The Michael Fuljenz Metals Market Report: January 2013, Week 5 Edition
Last Week In Metals: Gold fell $25 (-1.5%), silver fell $0.71 (-2.2%), platinum rose $25 (+1.5%) and stocks rose 1.2%.
- Gold 52 weeks ago (January 30, 2012): $1,729
- Gold's price at the start of 2013: $1,664
- Gold's London Low for 2013: $1,632.25 on January 4
- Gold's London High for 2013: $1,693.75 on January 2
Four Signs that Rare Coin Demand is Increasing
- A 1794 Silver Dollar recently sold for over 10 million dollars at auction. A new record!!
- Dealers are reporting increased sales of high priced individual coins of great rarity and beauty.
- Newspaper, magazine, TV and radio ads for coins are increasing.
- The numismatic premiums over gold melt value are expanding for many common gold coins.
Morgan Stanley: Gold to Rally into 2014
Morgan Stanley analysts foresee the Fed continuing to buy assets and expanding its $3 trillion balance sheet for another two years. That means, they believe, that gold will rally through 2013 and on into 2014.
"We expect that very low nominal interest rates, an ongoing commitment to QE3 and a below-par recovery with attendant pressure on the dollar will still combine to encourage investment buying of gold," Morgan Stanley said in the report. With continued support from QE3, gold will also benefit from expanded central bank buying. Last year central banks bought the most gold in 48 years, according to Thomson Reuters GFMS.
UBS believes that despite some recent U.S. economic data that came in stronger than many economists expected, the Fed's easy money position will be good for gold. "Accommodative [monetary] policy is still expected to remain in place for some time," said London market-maker UBS, "a scenario that continues to be conducive for higher gold prices. [Gold's] recent pullback should be viewed as an opportunity to pick up metal at more attractive levels."
Standard Bank reported this week that it is seeing an unusually strong gold demand early into 2013, with "good buying" from Southeast Asia. The January gold fever is not a typical seasonal pattern.
Germany Wants Its Gold Back Home
It seems even major central banks don't trust paper gold anymore and want to have their yellow metal physically within arm's reach where they can actually touch it and know it's real.
Germany's Bundesbank has begun repatriating more than half of its gold reserves currently held in foreign vaults by 2020. The other half will remain vaulted in New York and London.
Germany will recall 300 tons of gold from the Federal Reserve in New York and 374 tons from the Bank of France. Germany holds 3391.3 tons of gold reserves, second only to the United States' 8133.5 tons.
The official reason for this change of heart is to reinforce confidence domestically and to have "the ability to exchange gold for foreign currency within a short space of time." Analysts are still trying to parse what the real reason is, given what appears to be a breakdown in trust among governments and central banks with regard to the ongoing global financial turmoil.
"Confidence amongst the largest players (central banks, governments, etc.) has been ruptured, signaling the beginnings of systemic disintegration, strikingly similar to the end of the Bretton Woods Era," wrote Guillermo Barba in a report posted on ResourceInvestor.com. "These types of actions and sudden policy shifts were distinguishing precursors to the last precious metals bull market (1971-1980)."
Whatever the reason, the German repatriation should be bullish for gold, especially if it turns out that the gold that was supposed to be in the vaults isn't actually there as many skeptics suspect. It will have to be bought on the open market meet the obligation to return it.
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