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Metal Market Report April 2021 - Week 1 Edition

April 2021 - Week 1 Edition

Gold and Silver Finish First Quarter Strong       

Gold ended the first quarter by rallying strongly above $1,700. After spending most of Tuesday, March 30 at a three-week low in the $1,680s, gold rallied on a weakening dollar, due to the expected passage of another multi-trillion-dollar spending package by Congress. April gold futures rose $24 (+1.4%) to $1,708 on Wednesday, March 31, and silver rose 25-cents (+1%) from a three-month low.

For the first full quarter, Eagle sales in 2021 were up over 83% for Gold American Eagles (vs. 2020), while Silver American Eagle sales were up 35% versus last year’s first quarter.  This means more new buyers continue to enter the bullion and rare coin market pushing many premiums and prices higher for our products.

Big Money is Entering the Rare Coin Market – in a Big Way

Last week, we discussed the strengthening United States rare coin market due to a dramatic increase in precious metals sales and the expansion of the market to new customers over the last 15 months.  Many of these new buyers have already become rare coin buyers.  This has happened in all previous bull markets.  Prominent dealers across the country tell me they haven’t seen this much collector and investor interest in bullion and rare coins in 15 years. 

Now, we continue to see the expansion of the number of investors with large net worth entering the coin market in a big way. Many years can go by with no coin being sold for over $5 million, but we saw three coins sell for over $5 million so far this year. An NGC MS65* CAC 1787 Brasher Doubloon set an all-time gold coin sales record of $9.36 million in January. Also, in January, a PCGS 1804 Capped Bust gold $10 eagle graded Proof 65+ Deep Cameo CAC sold for $5,280,000.  Then, last week, the finest known PCGS AU50 1822 $5 sold for $8,400,000. There are only three of these known to still exist and two are in the Smithsonian collection.  No gold coin collection is complete without this coin.   

A PCGS MS66 1797 half dollar was also sold last week for $1,680,000, making it the most valuable half dollar ever sold. As you can see, big money is increasingly coming into the U.S. rare coin market. 

The world coin market is also strengthening. An Edward VIII gold proof pattern 5 pounds NGC 1937 Proof 67 Ultra Cameo sold for $2,280,000, a record for a British coin.  It is now becoming harder and harder to find special rare coins, so please don’t delay if there is a special coin you need to acquire for your collection.  Call your account representative today.

“Real” Interest Rates are Now Negative – and That’s Bullish for Gold

Despite the fact that long-term interest rates have been slowly rising this year, inflation rates are rising even faster, generating negative “real” rates. For instance, if the 10-year Treasury bond yields 1.75% this week, and the Consumer Price Index is 2.5%, your “real” return is negative -0.75%. 

One measure of the real return on Treasury rates is the “TIPS” (Treasury Inflation-Protected Security) bond, a Treasury bond indexed to inflation. The last time it declined sharply and went below zero was in 2011-12, when gold hit its most recent peak. We are now seeing a similar decline, which began in 2019.

With the Biden Administration having just passed a $1.9 trillion “COVID relief” spending bill, they are now discussing a $2 to $3 trillion “infrastructure” program that will be even greater. If it passes, the deficit will continue to grow this year and in future years due to a Democratic Congress and White House.

There’s no question that some infrastructure spending is necessary, but most studies show that about $1 trillion will fit the bill for the much-overdue requirement to fix roads, bridges, ports, waterways, rail lines, sewage plants and improvements to our electric grid and other power plants. This much spending has full bipartisan support, but what about the other $1 to $2 trillion of pork in proposed “infrastructure” spending that will be redirected for social programs like free community college, universal pre-kindergarten, minimum wage subsidies, Affordable Healthcare Act subsides, a national paid leave program, forgiveness of student loans, universal income, jobs training, climate change initiatives, Green New Deal programs and more?

The result will potentially be monstrous deficits, double-digit inflation and a resurgence of the gold bull market. Get ready for the greatest bull market since the “stagflation” bull market of the Carter days in the 1970s!


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