February 2015, Week 1 Edition

Gold fell $30 last Thursday but it recovered most of that ground on Friday, closing up 7% in January, vs. declines of over 3% in each of the major stock market indexes.  That means gold had a comparative advantage of more than 10% over stocks in the opening month of 2015.  Due to the strong U.S. dollar, gold is rising even more in terms of the euro, British pound, and Canadian and Australian dollars. On January 22, after the European Central Bank announced its QE plans, gold in euro terms shot up to a 21-month high of €1,136 per ounce, up 14% in three weeks, reaching its highest euro price since April, 2013.

Type III Double Eagle Book Desired by Dealers

My new book on Type III Double Eagles, to be released by April 2015, should increase demand for coins in this series. In 2000 my first edition about this popular series received the Numismatic Literary Guild Investment Book of the Year Award further boosting interest in double eagles. There will be some gorgeous photographs and innovative tools in this new edition that should greatly help collectors, investors and dealers who participate in this popular series. At a recent California convention some major dealers asked me for boxes of these books as soon as possible.

Fugitive Treasure Hunter Nabbed in Florida Hotel

After two years on the lam, fabled treasure hunter Tommy Thompson’s luck ran out.  U.S. Marshals caught up with him this week at an upscale West Boca Raton hotel in Florida and arrested him and his long term companion, Alison Anteiker.

“The couple offered no resistance at the time of the arrest and readily admitted to being the targets of the extensive investigation,” the Marshals Service said in a news release.  Authorities called Thompson “one of the most intelligent fugitives ever sought by the U.S. Marshals.”

Thompson made history in 1988 when he found the fabulous treasure of the long-lost SS Central America, known as the “Ship of Gold,” which went down in a hurricane 200 miles off the coast of South Carolina in 1857 with the loss of 450 lives.  Thousands of pounds of California gold went to the bottom of the sea with it, causing an economic panic in the young United States.

The recovery of the treasure was a technological triumph, and Thompson’s canny marketing sense made it an international sensation.  But then things started to unravel.

Decades of legal wrangling in court over ownership of the treasure and complaints by investors in the project that they weren’t paid dogged Thompson for years.  The 161 investors who paid Thompson $12.7 million to find the ship never saw returns from the sale, and two of them sued to recover their money.

He went into seclusion in 2006, taking up residence in a mansion called Gracewood in Vero Beach, Florida.  Six years later, he failed to show up for a court appearance and a federal warrant was issued for his arrest.  At that point, Thompson vanished.

According to an Associated Press report by Amanda Lee Myers, when caretakers for the property searched the mansion, “they found prepaid disposable cellphones and bank wraps for $10,000 scattered about, along with a bank statement in the name of Harvey Thompson showing a $1 million balance, court records said. Harvey, according to friends, was Thompson's nickname in college. Also found was a book called ‘How to Live Your Life Invisible.’ One marked page was titled: ‘Live your life on a cash-only basis.’”

No criminal charges have been filed against Thompson, only the civil federal warrant for failing to appear in court.

Two Mainstream News Sources Turn Favorable on Gold

During gold’s two years of net decline, the mainstream media piled onto the anti-gold bandwagon with stories nearly every week about how gold has “lost its luster.”  Now, after gold’s rapid rise in January, we find some of these sources being more balanced in their coverage.  First, on January 22, the day of the European Central Bank’s (ECB’s) Quantitative Easing announcement, the Wall Street Journal’s gold reporter Tatyama Shumsky wrote a piece called “Buyers Take a Shine to Gold & Silver Again.”

Shumsky began: “Gold and silver are getting another turn in the spotlight, luring investors worried about slowing global growth and surprises by central banks.” She said that many investors are still skeptical of gold “but others make the case that gold and silver look more promising than stocks, which are at or near record highs in many markets, or government bonds, where yields are near zero across the developed world. Some investors also are embracing metals as a store of value in case policies like those announced by the ECB spur inflation.” She then added: “Gold and silver are drawing buyers of all stripes, a sign fears about a worsening economic outlook run deep in financial markets. The metals are popular havens for nervous investors but had fallen out of favor after setting price records in 2011 as the U.S. recovery gained speed. Now these metals are luring back some money managers, as collapsing oil prices, fears of a recession in Europe and volatility in currency markets shake their faith in stocks and other investments,”

