Growth In Gold Due To Concerns Over Fed's Bond Buying

It would seem that the Chinese aren’t the only ones buying physical gold. A recent article of ours covered the rise in demand from China, suggesting China could become a larger consumer than India for gold jewelry and investment grade gold bullion. However, everyone is looking for a hedge against possible inflation in the future, or perhaps people are plain jittery about the economic recovery.

In the US, worries about the Fed’s bond buying leading to inflation and the government’s inability to agree on a budget have fueled yet further growth in Gold American Eagle coin sales, according to a Thompson Reuters report on the US Mint’s year to date sales position.

Sales of the coins rose rose to a two-year high last Friday, lifting 2013 sales above the previous year’s total and reflecting the consistently strong demand for physical bullion coins among retail investors, Reuters reported. Sales of the 2013 American Eagle gold bullion coins reported a gain of 3,000 ounces, bringing the total to 755,500 ounces thus far in 2013, already higher than last year’s tally of 753,000 ounces.

Sales in October climbed to 48,500 ounces, doubling the combined total of August and September. It’s also the highest since July’s 50,500 ounces. The U.S. Mint launched the gold investment coin program in 1986 and consistently used the highest 22-karat gold standard for its product. David Beahm, Vice President at New Orleans-based retail coin dealer Blanchard & Co., is quoted as saying that “Gold American Eagle demand has been steady despite the lack of price movement over the past few months.”

But in fact, it is the price fall and relative stability that have probably contributed to sales. Small investors and the general public see more upside than downside in the gold price’s having fallen back to what is perceived as more reasonable levels. Interestingly, gold backed ETF’s continue to show net sales, posting their 10th consecutive monthly outflow in October. Since last December’s record high, they have lost about 700 tons, or 30%, to a net position of about 1,690 tons, suggesting professional investors continue to see little potential in the gold price – a different driver than a store of value, which may be what is driving coin sales.

However, one word of caution for anyone about to rush out and join the queue for American Eagle coins: Michael Kramer, President of Manfra, Tordella & Brookes, a major U.S. coin wholesaler in New York, is quoted as saying that some investors have been selling their gold coins back to the dealers, a move that is likely to lower new coin demand from the U.S. Mint next year.

Meanwhile, the monthly Global Precious Metals MMI® registered a value of 95 in November, an increase of 1.1 percent from 94 in October.

After dropping the previous month, the price of Japanese silver prices rose 4.9 percent. The price of Japanese platinum bar rose 4.0 percent after falling the previous month. After dropping the previous month, the price of US platinum bar prices rose 3.4 percent to $1,447 per ounce. The price of Indian silver rose 3.1 percent after falling the previous month. After dropping the previous month, the price of Chinese platinum bar prices rose 2.0 percent. At $26.74 per gram, the price of Chinese palladium bar finished the month 1.9 percent higher. This was the second straight month of declines. For the second month in a row, the price of US palladium bar increased, rising 1.8 percent over the past month. The price of Japanese palladium bar rose 1.5 percent over the past month. The price of US silver rose 0.9 percent after falling the previous month. After dropping the previous month, the price of Chinese silver prices rose 0.5 percent. The price of Japanese gold bullion rose 0.2 percent after falling the previous month.

The value of Chinese gold bullion weakened by 1.8 percent this month. The price of Indian gold bullion drifted 0.6 percent lower. US gold bullion closed the month at $1,323 per ounce after dropping 0.4 percent.

The Global Precious Metals MMI® collects and weights 14 global precious metal price points to provide a unique view into precious metal price trends over a 30-day period. For more information on the Global Precious Metals MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

by Stuart Burns