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Gold's Fundamentals Have Not Changedby Peter A. Grant
Apr 18, AM The U.S. Mint is reporting sales of 147,000 ounces in April thus far, with two more weeks left in the month. Some sources are saying the Mint sold 63,500 ounces on Wednesday alone! That's more than they sold in the entire month of March. The U.S. Mint should easily exceed the high water market for the year set in January at 150,000. Regardless of the big paper driven sell-off that began last Friday, the underlying fundamentals have not really changed. The G-7 economies are moribund at best and recessionary at worst. The central banks of these nations continue to respond with super-easy monetary policy and extraordinary accommodations at best. A Time magazine article on gold's fall said, "let’s not mistake yesterday’s decline for the end of the gold bull run. [T]he issues confronting traditional currency have not been resolved." Truer words were never spoken; as clearly the debasement of the world's major currencies is an ongoing phenomenon. Investor and author John Mauldin said earlier this week in his Things That Make You Go Hmmm... newsletter: "[T]he era of fiat currencies is approaching yet another 'end point' due to the way such funny money is being abused by governments and central banks." Mauldin goes on to add, "The only real viable alternative is gold." While Cyprus is reportedly considering selling at least a portion of it's gold reserves to help finance its bailout, central banks in general remain net buyers of physical gold as part of a broad reserve asset diversification strategy that is unlikely to end any time soon. There is some concern out there that other sovereigns may be pressured to sell gold reserves under duress. Recall however that back in the summer of 2011, when the Greek crisis was in full swing, the Bank of Greece managed to scrape together enough money from somewhere to actually add to its gold reserves. I don't believe meaningful central bank gold sales are a legitimate risk. If Cyprus does sell 10 tonnes of gold, it will never see the open market. Rather it will most likely be snapped up by one of the many gold hungry sovereigns. Over the last couple days the yellow metal seems to be trying to form a base. While further tests of the downside can not be preclude, given the size of the paper market relative to the physical market. Conservatively, there are 100 paper ounces of gold out there for every ounce of the real thing. Yet physical buyers have largely been viewing the recent drop has a huge gift courtesy of that paper market. Our phones have been ringing off the hook and I have yet to process a single purchase order, where a client is selling. Understandably, some clients want to have a conversation about recent price action and timing. However, since the drop began last Friday, they have all been buyers and I view that as perhaps the strongest indicator of all. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
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Thursday April 18
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