Gold Leads All Investments

THE FED CAN’T PRINT GOLD

Gold leads all other major investment asset categories through the end of May 2020, although stocks have made a strong comeback in April and May 2020. Gold is up 15% year-to-date versus double-digit declines in the Dow Jones Industrials and European stock market, while the widely-quoted S&P 500 is down 8.3%, and the tech-heavy NASDAQ composite has delivered a positive performance of just +5.76% through May 31, 2020. The Wall Street Journal U.S. Dollar Index is up 3.3% through May 31, meaning gold has performed an average 3.3% better in global currencies than in dollars. Gold is up over 20% year to date in the Canadian dollar, Indian rupee or British pound, and gold is up over 50% in a troubled currency such as the Brazilian real. The biggest story in the precious metals market during the second quarter, as of June 2020, is that silver came back from $12 in mid-March to $18 in a little over two months. At one point, the gold-to-silver ratio spiked to 130-to-1, when silver dipped to $12 on March 19, while gold traded at $1,560. That was also the week of maximum panic in the stock market when gold was the only asset that held its value. Silver has risen 50% in a little over 10 weeks based on rising industrial demand and rising investor demand. The current gold-to-silver ratio has now dipped to 95-to-1. Total sales of bullion coins by the U.S. Mint slowed from their torrid pace in March, but they are still up strongly above the same five months in 2019. For the first five months of 2020, sales of American Eagle gold coins total 335,000 Troy ounces, up 222% from the 104,000 ounces sold last year. This May, the Mint sold 11,500 ounces, down from April, but 187% above the 4,000 ounces sold in May 2019. Sales of American Eagle silver coins reached 490,000 ounces in May 2020. Although down from April and from last May, this brings the total American Silver Eagle sales for the year to 11,218,500 one-ounce coins, which is 25% more than the 8,987,000 coins sold through the same five months in 2019. American Buffalo gold coin sales totaled 2,500 ounces in May, lifting their year-to-date total of 118,500 ounces, which is 166% above their sales level for the first five months of 2019 when they totaled 44,500 ounces. One reason bullion coin sales were down in April and May was the West Point Mint was sometimes closed due to novel coronavirus concerns. If the Mint were open more days, sales would likely have been much higher. The fundamentals for gold continue strong as it reaches new highs worldwide and near an eight-year high in the United States, and that is helping to boost increased demand for some rare gold coins. One reason for the increased demand for popular rare coins is that when gold and silver prices rise, the many new bullion buyers eventually begin purchasing rare gold

coins. I have found that many quality gold coins with a low population (known available quantity) are being snapped up at higher prices than six months ago. CAC (Certified Acceptance Corporation) coins are also very popular now. The recent large quantity melting of vintage U.S. $10 and $20 denomination gold coins struck in the late 19th and early 20th centuries created a shortage in supply, and prices for more common dates in Mint State are rising. Major hedge fund luminaries and large asset managers are bullish on gold bullion as one of the most undervalued investable assets today and for good reason. Day after day, we are continuing to see moves in Washington for unprecedented Federal debt and deficits. The U.S. Congressional Budget Office now foresees a $3.7 trillion budget annual deficit for the fiscal year 2020. Remember this advice from Bank of America: the Fed can’t print gold. But before you respond to slick print, online, or television ads selling gold or silver, I caution that you must know your dealer.

Mike Fuljenz, president of Universal Coin & Bullion in Beaumont, Texas, is a leading coin expert and market analyst whose insightful writing and consumer advocacy have earned major honors from the ANA, PNG, NLG, and the Press Club of Southeast Texas. His website is www.universalcoin.com.