Metals Market Report Archive

The Mike Fuljenz Metals Market Report

July 2020 - Week 3 Edition

Gold Near All-Time High

Gold is trading above $1,800 for the first time since September 2011, the month it set its all-time high. Friday’s Wall Street Journal proclaimed: “Gold Prices Head for Record Levels,” citing near record-low interest rates, high debt levels, high gold ETF demand, a recovery in China and uncertainty over the rise in COVID-19 cases and a potential decline in U.S. economic indicators. A weaker dollar also spurred the metals and other commodities markets, with silver reaching $19.38, its highest level since September of 2016.

Gold ETF Buying Reached a Record High in the First Half of 2020

Last Thursday’s Wall Street Journal (July 9) revealed that the Gold Council’s quarterly report on gold demand, released this past Tuesday, showed investors poured a net $39.5 billion into gold exchange-traded funds (ETFs) in the first half of 2020, breaking the previous record high set in 2016.  The Journal also reported that Wednesday’s (July 8) most actively traded futures price closed at $1,820.60, which was only 3.8% below the previous record-high gold futures price of $1,891.90, set during August 2011.

The Journal article states the buying is coming mostly from “skittish” investors driven by a variety of fears “along with ultralow interest rates amid central banks’ efforts to prop up the world economy.” In addition, they wrote, “Precious metals are also getting a boost from unease about November’s presidential election and fresh geopolitical conflicts around the globe,” including tense U.S./China relations, a border dispute between India and China and new tensions in Korea. Another analyst called it a “perfect storm” of crises.

Gold ETF inflows were highest in April, which seemed to parallel the worst month of COVID deaths, but with COVID cases soaring in early July and deaths starting to rise again, interest in gold is also rising in July. Chris Mancini, an analyst at the Gabelli Gold Fund, said that, “It just seems like the momentum is going to continue. We’re starting to see more and more broad interest from people who don’t know much about gold and are trying to learn about the story.” A big part of that story is “The Fed can’t print gold.”

With the Treasury, Congress and the Federal Reserve adding up to $10 trillion dollars in the last four months in new deficit spending (by Congress), liquidity (in the Federal Reserve’s balance sheet), bond offerings (by the Treasury) and new electronic currency to fight coronavirus disruptions, there may be a wave of inflation coming next year. There is no way to “print” more gold. In fact, no new major gold mines are being found, so the amount of gold per dollar bills in circulation keeps shrinking, making each ounce of gold worth more per existing paper dollar, euro, yen, pound, rupee or yuan in circulation.

As we know from experience, whenever gold is rising this fast, many coin dealers place ads for bullion products, and many new investors buy bullion coins, causing gold and silver prices to rise even faster in a “virtuous cycle.” After a year or two, many of these new bullion customers then graduate into buying the far more selective market of rare coins, pushing the prices up, so now is the time to buy rare coins on sale.  Call “Team Mike”, our long-time professional account representatives today!

Shortage of Circulating Coins Points to the Likelihood of New Coin Designs by 2022

Due to the coronavirus, there have been sporadic work stoppages at the U.S. Mint. This has caused a shortage of many fractional issues of the Gold American Eagle coins, as I have written before, but it has also caused a shortage of circulating coins as well. As a result, there is now a national project (called “The Cent Project”) to take a census of Lincoln cents – a private effort estimated to involve 44,000 volunteer coin counters throughout the nation to sort through 220 million cents between now and May 2021, sorting by mint mark and date. This would represent only about 1% of all the 22 billion Lincoln Memorial cents in circulation, but it would give the Mint a rough idea of the distribution of Lincoln pennies in circulation.

This shortage of coins in circulation could also help to spur the development of a new coin design to help celebrate the time when we emerge from the COVID shutdown. In this transitional time in our history, it would be a perfect time to place a woman or two on our major circulating coins, preferably on the obverse (front), but at least on the reverse.  Here are two ideas, tied to their upcoming Bicentennial birthdays:

  • Clara Barton, founder of the American Red Cross, was born on December 25, 1821, and
  • Harriet Tubman, a leading abolitionist and “conductor” on the Underground Railroad, was born around March 1822 (her precise birth date is uncertain).

Both of these women would be perfect candidates for new coinage in 2021-22 as a bicentennial tribute. 

Adding a woman’s face to a circulating coin for the penny, nickel or quarter would bring it into the hands of many children, causing them to learn more about American history and encouraging more new collectors. History shows that a new coin in circulation also generates more new coin collectors of the old series.

And speaking of 2021, it’s looking increasingly likely that we will see a new Morgan Silver Dollar issued next year, in honor of the centennial celebration of the popular 1921 “transition year” of the last Morgan Dollar issued (in 1921) and the birth of the new Peace Dollar that same year. This would make next year a banner “coming out” year for the Mint as they emerge from these COVID-19 shutdowns. 

The Morgan Silver Dollar is the most popular numismatic coin series. Issuing a new centennial silver dollar in 2021 will create even more interest in coin collecting and investing in precious metal coinage.  Call “Team Mike” to learn more about this exciting new development.


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