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- Created on Monday, 29 July 2013 09:30
December 2013, Week 1 Edition
Gold rose back above $1250 on the Friday after Thanksgiving, but then it fell to a five-week low under $1230 on "Cyber Monday," December 2. Silver also traded back above $20 last Friday, before dropping below $20 again on Monday morning. The reason being offered by the press for such a sharp drop is a series of upbeat U.S. economic statistics. In truth, the technical New York trend followers look for any excuse to unload their paper gold positions.
Good News: Chinese Demand Picks Up Whenever Gold Prices Decline
In October, China posted its second-highest level of net gold imports, nearly topping the record set last March. According to the World Gold Council, China has imported 967 tons of gold through Hong Kong, its main port of entry, in the first 10 months of 2013.
China imported at least 100 tons of gold each of the last six months. After beginning the year slowly (20 tons in January and 61 tons in February), here are the last eight months:
*Metric tons of Chinese gold imports via Hong Kong; Source: World Gold Council
China is now the world's #1 gold producer and consumer. Through October, China has produced 430 tons of gold, which makes China's demand 1,400 tons in 10 months, from just these two sources. Imports also come through Shanghai and official government channels in Beijing, for China's foreign reserves (which remain a closely-guarded state secret).
So far this year, gold demand in China has approximately tripled last year's demand, since the Chinese (and most other Asians) are cost-conscious consumers, buying more gold when the price is down. At the same time, paper-gold ETF traders in New York have unloaded about 800 tons of gold this year. The tug-of-war between paper gold investors in New York and physical gold investors around the world continues.
Middle East gold demand is also rising. The Noor Islamic Bank in Dubai has become the first Middle Eastern bank offering gold bullion coins in full ounce, plus half, quarter and tenth-ounce sizes, all in .9999 purity. The coins are minted by a Swiss refiner, Argor-Heraus, one of the world's largest processors of physical gold. This new coin program meets the rising need for physical gold in portable form vs. shares of paper gold ETFs.
Wall Street's Few Gold Bugs – Paulson & Soros – Are Buying or Holding Gold
It's a lonely position to be a gold bug on Wall Street these days, but the most famous mainstream hedge fund manager in the gold camp – John Paulson – has held on to his 10.23 million shares of the SPDR Gold Trust (GLD), meaning that he is still the largest shareholder in the largest gold exchange traded fund (ETF). His November filing on his holdings as of September 30, 2013, shows no change in his gold holdings last quarter. Paulson cites the risk of "high inflation in the future" as his main reason for holding gold.
Meanwhile, George Soros has bought shares in the super-depressed gold mining sector. Last quarter, Soros Fund Management bought 1.1 million shares of the Market Vectors Gold Miners ETF after selling all of its shares in the same ETF during the second quarter.
The rest of the financial world seems to be down on gold, with some analysts predicting lower gold prices in 2014. They cite the 700 to 800 tons of physical gold sold by the ETFs, plus the regulations on gold imports in India. But both of those fundamentals could turn on a dime, if the Chinese demand trend forces gold prices back up in 2014.
Most of these same analysts have been wrong about gold for a long time. They often predicted lower prices in the 12 years from 2001 to 2012, when gold rose each year, so why should they be right about predicting lower prices for 2014? Is it possible they will be wrong again? They cite the money coming out of the gold ETFs, but there has been rising physical demand to offset the sale of paper gold shares. At the same time, most global central banks are rapidly increasing the quantity of liquidity and fiat currencies. Central banks are still net gold buyers and massive paper-currency printers. Both trends are positive for the gold price in future years. In addition, gold mines are closing their marginal operations, due to the low price of gold, creating a new supply/demand squeeze.
The Eric Newman Collection Shows the Value of "Buying and Holding" Classic Rare Coins
The precious metals have not been behaving well lately, but the rare coin market has been setting records for great coins.
This month many historically important coins were auctioned from the collection of Eric P. Newman, a notable numismatist and collector. Most of these coins had been off the market for over 60 years. All of the coins were certified by Numismatic Guaranty Corp. (NGC). Newman only paid about $7,500 for these coins. The sale brought in $23.4 million which is over 50% above the pre-sale estimate. The highest amount paid in the entire sale was $1,527,500 for a phenomenal 1796 Quarter graded NGC MS67+. It was the finest known coin of this highly desired first-year issue and set a new record price for a silver minor coin. Newman bought this coin from the estate of "Colonel" E.H.R. Green in the early 1940s for only $100.
Other examples from the Newman auction include $910,625 for an MS-66+ (NGC) 1795 Draped Bust Off Center Dollar. Newman paid only $75 for that coin. Not far behind was the $822,500 realized at auction for an MS-67 (NGC) 1799 7x6 Stars Dollar, for which Newman only paid $30! Significantly, 46 coins in the sale exceeded the psychologically important $100,000 barrier.
Eric P. Newman was born May 25, 1911 in St. Louis. He is currently 102 years of age. He began collecting coins in 1918, age 7, when his grandfather gave him an 1859 Indian Head cent. By age 10, he was visiting with major St. Louis coin experts to feed his lifelong passion. His lifetime of accumulating great coins shows that a gradual and value-oriented lifetime of collecting some of the finest known coins and sets in the best obtainable condition can lead to profits of several thousands of percent per coin.
"These outstanding results are a clear indication of the strength of the rare coin market and of NGC-certified coins in particular," noted NGC Chairman Mark Salzberg. Other recent sales have shown similar results for outstanding specimens and sets held for decades. Proceeds from this sale are to be donated to charities, as selected by the Eric P. Newman Numismatic Education Society.
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