Gold No Hysteria and No Bubble According to US Mint Coin sales

By: GoldCore

Gold’s London AM fix this morning was USD 1,674.75, EUR 1,254.03, and GBP 1,044.17 per ounce. Yesterday's AM fix was USD 1,664.00, EUR 1,246.16 and GBP 1,037.54 per ounce.

Silver is trading at $32.95/oz, €24.70/oz and £20.58/oz. Platinum is trading at $1,657.25/oz, palladium at $655/oz and rhodium at $1,350/oz.

Cross Currency Table – (Bloomberg)

Gold rose $8.80 or 0.53% in New York yesterday and closed at $1,677.00/oz. Gold traded sideways to slightly higher in Asia but has fallen in European trading to $1,674/oz.

Markets may get direction from clues regarding the outlook for the U.S. economy and hints regarding monetary policy from the minutes of the last U.S. Federal Reserve policy meeting.

Fed officials on Monday signalled little appetite for further monetary steps to stimulate U.S. growth. However with the US recovery fragile, monetary policy is set to remain extremely loose and negative interest rates will continue for the foreseeable future bolstering gold.

Physical demand remains lack lustre with markets in China closed for a public holiday (reopening Thursday) and with the demand drop from the Indian jewellery strike.

Gold’s price resilience is impressive with the global number one and two purchasers of the yellow metal not contributing to global demand in recent days.

Gold Coins (US Mint) In Q1 2012 Show "No Hysteria and No Bubble"

Dr. Constantin Gurdgiev, a non Executive member of the GoldCore Investment Committee, has again analysed the data of US Mint coin sales in Q1 2012 and has looked at the data in their important historical context going back to 1987.

He finds that the data regarding gold coin sales in Q1 2012 confirms that there is “no hysteria and no bubble here”.

Dr Gurdgiev finds that while volume of sales in Q1 2012 fell from the quite high levels seen Q1 2009, 2010 and 2011, demand was much stronger than “in the pre-crisis average for 2000-2007.”

Also of note is the fact that despite the worst financial and economic crisis the modern world has ever seen being experienced since 2008 demand has remained below the record levels seen in the aftermath of the Asian debt crisis and unfounded Y2K concerns.

Interestingly, Dr Gurdgiev finds that the historic data (since 1987) shows that the "gold price has virtually nothing to do with demand for US Mint coins - in terms of volume of gold sold via coins."

He finds that the demand for gold coins has little to do with the price in general and that “something other than price movements drives demand for coins”.

This is something we have long asserted. Gold coin buyers are some of the least speculative participants in the market. They are safe haven and store of wealth buyers who are not guided by price and by making money.

Their motivation is one of financial insurance and of getting a “return of capital rather than return on capital.”

Dr Gurdgiev concludes that “in recent months demand for gold has been oscillating around the historic trend (as opposed to resting above that trend in August 2008-August 2011 period) is the good news - the current levels of demand are historically sustainable, trend reversion-consistent and show neither hype, nor panic buying.”

This is further evidence that there are little signs of “irrational exuberance” or speculative fervour in the gold market. It debunks the popular perception of a “gold rush” with the “man in the street” or retail investor “piling into gold.”

Nothing could be further from the truth and gold and particularly gold bullion remains owned by a tiny minority of people who are more aware of monetary and systemic risk than the broader public.

Click to read full research and charts from Dr Gurdgiev at True Economics Blogspot.

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Yours sincerely,
Mark O'Byrne
Exective Director

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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