U.S. Mint Runs Out of Smallest American Eagle Gold Coin

This story comes to us from Dabarati Roy at Bloomberg

The U.S. Mint ran out of its smallest American Eagle gold coin after demand surged following the biggest drop in futures in three decades.
Sales of the coins weighing a 10th of an ounce were suspended after demand more than doubled in 2013 from a year earlier, the Mint said yesterday in a statement. Total sales of American Eagles in April have almost tripled from a month earlier, according to its website.

Zack Seckler/Bloomberg

American Eagle Gold Bullion Coins, shown here in 1 oz., 1/2 oz., 1/4 oz., and 1/10 oz. sizes, are some of the world's leading gold bullion investment coins.

American Eagle Gold Bullion Coins, shown here in 1 oz., 1/2 oz., 1/4 oz., and 1/10 oz. sizes, are some of the world's leading gold bullion investment coins. Photographer: Zack Seckler/Bloomberg

 

 

Shoppers from India to China and Japan joined consumers in the U.S. and Australia in the rush to buy jewelry and coins after futures slumped 13 percent in two days through April 15. Indian buyers flocked to stores and banks for ornaments, coins and bars as purchases from the Perth Mint in Australia doubled and retail sales across China tripled.

“This week has been very busy for us,” Michael Kramer, the president of New York-based MTB Inc., a dealer authorized to purchase coins directly from the Mint. “We do not yet anticipate suspension” of heavier coins, he said. The Mint also sells 22-karat American Eagles of 1 ounce, half an ounce and a quarter of an ounce.
“The 1-ounce gold bullion coins are the most popular,”Michael White, a Mint spokesman, said in the e-mail.
A rush by Indian consumers for bracelets and coins is prompting jewelers to offer premiums on imports as traders and banks run out of stockpiles, a trade group said yesterday. Jewelers in big cities are paying as much as 800 rupees ($14.73) per 10 grams (0.02 pounds) while retailers in some remote areas are paying about 1,200 rupees per 10 grams as a premium, according to Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation.

Hong Kong, Japan

Overseas purchases may jump 36 percent to 305 metric tons in the three months ending June from 225 tons a year earlier, Mohit Kamboj, president of the Bombay Bullion Association Ltd., said last week. Imports may climb as much as 20 percent this month from year earlier, he said.
Volumes of gold products sold jumped 150 percent in Hong Kong and Macau during the April 13 weekend compared with the weekend before, according to Dennis Lau, director of sales operations at Chow Sang Sang Holdings International Ltd. (116), last week. Retail sales tripled across China on April 15-16, the China Gold Association reported.
Japanese consumers are poised to become net buyers of gold for the first time in eight years as the yen’s decline and looming inflation drive them to seek refuge in bullion, according to Standard Bank Plc.
Futures on the Comex in New York climbed 1.1 percent to $1,424.90 an ounce by 5 p.m. in Singapore, about $100 above the $1,321.50 reached on April 16, which was the lowest level in more than two years. Prices have plunged 26 percent from the record $1,923.70 in September 2011.

Gold Buying Surges on Price Correction

This Article comes to us from Economics Fanatic on SeekingAlpha.com

As reported, investors and ornament lovers in India mopped up 10-15 tonnes of gold within three days of decline in the precious metal. Readers might argue that buying gold in India is more an ornament consideration than an investment consideration. However, the buying would not be rampant if a further decline in gold prices was perceived. Further, there has been buying of gold coins and bars, which underscores the point that Indians are increasingly looking at gold as an investment or currency.

In the United States, Zero Hedge reported that the U.S. mint sold 63,500 ounces of gold in a day, which happens to be a record. According to the website -

According to today's data from the US Mint, a record 63,500 ounces, or a whopping 2 tons, of gold were reported sold on April 17th alone, bringing the total sales for the month to a whopping 147,000 ounces or more than the previous two months combined with just half of the month gone.

Therefore, even investors in the U.S. are looking at the current correction as a buying opportunity than considering it to be an end to the bull market for gold. Commodity guru, Jim Rogers also considers the correction healthy and is looking to buy gold on further correction.

The important point I am trying to make through these examples is that the global appetite for gold has not declined after the crash. Instead, investors are taking the correction positively and looking to buy further instead of panic selling. Considering this buying momentum, I don't expect another major downside from these levels. I had written an article, which discussed the probability of a 10-15% correction in gold. For me, that target is achieved and I would consider buying some physical gold at these levels.

