How soon they forget. It wasn't but a few weeks ago when headlines screamed, the gold rush is over! Now they dare prance experts past the camera that make the solid case for gold at $5,000 an ounce. Who are they kidding? I know how TV works. At any given time there are a hundred press releases or expert profiles in front of producers, all including claims of this expert or that expert.
At beckon call, there is a bull or bear waiting to make his or her case on TV. Whether it be about the gold market, stocks, real estate, bonds or coconuts in Peru, there is always someone bullish or bearish. When gold made its last run to $1580 an ounce, it seemed to provide an excellent ratings backdrop to put experts on that said it was now ready to crash. Same with Silver. Silver approached $50 an ounce and retreated to $33 and the story was, silver is off 30% and not that silver was still up 100% over the last year.
So what about this $5,000 gold claim? Today CNBC made a big deal out of Standard Chartered's prediction that gold was headed for $5,000 an ounce. In the article, it says the London-based firm is among the first to focus on the supply-side of the gold equation to provide basis for this bold prediction. I beg to differ. Lear Capital has been talking about a gold shortage for years in these articles, on radio and in special reports. It's only recently that the U.S. mint resumed sales of American Gold Eagles after its well-publicized shortage of gold blanks used in the minting process.
I can't even imagine a more blatant warning that gold supplies are shrinking, than the U.S. Mint running out of gold. Yet, somehow, this is now breaking news. Be assured, gold supply and demand forces have always affected the gold price. It only makes sense. There is never an infinite supply of any natural resource. Now add to this colossal increases in demand by foreign countries and central banks and it's easy to see why gold prices may be reaching a tipping point that could cause the price to explode.
Signs are everywhere. One I find most intriguing comes again from the U.S. Mint. Finally, American Gold Eagles are for sale again. However, pricing seems whacked. It used to be the Proof coins carried a significant collector premium. Now the uncirculated Gold Eagle carries near the same premium as a proof coin. Today, as I checked the U.S. Mint web site, the uncirculated one ounce Gold Eagle was $1778 per coin while spot was $1530. Incidentally, at the same time, Lear Capital's online price for a one ounce gold eagle was $1598.75.
So, what makes the mint believe it can demand such a premium. I believe the gold shortage is real and has been for months - maybe years now. It's as though the mint is saying, we still don't have enough to go around so if you want some you have to pay the premium. I don't think they want to sell them at all. I think they would rather build inventory and save it for a time when gold prices explode and hit $5,000 an ounce.