October 2020 - Week 1 Edition
New Reverse Design for American Eagles Now Approved for Mid-2021
Last Thursday, the U.S. Mint unveiled the new reverse design for the American Eagle Gold and Silver bullion and collectible coins for 2021, a year which marks the centennial of the first Peace Dollar and the final Morgan Dollar year as well as the 35th anniversary of the American Eagle Coin, which debuted in 1986.
For the American Eagle Gold reverse, the Mint’s Artistic Infusion Program (AIP) designer Jennie Norris created a portrait of the noble head of an eagle that was sculpted by Mint Medallic Artist Renata Gordon. Ms. Norris, a former volunteer raptor handler, drew her inspiration from a lifelong connection with wild birds, saying, “His gaze speaks of pride and wisdom passed down through generations of time.”
The American Eagle Silver reverse depicts a single eagle coming in for a landing, carrying an oak branch as if to add it to a family nest. AIP designer Emily Damstra created the design, which was then sculpted by Mint Medallic Artist Michael Gaudioso. Ms. Damstra commented that her design grew from a desire to show the traits of our national bird, “such as diligence, cooperation, care, and protection.”
The obverse (the front or “heads” side) will remain the same – the classic Augustus Saint-Gaudens gold design and the 1916 “Walking Liberty” design by Adolph A. Weinman for the Silver American Eagle.
The new 2021 America Eagle coins will be introduced around the middle of 2021, meaning that there will be two American Eagle designs dates for 2021 – the old design and the new. That means the 2021 date will be collectible for both the old and new design, with limited mintages for both old and new transitional designs.
Partial-year mintages, or first and last year mintages, are always popular, potentially adding to the premium over spot prices. In addition, due to Covid-19 exposure risk, the Mint’s sales centers continue to be closed “until further notice,” and the Mint’s production facilities have also been sporadically closed since last March, so there have been some delays in sales and production this year, but sales have still remained brisk.
In September, the U.S. Mint sold 22,000 ounces of American Eagle Gold coins, up 300% from 5,500 oz. last September. American Eagle Silver coin sales in September were up 190% from last September, with 2,958,000 ounces sold in 2020 vs. 1,021,000 sold last September. Through nine months, American Eagle Gold sales were up 400% (637,500 ounces vs. 127,500 in 2019) and silver sales are up 59% in 2020.
Zero-Interest Rates Until 2023 Comprise Gold’s Long-Term “Insurance Policy”
Gold doesn’t need inflation to soar, just so long as gold delivers a “real” positive return – a positive gain after inflation, especially in comparison to prevailing short-term interest rates. With the Federal Reserve now promising to keep interest rates at or near zero through 2023, investors can accumulate gold with confidence that it will deliver real returns for at least the next three years, and likely much longer, due to the huge infusion of new fiat currency and federal deficit spending this year and for many years to come.
Gold and silver have soared this year, due in large part to the Fed’s expansive monetary policy. Gold has already reached an all-time high in August, and silver staged a strong rally in the same month. That’s when Federal Reserve Chairman Jerome Powell formalized Fed policy by saying it would drop its long-standing plan for pre-empting any rising inflation by raising interest rates. This time around, they said they would let inflation rates rise above their target rate of 2% without raising interest rates to stem rising inflation.
Mutual fund manager Frank Holmes has long stated that “negative real interest rates” (i.e. inflation rates higher than interest rates) are a primary engine of gold bull markets in history, and we have had negative real interest rates in Europe, Japan and the U.S. for several years now, fueling gold’s bull market since 2015. Fed policies which guarantee a continuation of negative “real” rates have accelerated the gains in gold and silver this year. The dollar’s 10% decline from March through August magnified gold’s gains.
The Year and the Third Quarter Belonged to the Metals – Especially Silver!
The third quarter – July 1 to September 30 – belonged to the commodity sector more than any other asset class. For the 116 investments charted by The Wall Street Journal in the Stock, Commodity, Currency and Exchange-Traded Fund (ETF) markets for the third quarter, the top three investments were all commodities (hogs, natural gas and silver), and all but two of the 18 tracked commodity prices went up.
For the first nine months of the year, silver also led the way, due mostly to its third quarter surge. In the stock market sector, the tech-heavy NASDAQ soared above the herd, due in most part to four gigantic stocks worth over $1 trillion each (Microsoft, Apple, Google/Alphabet and Amazon), which ironically comprise the Trump-friendly acronym MAGA (which I haven’t heard any of the media use, for some strange reason!) Meanwhile the Dow Industrials and the small-stock Russell 2000 indexes still remain below zero in 2020.
With the Bank of America saying that silver could rise to $50 if Joe Biden wins the election and Goldman Sachs saying silver could rise to over $30 in 2021, the run-in precious metals prices is far from over.
Gold Futures Rose Last Week
Gold futures rose 2.2% last week and settled at $1,907 an ounce last Friday, then dipped over the weekend before rising $30 Monday morning, October 5, from $1,885 to reach $1,915 by 11:00 am Eastern time, based first on strong European buying and then on New York trading. During those few hours, the US Dollar Index fell 0.4%, but that doesn’t explain gold’s rapid 1.6% gain. Most of the gain probably came on fear of a rise in coronavirus cases as exhibited by the broad swath of new cases in the White House staff following the President’s Friday announcement and weekend hospitalization for Covid-19.
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