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Huge run on gold has Royal Mint racing

2014 Sovereign coins sell out on “exceptional demand”

Blanchard Economic
Research Unit

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Donald W. Doyle, Jr.
Chairman and CEO

David Beahm
Vice President

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Bullion targets $1,250 early on

After charging out of the gates in the first days of 2014 and almost hitting $1,250 on Monday, gold downshifted near $1,228 early Thursday on a stronger U.S. dollar and healthy jobs reports. Though its early breakout pace has moderated, bullion continues to hold well above the key technical level of $1,200, supported by brisk Asian buying ahead of the Jan. 31 Lunar New Year holiday, as well as traditional portfolio rebalancing after the 2013 stock boom. In contrast, equities have struggled in 2014, with the S&P 500 on a three-day losing streak before Tuesday. Their direction remains uncertain, given that newly released Federal Reserve minutes showed strong support in December for tapering the stimulus program that has helped inflate stock values to record — and dangerously unsustainable — levels. Now is the time to diversify back into gold. Read more

Gold demand “shows no sign of abating”

On the physical-gold front, there is stunning news to start off the year — and, surprisingly, it’s not from China: Citing “exceptional demand,” the United Kingdom’s Royal Mint has run out of 2014 Sovereign gold coins. “Since the dip in the price of gold, we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating,” the mint told Bloomberg. “The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.” While 2014 Sovereigns might be hard to come by, please consult Blanchard and Company’s Account Executives for availability of these in-demand coins in older issues. Read more

Coins “flying off the shelves”

Coin sales have been so strong that even The Wall Street Journal had to acknowledge the trend in a Jan. 2 article: “Sales of gold coins are booming even as the metal’s price is falling, a testament to gold’s continued appeal for small investors and collectors despite its first bear market in more than a decade. … At mints and coin shops around the world, gold continued flying off the shelves.” Read more

ETFs won’t do: Coin buyers are a different breed

Why are coin sales soaring even as the price admittedly seems stuck in place? “Coin buyers tend to be small investors who view gold as an insurance policy against financial shocks, said Bart Melek, a senior commodity strategist with TD Securities Inc. Because these investors intend to hold onto their gold for years or decades, many see the recent drop as an opportunity to buy more at a cheaper price, he added. ‘They’re not under any pressure to get a yield or a return in a year,’ Mr. Melek said. … Unlike hedge funds, who may leave when prices fall, many coin buyers are in for the long haul.” Read more

Canadian, Australian sales booming, too

The British and U.S. mints aren’t the only coin producers to report strong sales, either. “Sales of gold Maple Leaf coins by the Royal Canadian Mint surged 82.5% to 876,000 ounces in the first three quarters of 2013 from the same period of 2012. The Perth Mint, Australia’s national coin and bar producer, saw sales rise 41% to 754,635 ounces last year,” The WSJ noted. Perth’s silver coin sales surged 33% to about 8.6 million ounces from 6.5 million ounces in 2012. Read more

Gold imports in Turkey hit highest level on record

Strong physical demand has turned heads in Turkey, too. Its Hurriyet Daily News is reporting that “gold imports jumped to their highest annual level on record in 2013 due to a considerable drop in market prices.” Meanwhile, Bloomberg reported that “Turkey’s silver imports climbed in December to the highest since at least 1999.” Commerzbank analyst Daniel Briesemann commented: “Some people took the opportunity of lower prices and bought remarkable amounts of gold and silver. Generally, prices are very attractive. Demand is very robust in Turkey and the Arab world as well.” Read more

India weighs making it “easier for gold-hungry Indians to buy”

Meanwhile, a key impediment to gold prices in 2013 could be lifted this year. India reportedly is considering easing curbs on its bullion and jewelry trade, which were imposed to reduce its trade deficit. “Indian officials are in discussions to cut a record-high import duty on gold and relax rules on exports, government sources said, after the measures helped narrow the country’s trade deficit and now threaten to encourage smuggling,” Reuters reported Monday. “The decision to cut the import duty is likely to be taken anytime this month.” The move will “make it easier for gold-hungry Indians to buy” — and should propel prices higher again over the longer term. Read more

Silver now hitting its historical “sweet spot”

The theory of seasonality, in which the gold price is weakest in summer and strongest in November, is an important investing concept that also applies to silver. “The sweet spot for seasonal strength in silver has just started,” according to Horizons Investment analysts Don and Jon Vialoux. “The strongest time of year for the price of silver has been from Dec. 23 to Feb. 28,” they wrote, citing Equityclock.com research. “Over the past 20 years, the metal has gained an average of 9.05% with positive results recorded in 14 of the past 20 periods.” Silver also gets a year-starting boost as coin collectors swoop in to buy the newly dated issues. Last year the U.S. Mint broke its all-time record for silver Eagle sales, moving more than 42 million ounces of the coins. Place your order for 2014 Eagles today with Blanchard and Company. Read more

