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Metal Market Report March 2022 - Week 1 Edition

March 2022 - Week 1 Edition

Gold Marching Higher

Gold rallied to $1,950 on Tuesday, March 1 on news that the Russian invasion of Ukraine worsened over the weekend, Western powers imposing new sanctions on Russia and its President Vladimir Putin putting the country’s nuclear forces on high alert. This marks the first time gold has risen above $1,950 since September 2020, reflecting gold’s role as a safe haven and inflation hedge – similar to the time when Russia invaded Afghanistan in 1979.

Russia Has Stockpiled More Gold Than Any Other Nation Since 2010 – Since They Know Gold Provides “Ultimate Value” (and Anonymity)

Back in December 1979, Russia invaded Afghanistan amid high and rising inflation, and that act pushed gold from barely $400 to $850 within a month. One untold story of Russia’s invasion of Ukraine last week is that Russia has been stockpiling gold regularly over the past decade – like no other nation – even though it is a relatively poor nation, not much richer than Spain. They likely did this since they probably knew gold would soar after their aggressive actions, offsetting any possible loss in future energy sales.

In 2010, gold represented only 7.4% of Russia’s official foreign exchange reserves. By 2019, that share had more than tripled to 23.4%. They funded this by unloading their U.S. dollar holdings.

This gold purchasing program has pushed Russia’s gold hoard to the #5 position in the world, not far from #3, behind only the U.S. and Germany. Russia how holds 2,300 metric tons of gold, according to the World Gold Council (WGC). At today’s price, that’s about $145 billion, which equals about 10% of Russia’s GDP. Gold is fungible everywhere. This stockpile, if sold to a Russia-friendly country like China, could also help offset, or make moot, any monetary sanctions put on the country by the U.S. or NATO following its invasion of Ukraine – at least in the short term.

Where We Stand After Two Months of 2021

All of the precious metals are in positive ground after just two months of the New Year. With approximately 5% gains – and even more after March 1 – the major stock market indexes are down an average of 8%, and even more after March 1. And the indexes sank further on the increasingly fearful news coming out of Ukraine, on Tuesday, following President Biden’s State of the Union address.

 

In the first two months of 2022, U.S. Mint sales were down (year over year) for the American Eagle gold and silver coins – down 21.7% for Gold American Eagles and down 18.4% for Silver American Eagles. This is partly due to the fact that 2021 was a banner year of sales growth for the Eagle pattern design change, but American gold Buffalo one-ounce coin sales rose 65.6% in February vs. February 2021, partially offsetting lower Eagle sales.

Portfolio Planning Principles for Owning Gold and Rare Coins

#1: Don’t Put All Your Eggs in One Basket. We constantly urge investors typically not to put more than 25% of their investible dollars in any one investment category – like stocks, bonds, certificates of deposit, real estate and gold coins.  There may be some exceptions to this advice due to unusual circumstances or opportunities but typically that’s what I and others advise.  At one point, I demonstrated this on top of a building by dropping a basket of eggs, showing how all the eggs were shattered at once. Unfortunately, some on-lookers from a nearby nursing home got concerned and called the police, thinking that somebody was contemplating suicide up there. Well…. I got my point across to those at my seminar. It’s important to have a wide variety of investments, where one class of investments can “zig” while the others “zag.” Very often, your stocks will fall while gold rises, while the opposite might happen at other times. You must diversify. The World Gold Council has studies supporting the benefits of diversifying a portfolio with gold coins.

#2: There is No Santa Claus in Numismatics. If you see a rare coin for sale at a substantial discount from its normal price, do not expect a bargain. It may be a falsely graded coin, a counterfeit, or a fraud. We recently heard from a client who sent us some $2.50 Indian gold coins graded by a company with some letters that were very close to “PCGS” or “NGC” but were not the precise letters of those respected grading services. The coins were graded MS-65 by this second-rate grading service and were not even worthy of a MS-60 grade, in my view. Since the coins were subject to a 15-day money-back guarantee, I urged this client to ask for his money back, or to seek legal aid, our further help, if that were no longer possible. Be wary of something that seems “too good to be true,” since it probably is. There is no Santa Claus in the numismatic world.

#3: Buy Quality Coins from Someone Known for Expertise in the Field. Sometimes, you may pay a little bit more for the same grade rare or antique coin from a recognized expert in the field, but you will also likely fetch more for that coin later on, when you go to sell it, because the expert is selling you a “sight seen” coin, selected as a better coin, not a generic “sight unseen” coin marketed by so many other dealers who do not have the expertise or take the time to select the better coins in the field. I have graded coins at leading grading services and taught grading at seminars for decades. As you can see from our Website, I have an unprecedented number of industry awards in my 45 years of professional experience in the numismatic field. I am personally involved with reviewing or approving most of the high-end numismatic coins that we select and sell to our clients, so that you have the best opportunity to have a better coin for the grade compared to many other coin companies.

 

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