Gold & silver rally continues - rare gold coin prices move higher
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Last Tuesday somebody told Gold buyers that it’s normally hot in the month of August. Then the Gold price broke above the key $2,000 resistance level and it kept on going. Gold reached a high of $2,075 per ounce on Friday, then saw some profit taking. Gold closed the week at $2,035, up $72 per ounce (3.68%) for the week, and the ninth consecutive week that Gold has rallied. Gold has increased $508 (33.48%) since the beginning of 2020 and is trading at an all-time high.
One of the key factors that has helped the Gold price rally is the value of the U.S. dollar. The U.S. dollar has also dropped for seven weeks in a row, declining over 5% against other major world currencies. The U.S. dollar index has declined from 97.87 to 93.20 in the past seven weeks.
Why is the value of the dollar dropping?
A number of major European and Asian countries have handled the COVID-19 pandemic problem much better than the United States has. So, now their economies are in a recovery mode, while the U.S. continues to see our pandemic numbers increase. Many of these countries are opening or about to open up their businesses and markets. The world’s financial markets see this as recovery and their currencies have gained strength against the U.S. dollar. The value of Gold is global and we, as Americans, look at the price in terms of U.S. dollars. So, $100 of the $300 increase in the Gold price over the past seven weeks is a result of the decline in the U.S. dollar. Many economists and market analysts believe that, based on the current situation the U.S. dollar Index could easily drop below 90, another 3.5% or $70 in the price of Gold.
In the United States our Congress and the White House continue to fight over the contents of the next COVID-19 pandemic aid legislation. It appears that the Democrats have come down to $2 trillion, but the content of the aid package is in dispute. When the legislators make a deal, this $2 trillion will be another catalyst for the Gold price. While the politicians are arguing over the aid package, the Federal Reserve continues to provide dollar liquidity to the world’s financial markets, another contributor to the weakness in the dollar.
What is happening in the physical Gold markets?
As I expected, when the price of Gold broke above $2,000 per ounce last Tuesday, the media (television, radio, press and internet) shared that information with the public. Wow, what an influx of new demand for the popular Gold and Silver coins. With mints backordered, as much as a month to six weeks, and very little profit taking from holders, the premium continues to remain strong.
As the Gold price continues to outperform my conservative estimates, my year-end prediction of $2,200 may be too low. But, to maintain an orderly rally, it would be good for Gold to spend at least a month trading in the $2,000 to $2,100 per ounce level. That would give investors the time to take profits or add to their holdings, while giving dealers the opportunity to pick up fresh inventory and fulfill back orders. I end this part of my report by asking Gold investors, ARE YOU ENJOYING THE RIDE?
Today: After seeing some overdue profit taking on Friday, the Gold rally is back on track. Over the weekend the COVID-19 pandemic hit 5 million cases in the U.S. That news combined with a lower U.S. Dollar Index fueled fresh buying in the Gold market, moving it back over $2,050 per ounce.
A $72 increase in last week’s Gold price was little compared to Silver’s price activity. Silver opened the week at $24.20 per ounce and closed the week at $27.54 per ounce, an increase of $3.34 (13.7%). Since the beginning of 2020, Silver has increased $9.71 per ounce, a whopping 54.46% in only 7+ months. Last Friday during trading in Asia, Europe and the U.S., Silver rallied $1.50 to a high of $29.90 and fell back to close at $27.54, on the highest trading volume I have seen in years. In Friday’s after-market trading the price of Silver moved over $28 per ounce.
Silver has rallied 34% since July, outperforming all major financial assets. Silver is on a record pace and the highest percentage gain since 1979. Demand has been fueled by worldwide Silver trading exchanges, reaching 25 billion ounces since the beginning of 2020. Physical demand for popular Silver investment products has increased over 60% this year. The Silver-to-Gold ratio has dropped to 73-to-1.
Today: Silver led Gold higher this morning, after bottoming out Friday and in Asian markets over the weekend. It appears that Silver is back on track to reach $30 per ounce very soon. Physical demand for popular Silver investment items is strong, with premiums remaining high and inventories low.
State of the Numismatic Market
Last week there were two numismatic events (not conventions). These numismatic meetings took place in Las Vegas, NV and Dallas, TX, with both holding Heritage and Stack Bowers auctions. Few dealers and public attended, due to pandemic concerns. The focus of demand fell on the bidding at the numismatic auctions. Dealers, collectors, and investors accessed bidding on the internet, auction company websites, and at the live auctions.
Bidding was aggressive, particularly on Gold coins valued over $2,000. With Gold trading over $2,000 per ounce, many of the popular pre-1933 Gold coins looked attractive compared to previous auctions. So, with lots of active bidding, we saw lots of record highs. Popular modern, post 1985 U.S. Gold coins (Eagles, Buffalos, and High Reliefs) found strong bidding, but the supplies were limited. The results of bidding on popular Silver rare coins was a little disappointing - higher than previous auctions- but not at the percentage the Gold coins received.
Historically, the rare coin market follows major increases in precious metal prices. It takes anywhere from 3 to 6 months to show that sizeable uptick. During that period, you see an upsurge in demand, causing higher auction prices and declines in dealer inventories.
With the price of Gold going up over $500 this year, I believe we will see a jump in better date $10 and $20 U.S. Gold prices, not just the base bullion price, but the premium over melt that they have been trading for.
Something that rare coin investors need to know. History has shown me that there is always a 3 to 6-month delay in rare coin price increases after the bullion market explodes. Many dealers have priced their coins based on cost and replacement value. Therefore, with Gold up $500 and Silver up $13, rare coin prices need to adjust higher because the base value is higher.
What happens during this 3 to 6-month timeframe?
- Dealers will withdraw undervalued coins from sale and increase prices on others.
- Dealers will become aggressive buyers on the popular undervalued Gold/Silver coins.
- The well-known pricing reports, websites, and newsletters will move prices higher.
- Collectors and investors, seeing a bull market, will increase demand, which adds to inventory shortages and higher prices.
Barry Stuppler has been a professional numismatist for 60 years, and considered one the nation’s foremost experts in rare coins and precious metals. Mr. Stuppler is a past President of the American Numismatic Association (ANA) and Professional Numismatists Guild (PNG). He is currently chairman of the Federal and California State Gold & Silver Political Action Committees. Barry is proud to say he has help over 10,000 rare coin and precious metal investors and collectors to build their collections and holdings.
For more information about Barry see: https://en.wikipedia.org/wiki/Barry_Stuppler