Bearish Outlook On Gold Signals Buying Opportunity

Despite the fact that gold has outperformed virtually every other asset class for the past decade, the September correction in gold prices has caused market sentiment to turn decidedly bearish.  As measured by the London closing fix price, gold reached an all time high of $1,895 on September 5th.   Within the next three weeks, gold had plunged by almost $300 per ounce, closing at $1,598 on September 26th.

Did September mark a turning point in the decade long gold rally, as many have suggested, or is it a buying opportunity?  A review of the factors contributing to the September sell off suggest that from a contrarian and fundamental point of view, the groundwork is being laid for a move to new highs in gold.

Extreme volatility in global equity markets due to the European debt crisis resulted in losses and subsequent margin calls for many leveraged investors who indiscriminately liquidated whatever they owned, including gold investments.

In mid November, SEC documents disclosed that Paulson & Co., the hedge fund run by legendary investor John Paulson had liquidated 11.2 million shares of the SPDR Gold Trust (GLD) during the quarter ending September 30th.  Paulson's exact motives in selling the GLD remain unknown, but is was reported that huge losses in his hedge funds had resulted in the forced selling of SPDR Gold Trust shares.

Besides helping to drive down the price of gold, investors may view Paulson's large sale as a bearish signal from an investor who has an incredibly successful long term track record.  Paulson, however, still remains the largest shareholder in the SPDR Gold Trust with a position of 20.3 million shares at September 30th.  In addition, Paulson reportedly remains long term bullish on gold and may have large positions in physical gold through allocated bullion accounts.

In addition to the factors mentioned above, gold may simply have gotten ahead of the fundamentals.  Every long term bull market experiences episodes of sharp price corrections and consolidation.  Over the past decade, with a brief exception in 2008, gold has found solid support at the 200 day moving average.  In April 2009, July 2010 and February 2011, gold experienced a sustained multi-month rally after correcting down to the 200 day moving average.  Currently, a retreat to the 200 day moving average would bring gold down to the $1,600 level.

Gold - courtesy stockcharts.com

Mark Hulbert, of the Hulbert Gold Newsletter, who tracks investor sentiment on gold says that the bearish sentiment on gold is reaching extreme levels.  Hulbert says "According to contrarian analysis, this is building a strong foundation for a fresh assault on gold’s recent all-time high above $1,900 an ounce.  This doesn’t guarantee that gold will rise from here, of course, or that it will do so right away. But it does mean that contrarian analysis is currently on the side of the bulls".

Patient long term investors in gold have been well rewarded.  Despite the September correction, gold prices have advanced by $364 per ounce in 2011, for a gain of 26%.

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Four Debuting US Mint Coin Products Beat by Proof Set Sales

Four new coin products launched and boosted sales all around in the latest report of United States Mint sales figures. The clear winner, however, was not any of the new products. Instead, it was the 2011 Proof Set with 24,348 orders.

The Olympic 5 oz. coin was one of four coin products to debut last week

It is not uncommon for sales to spike in the first week of December. After all, it is the gift buying season for United States Mint products. So the jolt for the 2011 Proof Set was no surprise. Total sales reached 998,226, or 1,774 short of hitting the major milestone of one million.

Of the products debuting in this round, two ranked in the United States Mint's top five best sellers for the week. All of the new items are listed below by highest to lowest in sales.

The 2011 quarters circulated set certainly started with better numbers than the previous 2010 issue, which opened with 5,684 in sales in November last year. The same could not be said for the Olympic coin, however. The prior America the Beautiful 5 oz Silver Uncirculated Coin, honoring Glacier National Park, opened with 10,680 in October.

Perhaps a lower starting price is what made the Lucretia Garfield First Spouse Gold Coins launch with higher opening numbers than the Lucy Hayes coins. When the Hayes coins were released in September, collectors gobbled up 1,265 proofs and 857 uncirculated versions, but prices were also higher by $25 each.

All available sales on United States Mint products are below. The first three columns of the table below provide weekly United States Mint sales increases between the listed time periods, offering a sense of recent trends. The final column provides the latest United States Mint sales totals as of Monday, December 5, 2011. Bullion coin tables are found toward the bottom, with the most recent sales as of Tuesday, December 6. (NLA = No Longer Available.)