The following Sunday, January 25, Bloomberg posted an article called “Precious Metals Coveted Once More as Draghi Acts.” The article begins: “Investors’ desire for precious metals is deepening after Mario Draghi’s $1.2 trillion pledge drove gold to a five-month high and silver to the brink of a bull market. Their buying helped boost the value of exchange-traded products backed by gold and silver by $8.2 billion this month, the most since September 2012, data compiled by Bloomberg show. Hedge funds and other speculators in futures and options are the most bullish on gold in two years and have bet more on silver in all but two weeks since the start of November.” Bloomberg then quoted David Rosenberg, chief economist at Toronto’s Gluskin Sheff:  “Silver is tied to gold, and they move with trust. There’s an increasing number of global investors who are starting to lose trust in the world’s central banks.”

Watch out!  When The New York Times turns bullish on gold, we may be near an interim peak in gold!

The Latest Bullish Trends in Asian Gold Demand

The year is still young, but the leading metals consultancy group Thomson Reuters GFMS released its first 2015 Gold Update, saying that physical demand is rising so far this year. That’s important because the leveraged investor demand (through ETFs) has battered the gold price since April of 2013.  There has been a “tug of war” between 100% physical non-leveraged buying, primarily in Asia, and leveraged paper gold trading, primarily in New York. The dollar surge has given the gold bears something to crow about, since gold has been flat in dollar terms, but the yellow has been rising strongly in most other currencies.

GFMS (formerly the Gold Fields Mineral Services) toted up some of the new fundamentals in gold’s favor:  “For the longer-term there are a number of forces in place: The Swiss National Bank abolition of the Swiss franc/euro cap is arguably bullish, as is the fall in the oil price – over 60% of jewelry demand comes from countries that benefit substantially from lower oil prices.” On the supply side, GFMS said mine production will likely “slow to a trickle” this year while scrap supply is expected to bottom out.

Here are some of the key demand factors for 2015, mostly centered in Asia:

India is once again #1 in gold jewelry demand, according to GFMS.  With some of their restrictions on gold imports being lifted, along with a slight decline in Chinese demand in 2014, India regained its top national ranking among gold buyers. GFMS reported that 2014 Indian jewelry demand rose by 14% to 690 tonnes (a metric tonne equals 2205 pounds), eclipsing China’s 608 tonnes.  The rivalry will be fierce this year, with the world’s two top nations competing in something like the Super Bowl of gold demand.

China buys more gold bullion than jewelry.  Last year, withdrawals from the Shanghai Gold Exchange (SGE) totaled 2,102 tonnes, not counting imports through Hong Kong or Beijing. The SGE is new and is now the main barometer for measuring Chinese demand, eclipsing Hong Kong.  (Beijing imports are for the central bank and they are NOT reported, since the Chinese government wants to mask the total of its official gold holdings.)  The SGE recently said that it will soon begin offering gold derivatives (options) on a trial basis. This is important since Chinese leaders had previously banned options as “speculative.”

Russia is another vital source of ongoing gold demand.  Due to a falling Russian ruble, the Russian central bank has been exchanging worthless paper for gold throughout 2014.  The Russian Central Bank bought 5.5 million Troy ounces of gold (171 tonnes) in 2014, including 10 straight months of at least 300,000 ounces per month.  Over half their annual purchases came since September, when they bought a record monthly total of 1.2 million ounces.  Russia now holds 38.8 million ounces (1207 tonnes), vaulting Russia into the sixth spot, behind only the U.S., Germany, the IMF, Italy and France in gold holdings.

Kazakhstan, a former Soviet client state, has been buying all of the gold the mineral-rich country mines each year, which amounts to 22 metric tons. Albert Rau, the nation’s Minister for Investments, said “Given the turbulent global economy condition, the National Bank has been buying out all the fine gold produced.” He cited the “volatility of major currencies,” especially the weak euro, while saying “gold is seen as a stable harbor.” He was also open to smelting the nation’s gold to sell to its private citizens, explaining “There’s never too much money in a family.  In the same way, there’s never too much gold.”

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