The Michael Fuljenz Metals Market Report: August 2011, Week 4 EditionGold soared to yet another all-time high of $1862 on London's Thursday morning gold price-fixing. The New York price reached $1866 on Friday morning, then as high as $1882 over the weekend and $1898.60 in Monday morning trading. Silver rose to $44 over the weekend. All eyes are now on Federal Reserve chairman Ben Bernanke: Will he announce, potentially boosting gold prices, another round of "quantitative easing" (money printing and bond buying) this week at the Fed's Jackson Hole, Wyoming, retreat - like he did last year? Concerns are now spreading about the health of large European banks and the exposure of American financial institutions to bank failures across the pond.
Last Week In Metals: Gold gained $112 last week. Silver rose even faster (+10%) while stocks lost 17% in the last four weeks. The New Gold Standard: Widespread Gold Ownership Defies Government Manipulation Back in 1980, market regulators were able to kill the silver bull market by manipulating silver margin requirements on the commodity exchange. Since the Hunt Brothers had tried to corner the silver market, there was not enough widespread silver interest to provide new buying support for silver, which fell from $50 to $10 in two months. The gold price followed silver down in 1980, and it took 25 years to reach new highs. This time around, however, the regulators' attempts to raise the margin requirements on silver only pushed the price down to $35; then silver rallied to $43. The recent attempt to raise reserve requirements for gold by 22% have backfired. Gold continues to hit record highs as investors rally to buy more gold. The opposite has happened with bank stocks. Germany and France have failed to develop a credible plan to defend the euro, after waves of super-high interest rates on euro-zone bonds in Italy, Spain, Greece and other troubled euro-zone nations caused a crisis in euro-zone banks, similar to our own banking crisis of 2008. Treating the symptom instead of the cause, European stock market regulators have tried to defend their banks by banning the short selling of bank stocks (i.e., the borrowing of a stock in order to sell it.) Most major European banks - including France's two largest banks - have lost 50% of their stock value since early 2011. Last Thursday alone, France's Societe Generale fell 12% and Belgium's Dexia bank lost 14%, so the recent ban on short-selling encouraged more investors to bail out of those banks. The lesson: These days, most investments are too widely held and followed worldwide to manipulate, making them harder for governments and regulators to control. Gold's bull market is far more solid today than it was in 1980. It would be very hard for any government manipulation to slow down the bull market in gold for long. When people own gold, they become the owners of the standard by which all paper currencies are judged. The people prefer gold, which is rising in terms of currencies. Venezuela Nationalizes Gold Mines, Further Adding to Gold's Supply Squeeze Here's another story about attempted government manipulation of the gold market pushing gold higher. Last Wednesday, Venezuelan President Hugo Chavez suddenly nationalized that country's gold industry. In his clever and folksy manner, he said that Venezuela "can't allow our gold to be taken away" by the foreign devils. According to Chavez, Venezuela has over $12 billion in gold reserves on deposit around the world, and he is going to start to bring that gold back. That may cause issues with banks and other entities who now may have to deliver the gold. Venezuela's move is putting further strain on both the supply and demand side of gold. About 2,500 tons of gold are mined each year, but that is not nearly enough to keep up with private investor demand, much less any new attempt to nationalize gold or to fund further central bank gold purchases. Central banks bought 155 tons of gold in the first five months of 2011 (worth over $9 billion), a rate of 31 tons a month, or 372 tons per year. Then, in June, South Korea alone bought another 25 tons. Central banks are now buying about 15% of the newly-mined gold each year, not the dominant demand factor by any means, but this represents enough new demand to keep pushing the price of gold up. (Some of the other major gold buyers in 2011 include smaller, relatively new emerging economies like Thailand and Kazakhstan.) Inflation and Gold The core U.S. inflation indexes are rigged to minimize inflation of food, energy and commodity prices, while favoring deflationary elements like computer electronics, real estate ("rental equivalent") and an overall decline in selected retail prices due to slower consumer demand in a near-recession environment. Global inflation measures, particularly in the emerging markets, are much higher than the U.S. inflation rates. That is one reason why gold demand is flourishing in high-inflation markets like India and China. Historically, gold is strongest in September through January, in the holiday seasons of various cultures, but this year gold has soared in August. So far in August, gold is up 16% and stocks are down 13%. Gold is on pace for its best year since 1979, while 2011 may also be the first time since the 1930s when we've seen a stock market decline in the third year of a Presidential cycle, usually a super-bullish year, as people look forward to "change" the coming year. We've seen huge gains in 1991, 1995, 1999, 2003 and 2007, but 2011 has featured a weak economy and a federal fiscal crisis, pushing stocks down and gold up. World Monetary Views
Gold was HOT at the World's Fair of Money The recent Chicago World's Fair of Money, the largest convention of its kind ever held in the United States, was a resounding success. With gold prices reaching new highs virtually every day, many major dealers, including me, spent more days than initially planned at this bustling convention that attracted dealers from across the country and around the world. As gold prices rose all week, so did the demand and prices for many gold coins. Many dealers went home with fewer gold coins than they needed for their customers. The major news media were there in larger numbers than past years to report on the continuing "Gold Rush," and I was interviewed by Jeff Flock of Fox Business Network and also interviewed by ABC News. Michael Fuljenz Receives Important NLG Awards at 2011 World's Fair of Money in Chicago The latest NLG awards presented to Michael Fuljenz, his 36th and 37th in nine different categories from the organization the past two decades, are for Best Dealer Publication and Best Non-Commercial Video. The award winning video is from a featured educational seminar, "How to Include Gold Coins in Your Portfolio," presented by Fuljenz at the Money Show of the Southwest in December 2010.
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