July 2020 - Week 4 Edition
Our $20 Silver Prediction Comes True – with Five Months to Spare
Silver surged past $21 an ounce this week and we made “the case for $20 silver in 2020” over a year ago in “July 2019, Week 3,” when silver was $15.31, so we can now crow a bit. Gold hit $1,843 Tuesday morning July 21, its highest level since September 2011, the month it peaked at around $1,900 per ounce. The gold price held steadily above $1,800 most of last week on steady buying from “safe haven seekers.” This, after rising for six consecutive weeks, especially as COVID-19 cases began rising again in America and several global nations, causing economic shutdown following tentative openings in June. Pandemic fears and worsening relations between the U.S. and China have been bullish for gold.
The Adens Declare “Gold is the Best Investment in the World Today”
In their popular financial July 17 newsletter, Pamela and Mary Anne Aden declared gold as “the best investment in the world today” and told their readers “we want you on board the gold train as it pulls out of the station.” The Adens outlined some of the reasons why: “Gold is, and always has been, the world’s safe haven. That is, during times of uncertainty, insecurity, economic or political upset, war, devaluations and more, gold has always come out as #1. And this track record goes back more than 5,000 years… Throughout history, gold has always maintained its purchasing power, and again, no other investment comes close…. Plus, gold is durable and it’s beautiful, which has also made it superior to other mediums of exchange.” They then go back through history, from the Egyptian pharaohs, who were buried with their gold, through the Roman empire, to the Spanish conquistadors, to the 1849 Gold Rush, the Vietnam boat people; to the present, when we’ve seen gold beat every other investment since 1970, since 2000, and this year, too.
Turning to today’s market, the Adens say the current bull market began in 2015, when central banks began pushing rates down toward zero and piling up debt levels. Now, new money printing will begin fueling inflation, pushing the dollar lower, and pushing gold higher, reaching new record highs:
“Once gold hits new record highs, sky’s the limit. As we’ve pointed out before, if this bull market unfolds like the previous ones did, the gold price could ultimately soar to the $7,500 to $25,000 level. We know that sounds crazy, but it’s happened before, and it could happen again. That’s even more so the case considering we’re in uncharted waters and these are unprecedented times. But regardless of where gold ends up, the point is, gold is the very best investment in today’s environment. It’s poised to outperformed stocks and bonds, and it’s where you want to be. It’s not too late. We believe the big exciting up moves lie ahead, in the months and years to come.”
“What’s Driving Gold” – Three Important New Tailwinds
In past years, we relied on a weak dollar, inflation, and some global hotspots as gold’s primary tailwinds. We don’t have all those “tailwinds” in gold’s favor yet this year, but we still have gold moving to within 5% of a new high on three new tailwinds, according to Giles Coghlan, writing for FX Empire on Yahoo! These tailwinds are related to the Coronavirus outbreak. One is Rising Gold ETF Demand. Through May, gold-backed ETFs registered inflows totaling $33.7 billion, the largest-ever annual total, breaking the previous record ($24 billion in 2016) by almost $10 billion after only five months of buying demand.
The second tailwind is Supply Disruptions, not only in U.S. Mint production, which we have covered here, but in gold bullion bar production out of Switzerland and in jewelry production. Most importantly, new gold mining production is also way down. Last month it was estimated by Wood Mackenzie that in order to maintain 2019 gold mine production levels, the gold industry would have to invest $37 billion into roughly 44 new projects by 2025. In addition, many operating mines are in coronavirus “hot spots.” Currency Risk comprises the third tailwind. This includes massive new printing of unbacked currency, combined with super-low (even sub-zero) interest rates, amid unprecedented deficit spending to fight the COVID-19 economic disruptions. Millions are forced out of work on every continent, which disrupts tax collections and corporate profits. On top of this, new geopolitical risks are arising from complex new trade tensions between China, the U.S., India, the Korean peninsula and the Middle East, just for starters.
Many Popular Rare Gold Coins Outpace Gold Bullion Gains
As of Monday morning, gold was up from $1,515 to about $1,815. In the last six months, gold has moved up $300, while the premiums on some MS-63 $20 Liberties have moved up $600. The premiums on some gold MS-63 $10 Indians have moved up proportionally in that same time span, also outperforming gold bullion. Reasons for the rise in premiums are that we had recent large quantity melting of vintage U.S. $10 and $20 denomination gold coins and have seen periodic shortages of classic gold coins that are becoming scarcer. As this price momentum develops, that translates into more demand for these rare coins. For example, two prominent investors taken together, bought over $1 million in gold coins from me last week. They had previously “put their toes in the water,” making frequent inquiries, but now they have committed, and I think they will be happy with the results. With gold ETF buying up, interest rates historically low, and gold the best performer this year (and the last two years and the last 20 years and 50 years), the long-term risk seems relatively low. In past major rare coin bull markets, select rare coins have often amplified the gold bullion market gains. Now’s the time to call your representative to see what special rare coins are still available.
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