This is why you will see high premiums on American Eagle silver coins in 2023

Neils Christensen
Friday January 13, 2023

The U.S. Mint’s disappointing sales numbers in 2022 are raising some questions among bullion professionals and retail investors; however, according to some analysts, these issues are also a part of a more significant trend in the global precious metals marketplace.

Last year the U.S. Mint sold slightly less than 16 million one-ounce American Eagle silver coins, a drop of 43.5% from sales of more than 28.2 million coins sold in 2021. Sales of American Eagle coins dropped to their lowest level since 2019.

However, analysts note that the reduced sales weren’t due to a lack of investor interest. Analysts have reported solid global demand for silver bullion throughout 2022. An indication of investor interest has been record-high premiums for American Eagle coins, pushing above 70%.

While the U.S. Mint reported disappointing sales numbers for 2022, Perth Mint saw record sales of more than 23 million ounces.

Michael Fuljenz, president of Universal Coin & Bullion and chair of the National Coin and Bullion Association American Silver Eagle sales committee, said that there are systemic issues impacting the production and supply of American silver bullion coins. He added that these issues could continue to persist in 2023, which means consumers will continue to face persistently high premiums.

Fuljenz said the biggest problem is that the mint buys silver blanks from private mints. Blanks are silver disks that are then transformed into coins.

Analysts have noted that the U.S. Mint has had difficulty maintaining its supply of blanks as it competes with growing overseas demand.

“The U.S. Mint either needs to start making their own blanks or be more competitive and pay more or loosen their conditions when it comes to buying them,” said Fuljenz. “If the Mint had more blanks, they would probably have had sales matching 2020 and 2021, and premiums would not have risen from about $3 over the spot silver price to $14 over the spot silver price in two years.”

Tom Power, president, and CEO of Sunshine Mining, which supplies the majority of the U.S. Mint’s silver blanks, said his company is running at full capacity trying to keep up with growing global and domestic demand.

He added that the silver market continues to deal with supply chain and production issues, particularly a shortage of skilled labor.

“There is no shortage of silver or the raw metal out there, but there are still ongoing production issues as we all continue to suffer from a labor shortage,” he said. “This has been going on for two years now and we could see it last another year or two.”

Power added that even if he could increase capacity at Sunshine, it would take 12 to 16 months to get the equipment he would need. “We are giving the U.S. Mint everything we can afford to give them,” he said.

Along with ongoing supply issues, the U.S. Mint also has to compete with unprecedented global demand.

Everett Millman, a precious metals expert at Gainesville Coins, said that the supply issues the U.S. Mint faces are part of a much bigger trend as a wealth of precious metals flow from Western nations to Eastern countries. Many analysts have noted that India has seen an insatiable appetite for silver bullion, with record imports in 2022.

Millman explained that this is a trend the precious metal sector sees every time there is a significant drop in gold and silver prices.

“Investors in the East seem to always take advantage of these price dips to stock up on precious metal,” he said. “When prices start to rise, we see the reverse and the metal flow back to the West.”

Millman added that in this environment, it’s not surprising that the U.S. Mint would have difficulty finding enough silver blanks to meet domestic demand.

“If there is more demand in the East and that is driving prices, then that is where the gold and silver are going to go,” he said.

Millman also pointed out that the Perth Mint’s record performance in 2022 indicates robust global demand.

Although consumers could continue to face higher premiums through 2023, Millman said that healthy demand in the East is a strong indicator that prices will eventually rise.

“Traditionally, investors in the East are not looking to buy gold to make a quick profit but are concerned about preserving their wealth and hedge against ongoing currency debasement,” he said. “Those dynamics are good reasons why we see gold flowing to the East.”

Millman said that he expects the tide in the precious metals market to shift when gold prices rise to $2,000 an ounce.