Yellen is an “inflationist,” warns Ron Paul

Back to Fed news. In a historic 56-26 Senate vote, Janet Yellen won confirmation Monday to succeed Ben Bernanke as Fed chief, and that’s good news for gold. Why? “She is really an inflationist,” former Texas Congressman Ron Paul said. “All the market has to do is say ‘boo’ and there will be no more tapering and interest rates will stay at zero until the the market overwhelms this mismanagement.” Paul also said the Fed’s $10 billion monthly tapering of its stimulus program is not a “serious move,” that the bank’s policies have destroyed “97% of the dollar, along with millions of jobs” since its creation, and that Yellen would “continue this economic foolhardiness.” Read more

Fed “nowhere near hitting the brakes yet”

The new Fed minutes underscore that central bankers remain worried about the economy and only tapered because of concerns the program was losing effectiveness. Two regional Fed presidents this week stressed that tapering should be done gradually. “This recovery has already been too slow, and we do not want premature tightening of monetary policy to delay the return to more normal economic conditions,” Boston chief Eric Rosengren said Tuesday. San Francisco Fed head John Williams added: “I want to stress that scaling back on asset purchases is not a retreat from accommodative monetary policy. We’re starting to ease off the gas, but we’re nowhere near hitting the brakes yet.” Read more

Inflation could make gold the “surprise asset class of 2014”

Ron Paul is right to be worried. Even New York Fed chief William Dudley admitted in a Jan. 4 speech that the Fed doesn’t really understand its own massive quantitative-easing program. “We don’t understand fully how large-scale asset purchase programs work to ease financial market conditions,” he said. A key danger of the program remains inflation, warned Marketfield Asset Management chief Michael Aronstein. “They never fail to make that error,” he noted. Even some sectors of CNBC are warning of potential inflation. “One of the things I think could really be the story of 2013 is if inflationary pressures really start to creep in, commodities could be the really big winner ... especially gold,” said CNBC.com’s Jeff Cox. Commodities could be the “surprise asset class of 2014.” Read more

U.S. dollar remains “in long-term decline”

Ron Paul also is right that the Fed’s policies have only hurt the dollar. Central banks know this and are diversifying into alternative currencies, new International Monetary Fund data show. Though MarketWatch columnist Matthew Lynn is predicting a strong 2014 for the U.S. dollar, he remains realistic about its long-term trajectory under current U.S. fiscal policies. “It is not hard to understand why investors wanted to diversify out of dollars,” Lynn wrote. “The American currency is still in long-term decline as the world’s reserve currency. A few good months won’t change that: the U.S. share of global output gets relentlessly smaller every year. But that does not mean it cannot stage bear-market rallies.” Read more

Gold can beat the S&P 500 — and other bold predictions

The end of a year and the anticipation of another always brings a wave of predictions, and with gold unexpectedly breaking its 12-year winning streak in 2013, analysts and investing pros have been weighing in on the metal’s 2014 prospects. And despite what you might have heard from the mainstream financial media, gold bulls are alive and well this year:

Belpointe Alternative Investments: “What we’ve seen on a shorter-term chart over the last month is that gold may have put in a double bottom,” Jeff Tomasulo told the joint CNBC-Yahoo! Finance show “Talking Numbers.” “It tried to break through that $1,200. It couldn’t do it, and now it’s about 5% up from its lows.” Read more

Commerzbank: “The equity markets have already had a very good run over the last couple of years, and we’re having probably a bumpy road starting from the second quarter of this year, and then definitely we’ll see a pickup in the investment demand for gold and also higher prices for gold,” predicted Eugen Weinberg. “We must also mention the massive pickup in the demand from China, which has become a kind of ‘China put’ on gold. ... Chinese investors have deeper pockets than the ETF holders who might sell in the short term.” Read more

Compass Global Markets: “It’s headed back to $1,500 average for the year,” CEO Andrew Su said. “We’ve seen a bottom. It’s tried three times to break below $1,180, which happens to be the average production cost of gold around the world. I think that’s a very strong technical sign that it will rise higher. We’ve already seen that bounce in the new year. I think we’ll also see its safe-haven status come back into play. I think both it and the U.S. dollar will rise in value this year. I think we’ll see a variety of factors coming into play which will see gold demand soar.” Read more

Coutts: “Gold buyers will return. The fundamental reasons for holding gold have not changed,” its analysts wrote. “While some systematic risks in the global economy, such as the meltdown of the eurozone, have been partly allayed, the developed world is still carrying a burden of debt that remains largely unaddressed. … We see current prices as an attractive entry point given our view that the balance of risks now points to the upside.” Read more