25th Anniversary Silver Eagle Set2011 Uncirculated Silver Eagles2011 American Eagle Platinum Proof2011 American Gold Eagle Uncirculated2011 American Gold Eagle Proof Coins2011 Medal of Honor Commemorative Coins2011 U.S. Army Commemorative Coins2011 American Buffalo Gold Proof2010 American Buffalo Gold ProofMary Lincoln Uncirculated (2010)Eliza Johnson Uncirculated (2011)Julia Grant Uncirculated (2011)Lucy Hayes Uncirculated (2011)Lucretia Garfield Proof (2011)Lucretia Garfield Uncirculated (2011)2011 America The Beautiful Quarters Silver Proof Set™2011 America The Beautiful Quarters Proof Set™2011 Presidential $1 Coin Proof Set™2011 United States Mint Silver Proof Set2010 United States Mint Proof Set2010 America the Beautiful Quarters Proof Set2010 U.S. Mint Silver Proof Set™2010 Presidential $1 Coin Proof Set™2010 America The Beautiful Quarters Silver Proof Set™2011 United States Mint Uncirculated Set2010 United States Mint Uncirculated Set2011 Presidential Uncirculated Dollar Set™2010 Presidential Uncirculated Dollar Set™AMERICA THE BEAUTIFUL 5 OZ SILVER UNCIRCULATED COINSGettysburg National Military Park2011 America the Beautiful Quarters Uncirculated Set2010 America the Beautiful Quarters Uncirculated Set2011 America the Beautiful Quarters "Circulated" Set2010 America the Beautiful Quarters "Circulated" SetAMERICA THE BEAUTIFUL 3-Coin SetCHICKASAW QUARTER QUARTER BAGS & ROLLSVICKSBURG QUARTER QUARTER BAGS & ROLLSOLYMPIC QUARTER QUARTER BAGS & ROLLSGLACIER QUARTER QUARTER BAGS & ROLLSGETTYSBURG QUARTER QUARTER BAGS & ROLLSMOUNT HOOD QUARTER QUARTER BAGS & ROLLS2009 ZACHARY TAYLOR $1 COIN ROLLS2010 ABRAHAM LINCOLN $1 COIN ROLLS2011 ANDREW JOHNSON $1 COIN ROLLS2011 ULYSSES S. GRANT $1 COIN ROLLS2011 RUTHERFORD B. HAYES $1 COIN ROLLS2011 JAMES GARFIELD $1 COIN ROLLSPRESIDENTIAL $1 COIN & FIRST SPOUSE MEDAL SETS™2011 KENNEDY HALF-DOLLAR BAGS & ROLLS2010 KENNEDY HALF-DOLLAR BAGS & ROLLS2011 NATIVE AMERICAN GOLDEN DOLLAR ROLLS2010 NATIVE AMERICAN GOLDEN DOLLAR ROLLSUS MINT SALES: 2011 BULLION COINSAmerica the Beautiful Silver Bullion Coins

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Gold Bullion Coin Sales Plunge 63% In November and 20% YTD – Have Americans Given Up On Gold?

Total sales of American Gold Eagle bullion coins plunged in November according to production figures from the U.S. Mint.

Total sales of gold U.S. Mint bullion coins declined by 63.4% in November from the previous year.  Sales of U.S. Mint gold bullion coins declined by 19.5% on a year to date basis through the end of November.  A total of 41,000 ounces were sold in November 2011 compared to sales of 112,000 ounces in November 2010.  Year to date sales through November totaled 934,500 ounces compared to the previous year to date totals of 1,160,500 ounces.

The reduction in the purchase of U.S. Mint gold bullion coins continues a trend of reduced sales since the record breaking year of 2009 when a total of 1,435,000 ounces were sold.  Total gold bullion sales  for 2011 will probably slip below one million ounces for the first time since 2009.  If sales decline in December by the same percentage amount as in November, total 2011 sales of gold bullion coins will come in at 956,500 ounces.

A summary of gold mint bullion coin sales since 2000 is shown below.

Gold Bullion Sales Since 2000

Gold Bullion U.S. Mint Sales Since 2000

Why would gold bullion coin sales be plunging when gold has been steadily rising?  Have Americans given up on gold?  Let's look at various trends in gold sales to get some perspective.

-Annual sales of gold bullion exceeded a half million ounces only once before 2008.  The financial crash of 2008 precipitated concerns about the integrity of both the banking system and the U.S. dollar, causing a huge increase in demand for physical gold.  Gold bullion sales exploded higher in 2008 and sales for 2011 remain far above levels seen prior to 2008 despite the recent drop in sales.

