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Gold and Silver Investing Facts That Can Make You Rich

Commodities / Gold and Silver 2010 Dec 19, 2010 - 07:05 AM GMT

By: Sean_Brodrick

Commodities

Best Financial Markets Analysis ArticleThe year is drawing to a close, so it’s good to look at four important developments in precious metals you may have missed in 2010. You don’t want to miss these four because they can make you rich.

Let’s get started …


#1) Gold Eagle Sales Are Hot … But Silver Eagles Sales Are Hotter! The U.S. Mint sold more American Gold Eagle bullion coins in November than in each of the previous three months.

With one month remaining, 2010 ranks as the sixth-best year for the Gold Eagle bullion coins. Year-to-date sales from January through November ended at 1,160,500 ounces.

If demand for bullion gold coins continues at the current pace, 2010 will end up as the fourth-best year behind 1999 (2,055,500); 1998 (1,839,500); 1986 (1,787,750); and 2009 (1,425,000).

While that sounds good, sales of silver eagles are leaving gold in the dust, even though (or perhaps, because) silver prices are rising faster than gold prices. CoinNews.Net reveals that silver eagle sales are going through the roof.

Annual Silver Eagle Sales

Source: CoinNews.Net

The U.S. Mint says 32,890,500 of silver eagle bullion coins were ordered between January and November. That is 4.124 million more than in all of 2009, which previously held the annual sales record.

You may have seen the bears growling that these silver sales indicate a frenzy is at hand and slacking of demand and lower prices are around the corner.

But is it likely that silver would peak when gold isn’t peaking? Gold eagles are a good measure of the buying interest among mom-and-pop investors.

This isn’t the best year in gold eagles, and it’s not even in the top three. So stop worrying about buying at the top of the market in gold OR silver. We aren’t even close.

#2) China’s Huge Appetite for Gold Is Getting Stronger. China is now the world’s biggest producer of gold and consumes all the gold its mines can dig up. China’s miners produced 277.017 metric tonnes of gold so far this year, up 8.8% from the same period last year. While that sounds like a lot, it’s not nearly enough to feed China’s ravenous and growing hunger for gold.

In fact, China imported 209.7 metric tons of gold in the first 10 months of the year. That’s up fivefold compared with the same period last year!

In a previous story, I told you how China’s securities regulator approved the country’s first gold fund designed to invest in overseas-listed gold ETFs. We may have only seen the first course in China’s hunger for gold.

In fact, surging demand from China is already changing the seasonal patterns in the gold price — pushing the annual gold price “peak” from November to February, as gold buying centers around China’s New Year. If current trends continue, the next change may be that February’s peak may not be much of a peak at all.

One more thing — Bloomberg reported that silver exports from China — the world’s largest producer of silver — may slump by 40%! Reason: Silver is an industrial metal, and demand for silver for industrial uses in China is growing by leaps and bounds.

#3) India Dives into Gold and Silver with Both Hands. This summer, many analysts were ready to write off India’s gold market. It seemed the Indian people were sitting on their hands, waiting for lower prices.

But the floodgates of demand opened up as the festival season loomed. India purchased 353 metric tonnes of gold through the end of November. That’s up 113% from the 168 metric tonnes in all of 2007.

As a result, in the third quarter, India’s gold imports hit 624 metric tonnes, passing last year’s total by 100 tonnes, and re-securing India’s spot as the world’s #1 gold buyer.

Part of this is due to the fact that people in India now have access to exchange-traded funds. Investment in India’s gold ETFs tripled in the year through October compared to last year.

When it comes to silver, India is the world’s #1 consumer as well. And imports are up sharply this year, nearing 30-year peaks.

#4) Small-Caps Miners Zoom Past Large-Caps and Gold Itself. Take a look at this next chart. It tracks the GDXJ (small-cap gold miners) against the GDX (large-cap gold miners) and the SPDR Gold Trust Shares (GLD), a fund that holds physical gold.

the GDXJ has more than doubled the performance of the GDX over the past 4 months.

You can see that the GDXJ has clocked 2.5 times the performance of the GDX over the past six months, and nearly FOUR times the performance of gold itself.

Why? Because we’re in the phase of the precious metals rally where smaller speculative stocks are going to do well because the rising price of gold has rocketed them from marginally profitable to VERY profitable.

You see, junior miners tend to have higher costs than the large-cap miners. The juniors may be profitable when gold is at $900 an ounce — but their profit margins go wi-i-i-i-ide open when gold goes over $1,300 an ounce.

This is one of the points I made in my $50 Silver and $2,500 Gold Report, in which I recommended smaller stocks just for EXACTLY that reason.

How You Can Profit from These Trends

So, what do these four facts tell us? Simply that: Demand for gold and silver is surging in China; demand is coming back strong in India; demand among small “mom-and-pop” investors in the United States is heating up and the highly-leveraged junior miners are likely to see even bigger, fatter profit margins as gold goes to $1,450, $1,600 and higher.

And the trends and forces that caused this outperformance in the GDXJ are still in place. The GDXJ is still a great bet going into 2011.

That $50 Silver and $2,500 Gold Report portfolio is showing big open gains. The good news is there is still plenty of time to potentially make bushels of money on those small gold and silver miners. The bad news is the window to buy the silver and gold report is closing. If you’re in this portfolio already, great. If not … don’t wait!

Yours for trading profits,

Sean

P.S. My $50 Silver and $2,500 Gold report is packed with analysis and red-hot recommendations on gold and silver. You need to buy while the metal is white-hot — get your Silver and Gold Report today.

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


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