I'm curious as to why precious metal prices have fallen from the record high levels set earlier this year, most, if not all dealers, are experiencing shortages, and retail buyers are finding it harder to obtain gold and silver coins.
The U.S. Mint, claims they never ran out of supply before, has sold out of its 1-ounce gold and silver coins, and the refining company that mints the South African Kruggerand gold coin announced it also had run out of supply. Big Hmmmmmmmmmmmmmmm.
Gold and silver are known as crisis commodities that tend to appreciate in value under the worse economic conditions. But at a time when many investors are unsure about the government bailout plan and more concerned about the financial system, the price of precious metals has dropped while demand appears to be rising.Hmmmmmmmmmmmm.
There is substantial disconnect between the paper and physical market for precious metals. Buyers who are able to find silver coins will pay more than $20 an ounce to obtain them and around $1,000 an ounce for gold.
Much of the recent decline in the paper value of gold, silver, platinum and palladium can be traced to the collapse of investment banks and hedge funds on Wall Street, said Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and author of "The Little Book of Bull Moves in Bear Markets."
Many of the Wall Street firms devastated by the credit crunch were forced to sell their precious metals assets to shore up their balance sheets or meet leverage calls. The avalanche of sales in the paper market for precious metals triggered a drop in price.
Peter Schiff says "Ultimately, people who are buying gold now are doing the right thing. "The dollar is at risk and a lot of inflation is being created. Gold will retain its value even if they bought it at $950 or $1,000. The drop is only temporary."
Read James Turks "The Collapse of the Dollar.""The paper market has driven the price of gold and silver down to a level that is not sustainable, and you'll see a snap back," Turk said. "I remain bullish."Some of the largest wholesalers in the world are out of gold and silver bullion.Monex, a big gold dealer in Newport Beach, Calif., said the company was out of three-quarters of the bullion products they normally carry. Kitco Bullion Dealers in Canada recently posted a notice on the company's Web site apologizing for its inability to fulfill all existing client orders.
Blaine Shiff, co-owner of Cybercoins.net in Dormont, Pa. hits it right on target "Something is up. But I don't know what."In volatile times such as these in which there is a credit crisis and growing doubt about the stability of the financial system, gold is unique in that it has no counterparty risks. It is a tangible asset that is not dependent on someone else's promise.
It is unclear how much the federal bailout plan will do to help calm the financial markets, personally I think it will hurt when all is said and done. Addison Wiggin, executive producer of the movie "I.O.U.S.A." and founder of Agora Financial in Baltimore, is convinced that it will lead to higher inflation and higher prices for precious metals, which are a hedge against inflation. My sentiments exactly.
The bailout tab so far, he says, will add about $1.8 trillion in government debt along with massive amounts of lost equity for stock market investors. The government is hiding from the American people the fact that there is Trillions more in debt. upward of 55 Tillion. Your children and grand-children will pay this debt.
"A huge amount of institutional money is in three-month Treasury bills on the sidelines," Wiggin said. "My guess is things will start shaking loose after the election. As these three-month T-bills mature, they will either roll back into Treasuries or into precious metals."
Earlier this week, the United States Mint took further actions to meet the increased demand for gold and silver bullion coins. This included production halts for certain bullion offerings and the continued allocation for one ounce Gold and Silver American Eagle coins. Join The Bullionaires Club Now - Don't Get Caught With Your Pants Down.
Within the memorandum sent to authorized bullion purchasers, the US Mint specifically stated, "gold and silver demand is unprecedented." Throughout the course of this year, the Mint has provided similar explanations each time a new suspension or allocation program went into effect. While sales of Silver Eagle coins are higher than any other year in history, the sales of Gold Eagle coins are far below their peak.
The following table shows the ounces of gold sold by the United States Mint in the form of American Eagle Gold bullion coins. These figures are taken from the US Mint website. You can visit the link for monthly data, as well as the figures for Silver and Platinum Eagles.
American Gold Eagle Bullion Sales (ounces)1986 1,787,750
1987 1,253,000
1988 851,000
1989 839,000
1990 715,000
1991 472,000
1992 638,600
1993 796,000
1994 559,500
1995 600,500
1996 729,500
1997 1,317,000
1998 1,839,500
1999 2,055,500
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000
2007 198,500
2008 492,000*
*through October 2008
While the number of ounces of gold sold has already more than doubled from last year, it still does not approach the levels reached during the several prior years, most notably 1998 and 1999. Very Fishy, If it walks like a Duck it's a Duck (Manipulation)
In terms of monthly demand, during 2008 the highest number of ounces sold was in September at 113,000 ounces. During 1998 and 1999, there were seven months with sales in excess of 200,000 ounces. The highest monthly sales total occurred in October 1998 at 288,500 ounces.
The demand for American Gold Eagles is clearly not unprecedented. What's actually unprecedented is the suspension and allocation of Gold Eagle coins. Even amidst the booming demand of the pre-Y2K years, the US Mint never resorted to suspensions or allocation programs. Why is the US Mint having so much trouble keeping pace with demand this year? Hmmmmmmmmmm.
The mainstream press has recently given coverage to the US Mint's suspensions and allocations of gold and silver bullion coins. The stories have always reported about the US Mint's inability to produce enough coins to meet demand. Given that the Mint has been able to produce far greater quantities of gold bullion coins in the past, I think the real story is the Mint's inability to obtain the physical gold needed for the coins. Now the story gets clearer. Read the next part very clearly and think but most of act on your behalf join the Bullionaires Club
But that just raises another question: With unfulfilled physical demand, why has the market price of gold remained stagnant? I think we will see this situation play out with some interesting consequences during the remainder of the year.