-Based on the current price of gold, the total value of all gold bullion purchased from the U.S. Mint since 2000 is $12.6 billion.  This amount represents only a fraction of the amount of investment dollars that have flowed into gold over the past decade.  In addition to purchasing physical gold, investors now have the option to purchase gold through gold trust ETFs.  The amount of money poured into the gold trust ETFs is many multitudes greater than the investment in physical gold bullion coins.  For example, since their inception in 2005, the combined gold holdings of the SPDR Gold Shares Trust (GLD) and the iShares Gold Trust (IAU) have grown to 47.2 million ounces valued at $82.5 billion.

-Gold ETFs have grown exponentially from their inception a short six years ago but the largest gold ETF, the SPDR Gold Shares Trust (GLD), has not been able to exceed its record gold holdings of 1,320.47 tonnes reached on June 29, 2010.  In addition, billionaire John Paulson recently liquidated a substantial portion of his GLD holdings, although much of the selling may have been forced due to severe losses in his hedge funds.

-Gold trader sentiment is either bullish or bearish, depending on who you talk to.

-Central banks, which have been increasing their purchases of gold since 2000, have sharply accelerated their purchases of gold bullion over the past several years.  Central banks from Asia and Latin America have accounted for most of the increased purchases.

-According to the World Gold Council, global gold investment demand increased by 33% in the 2011 third quarter compared to the prior year.  Investment demand for gold bars and coins increased by 29% and global gold holdings by gold trust ETFs increased by almost 78 tonnes.  Demand for gold increased notably during the third quarter in Europe and China.

While it is indisputable that global gold demand has increased, the appetite for gold by U.S. investors seems to be diminishing.  What do you think?

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Ron Paul Calls Central Bank Intervention A “Form of World Wide Quantitative Easing”

Central banks, spear headed by the U.S. Federal Reserve, launched a massive joint effort to provide liquidity to a European banking system that was teetering on the verge of collapse.

The six central banks involved in the emergency lending program were the U.S. Federal Reserve, the Bank of Japan, the Swiss National Bank, the Bank of England, the Bank of Canada and the European Central Bank.  The central bank actions provided European banks with cheap access to  funding through U.S. dollar swap lines.  Under dollar swaps, the U.S. Federal Reserve supplies dollars to foreign central banks which in turn lend the dollars to banks that need U.S. dollars to meet funding needs denominated in U.S. dollars.

In a joint statement, the six central banks said "The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."  As one European bank after another appeared to be on the verge of collapse, the calls for central bank intervention to "save the world" had become deafening.  Today, the central banks obliged, effectively endorsing the theory that more debt is the solution to the debt crisis.

In an early day interview on CNBC, Ron Paul gave his take on the massive central bank intervention, calling it "a form of worldwide quantitative easing."

Ron Paul also noted that the central bank actions "penalize the American people" and that the Federal Reserve actions will simply result in "more debt and more inflation."

Ron Paul said the Fed is doing the same thing that it has done for the past 40 years.  "Spending excessively, running up debt, printing up money, and manipulating interest rates.  We're up against the wall now, it doesn't work anymore. Lowering interest rates is essentially impossible.   That's what they're desperately trying to do today.  But, you know, when our interest rates to the banks are down to zero, what are they going to do next?  Used to be that Congress would just spend more money and that would help.  How can they spend more money when there's no more money in the Treasury?"

The answer to Ron Paul's last question is obvious and should deeply concern every American.  Funding needs of the Treasury will continue to be supplied by the Federal Reserve with printed money and the U.S. currency will continue to lose value.  The rising price of gold has reflected the systematic destruction of our currency.  Based on the predictable response of central banks worldwide to print their way out of the debt disaster, there is effectively no upside limit to the price of gold.

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US Mint Issues 2011 America the Beautiful Quarters Circulating Coin Set

Tuesday, November 29, 2011, the United States Mint issued the 2011 America the Beautiful Quarters Circulating Coin Set. Its price is $9.95, which is identical to last year's release.

United States Mint image of the newly issued 2011 America the Beautiful Quarters Circulating Coin Set

The set of 2011 quarters is the second of its kind in the America the Beautiful Quarters® program. It includes 10 of this year's quarter dollars, two strikes of each design. One of each design is produced at the United States Mint manufacturing facilities located in Philadelphia and Denver. Although the coins are business quality, they have never entered circulation.

