Metals Market Report Archive

The Mike Fuljenz Metals Market Report

November 2021 - Week 3 Edition

Gold Poised for Another Increase

Gold dropped $40 Monday after President Joe Biden nominated incumbent Jerome Powell to remain as Chairman of the Federal Reserve. Although he has presided over the massive inflation of the money supply over the past 20 months since COVID-19 struck, he is the lesser of two evils when compared to his chief rival for the position, the more progressive candidate favored by Senator Elizabeth Warren, Lael Brainard. This should be a minor bump in the road in gold’s latest surge since the Fed is continuing with its quantitative easing (QE), only at a $105 billion per month pace, down from $120 billion per month.

$20 Liberty Coin Quadrupled in Price in 7 Years

Collectors continue to look for the best available coin in a series and they are willing to pay much higher prices than previously imaginable. One recent example is the 1870 Carson City (Nevada) Mint gold double eagle that sold for $1.62 million after only fetching $411,250 in 2014. 

This Type II 1870-CC Coronet double eagle is graded AU-53 by PCGS. Although this coin is circulated, it is the finest known specimen that is certified by PCGS, the Professional Coin Grading Service. 

There were only 3,789 Coronet gold double eagles minted in Carson City in 1870, so this is a true rarity. Only about 40 coins in any grade are known to have survived. Most of them are well worn.  

The lesson here is that the “best in group” coins can sometimes draw high and rising prices that are far removed from underlying bullion prices.

Our Monthly “Dollars & Deficits” Update

The Almighty Dollar is living up to its name – at least in terms of other paper currencies – since the U.S. is offering slightly positive interest rates (about 1.5% on 10-year bonds) versus negative returns on similar bonds in Europe and Japan. The Euro has taken a nosedive in the past six months from $1.22 per dollar June 1 to $1.12 today. It was $1.16 as recently as November 8, so some of the euro’s decline has taken place in the last two weeks.  Part of that has to do with the sharp rise in COVID-19 cases in Europe lately. 

The U.S. Dollar Index (DXY) is up 3.4% since October 28 and +2.7% since November 8 for the same reasons. The DXY is most heavily weighted in the Euro (57.6%), followed by the Japanese yen (13.6%), British Pound sterling (11.9%) and Canadian dollar (9.1%), so it tends to follow the fortunes of the euro. 

The strong dollar is one reason why gold has been fighting to stay above $1,800, but gold has beaten all currencies over the last month, and it has narrowly beaten the U.S. dollar as well, so gold remains King

Deficits: During October 2021 – the first month of the federal government’s fiscal year 2022 – the budget deficit was $165 billion (a $2 trillion annual rate). That’s after the federal government accumulated a $2.77 trillion deficit in fiscal year 2021 (ending September 30), and over $3 trillion in fiscal year 2020. 

President Biden’s new “Build Back Better” bill will allegedly cost $1.75 trillion in new spending, but these shopping lists tend to grow longer as time goes by.  The Congressional Budget Office (CBO) has already said the plan, as it now exists, will add $367 billion to the long-term budget deficit.

 

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