Physical gold sales surge as retail investors cash in
According to Frank Holmes, with prices plummeting, retail investors are making the most of a Black Friday-like special on the yellow metal.
Posted: Tuesday , 23 Apr 2013
SAN ANTONIO (U.S. Global Investors) -
I was honored to be in
As her country faced an economic crisis with high inflation, high tax rates and hundreds of mining strikes, the lady’s iron courage helped her make the difficult decisions that steered the
A steely resolve seems to be lacking in many of our world leaders today. Thatcher led the
In his recent webcast, Global Portfolio Strategist Don Coxe points out the effectiveness of this privatization path, showing the rise in the
Buyers Move from Gold ETFs to Physical Gold
After spending a few short days in
I also met with several business leaders while in The Big Apple. For those of us in the investment business, we all have the same question on our minds: What’s going on with gold? How can governments’ balance sheets continue to expand like we’ve never seen before in history, yet the price of the metal melt so quickly?
We noted numerous reports indicating that there’s a shift taking place in the gold market, with investors discarding the gold ETF, preferring physical gold instead. Take a look at Zero Hedge’s chart. On one day alone, April 17, buyers scooped up a record 63,500 ounces from the U.S. Mint. This is equivalent to 2 tons of gold, “more than the previous two months combined,” according to Zero Hedge. This is a drastic move compared to recent history.
The U.S. Mint is generally the last place gold shoppers buy their ounces because they have to pay “a hefty premium” for gold. It’s like going to 7-Eleven on Christmas to buy AA batteries for the electronic toy Santa left under the tree.
However, gold shops such as Apmex or Gainesville Coins aren’t closed; rather, gold customers end up buying from the U.S. Mint because “nobody else has any physical [gold] at a lower premium to spot (or any metal in inventory),” says Zero Hedge.
So, even with the gold price dropping, why are gold coins selling at a premium? It’s Economics 101: The coin supply is limited and the demand is high.
This buying trend isn’t only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins. According to The Wall Street Journal, “Gold shops from
China Daily reported a similar buying enthusiasm occurring in jewelry stores in
To put it simply, for retail investors in the West and East, gold went on sale. A Black Friday special for the yellow metal in spring.
Moderation is Gold Investors’ Guide
We believe the yellow metal is experiencing a short-term correction during its long-term secular bull market. Compare today’s gold bull run to the spectacular gold bull market in the 1970s. From February 1975 to August 1976, gold fell 44 percent. However, those investors who held tight to their gold were rewarded: From August 1976 to January 1980, gold rose an astounding 700 percent.
This time around, gold fell 28 percent over nearly the same period.
This chart holds a mixed message for investors. On the one hand, if history repeats itself, gold could fall as far as $1,050. The positive message, though, is that history teaches us that gold can withstand a 44 percent decline and rebound substantially.
As Roman philosopher, Marcus Tullius Cicero, wisely said, “Never go to excess, but let moderation be your guide.”
“We put a lot of messages into the marketplace, but the one we stress most when it comes to gold is moderation. Don’t try to get rich with gold because the corresponding risk is simply too high. Gold is a volatile asset whose daily price action can be far more dramatic than blue-chip stocks and many other asset classes.”
Frank Holmes is the CEO and CIO at US Global Investors.