Euro Pacific Capital: “I’ve been buying gold now for 14 or 15 years, and out of the last 13 years it’s been down once, which was in 2013,” Peter Schiff said. “What’s amazing is you have this big down year and yet hardly anybody views it as a buying opportunity. ... The fundamentals for gold have never been better than they are now. The fact that so many people can’t see that just makes me more bullish. ... We had a pretty big down year in 2013, so I would expect a pretty good year upwards in 2014.” Read more

Fat Prophets: “Through 2014, we don’t think $1,000 (gold) is on the cards,” said David Lennox. “The U.S. has got to address its budget deficits and its debt positions. ... And once that starts, then the U.S. government has got to downsize, and that’s not going to be good for growth — and we think (it will be) good for gold in the latter part of the year.” Read more

Lloyds: “Gold has been in a significant correction ... and it’s now been testing this area around $1,180-$1,200,” technical strategist Tim McCullough told CNBC. “The trend since the low of $252 in 1999 is still intact. ... Gold still has to retest that $1,921 area high again at least up to around the $1,700 area until that long-term trend can be exhausted. ... The recent decline into the end of last year did hold support at around $1,180 and it also completed an exhaustion pattern of its own on that downward trend, suggesting ... the risk now is to the upside in gold.” Read more

Merk Investments: “We like gold as well, as people hate it right now,” Axel Merk told Fox Business. “Conversely, we think the stock market and the bond market are both not the greatest places to be. More broadly speaking, the time to take chips off the table — and I’m referring about the S&P here — is when times are good. You want to rebalance. ... I sleep much better at night with my gold holdings than with my equity holdings. You want something that’s inversely correlated with the stock market.” Read more

Morgan Gold: “When you take a look at gold at $1,200, it’s a relative bargain compared to all the overpriced stocks, and given the extremely strong demand from Asia — it was at historic highs last year — those should put some upward pressure on gold in the long term,” said Ed Moy, a former U.S. Mint director. “First half of the year, I think it will pretty much be trading in a narrow band slightly declining from where it is right now, maybe $1,250, $1,300, maybe down to $1,100. But the last half of the year is going to be the interesting part of the year. That’s where you’re going to see greater swings and for gold investors the potential for higher gold prices.” Read more

NOAH Capital Markets: “I see bonds having a final blow soon on some ‘good’ data in Q1 before outperforming significantly for the rest of the year, with U.S. 10-year yields resuming their steady path towards our eventual target of 1%,” Emad Mostaque wrote. “A drop in real interest rates is bullish gold and, given a deteriorating economic outlook, I would expect to see the barbaric relic hit $1,500 this year.” Read more

Pension Partners: “Everyone loved gold up until 2011, and everyone hates it now,” said Michael A. Gayed. “The contrarian in me says that’s why its worth watching carefully. The catalyst likely needs to be negative real rates, and with inflation expectations ticking up a bit, the ‘Great Convergence of 2014’ between reflation and U.S. markets may be precisely why gold’s S.O.S. moment gets heard.” Read more

Pento Portfolio Strategies: “The secular bull market in gold will re-emerge in 2014,” said Michael Pento. “I believe the yellow metal will approach $1,600 per ounce by the end of [this] year.” Read more

Pring Turner Capital: “Something tells me we might be experiencing the give-up phase for gold,” Martin Pring wrote. “By that I mean a point in the gold price cycle when just about everyone gives up on the possibility that gold prices will ever rise again. Which could mean the time to buy is here.” Read more

Stifel Nicolaus: “I think gold could actually outperform the S&P,” Dave Lutz predicted. “There’s a tremendous amount of momentum building under the surface for this yellow metal. First of all, we’ve got speculators, the big hedge funds, the big players on the street, they’re the most short that they’ve been in eight years. We’re starting to get a lot of signs that demand is picking up in China. China’s going to overtake India as the largest consumer of the metal (in 2014). And you know what? China is getting ready to roll out ETFs. Look what the GLD has done or the IAU has done as far as the metal’s concerned. They were buying tons upon tons of gold. So there could definitely be some momentum.” Read more

With debt levels at 200-year highs, gold is a must

Blanchard and Company, Inc. also would like to make investors aware of a recent IMF-sponsored report by Harvard economists Carmen Reinhart and Kenneth Rogoff. Its findings are sobering: “Much of the Western world will require defaults, a savings tax, and higher inflation to clear the way for recovery as debt levels reach a 200-year high,” wrote Ambrose Evans-Pritchard of London’s Telegraph in summarizing the paper, while CNBC predicted: “Many advanced economies are likely to require financial repression, outright debt restructuring, higher inflation, and a variety of capital controls. … The magnitude of today’s debt in Western economies will mean fiscal austerity will not be sufficient.” Translation: The Cyprus bail-ins have taught us that now more than ever is the time to move some of your assets outside the financial system. If you don’t physically hold your own wealth today in the form of gold coins, bars, and other hard assets, you might not own your wealth tomorrow. Call our Account Executives at 1.866.629.2281 to get started today. Read more

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