spreading, the U.S. Mint has shut down Eagle production, despite the huge 8-fold increase demand during March and continuing strong demand in the first half of April. American Gold Eagle premiums are also rising.

Last Wednesday, the Mint announced that “Due to the increasing number of COVID-19 cases in Orange County, New York, and out of an abundance of caution, the United States Mint has temporarily suspended production at the Mint facility at West Point.”  That Mint produces investment grade gold, silver, platinum and palladium bullion coins and sells them to authorized dealers. Due to a shortage and shutdown we have seen many dealers describe long delays in delivery.

Unlike many dealers, our company still has some $10 Indian and $20 Liberty U.S. gold coins and Silver American Eagles in stock, as well as finer rarities. Call today to see what is still available!

Gold Up 15% in a Month

Gold reached $1,730 last Thursday before correcting, as the metal once again enters its “two steps up, one step back” march upward to higher highs and higher lows on the correction. At $1,695, gold is still up over $220 per ounce (+15%) from its low of $1,474 one month ago, on March 19. On the same day last March, silver traded at $12, so silver has risen even faster (+28%) in one month. On Monday, April 20, gold and silver were rising again while stocks are falling, with the Dow index down 500 points as of 3 pm.

Most Commodities Continue to Careen Downward – Except Gold

On Monday April 20, the futures contract for May delivery of West Texas Intermediate (WTI) crude fell under zero.  How did that happen?

In a usual day, before this panic, the world consumed 100 million barrels of crude oil per day, but now we’re using barely 70 million barrels per day.  With airlines virtually closed down, automobile traffic severely reduced and only truckers delivering goods to stores and homes during this period of national lockdown, the demand for oil simply isn’t there and oil companies are paying others to store oil because it is cheaper than shutting down wells.

Gold’s recent rise is all the more remarkable since nearly all commodities are declining. So far in 2020, the CRB commodity index is down 37%. Oil fell over 70%, from $61.81 at the start of 2020 to just $18 last Friday. Gold advocates used to chart the price of gold and oil together, with inflation rates pushing both up in tandem, but that is no longer the case since we are in a world of DEFLATION, not inflation.

With the global slowdown, there is not much demand for industrial metals or energy sources. Most other commodities are also down, including agricultural commodities like corn, cotton, cattle or chicken.

The Thomson Reuters/CoreCommodity CRB index consists of 19 commodities sorted into four groups, with 41% weighting in agriculture, 39% in energy, 13% in base or industrial metals and 7% in precious metals. In the last 12 months, the CRB index has fallen from 195 to 123.8, for a 37% decline.

Here are the 12-month changes in all 19 commodities in the CRB index. Gold leads the pack with 32.8% gains, with wheat and coffee being the only other commodities with an appreciable gain. Fully 10 of the 19 commodities are down by double digits, with crude oil leading the way with an 83.8% annual decline.

Most of these commodities are universally priced in U.S. dollars, but with the Wall Street Journal’s U.S. Dollar Index up about 4% in the last year, these price changes would be approximately 4% higher in the “average” foreign currency, and much higher in terms of emerging markets’ currencies. In other words, gold was $1,275 a year ago (April 17-20, 2019), and it has risen 32.8% to $1,695 now, but it is up 38% in the “average currency” and up 50% or more in weaker currencies, for example +86% in the South African rand.

This list of commodities shows that gold has a unique role as a “crisis hedge,” not dependent on industrial demand, and silver is up slightly because it is a “hybrid” metal (both industrial and precious). All of the other metals and energy resources are down significantly during the current global economic slowdown.


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