“Soaring Silver Prices Lure Haven-Seeking Investors” --Wall Street Journal, May 19, 2020
Last Tuesday, the Wall Street Journal reported, the nearest-month silver futures price reached $17.892 per Troy ounce, rising 14% in the past four sessions and +52% from its March low. This is in immediate response to news of a promising coronavirus vaccine development the previous day but more in response to the 50 states announcing a variety of plans for opening up their states to business in June and beyond.
The progression of the gold-to-silver ratio this year marks the influence of the coronavirus on business:
Gold soared during the coronavirus scare while the industrial commodities retreated. Now, silver is returning to favor, with the gold/silver ratio finally retreating back to 100-to-1. Silver has an additional attraction, as the Journal article shows, as a “safe haven” during crisis times. Silver has a double role as an industrial metal (about 60% of demand), with jewelry (20%) and bullion coins and bars (20%) giving silver added glitter as a precious metal. As part of the bullion demand, silver exchange-traded funds (ETFs), like the iShares Silver Trust, have posted big inflows, and they must buy an equivalent amount of physical bullion to match the paper demand from ETF investors. London-based research firm Capital Economics said, “We think safe-haven demand for silver will continue to be a key driver of prices.”
Whenever gold and silver prices are rising, as they are now, and major newspapers and magazines back them up with positive articles, coin dealers place more ads, and those ads bring in more new customers than usual. Then, a larger percentage of those callers will buy bullion coins. Within 6-24 months, a good percentage (say 10% to 20%) will graduate into rare coins, pushing up the prices of select rare coins. Demand for popular rare coins is increasing. Call us today to find out about our latest purchases.
Silver is making a move above $17, while gold remains above $1,735, although correcting from its 7-year high above $1,760. On Monday, May 18, silver rose almost 50 cents (+3%) while gold fell $10 (-0.6%). On May 5, the gold-to-silver ratio was 115-to-1 ($1,700 to $14.75), but since then silver is up 16.5% and gold is up only 2.5%, so the gold-to-silver ratio is down to 101-to-1 in the last two weeks. That’s the lowest gold-silver ratio in the last two months. If you want to buy silver, please call us to learn about some of the best silver values in the industry!
In 2019, BankAmerica Securities, a division of Bank of America, told investors that their portfolios should contain 25-percent gold. Fast forward to April 2020, and Bank of America is now seeing potential gold prices being pushed to $3,000 an ounce in 2021 – a 50-percent increase from their previous forecast of $2,000 an ounce. “You can’t print gold,” wrote a Bank of America Analyst. “As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. And investors will aim for gold.” 1st American Reserve’s numismatic consultant, Dr. Mike Fuljenz, notes that recent actions by Federal Reserve have now boosted the Fed’s balance sheet by 50% to $6.42 trillion as it continues to “print” more money. Technically, the Federal Reserve has no printing presses but it can release more money, or credit, into the system with a few keystrokes. History has demonstrated that when large, established mainstream financial institutions start promoting gold investments the gold market begins to take off and a large group of new gold investors is created. Then, within 6 to 24 months, a significant proportion of those new bullion customers (maybe 10% to 20%) graduate up to the tighter rare coin market.
Surges in the price of gold have made the commodity seem like an attractive alternative to more volatile markets. 1st American Reserve wants you to know that while there are many reputable dealers in gold, this market’s desirability and investment potential makes it vulnerable to fraudulent business practices.
If you have been thinking about buying or selling rare coins or bullion products containing precious metal, Dr. Fuljenz, 1st American Reserve Numismatic Consultant, has three words for you: research, research, research. Before entering into a transaction, you need to research the background of the coin dealer including how long they have been in business and their Better Business Bureau (BBB) rating. You should also independently verify the dealer’s membership and status in leading industry organizations like being a Numismatic Guaranty Corporation Authorized Dealer. It is a good sign if the dealer has won any industry awards or served on any industry boards. This advice applies to all transactions whether done by phone, in person, online or by mail.
Here are some tips to avoid becoming a victim of fraud:
A couple of years ago, a commodity and currency analyst bet my friend Gary Alexander that gold would go below $1,000 and Gary won that bet – two years in a row. Now, that analyst has turned bullish and is predicting gold will double from here – to $3,300 per ounce by 2022 (“The Economic and Monetary Conditions are Perfect for Gold,” by Ivan Martchev, MarketWatch, March 30). He shows a dramatic chart of gold bullion rising to an all-time high relative to the CRB Commodity Index. The chart shows gold rising from 1.15 (to the CRB Index) in 2001 to a record high 13.07 recently – a gain of over 1,000% in 19 years.
