Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Crash Edition - 26th Mar 19
Handy Ways to Boost Your Home Income - 26th Mar 19
US Treasury Bond Yield Inversion and Political Fed Cycles - 26th Mar 19
Golan Heights Oil all about the Shekels - 26th Mar 19
Falling Yields a Catalyst for The Gold Catalyst - 26th Mar 19
Can We Lock Up Rachel Maddow Now? - 25th Mar 19
Real US National Debt Might Be $230 Trillion - 25th Mar 19
Friday's Stock Market Sell-Off - New Downtrend or Just Correction? - 25th Mar 19
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

U.S. Mint Gold Eagle Coin Sales Research (1987-2011) Casts Doubt on “Gold Bubble” Assertion

Commodities / Gold and Silver 2011 Sep 08, 2011 - 08:44 AM GMT

By: GoldCore

Commodities

Best Financial Markets Analysis ArticleGold is trading at USD 1,841.60, EUR 1,310.90, GBP 1,148.90, CHF 1,593.10 and JPY 142,290 per ounce and is thus trading at levels seen at this time yesterday.

Gold’s London AM fix this morning was USD 1,827.00, EUR 1,298.88, and GBP 1,146.68 per ounce. Gold fixed lower in all currencies from yesterday’s AM fix - USD 1,844.00, EUR 1,311.99, GBP 1,153.44 per ounce.


Cross Currency Table

New research from Dr Constantin Gurdgiev, Head of Research with St Columbanus AG, member of the investment committee of GoldCore and the adjunct lecturer in finance in Trinity College, Dublin, questions the widely held belief that retail investors are “piling into” gold in a speculative frenzy.

This assertion has been heard for many months now. It is one of a few simplistic assertions that are used by those who have been claiming that gold is a bubble – including by respected economists such as Paul Krugman.

In July, Krugman suggested somewhat simplistically that gold prices have risen to record nominal highs due to retail gold dealers in the US engaging in a “marketing scam” trying to aggressively sell gold coins by preying on people’s fears about inflation.

The very real and significant global gold demand, especially from Chinese and Asian store of wealth buyers and from central banks internationally who are set to be net buyers again in 2011, was completely ignored by Krugman.

Many have echoed Krugman’s assertion that retail demand for gold coins due to aggressive marketing campaigns by unscrupulous bullion dealers was leading to higher gold prices and creating a gold bubble.

The ‘gold bubble’ meme has been widely accepted and propagated by much of the non specialist financial press.

Constantin Gurdgiev’s article published in The Globe and Mail today looks at the facts and questions this widely held assertion and assumption.

The article, ‘If you’re looking for bubbles, don’t look at gold coins’, can be read here.

“The U.S. Mint data on sales of gold coins suggests that we are not in the last days of the ‘bubble’,” finds Gurdgiev.

Buyers of gold bullion coins such as the U.S. Mint’s gold eagles are store of value buyers and sometimes collectors, Gurdgiev points out.

They are not speculative buyers trying to time the market and make a short term financial gain or speculative profit.

Buyers of gold bullion coins and bars are not speculators as speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum. Most buyers of gold coins are motivated not by a return on capital but by a return of capital and by wealth preservation.

This is particularly the case in today’s extremely uncertain world where some blue chip stocks, including bank stocks, have collapsed to become worthless and where a safe haven currency such as the Swiss franc can be devalued against gold and other currencies by more than 7% in a matter of minutes.

Concern, risk aversion and sometimes fear is leading to store of wealth demand. Demand today is not driven by greed, “irrational exuberance” or a mass mania to get rich by jumping on the latest bandwagon.

Gurdgiev points out that “gold coins are traditionally held by retail investors as portable units to store wealth. Due to this, plus demand from collectors, gold coins are less liquid and represent more of a pure ‘store of value’ than a speculative instrument.”

US Mint Gold Coin Sales and Nominal Gold Price (1986-2011)

The data shows that there has not been a dramatic increase in demand for the U.S. Mint’s Gold Eagles with annual demand in 2011 set to be some 1,275,000 oz which is below the levels since back in 1986-1987, in 1998-1999 and more recently in 2009 when demand was 1,435,000 oz.

Gurdgiev points out that even if there was record demand for gold eagles today surpassing the levels seen in 1986-1987, in 1998-1999, and again in 2009, it would not necessarily be a contrarian signal that gold was a bubble about to burst.

“Classical bubbles arise when speculative motives (bets on continued accelerating price appreciation) exceed fundamentals-driven motives for holding gold. In later stages of the “bubble”, we should, therefore, expect demand for gold coins to fall compared to the demand for financially instrumented gold.”

This is something we have long pointed out. Demand for gold bullion coins and bars is not a good contrarian indicator of retail demand and the typical mass mania greedy buying that accompanies most market tops and most bubbles.

A far better indicator of this is the Commitment of Traders (COT) data from the COMEX and data from the global gold market and the increasingly important gold spot and futures markets in Dubai (DMCC) and especially Shanghai (SGE).

(COT data from the COMEX, as we pointed out last week, is far from the record levels seen in recent years and sentiment remains lukewarm today.)

The myriad of more liquid gold ETFs which cater for the less risk averse stock trading and investing public may also be a good benchmark of retail exuberance for gold.

Gurdgiev's excellent article concludes that the data and evidence from the U.S. Mint regarding the “behaviourally anchored, longer-term demand for gold coins as wealth preservation tool for smaller retail investors” does not “appear to support the view of a dramatic over-buying of gold by the fabled speculatively crazed retail investors that some media commentators are seeing nowadays.”

For the latest news and commentary on financial markets and gold please follow us on Twitter.

SILVER
Silver is trading at $42.20/oz, €30.05/oz and £26.35/oz.

PLATINUM GROUP METALS
Platinum is trading at $1,839.50/oz, palladium at $757/oz and rhodium at $1,800/oz.

GOLDNOMICS - CASH OR GOLD BULLION?



'GoldNomics' can be viewed by clicking on the image above or on our YouTube channel:
www.youtube.com/goldcorelimited

This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W www.goldcore.com

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules