The final straw that will push gold to $2,200 or more by year-end
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Last Thursday, Federal Reserve Chairman Powell announced some major policy shifts at the Jackson Hole virtual economic symposium. These changes to the central bank’s policy framework are considered very accommodative monetary policies and are bullish for Gold bullion owners. In Powell’s statement, the Fed has adopted an “average inflation target” and recognizes the benefits of a strong labor market. The Fed’s strategy holds 2% annual inflation as a target but the Fed said it “seeks to achieve inflation that averages 2% over time.” The Federal Reserve has instinctively raised interest rates when their inflation rate indicators moved over 2%. Now that is changing.
Powell further stated, “It is hard to overstate the benefits of sustaining a strong labor market, a key national goal.” The Fed made it clear that employment numbers are more important than inflation numbers, and interest rates aren’t going higher for at least a year.
Ever since the COVID-19 pandemic affected our economy, with businesses closing and unemployment spiking, most analysts felt the Federal Reserve would focus their concerns on deflation and economic depression. But Powell’s Thursday speech made it clear they are now more concerned about the serious inflationary effects that the trillions of dollars provided for liquidity to the financial markets and the congressional stimulus packages will have during the next few years. I believe this was the final straw that was needed to push many well-respected professional commodity traders and financial analysts to become bullish on Gold and take the price to $2,200 or more by year-end.
Gold closed at $1,964 last Friday, up $42 for the day, after the Fed signaled interest rates will remain near zero indefinitely and it is not concerned about inflation. August has been an exciting month for Gold owners. During the month of August, Gold hit an all-time high of $2,070 per ounce and closed over $2,000 six times. During August, Gold suffered its third major 10% plus correction since the beginning of the year. Now, the Fed’s inflation policy issue will become one of the key factors to a major increase in the price of Gold over the coming years. STAY BULLISH ON GOLD/SILVER AND ENJOY THE RIDE.
The Silver price also had an exciting week and an exciting August. Last week Silver briefly traded above the key $28 level on Thursday but settled back on short-term profit-taking. On Friday, Silver closed at $27.62 per ounce, up $.88 for the week, and $3.40 for the month. As Gold approaches $2,000 again, I look for Silver to break above $28, while keeping $30 in its sight. The Silver-to-Gold ratio continued to drop last week, closing last Friday at 71.5-to-1.
It appears that the U.S., Australian, and Canadian Mints have caught up with the backlog and are now offering distributors the ability to order a full allotment. Therefore, premiums on Silver Eagles, Kangaroos, and Maple Leafs have declined, giving investors the ability to add to their holdings at an attractive price.
STATE OF THE NUMISMATIC MARKET
During the month of August, there were three very successful auctions at Heritage, Stacks Bowers, and Legend. Due to the COVID-19 pandemic, most of the bidders were on-line, either by phone or internet. Hundreds of dealers, collectors, and investors were aggressively biding for most of the numismatic rarities. With the Gold price trading around $2,000 per ounce, many of the popular pre-1933 Gold coins looked attractive compared to previous auctions. Many dealers, like myself, are active at these auctions because it’s difficult to acquire high-quality rare coins because there hasn’t been a major coin convention since January. So, with lots of active bidding, we saw record highs. Popular modern post-1985 U.S. Gold coins (Eagles, Buffalos, and High Reliefs) found strong bidding, but the availability was limited.
Historically, the rare coin market prices follow 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, currently around $2,000. I believe we will see a price jump in better date $10 and $20 U.S. Gold, not just the base bullion price, but also the premium over melt that they have been trading for.
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 Stuppler, as president of MintStategold.com 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