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Metal Market Report September 2019 - Week 3 Edition

September 2019 - Week 3 Edition

Russia and China Pile into Gold
- Barron’s, September 16

Through June 30, central banks purchased a record 374 metric tons of gold in 2019, the highest first half of gold purchases of any year on record. Totals for the third quarter will not be available until October.

This week’s “Commodities Corner” in Barron’s focused on the latest wave of gold buying by central banks in Russia and China as well as other “emerging markets,” as central bankers exchange their rapidly eroding paper money reserves for the proven value of gold. According to the latest data from the World Gold Council (WGC), Russian gold reserves stand at 2,219.2 metric tons and China’s reserves are 1,936.5 metric tons (one metric ton is 32,150 Troy ounces, worth $48,225,000 at $1,500 per ounce. This means the combined value of Russian and Chinese central bank gold is now worth a total of over $200 billion.)

Each quarter, the major hedge funds must report to the SEC their level of gold holdings by the middle of the following quarter, so we learned in mid-August that the world’s largest hedge fund, Bridgewater Associates, operated by Ray Dalio, bought $68 million in the leading gold ETF in the second quarter. Also, billionaire gold bug John Paulson maintained his 4.36 million shares in the SPDR gold fund. Overall, investors poured $870 million into the SPDR gold ETF in the second quarter according to SEC filings.  Their timing was excellent, as gold rose from $1,390 on July 1 to over $1,500 recently.

Gold Rises Above $1,500

Gold is Back Above $1,500 and silver is around $18 per ounce, after both slipped below those levels last week. This was a necessary “breather” after the precious metals had risen so far, so fast, in July and August. On Wednesday morning, September 18, gold rose $5 to $1,507 on the opening while silver was slightly down as the nation awaits the Federal Reserve’s decision on cutting interest rates after last week’s war of words between President Trump and the Fed Chairman Jay Powell. At one point last week, the President called the Federal Reserve Board “Knuckleheads” for not cutting short-term rates to “zero or less,” as in Europe.

Remember that rising gold and silver prices tend to generate more gold and silver ads, which bring in more new customers for many coin dealers, lifting demand for bullion coins at first and then rare coins.  That often leads to higher prices for both types of coins, even though rare coin prices may not rise immediately.

Happy Constitution Day – September 17

The U.S. Constitution was signed September 17, 1787 and ratified nine months later. For most of our nation’s history, September 17 was honored as Constitution Day, but that day had fallen into obscurity, however, on September 17, 2017, President Trump reinstated that date as Constitution Day and Citizenship Day.

The Constitution, in Article I (The Legislative Branch), Section 10 (Powers Prohibited of States), touches on gold and silver, when it says, “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” But there are also many prescriptions for limited government in the Constitution.

Any fresh reading of the Constitution reveals that it prohibits most of what our federal government is doing today! For instance, the Presidency is a very limited job description, originally designed to be something like the President of today’s Swiss Confederation – an obscure person named Ueli Maurer!

The design of the office of the U.S. President was one of the most contentious elements of the 1787 Constitutional Convention. It was only decided on Day 105 of the 116-day convention – in a sweltering Philadelphia hall. There were 30 votes on the subject of how to appoint a President, with no delegate advocating election by popular vote. In six of those votes, attendees voted unanimously for a President appointed by Congress. F.H. Buckley, author of Once & Future King (2014) said, “They did not want a president elected by the people. That question was put to them four times and they lost each time.” To this day, the U.S. President is not directly elected by popular vote but by the electors of each state.

The Founders sought a balance of power – or “gridlock,” in today’s terminology. The Founders were more concerned with what our federal government must NOT do than what it should do. The primary author of the Constitution, James Madison, said, “The accumulation of all powers, legislative, executive and the judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.” 

Last week, Professor Nicholas Giordano, of Suffolk County Community College, appeared on the Tucker Carlson show. He said that he opens each of his classes on Civics with the U.S. Citizenship Exam on the first day of class with a test – the civics test that each legal immigrant must pass to become a U.S. citizen. It asks questions, like who is the Speaker of the House? This semester, he said, every student failed.

Let’s all read and encourage our youth to read the U.S. Constitution again – and read it again, once a year, on or near Constitution Day

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 even 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 numismatics’ 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 and discussed this topic with them.



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