I would also like to offer the views of the World Gold Council on the recent decline in gold prices. The comments by the WGC underscore my points stated above. According to the WGC -

It has become increasingly clear over the course of the past week that the fall in the gold price was triggered by speculative traders operating in the futures markets. Their short-term view of generating a trading profit is in stark contrast to the views of long term investors in gold, as evidenced by the massive wave of physical gold buying that began over the weekend and accelerated following Monday's further decline. The surge in gold purchases is spanning markets from India and China to the US, Japan and Europe. Buyers are viewing this as an opportunity to purchase gold at prices not seen in the past couple of years.

Surely, for long-term investors, it is the time to accumulate gold. Of course, gold should be just a part of the portfolio and diversification is needed in order to avoid sharp erosion of capital due to the volatility witnessed. Talking about volatility, the movement in all asset classes subsequent to the crisis has been associated with a large degree of volatility. Therefore, diversification in asset classes and regions globally is essential.

For gold, investors can consider this as one of the best opportunities to buy and hold for long-term. I am not sure about the short-term trend. For the long-term, I can say with a lot of conviction that gold will trend much higher than its previous high.

7 Signs of an Emerging Silver Shortage

There are several signs of silver shortages brewing. Investors who have interest in paper silver like (SLV) or (AGQ) need to be aware of this as their holdings could blow up in a very short time frame if they don't notice the current shortages in the physical silver market. Today we are seeing massive shortages in silver as Egon von Greyerz points out here: "We are now seeing major shortages of silver. It's much, much harder to get hold of silver than it is to get gold. As soon as people get silver inventory to sell, it's gone straightaway."

First, the most important indicator for the physical market are silver sales at the U.S. Mint. In mid December 2012, they shut down the sales of American Eagles for about 3 weeks. Then they started selling silver coins again on the 7th of January 2013. Investors started with a buying frenzy of 4 million silver coins in just one day. As of yesterday, the U.S. Mint had sold 6 million ounces of silver coins. That's already equal to the amount of silver that has been sold the entire month of January 2012. But the U.S. Mint announced several days ago that they are again suspending the sale of silver coins. That's how crowded the physical silver market is. Sales will continue on the 28th of January 2013.

Table 1: January 2013 Silver Sales (18 January 2013)

Second, on that first day of silver sales at the U.S. Mint, the trading volume on the Shanghai Gold Exchange's 99.99 gold physical contract shot through the roof, hitting a record of 19,504.8 kilograms, after double-counting transactions in both directions.

Third, we see that the premiums on Silver American Eagles for APMEX (American Precious Metals Exchange) are soaring to $4 for a single ounce of silver (Figure 1). This is a 4/31 = 13% premium over the spot price.

Figure 1: APMEX 1 Oz Silver American Eagle

To give you an idea of historic premiums: at the end of 2010, we had a silver price of around $27/ounce and the APMEX premium was $2/ounce over spot. This is a 7% premium. Mid 2011, we had a silver price of $48/ounce and the APMEX premium was $5/ounce over spot, which is a 10% premium. Today, we have a 13% premium and I think this will keep going up. Investors need to closely monitor this premium when they are holding paper silver to see if shortages are building up.

Fourth, we can see these premiums for Silver American Eagles go up on eBay, with prices going from $38/ounce to even $60/ounce, while the spot price is only $32/ounce (18 January 2013).

(click to enlarge)

Figure 2: American Silver Eagle (EBAY) (18 January 2013)

Fifth, we saw yesterday that Apple Inc. (AAPL) has seen delays in its new 21.5″ iMacs, which were announced on the 23th of October 2012. There are production problems occurring at this moment due to a shortage in silver in China. This silver is used extensively in these iMacs. The delay of these iMacs is already spanning a period of 3 months to date.

Sixth, on Wednesday 16 January 2013, the iShares Silver ETF has bought a huge amount of silver in the amount of 571.63 tonnes of new silver (183,378,092 ounces) in just one day. That's a 5% increase of silver holdings (Chart 1).

(click to enlarge)

Chart 1: SLV Silver Holdings (Got Gold Report)

Seventh, just a week ago, Swiss gold refiners (who are the world's gold hub) announced that silver's counterpart, namely gold, had major delivery issues due to large gold bullion demand. As 70% of the world's gold transits through Switzerland's refiners, this event shouldn't be ignored.

Conclusion:

There are now countless indicators that silver demand is exploding while the silver supply should be dropping due to the low price of silver at this moment. I pointed out this supply issue due to increases in marginal cost of production (marginal cost of production currently $30/ounce for silver) in this article. If we do get a significant increase in delivery time in physical silver, the first person to go public with this would be Eric Sprott as he pointed out here: "As you know, I've always hoped we can't get that last bar (of silver) because we'll publicize it. But so far the silver has come in." So, the most prudent thing investors can do now is just buy physical silver (PSLV).

This article comes courtesy of writer Katchum on the Seeking Alpha Website. www.seekingalpha.com