He compares the current coronavirus crisis to the 2008-09 financial crisis, which propelled gold to an all-time high in 2011, saying, “We have a similar environment at the moment. Interest rates have been dropped to zero at the fed funds rate level, and the federal deficit will be larger than 10% of GDP (larger than after the 2008 crisis) due to the $2 trillion bailout. Record deficit spending and the Federal Reserve’s quantitative easing (QE) with no preset limits is the perfect environment for gold bullion.
Dr. Mike Fuljenz, numismatic consultant for national award-winning precious metals dealer 1st American Reserve says “With record deficit spending and interest rates at zero, we may be faced with an environment where the Fed will keep interest rates below the level of inflation for some time until the economy normalizes after the outbreak is controlled. This would be the perfect environment for gold bullion.”
We don’t know if $3,300 gold is possible by 2022, but Gary and I would not bet against it.
Wells Fargo Bank issued a report on Real Assets, in May, where their Head of Asset Strategy, John LaForge, predicts gold will “test its all-time highs” going forward. As the best investment metal on the market, gold has been on the rise and previous predictions of $1,700 have turned into even higher numbers, according to Dr. Mike Fuljenz, numismatic consultant for 1st American Reserve in Beaumont, TX. As for LaForge and Wells Fargo, the prediction is that gold will once-again hit its all-time high of $1,900 by the end of the year. “Gold has a host of economic and market factors working in its favor, and we are increasingly confident that gold could test its all-time high of $1,900 this year,” LaForge stated, and Wells Fargo has already upgraded its year-end 2020 gold target price three times in 2020 and now sees this new all-time high above $1,900. LaForge explains that “gold has a host of economic and market factors working in its favor. Of course, the increased volatility in 2020 is one. Gold’s prime macro driver, though, continues to be the direction and level of global interest rates, and their persistent flirtation with the negative. Since 2016, gold has increasingly been used by investors as a hedge against the unknown impacts of sinking, and persistently low, long-term interest rates. Recent global injections of money by central banks (quantitative easing, or QE), in reaction to the coronavirus’ economic effects, has only added fuel to this hedge. “Gold is also being used by investors as a substitute for long-term bonds as a perceived ‘safe asset,’” LaForge stated. “With no particular ties to a government or other bond issuer, we believe gold looks attractive to long-term investors. The bottom line is that we continue to like gold as part of a well-diversified portfolio, particularly in light of additional global QE, and persistently low and falling long-term interest rates.”
The United States Mint will change the reverse of the well-known American Silver Eagle (ASE) and American Gold Eagle (AGE) coins in 2021, noting the end of the famous "family of eagles" designed by renowned artist and sculptor Miley Tucker-Frost from the first 1986 gold coin series. 1st American Reserve is anticipating these approaching changes will bring increasing enthusiasm by collectors for these coins. The new reverse will likewise include state-of-the-art security to thwart counterfeiting measures. Many of these anti-counterfeiting measures have been successfully implemented by other countries to protect their currencies from continuous assault by counterfeiters, especially those from China. “Having my design on the nation’s gold coinage has been a tremendous honor,” says this acclaimed sculptress, whose name was Miley Busiek at the time the American Eagle bullion coins first appeared in late 1986. The Gold Eagles pair her plan with Augustus Saint-Gaudens' heavenly representation of Liberty from the front-side of the dazzling Saint-Gaudens twofold hawk ($20 gold bit) of 1907-1933. Exhaust Frost invests wholeheartedly in this fortunate matching. “I am thrilled that they did that,” she says enthusiastically. “I just consider it an incredible honor to be on the other side of a coin that carries such a beautiful design.”
