Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
More Clarity for the Short Term for Bitcoin Price - 22nd May 18
Study: A Rising and Strong U.S. Dollar Isn’t Consistently Bearish for the Stock Market - 22nd May 18
Gold, Silver & US Dollar Updates with Review of Latest COTS - 22nd May 18
Upside DOW Stock Market Breakout May Be Just the Beginning - 22nd May 18
5 Reasons Why Forex Trading Is Becoming Such A Big Deal In SA - 22nd May 18
Fibonacci And Elliot Wave Predict Stock Market Breakout Highs - 21st May 18
Stock Market Ideal Cycle Low Near - 21st May 18
5 Effects Of Currency Fluctuations On The Economy - 21st May 18
Financial Conditions are Still too Easy for the Stocks Bull Market to End - 21st May 18
US Stock Market Elliott Wave Predictions for 2018 and Beyond - 20th May 18
Are You Still Fearful of Cryptos? - 20th May 18
US Stocks - Why I am Short-term Bearish, Medium-term Bullish - 20th May 18
Looking for a Turn in Gold Price - 20th May 18
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18
What Happens Next When Small Cap (Russell) Leads the Stock Market - 17th May 18
Negative Signs for EUR/USD? AUD/USD - Battle - 17th May 18
DOW Jones and CRUDE Oil on a Cliff Edge, Waiting for a Nudge! - 17th May 18
Gold Price No More Subtleness – It’s Show Time! - 17th May 18
VIX Cycles Point to Stock Market Correction - 17th May 18
Trump Sounds End Times Armageddon Trumpet for Jerusalem, Israel Evangelical Prophecies - 16th May 18
Our Next Stock Market Dow Fibonacci Price Targets – Get Ready! - 16th May 18
The Coming Copper Crunch - 16th May 18
Stock Futures Are on a Sell Signal - 16th May 18
What to do When the IRS Comes for Your Property - 16th May 18
IS BITCOIN ANONYMOUS? - 16th May 18

Market Oracle FREE Newsletter

Trading Lessons

Gold Buyers Get Physical As Coin and Jewelry Sales Surge

Commodities / Gold and Silver 2013 Apr 23, 2013 - 06:39 AM GMT

By: Frank_Holmes

Commodities

I was honored to be in St. Paul's Cathedral attending Margaret Thatcher's funeral last week. It was quite a special opportunity to pay tribute to Britain's longest-serving prime minister in person, and the ceremony provided a reflective occasion on her influential leadership and unwavering conviction.

As her country faced an economic crisis with high inflation, high tax rates and hundreds of mining strikes, the lady's iron courage helped her make the difficult decisions that steered the United Kingdom to a more sustainable path.


A steely resolve seems to be lacking in many of our world leaders today. Maggie led the U.K. down the path of privatization, encouraging entrepreneurship and free markets because her belief was that "Socialist governments traditionally do make a financial mess. They always run out of other people's money."

In his recent webcast, Global Portfolio Strategist Don Coxe points out the effectiveness of this privatization path, showing the rise in the U.K.'s real GDP from the time she was elected Leader of the Opposition in 1975 through today.

U.K.'s Real GDP Under Thatcher's Leadership

Buyers Move from Gold ETFs to Physical Gold

After spending a few short days in London, I flew back to the U.S., landing in New York City to work with the International Crisis Group. U.S. Global Investors has been a strong supporter of the ICG, which works to resolve conflicts around the world and promote peace and prosperity.

I also met with several business leaders while in The Big Apple. For those of us in the investment business, we all have the same question on our minds: What's going on with gold? How can governments' balance sheets continue to expand like we've never seen before in history, yet the price of the metal melt so quickly?

We noted numerous reports indicating that there's a shift taking place in the gold market, with investors discarding the gold ETF, preferring physical gold instead. Take a look at Zero Hedge's chart. On one day alone, April 17, buyers scooped up a record 63,500 ounces from the U.S. Mint. This is equivalent to 2 tons of gold, "more than the previous two months combined," according to Zero Hedge. This is a drastic move compared to recent history.

Gold Ounces Sold by U.S. Mint - Daily

The U.S. Mint is generally the last place gold shoppers buy their ounces because they have to pay "a hefty premium" for gold. It's like going to 7-Eleven on Christmas to buy AA batteries for the electronic toy Santa left under the tree.

However, gold shops such as Apmex or Gainesville Coins aren't closed; rather, gold customers end up buying from the U.S. Mint because "nobody else has any physical [gold] at a lower premium to spot (or any metal in inventory)," says Zero Hedge.

So, even with the gold price dropping, why are gold coins selling at a premium? It's Economics 101: The coin supply is limited and the demand is high.

This buying trend isn't only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins. According to The Wall Street Journal, "Gold shops from Tokyo to Dubai have witnessed frantic buying of the coins, alongside other items such as gold wedding bracelets. The surge has been triggered by cheaper prices."

China Daily reported a similar buying enthusiasm occurring in jewelry stores in Beijing, Shanghai and Guangzhou. Shanghai's newspaper reported that "while gold markets in the United States and Europe saw panic selling, sales of gold bars and jewelry jumped in China as buyers viewed the lower prices as an opportune moment to invest."

To put it simply, for retail investors in the west and east, gold went on sale. A Black Friday special for the yellow metal in spring.

Moderation is Gold Investors' Guide

We believe the yellow metal is experiencing a short-term correction during its long-term secular bull market. Compare today's gold bull run to the spectacular gold bull market in the 1970s. From February 1975 to August 1976, gold fell 44 percent. However, those investors who held tight to their gold were rewarded: From August 1976 to January 1980, gold rose an astounding 700 percent.

This time around, gold fell 28 percent over nearly the same period.

Gold Declined 44 Percent During 1970s Bull Market Before Rebounding Significantly

This chart holds a mixed message for investors. On the one hand, if history repeats itself, gold could fall as far as $1,050. The positive message, though, is that history teaches us that gold can withstand a 44 percent decline and rebound substantially.

As Roman philosopher, Marcus Tullius Cicero, wisely said, "Never go to excess, but let moderation be your guide." Cicero's advice applies to life as well as when investing in gold. What I wrote in The Goldwatcher back in 2008 remains valid today:

"We put a lot of messages into the marketplace, but the one we stress most when it comes to gold is moderation. Don't try to get rich with gold because the corresponding risk is simply too high. Gold is a volatile asset whose daily price action can be far more dramatic than blue-chip stocks and many other asset classes."

Don’t miss the presentation that received more than a quarter-million page views on businessinsider.com. To download your copy, go to www.usfunds.com, follow us on Twitter or like us on Facebook.

By Frank Holmes

CEO and Chief Investment Officer

U.S. Global Investors

U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.

Frank Holmes Archive

© 2005-2018 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