Metals Market Report Archive

The Mike Fuljenz Metals Market Report

October 2020 - Week 3 Edition

Commerzbank Sees Higher Gold Prices

Last week’s New Orleans Investment Conference featured several speakers who predicted $3,000 to $5,000 gold prices within the next few years, but that would normally be expected in a gold-oriented conference. We’re more impressed when mainstream banks and investment advisors predict much higher gold prices. We’ve mentioned Bank of America and Goldman Sachs in recent months, but Germany’s Commerzbank was one of the first major banks to predict higher gold prices – several years ago.

According to a new Commerzbank report released last week, analyst Daniel Briesemann wrote that gold, “is finding support from the steep rises in new coronavirus cases, which are fueling concerns among market participants.” He also cited the forthcoming stimulus package and the “hard” Brexit separation of Britain from the European Union (EU), which seems finally ready to reach fruition, more than four years after the June 2016 vote. “The next weeks will show whether the two sides are able to meet one another halfway and avoid more substantial damage. Gold should profit from this uncertainty,” Briesemann said.

Briesemann continued, “We believe that gold is well-supported and expect the next few weeks to bring a renewed and lasting upswing rather than any noticeable correction.” Specifically, Commerzbank sees a likelihood of gold returning back above $2,000, especially if Biden wins. “Speculation has emerged that Joe Biden and the Democrats might set in motion a stimulus package worth $5 trillion if Biden were to become the next U.S. president and the Democrats were to win a majority in the Senate (they already have a majority in the House of Representatives). This would lead to another steep rise in the national debt.”

The Fed has added $3 trillion to its balance sheet (a 75% increase) so far this year, and the price of gold has been positively correlated to the expansion of the Federal Reserve’s assets. The fall of the dollar is also correlated to the fast pace of the Fed’s monetary increase vs. the European Central Bank’s monetary growth this year (+47%) and the Bank of Japan (+25%), causing the dollar to fall to the euro and yen.

Frank Holmes, CEO of U.S. Global Investors, sees gold reaching $4,000. “In the next three years, if we look back, if [history] repeats itself, from 2008, 2009 to 2011, that three year run saw gold go from a $750 - $800 range up to $1,900. If we forecast that because we have the same expansion of the balance sheet of the Fed, then it would project, if cycles are exactly the same, gold could go to $4,000,” Holmes said.

He said that the Fed’s balance sheet is now about 33% of GDP vs. 6% of GDP when Alan Greenspan was Fed Chairman. He also said that the debt expansion and recession this year are “going to cost the U.S. government approximately $10 trillion in fiscal and monetary policy to get the economy back” vs. about $2 trillion after the 2008-09 crisis. “This is unprecedented,” he said, “so, I think hard assets trade higher.”  BUY GOLD NOW!!!

More Coin Changes Coming – New Legislation Seeks Changes to Coin Alloys

We have been telling you about a wide array of changes coming in U.S. coins. First, we heard about the new Morgan and Peace dollars probably coming in 2021 to mark the centennial of the final Morgan dollar year and first Peace dollar year. Then we heard about a new change in the American Eagle reverse designs in 2021. These new coin issues next year will create great interest in old and new collectors and in precious metals in general, with new ads posted in the media, generating new customers and new national interest.

We also learned that the U.S. House of Representatives passed legislation authorizing massive changes to circulating coinage to be implemented between 2022 and 2030. That bill, H.R. 1923, would authorize:

  • Circulating quarter dollars honoring women to be issued from 2022 through 2025.
  • Circulating coins in multiple denominations in 2026, celebrating America’s 250th birthday.
  • Award medals for the 2028 Olympic Games in Los Angeles.
  • Silver bullion coins with the same designs as all of the quarter dollars and half dollars authorized from 2022 through 2030, in the now standard 5-ounce size and in fractional sizes.

And now we learn that new alloys may be used in forthcoming coin mintages. This will also create new interest in the collector and investor communities, since first-year issues are especially popular and their mintage totals are sometimes limited. On September 23, Senator Margaret Wood Hassan (D-NH) introduced legislation seeking possible changes in the composition of United States circulating coins in S. 4663, the “Coin Metal Modification and Cost Savings Act of 2020.” The primary concern is to reduce production costs and limit shortages. “By tweaking the metal composition of our coins, the U.S. Mint could, in the short-term, create more coins amid a temporary shortage, and, in the long-term, save millions of dollars every year without any significant changes to the coins’ weight or appearance,” Senator Hassan said. 

The Senate will seek to commission a study and analysis to be conducted by the Mint, with input from industry stakeholders such as vending machine manufacturer, that would be affected by any composition changes. If passed, S. 4663 would amend Title 31 of the United States Code dedicated to Money and Finance, and grant the Treasury secretary discretion to make composition changes if a Mint study and analysis indicates such changes would result in cost savings, be seamless with the same diameters and weights as current coinage denominations, as well as, the same electromagnetic signature, and have minimal adverse impact on the public and machine manufacturers. The Mint’s study and analysis would have to determine the justifications for changing the compositions for any possible changes to be considered.

Coins under consideration for change are the copper-plated zinc Lincoln cent, copper-nickel Jefferson 5-cent coin, copper-nickel clad Roosevelt dime and copper-nickel clad America the Beautiful quarters. The cost savings will be greatest for the lower-denomination coins, since the 1-cent and 5-cent coins currently cost more than face value to produce. The Mint has come up with potential compositional alternatives that offer cost savings for most circulating coins, except for the cent. None of the currently known possibilities would bring the cent’s cost below face value, according to the most recent report. Possibilities determined by the Mint for the 5-cent, dime and quarter dollar denominations would incorporate manganese with varying percentages of copper and nickel in the alloy.  Other alternative metals include alloys of steel.

Gold Climbed to $1,920 Monday

Gold held above $1,900 over the weekend and climbed to $1,920 early Monday, October 19 on a weak dollar and renewed hope for a compromise stimulus package before the presidential election. Another $2 trillion stimulus package would push the “fiat money” infusion for this year above $5 trillion after the Fiscal 2020 federal deficit (ending September 30) reached $3.1 trillion, a record by more than double.


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