By Neils Christensen

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Gold sharply up as USDX, U.S. bond yields plummet after cooler CPI

Jim Wycoff – Thursday November 10, 2022

Gold and silver prices are solidly higher in midday U.S. trading Thursday, with gold scoring a 2.5-month high and silver a 4.5-month high, following a U.S. inflation report that came in just a bit cooler than market expectations and in turn pushed the U.S. dollar index and U.S. Treasury yields sharply lower. December gold was last up $38.60 at $1,737.90 and December silver was up $0.323 at $21.66.

The U.S. consumer price index report for October came in up 7.7%, year-on-year, versus expectations for a rise of 7.9%, year-on-year, and compares to the 8.2% rise seen in the September report. This report may be the most important data point of the month, if not the quarter. A slightly cooler reading in the CPI print may influence the Federal Reserve”s decision-making process ahead of its December FOMC meeting. The Wall Street Journal is reporting the Fed is likely to raise its Fed funds rate by 0.5% in December, following a string of 0.75% increases at past FOMC meetings.

The U.S. stock indexes soared on the cooler CPI print, with Bitcoin also posting solid gains after the report. However, the crypto currency markets remain in turmoil late this week, with fears of a contagion effect and more illiquidity in the cryptos. Broker SP Angel this morning reports in an email dispatch: A proposed takeover of likely insolvent FTX crypto exchange by rival Binance is set to fail, sending Bitcoin down 26% this week and triggering concerns of wider market contagion. FTX exchange, whose founder Sam Bankman-Fried (likened to John Pierpont Morgan during the banking crisis of 1907), is looking for support for a reported $8 billion debt shortfall. The exchange”s insolvency has triggered a further step down in crypto market values, with the total crypto market cap standing at $914 billion, down from over $3 trillion in November 2021. JP Morgan are reporting crypto market participants are facing a “cascade” of margin calls, although it is unclear whether this will feed into wider equity markets.

The key outside markets today see the U.S. dollar index sharply down and hit a two-month low after the cooler CPI. Nymex crude oil prices are higher and trading around $87.25 a barrel. The 10-year U.S. Treasury note is yielding 3.852% and has fallen sharply in the wake of the cooler CPI report.

Technically, December gold futures prices hit a 2.5-month high today. The gold futures bulls and bears are back on a level overall near-term technical playing field. Bulls have momentum as a price downtrend on the daily bar chart has been negated. Prices this week have also seen a bullish upside breakout from a trading range, to suggest still more upside in the near term. Bulls” next upside price objective is to produce a close above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the November low of $1,618.30. First resistance is seen at today”s high of $1,757.20 and then at $1,775.00. First support is seen at $1,738.70 and then at $1,725.00. Wyckoff’s Market Rating: 5.0.

December silver futures prices hit a 4.5-month high today. The silver bulls have the overall near-term technical advantage and have momentum. Prices are in a choppy nine-week-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at today”s high of $21.94 and then at $22.50. Next support is seen at $21.00 and then at this week”s low of $20.435. Wyckoff’s Market Rating: 6.5.

December N.Y. copper closed up 720 points at 377.15 cents today. Prices closed nearer the session high and hit a four-month high today. The copper bulls have gained the overall near-term technical advantage. Prices are in a six-week-old uptrend on the daily bar chart. Copper bulls’ next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the October low of 330.30 cents. First resistance is seen at 380.00 cents and then at 390.00 cents. First support is seen at today’s low of 362.85 cents and then at this week’s low of 356.25 cents. Wyckoff’s Market Rating: 6.0.

By Jim Wycoff

JPMorgan’s Jamie Dimon: U.S. to face recession in 6-9 months, markets could become disorderly

Anna Golubova  
Monday October 10, 2022

The situation is dire, with problematic inflation, oversized rate hikes, unknown effects from the Federal Reserve’s quantitative tightening, and the war in Ukraine acting as primary triggers for a recession.

“These are very, very serious things which I think are likely to push the U.S. and the world — I mean, Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now,” Dimon told CNBC Monday.

