Metals Market Report Archive
Metals Market Report 02-21-2017

The Mike Fuljenz Metals Market Report

February 2017 – Week 3 Edition

Why I Write about Gold More than Gold Coins

Some clients and customers I meet wonder why I don’t write more about rare coins than gold and silver bullion. After all, I have written several award-winning books about coins and specific coin series, like Gold Double Eagles (of various types) and Gold Indian coins of several denominations and mints.

My answer is that a rising price of gold and silver invariably awakens the public’s interest in owning gold, through bullion coins at first.  This increases first-time callers to our coin company, since our advertising works better in a rising bullion market than when prices are falling.  This year is starting out with a gold bull market surge, so we are receiving more first-time callers than usual.  Many of them quickly become interested in rare silver and gold coins. In addition, many customers order my books on gold Indian coins and other rarities and become interested in owning a selection of rare gold and silver coins.  This is why I talk about gold. A rise in the price of gold motivates the public to pay attention to ads for American Silver Eagles, or Canadian gold coins, and then they discover the beauty and rarity of historical gold and silver.

By the way, we keep extensive “wish lists” for rare coins, such as the 1908-S $5 and $10 Indian in MS-61 to MS-63, or the Carson City mint’s $5 and $10 gold coins. I advise our customers to tell us if they are looking for a coin they can’t find.  Contact one of our representatives and we will keep our eye out for specific rare coins when we travel to buy coins.

Gold Remains Strong

Gold remains strong in the new year, up 6.8% in the first seven weeks, with silver outperforming gold at +11.3%.  Both metals are beating stocks as an investment vehicle in 2017 and since the year 2000.  So far in February, gold has a firm “ceiling” at $1,242, with London pm price fixes of $1,242.10 (February 8) and then $1,241.95 last Friday, February 17.  If gold manages to pierce $1,242 decisively on the upside, gold could move up to $1,280.  So far, gold’s major moves have been about $40, from $1,160 to $1,200 in January, then up to $1,240 in February, so a penetration of $1,240 should make $1,280 the next target.

Former Fed Chair Alan Greenspan Says Gold is a “Primary Global Currency”

Just over 50 years ago, when he was an acolyte of philosopher/novelist Ayn Rand, Alan Greenspan wrote a famous essay, “Gold and Economic Freedom” for Ayn Rand’s Objectivist newsletter.  In 1967, that essay became a chapter in Rand’s book, “Capitalism: The Unknown Ideal.”  Greenspan began powerfully:

“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable….”

 Now, 50 years, later, in a featured article for the World Gold Council’s February “Gold Investor” report, Greenspan told the world he still believes in the superiority of gold vs. all of the world’s fiat currencies.

“Significant increases in inflation will ultimately increase the price of gold. Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection. I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value…. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.”

Greenspan has often stated his support for the gold standard. In the WGC article, he argued that if the gold standard were in place now, the federal government budget would not be so deep in debt:

“Today, there is a widespread view that the 19th century gold standard didn’t work. I think that’s like wearing the wrong-size shoes and saying the shoes are uncomfortable! It wasn’t the gold standard that failed; it was politics. World War I disabled the fixed exchange rate parities and no country wanted to be exposed to the humiliation of having a lesser exchange rate against the US dollar than it enjoyed in 1913…It wasn’t the gold standard that wasn’t functioning; it was these pre-war parities that didn’t work…. Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves…We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line.”

Mainstream Investors are Returning to Gold ETFs

Last Wednesday, Germany’s Commerzbank reported that gold exchange-traded funds (ETFs) added 51 metric tons of gold (worth about $2 billion) in the previous 10 days.  Bloomberg added that gold ETFs saw 10 consecutive days of net inflows of gold in early February.  (Gold ETFs must buy physical gold to back up their “paper” investment, so adding physical gold translates to net buying of gold ETF shares.)

Commerzbank has been one of the mainstream banks that has been consistently bullish on gold. Last week, they said that any price correction in gold should be regarded as a buying opportunity.  They are also encouraged by the fact that investors are buying gold despite a generally rising stock market:

“Even the fact that stock markets are still riding high does not appear to be discouraging investors from putting their money in gold…. This is also evident from the renewed purchases in gold ETFs, which saw additional inflows of 5.8 tons on Monday [February 13]; for the most part, these were attributable to the world’s largest gold ETF, the SPDR Gold Trust.”

Since Brexit (last June 23), gold has been particularly popular in England, where the British pound is falling, causing a strong rise in gold’s price in British pound terms. A study by Lloyds Private Bank shows that gold is the most popular investment in Britain with an approval rating of 46.4%.  Lloyds says that investors prefer gold to stocks due to “the need to shield against persistent geopolitical uncertainty.”

 

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