The five designs of the 2011 coins depict a scene emblematic of Gettysburg National Military Park, Glacier National Park, Olympic National Park, Vicksburg National Military Park, and Chickasaw National Recreation Area.

The coins are mounted on a card that allows easy access. This set provides collectors with an economical opportunity to add each of this year's issues to a collection or coin album without having to break up one of the U.S. Mint's larger or more expensive sets that may contain other coin denominations.

Once available, hobbyists may place an order via the Mint's online store at http://www.usmint.gov/catalog or call 1-800-USA-MINT (872-6468).

For reference, the U.S. Mint press release announcing the 2011 America the Beautiful Quarters Circulating Coin Set follows.

WASHINGTON - The United States Mint will begin accepting orders for the 2011 America the Beautiful Quarters Circulating Coin Set at noon Eastern Time (ET) on November 29, 2011. The 10-coin set, priced at $9.95, contains the 2011 America the Beautiful Quarters® Program coins in circulating quality - one of each quarter from the United States Mint facilities at Philadelphia and Denver.

The packaging allows the coins to be easily removed and placed into the America the Beautiful Quarters Coin Album™ or other storage option. 

Orders will be accepted at http://www.usmint.gov/catalog, or at 1-800-USA-MINT (872-6468).  Hearing- and speech-impaired customers may order by calling 1-888-321-MINT (6468). A shipping and handling fee of $4.95 per order will be added to all domestic orders.

The America the Beautiful Quarters Circulating Coin Set is also available for purchase through the United States Mint Online Subscription Program. For additional information about this convenient ordering option, visit http://www.usmint.gov/catalog.

Note:  To ensure that all members of the public have fair and equal access to United States Mint products, orders placed prior to the official on-sale date and time of November 29, 2011, noon ET shall not be deemed accepted by the United States Mint and will not be honored.  For more information, please review the United States Mint's Frequently Asked Questions, Answer ID #175.

The United States Mint, created by Congress in 1792, is the Nation's sole manufacturer of legal tender coinage and is responsible for producing circulating coinage for the Nation to conduct its trade and commerce. The United States Mint also produces proof, uncirculated and commemorative coins; Congressional Gold Medals; and silver, gold and platinum bullion coins.

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US Mint Silver and Gold Bullion November 2011 Coin Sales

Sales were slow for US Mint silver and gold bullion coins in November compared to earlier months in 2011. Levels retreated for all but one offering, the smallest coin.

American Silver Eagles, with sales 1.384 million coins, ended with their lowest sales level since July 2008 while American Gold Eagles plunged in November with sales of 41,000 ounces, their lowest since June 2008. The contrast between how the bullion coins performed against the previous month of October was extreme. Silver Eagle sales in November plunged 54.8% from October while Gold Eagles dropped 18% over the same time.

Silver Eagle bullion coins stopped a little shy of 38 million by ending the eleven month period at 37.8595 million. Earlier in the year it looked like the silver coins would overtake 40 million in annual sales, but now it is not so sure.

Eleven-month sales for the 22-karat Gold Eagle bullion coins reached 934,500 ounces. The level is not bad, but it is still very far behind 2010's annual sales of 1.22205 million ounces.

A detailed look on how both series of coins performed in November versus past months in 2011 follows:

2011 American Gold Eagle Bullion Coin Sales Totals(See this CoinNews.net sales article for more analysis.)

2011 American Silver Eagle Bullion Coin Sales Totals
(See this Silver Coins Today sales article for more analysis.)

(As a side note, Silver Eagle sales picked up in early December, with another milestone as the coins crossed 38 million by December 5.)

As for other gold bullion coins sales for the month of November, the 24-karat Gold Buffalo tacked on 8,500. The bullion coins have been sliding since August's 28,000 jolt, and reaching the 209,000 coins sold in 2010 appears slim. Those declines and how they have performed since their introduction in 2006 may be compared in the following table:

American Gold Buffalo Bullion Coin Sales Totals (2006-2011)

Also in the US Mint's bullion arsenal in 2011 are the five bullion 2011 America the Beautiful Silver Coins. The first two five-ounce silver bullion coins have sold out earlier this year, hitting their maximum published mintages of 126,700 each. Those were the coins honoring Gettysburg National Military Park in Pennsylvania and Glacier National Park in Montana. The third one, for Olympic National Park in Washington stands at 83,300 and was released in May while the fourth, the Vicksburg National Military Park bullion coin for Mississippi, is at 32,500, after being released in June. The final 2011-dated five ounce bullion coin honoring Chickasaw National Recreation Area in Oklahoma launched in July and hit 24,700 in sales as of Monday, December 5, 2011. Cumulative sales total 393,900.