Dimon added that the S&P 500 could fall by “another easy 20%” from the current levels. And the next 20% drop is likely to “be much more painful than the first,” he noted. “Rates going up another 100bps will be a lot more painful than the first 100 because people aren’t used to it,” Dimon said.

The type of recession the U.S. is likely to see ranges from something very mild to quite hard. And a lot depends on what happens with the war in Ukraine, Dimon explained.

“To guess is hard, be prepared. One guarantee is volatile markets. You are going to have volatile markets. You’ve already seen markets down quite a bit, which is typical but still [has] been orderly. It’s possible to see it be disorderly sometime in not too near future,” he said.

On the Fed, Dimon said that the U.S. central bank waited too long and did too little, with QT starting too late. But the Fed is motivated to catch up now, he added. “And, you know, from here, let’s all wish him success and keep our fingers crossed that they managed to slow down the economy enough so that whatever it is, is mild — and it is possible,” Dimon said.

Dimon’s comments come as markets adjust to rising rate hike expectations amid fears of an economic recession.

Last week, the United Nations urged the Federal Reserve and other central banks to ease up on rate hikes, warning that tighter monetary policies are pushing the global economy into a recession.

“There’s still time to step back from the edge of recession,” UNCTAD Secretary-General Rebeca Grynspan said. “But the current course of action is hurting the most vulnerable, especially in developing countries and risks tipping the world into a global recession.”

The Federal Reserve raised rates by 300 basis points the year to the current range of 3% to 3.25%. Meanwhile, the European Central Bank hiked 125 bps, and the Bank of Canada raised by 300 bps.

At the beginning of June, Dimon also told investors to brace for an economic “hurricane.”

“You know, I said there’s storm clouds, but I’m going to change it … it’s a hurricane,” CNBC quoted Dimon as saying at a financial conference in New York. “You’d better brace yourself … JPMorgan is bracing ourselves, and we’re going to be very conservative with our balance sheet.”

By Anna Golubova

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Despite its losses, the gold market continues to outperform most other major assets – WGC

Neils Christensen   Monday September 26, 2022

The gold market continues to struggle in the face of unprecedented strength in the U.S. dollar; however, a new report from the World Gold Council said that investors need to put the recent price action in perspective compared to larger movements within financial markets.

Although the gold market has seen some significant selling pressure, dropping briefly to fresh two-year lows at $1,633 an ounce, prices are still only down less than 10% since the start of the year. In his latest report, Juan Carlos Artigas, global head of research at World Gold Council, said that given where the U.S. dollar is along with bond yields, gold prices should be down closer to 30%. December gold futures last traded at $1,646.90 an ounce, down 0.53% on the day.

“In fact, gold has done much better than inflation-linked bonds both in the U.S. and elsewhere. And we believe that gold’s performance so far this year reflects the behavior of its underlying drivers,” he said in the report.

Looking at broader financial markets, the S&P 500 is down nearly 23% year to date. The tech sector has been even harder hit, with the Nasdaq dropping more than 30%. The only sector that gold hasn’t outperformed is the broader commodity index.

It’s time to buy commodities, not equities – Goldman Sachs

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“The fact that gold has performed as well as it has, all things considered, is a testament to its global appeal and more nuanced reaction to a wider set of variables,” said Artigas.

Although gold prices are expected to continue to struggle in the face of rising interest rates, Artigas said he remains optimistic that the gold market can still find some support through year end.

Although the Federal Reserve is expected to continue to aggressively raise interest rates, the WGC said that the tightening cycle is closer to the end.

“Given how much tightening has occurred so far, we would expect rate hikes to slow down, allowing some of gold’s other supporting factors to play a more important role. Also, the fact the other central banks are being more resolute in their policy decisions – partly to curb inflation, partly to defend their currencies – should weigh on the U.S. dollar,” Artigas said.

Artigas added that growing recession risks as central banks continue to tighten monetary policy worldwide should also provide some support for the yellow metal.

