Gold And Silver Bullion Coin And Bar Shortages Continue

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Today’s AM fix was USD 1,476.50, EUR 1,124.95 and GBP 949.34 per ounce.   Yesterday’s AM fix was USD 1,456.00, EUR 1,106.22 and GBP 935.07 per ounce.

 

Cross Currency Table – (Bloomberg)

Gold rose $8.10 or 0.56% yesterday to $1,466.80/oz and silver finished + 0.68%.

Physical demand for coins and bars internationally continues and is the strongest since the immediate aftermath of the Lehman Brothers collapse on September 15, 2008, and the consequent global financial crisis.

Government mints, refiners and bullion dealers internationally are reporting demand as high as in the aftermath of the Lehman crisis. 

Brokerages are seeing nearly all buyers and little or no sellers which is making for a tight market with rising premiums. At GoldCore, sellers have been people liquidating unallocated positions and opting for taking physical possession or the increased safety of allocated accounts. 

Higher prices will be needed by bullion owners in order to incentivise them to sell – prices that will likely be significantly higher.    

Most physical owners are buying for the long term and will not sell in the coming months even when prices recover. If prices rise to back above $1,600/oz, some physical gold might come back into the market and alleviate the supply issues. 

Gold in USD, 1 Year – (Bloomberg)

However, we believe that this may be a long term structural supply demand issue in what is a very small physical bullion market, that will only be alleviated by much higher prices and indeed higher premiums.

It is difficult to generalise regarding premiums as there are so many products and so many regions but in general terms, prices on nearly all small coins and bars are rising and on average there have been 1% to 2% rises in the premiums on popular one ounce gold coins and bars. This means that one ounce coins and bars can cost some $14 to $28 more than they did prior to the price falls. 

The percentage increase in premiums in the silver market is even higher and there are more delays and unavailability of silver coins and bars with popular formats such as Eagles and Maples now almost difficult to secure. We acquired a large number of Silver Eagle Monster Boxes yesterday which we expect to have sold by the close today.

Today, return of capital is of far more importance than return on capital.

Gold in Euros, 1 Year – (Bloomberg)

Gold and silver bullion coins and bars are important in this regard as they are not about making a capital gain per se rather they are about wealth preservation.

Given we are in an era of competitive currency devaluations, there is also the real possibility of making significant capital gains.

Of fundamental importance is the fact that gold and silver coins are not 'investments' rather they are a safe form of money and an important form of financial insurance that everybody should own.

With the risk of a global depression remaining very real, people need to own the financial insurance that bullion coins represent. Bullion coins are like health insurance in that you should own them but hope you never have to use them.

The biggest benefit of owning gold coins either in your personal possession or allocated in secure vaults internationally is that they will always retain a value unlike paper assets and currencies which have considerable counter party risk today - as was seen in the deposit confiscation in Cyprus.

NEWS

Gold ticks up, heads for second straight weekly gain – Reuters

60 killed as gold mine collapses – Irish Independent

Asian Stocks Rise With Metals; Dollar Weakens Before Jobs Data - Bloomberg

Arizona governor vetoes bill making gold, silver legal tender – Reuters

COMMENTARY

Italy should use its gold reserves to force a change in EMU policy – The Telegraph

Gresham's Law Proves Gold And Silver Are Remarkably Undervalued – Seeking Alpha

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