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US Mint Releases Garfield Presidential $1 Coin

The United States Mint and the National Park Service ceremoniously released the James Garfield Presidential $1 Coin Thursday morning at Lawnfield, the James A. Garfield National Historic Site in Mentor, Ohio, east of Cleveland.

James Garfield Presidential Dollar

In attendance at the dollar ceremony were Marc Landry, US Mint Acting Associate Director for Manufacturing; Dr. Allan Peskin, Cleveland State University Professor Emeritus of History; Rudolph Garfield, President Garfield's great-grandson, as well as government and local dignitaries.

The official launch ceremony ended with the traditional coin exchange hosted by a local bank, Cardinal Community Credit Union of Mentor, allowing attendees to buy rolls of the new dollar at face value. Children in attendance received a free Garfield Presidential dollar, the 20th dollar issued in the United States Mint's Presidential $1 Coin series.

Below is a press release from the United States Mint that summarizes the James Garfield Presidential $1 Coin Ceremony on November 17, 2011.

MENTOR, Ohio - Admirers of former U.S. President James Garfield gathered today for the United States Mint's official launch of the Presidential $1 Coin struck in his honor. The ceremony was held at the James A. Garfield National Historic Site - location of the 20th President's family home - two days prior to the 180th anniversary of Garfield's birth.

"The Presidential $1 Coin series connects Americans to inspiring life stories like President Garfield's," said United States Mint Acting Associate Director for Manufacturing Marc Landry.  "He was the last President born in a log cabin, fatherless by the age of two, drove canal boat teams to earn money for college, became a classics professor and college president, rose to brigadier general in the Civil War, and enjoyed a long, distinguished career in the U.S. Congress."

In addition to Landry, speakers at the event included Rudolph Garfield, a great-grandson of President Garfield, and Dr. Allan Peskin, professor emeritus of history at the Cleveland State University.  Peskin, who served as the event's keynote speaker, is the author of "Garfield," the definitive biography of James Garfield. 

Those who attended the event were among the first in the Nation to get the new James Garfield Presidential $1 Coin, which was released into circulation today. Following the ceremony, many of those in attendance exchanged their currency for 25-coin rolls of the new coin.

The James Garfield Presidential $1 Coin is the 20th released in the United States Mint's Presidential $1 Coin Program, authorized by the Presidential $1 Coin Act of 2005 (Public Law 109-145). The coin's obverse (heads side) bears a bold portrait of former President Garfield, designed and sculpted by United States Mint Sculptor-Engraver Phebe Hemphill, with the inscriptions JAMES GARFIELD, IN GOD WE TRUST, 20TH PRESIDENT and 1881. 

The coin's reverse (tails side), by United States Mint Sculptor-Engraver Don Everhart, features a striking rendition of the iconic Statue of Liberty with the inscriptions $1 and UNITED STATES OF AMERICA. The inscriptions E PLURIBUS UNUM, 2011 and the mintmark ("P" or "D") are incused on the coin's edge.

James Garfield was born in Cuyahoga County, Ohio, in 1831.  He later graduated from Williams College in Massachusetts and returned to the Western Reserve Eclectic Institute (later Hiram College) in Ohio as a classics professor and then its president. He was elected to the Ohio state senate in 1859.  In 1862, he was elected to the U.S. House of Representatives, where he served 18 years.

At the 1880 Republican convention, Garfield won the nomination for President on the 36th ballot. On July 2, 1881, just four months into his term, an embittered attorney who had unsuccessfully sought a consular post, shot the President in a Washington railroad station. He lay wounded in the White House for weeks. Alexander Graham Bell, inventor of the telephone, tried in vain to find the bullet with an electrical device he had designed. On September 6, Garfield was taken to the New Jersey seaside and for a few days, he seemed to be recuperating. On September 19, 1881, however, he died from an infection and internal hemorrhage.

The United States Mint (www.usmint.gov), created by Congress in 1792, is the Nation's sole manufacturer of legal tender coinage and is responsible for producing circulating coinage for the Nation to conduct its trade and commerce. The United States Mint also produces proof, uncirculated and commemorative coins; Congressional Gold Medals; and silver, gold and platinum bullion coins.

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