Finally, Artigas said that central bank demand is also providing solid support for gold as they continue to diversify their holdings away from the U.S. dollar.

Last week, the WGC noted that the central bank of Uzbekistan has been extremely active in the gold sector, buying another 8.7 tonnes of gold in August. This is the third consecutive month of purchases.The WGC noted that Uzbekistan has bought 19.3 tonnes of gold this year, pushing total reserves to 381.3 tonnes

By Neils Christensen

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This is the scenario in which gold price jumps $300 this fall – RBC Capital Markets

Anna Golubova  Wednesday August 31, 2022

Even though gold is heading for its fifth monthly drop, a high price scenario of above $2,030 an ounce cannot be ruled out this fall, according to RBC Capital Markets.

After peaking above $2,000 an ounce back in March, gold is ending the month of August down more than 5% year-to-date, with December Comex futures last trading at $1,731.70 an ounce.

“The large rally that we saw at the beginning of the year, particularly as Russia invaded Ukraine, was the type of crisis performance typical of gold,” Christopher Louney, commodity strategist at RBC Capital Markets, told Kitco News.

But since then, gold has fallen from its yearly highs. And that’s because the particulars of this type of crisis were negative for the precious metal, Louney explained.

“It takes economic and financial fallout to get gold to perform more strongly in the long term,” he said. “And even though there’s certainly been financial and economic fallout, this crisis played out in a way that means higher rates and a stronger dollar, which when we think of a crisis, is not always the case. That’s part of why gold is priced the way it is.”

The macro drivers from aggressive rate hikes and a strong U.S. dollar have been keeping gold below $1,800 an ounce, RBC’s strategists added.

“Gold has been stuck. The day-to-day has been defined by expectations versus surprises in response to macro data or Fed speak. That sort of repricing of 50 versus 75-basis-point hikes and how long they last are what drives gold daily,” Louney said.

But the heightened geopolitical tensions could still support gold into the year-end, which is why a price tag above $2,000 is still possible this fall.

“Gold’s tug of war is happening against a high-risk environment. One where there is a war in continental Europe that’s ongoing. Also, I wouldn’t write off U.S.-China tensions over Taiwan. On top of that, there are the broader geopolitical trade intricacies of what is happening in terms of an energy crisis and economic performance more broadly,” Louney pointed out. “There is this high-risk perceived safe haven undercurrent that is a tailwind supporting gold above where the macro factors otherwise would put gold.”

Due to these opposing forces, RBC is pricing in two potential scenarios into the year-end — the middle and the high.

The middle one, defined by more rate hikes and a strong dollar, sees gold at $1,679 in Q3 and $1,663 in Q4, with an annual average of $1,773. “That’s a fair gold price if it were determined just by its macro drivers,” noted Louney.

The high scenario, which estimates more geopolitical risk and safe-haven undercurrents, puts gold at $2,036 in Q3, and $1,986 in Q4, with an annual average of $1,944 for 2022.

“This is the outlook where the geopolitical risks come to the fore and become the driving principles of how the gold price discovery process is done, such as more safe-haven flows into the ETFs and other gold assets. If the market becomes more concerned about the geopolitical risk or the broader risk faced by the economy, our high scenario is a fair bet,” Louney described.

Gold’s current trading pattern puts the precious metal between the RBC’s middle and high scenarios.

“It’s really about what investors are placing in the driver’s seat for gold — whether we’re in a risk-on environment or a risk-off environment. That question really matters. Those triggers can lead to higher gold price levels seen earlier this year,” Louney said.

On the economic front, RBC’s base case is a mild recession in the U.S., which will be enough to keep gold prices somewhat elevated but unlikely to lead to fresh record highs.

The ETF flows for gold is the one gauge to pay close attention to for the rest of the year, Louney added. “The ETF flows have not been good this year. That’s a good indicator of how the market views risk and the desire for a perceived safe haven,” he said.

By Anna Golubova