October 2019 - Week 5 Edition

Project 20/20 is Gaining Steam

In May, I told you a little bit about Project 20/20, which will be our program for enlightened coin accumulation – using a “rifle shot” approach rather than a “shotgun” blast to find undervalued “sleeper” coins. As I said, we will begin by bringing you highlights of recommendations in the major types of coins we like most – for their sheer beauty, profit potential and historical importance. We’ll highlight the most undervalued coins, starting with $2.50, $3, $5 and $10 Indians and Type II and III Liberty Double Eagles.

By using the capitalization approach (coin population reports times market value), we now have one more tool toward determining better coin purchase opportunities – where the profit leverage is to your advantage.

Already, we have seen over 25% of our antique coin 20/20 recommendations rise in price and most of our 20/20 $10 and $25 American Gold Eagle coins also rose in price. This is just the beginning. Please contact your account representative to learn more about how you can benefit from this innovative 20/20 program.

There are some other factors that increase a coin’s popularity, like low mintage, first and last year of a series, etc. I still believe strongly in set building, which is a good way to diversify coin holdings. In past bull markets, this has often resulted in “set premiums,” resulting from the sale of special complete sets.

U.S. Mint Forum Report

Last week, the U.S. Mint held its annual Forum, which I was invited to but could not attend. Those in attendance told me the biggest news to come out of the Forum was that the U.S. Mint will be redesigning the American Eagle bullion coins in 2021.  That has not happened since they were first minted in 1986. I think the ending of this 35-year series will increase interest in these coins for collectors and investors.

This is being done, in part, to fight Chinese counterfeiting, as has been done by other world mints. This is why it is so important that the New Mint Director David J. Ryder has such an exceptional professional background in corporate security measures.

The Mint also noted that they will be redesigning all our circulating coins, from 1¢ to 50¢, by 2026, so collectors and investors should note this added attention should be good for the collectible coin market.

Goldman Sachs Predicts $1,600 Gold Within Six Months

Major banks are recommending a position in gold in lieu of cash, especially with global interest rates so low. In last week’s Barron’s (“Gold Ready to Shine Again,” by Randall W. Forsyth), France’s giant bank Societe Generale recommends a 5% gold position in its portfolios because gold “is increasingly seen as an alternative to cash.” They’re especially bullish on gold since they expect the Fed to keep cutting rates, leading to a weaker dollar. The U.S. dollar is already down 1.3% in October. Major hedge funds are also adding gold positions, according to Societe Generale. They also note that central banks are adding gold.

Goldman Sachs issued a special report last Friday saying that gold will find support at $1,500 if the Fed cuts rates one more time, and they maintain a price target of $1,600 gold by next April. They said there is enough geopolitical tensions to keep gold prices trading around $1,500. Specifically, they wrote, “Uncertainty around UK elections, Brexit and the Middle East is keeping gold in focus but has yet to stimulate another tranche of investment demand.” Looking toward 2020, they wrote: “Combined with CB [central bank] gold purchases related to de-dollarization, we maintain our bullish gold target of $1,600.”

Goldman’s economists cite a “savings glut” (ample cash on the sidelines) for making such a prediction. “The current savings glut … is driven by an intended rise in precautionary savings (supporting the dollar), stagnant real asset prices and a decline in investment due to rising policy uncertainty. When combined with 750 tonnes of central bank gold purchases related to de-dollarization and defensive portfolio rotations, the savings glut means we maintain our bullish gold stance,” their economists wrote. 

Silver is Outshining Gold – As We Predicted in July

Year-to-date, gold is slightly ahead of silver in the performance derby, but we made a bold prediction in our early-July newsletter that silver would outshine gold in the second half of the year and into 2020, when we made the “Case for $18 Silver by Year-end 2019 and $20 in 2020.”  As of midyear 2019, gold traded at $1,409 and silver was $15.22.  We argued that this 93-to-1 gold/silver ratio was historically too high.  Silver has industrial applications and the world is not going into a global recession. Silver has a narrower market and it has the capacity to outshine gold in a bull market move. We turned out to be right.

Since June 30, gold is up 6% and silver is up a stunning 17.3%. Now, we see that this week’s “Barron’s” is confirming what we wrote four months ago. Their October 28 “Commodities Corner” column is titled “Silver is Outshining Gold.” Silver is up 5.5% in October while gold has gained only 2.2%, the article says. They note that silver mine production fell for the third straight year in 2018, by 2%, to 855.7 million ounces, while demand rose by 4% to 1.03 billion ounces, creating a 174.3 million ounce shortfall, which can only be met by melting scrap supplies, and “primary silver producers need prices in the upper teens to lower $20s for their mines to break even,” so very few silver mines are profitable if prices dip below $18.

We still see silver returning to $18 by Year’s End and staying above $20 for most of 2020.

Gold Briefly Rose Over $1,500 Again

Gold briefly rose over $1,500 (and silver over $18) last Friday, October 25, but they returned under $1,500 and $18 on Monday, in a long-standing battle with those resistance levels. Gold reached $1,513.45 on the London afternoon setting Friday, and silver was $18.125.  This was gold’s first time over $1,500 since October 9 and silver’s first time over $18 since September 25, but those prices didn’t hold over the weekend, as money turned toward the S&P 500 hitting a new high Monday, despite impeachment threats.

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