Every quarter, hedge fund managers are required to file their holdings – including gold holdings – with the Securities & Exchange Commission (SEC) at the midway point of the next quarter. The latest filing was due last Friday, May 15. According to Bloomberg reports on Monday, May 18, there is indication that hedge fund luminaries including Paul Singer, David Einhorn and Crispin Odey are among those bullish on gold, according to recent letters to investors. So are large asset managers like Blackrock Inc. and Newton Investment
Management. Bloomberg reported on their filings and letters to investors: Crispen Odey of the Odey European Fund wrote of his holdings at the end of March: “Gold is the only escape from global monetizing.” Gold futures were the third largest position held by his fund at the time. Paul Singer of Elliott Management Corp told his investors, “In recent months, gold has gone up in price to some degree, but we think that it is one of the most undervalued investable assets existing today.” He argued that low interest rates, mine disruptions and “fanatical debasement of money by all of the world’s central banks” would lead gold to rise to “literally multiples of its current price.” (Literally, one multiple of $1,750 gold would be a doubling to $3,500. Two multiples would be to $5,250, and so forth…) Turning to the expected inflation next year, David Einhorn’s Greenlight Capital argued in a letter to the fund’s investors that, “We expect policymakers to target and applaud mid-single digit inflation, which, combined with interest rate suppression, will be the only way to outgrow the mounting debts,” Catherine Doyle at Newton Investment Management agreed: “It’s almost inevitable that there will be a fiscal tailwind for gold – when markets wake up to the scale of the stimulus.” Even if hyper-inflation isn’t coming, Russ Koesterich, portfolio manager of the $20.5 billion BlackRock Global Allocation Fund, points to gold’s inverse relationship with real interest rates: When interest rates are low, adjusted for inflation, the opportunity cost of holding gold is low and real rates are negative now. In February, Bank of America (BofA) Securities came out with a new “Global Investment Strategy” report for the 2020s with recommendations that investors adjust portfolios by going into a strategic posture with 25% in gold. Monday, May 4, Wells Fargo Bank issued a report on Real Assets, in which John LaForge, Wells Fargo’s Head of Real Asset Strategy opened with this headline: “Gold may test its all-time highs, adding, “Gold has a host of economic and market factors working in its favor, and we are increasingly confident that gold could test its all-time high of $1,900 this year.” Wells Fargo has already upgraded its year-end 2020 gold target price three times this year and now sees this new all-time high above $1,900. Whenever gold prices are rising, as they are now, and established banks and hedge funds predict higher gold prices, many coin and bullion dealers place more ads, and those ads often bring in more new customers than usual. Say an ad brings in 100 new calls in normal times. Those ads might bring 150 new callers in hot markets like this. A larger percentage of those callers will buy bullion coins. Within 6-24 months, a good percentage (say 10% to 20%) will graduate into rare coins, often pushing up the prices of select rare coins. I urge you to buy select rare coins now before prices rise further!
A survey by The World Gold Council of 18,000 worldwide market participants on their beliefs about gold found that more than half of those surveyed in the U.S., India, Germany, and China trust the yellow metal more than cash currencies. And 67% of the participants agreed, “gold is a good safeguard against inflation and currency fluctuations.” It was also questioned by researchers, “what motivated an investor’s decision to buy gold.” The leading motivation (44%) was to manage risk via diversification by shifting money away from more volatile investments into gold, which they believed to be more stable and is a tangible asset. The second most-cited reason (31%) was due to “the recommendation of a financial advisor or a friend,” while the third largest reason was that people bought gold because they believe the price was low or beginning an upward trend. Not surprisingly, nearly two-thirds of those who have previously invested in gold (64%) would purchase it again in the future. 1st American Reserve’s numismatic expert, Dr. Mike Fuljenz, explains that when confidence is high in the precious metals industry it can create a bull market that is, “usually accompanied by more advertisements by major coin dealers for bullion coins and more customers responding, which many times lead (usually within 6-24 months) to a rare coin bull market.”
During this unprecedented pandemic, counterfeiters and fraudsters have been very quick to capitalize on the fear and anxieties of victims and adapt their modus operandi to seize upon criminal opportunities during this crisis. The number of counterfeit reports and fraud schemes have continued to increase. Factors that have prompted this increase include high demand for coins and precious metals, decreased mobility, the public staying at home teleworking, increased on-line buying, internet exploration, and decreased supply of products. The criminal threat related to counterfeit rare coins and even precious metal bullion remains dynamic and new or adapted types of criminal activities will continue to emerge during the crisis and in its aftermath. 1st American Reserve wants to help you buy genuine silver and gold coins, safely and without the risk of being duped by counterfeits. Our numismatic consultant, Dr. Mike Fuljenz, sits on the board of the Anti-Counterfeiting Task Force, which has identified more than 100-plus websites selling counterfeit coins and precious metals. “In the past year, I have reviewed several customers’ coin collections and sadly detected one or more counterfeit coins,” Fuljenz said. “In one instance, the majority of one person’s collection consisted of counterfeit-proof American Buffalo one-ounce gold coins, with all coins appearing in what looked like genuine NGC holders. The holders themselves were also fraudulent. Many of these counterfeits seem to have been, ‘Made in China.’ “Other collectors I have helped, had counterfeit American Gold Eagle coins, as well as, counterfeit Morgan, Peace, and Trade Dollars purportedly made from silver. Metals composition testing revealed they were made of copper, nickel, zinc, tungsten or other inferior metals. Some counterfeit Trade Dollars were easily spotted because there were no dates used when Trade Dollars were minted. This caused them to ring at a very high pitch versus the sound of a real silver dollar when tapped with a pen.” As part of 1st American Reserve’s commitment to its customers and the public, as a whole, we want to remind you to be sure you know who you are buying your coins and precious metals from. Make sure they are BBB accredited, have affiliations with industry trade groups and contribute to the numismatic industry through publications, philanthropy and by giving their time to help others. “Does the dealer you are considering have a long-term track record of honest dealing – a reputation that must be maintained by continuing to deal with honesty and integrity? These are the instructions I provided to the Attorney General of Texas when I helped him with is Gold Coin Consumer Protection Alert. And these are the same qualities that make fee confident about being chosen as the numismatic consultant for 1st American Reserve.”