April 2016 – Week 1 Edition

Gold closed the first quarter up 16.4% vs. 0.8% for the S&P 500, giving gold a 15.6% edge over stocks in the first quarter.  Gold’s performance is especially impressive considering that the 19-commodity CRB Index fell 3.3% for the quarter, with crude oil up 3.5% and natural gas down 16.2%.  The U.S. dollar fell by about 4% in the first quarter, giving a boost to gold but not helping most of the other commodities very much.  Gold corrected to $1,215 on Monday, April 4, but then it rose back to $1,230 Tuesday morning.

Global Mints Enjoy Higher Coin Sales in 2016

The U.S. Mint’s volume of sales declined in March from a torrid January and February pace, but the Mint just reported that first-quarter gold sales still managed to gain over 68% vs. last year’s opening quarter.

U.S. American Eagle Mint Gold Sales Up 68% in First Quarter

First Quarter         Gold Ounces        Silver Ounces

2015                       146,000              12,071,000

2016                       245,500              14,842,500

Gain                       +68.2%               +23.0%

Since the Euro-zone, plus Switzerland, Denmark and Sweden (which are not in the Euro currency zone) currently impose negative interest rates on member banks, more European investors are turning to gold for safety and potential capital gains.  As the tragic headlines from Belgium show, Europe is suffering devastating attacks from terrorists, following a seemingly uncontrollable influx of refugees from Syria and other troubled Middle Eastern nations.  Over a million refugees entered Germany alone last year. 

These concerns are driving more investors toward gold, according to Andrea Lang, director of marketing at the Austrian Mint.  She said “they want to have a safe haven for their money.”  Last year, the Austrian Mint’s gold sales increased 45% to 1.32 million ounces, while silver sales grew 59% to 7.3 million ounce.

At times like this, when more bullion coins are sold, more buyers are introduced to the fascinating and profitable world of rare coins. This often generates more numismatic coin buyers over the following year. 

Gold Delivers its Best Quarterly Gains in 30 Years

Gold closed the first quarter last week up 16.4%, its best quarterly performance since 1986.  In the first half of the quarter, through mid-February, gold soared while stocks tanked, but gold managed to hold on to most of its gains while stocks recovered their early-year losses. The gains in gold came from both the physical markets and the “paper gold” ETF market.  The Wall Street Journal reported last week that the holdings at the biggest gold ETF, SPDR Gold Shares, are at nearly their highest levels since late 2013, as the fund added a net 300 metric tons last quarter, the most gold tonnage added in any quarter since 2009.

The dollar has declined about 4% to a basket of foreign currencies during the first quarter, accounting for about one-fourth of gold’s quarterly gain, but gold is also rising in terms of every other currency on earth. The major reason for gold’s gain is the Federal Reserve’s sudden reversal of policy from a planned four interest rate increases in 2016 to maybe two, but probably only one rate increase (or perhaps even none). Interest rates in Japan and most of Europe are now below zero, so gold “yields” more than euros or yen!

First Quarter Performances: Precious Metals vs. Energy and Stocks

GOLD                                          +16.4%

Platinum                                     +11.9%

Silver                                          +11.3%

Crude Oil                                      +3.5%

Dow Jones Industrials                    +1.5%

S&P 500 Index                              +0.8%

NASDAQ Composite                       -2.7%

Natural Gas                                   -16.2%

Last week, Fed chair Janet Yellen added some “dovish” remarks, which indicated that the Fed may not raise rates this year, giving gold a “level playing field” with paper money for interest income, but with gold having the advantage as a crisis hedge and a proven long-term winner vs. any paper form of money.

New potential crises in 2016 include increased threats of terrorism, a potential UK exit from the euro-zone, nuclear tests by North Korea, ISIS advances in Syria and Iraq, and a Presidential campaign that seems to be led by unqualified candidates – an irrational billionaire, a socialist and a potential criminal. Dallas-based Kyle Bass, who founded and leads Hayman Capital Management, likes gold now. He summed up this year well: “Buying gold is just buying a put against the idiocy of the political cycle.”

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