Greetings from the SchiffGold Precious Metals Team. I hope this email finds you enjoying your summer.
Whew, what a volatile week last week was!
There has been a lot going on in global capital markets and precious metals. Below you will find our take on the highlights.
Precious Metals and the US MINT Selling out of Silver Eagles…again
Last week, both metals fell precipitously retouching lows made previously this year and last November 2014. Gold hit a low of $1152.00/oz and Silver fell below $15.00 to stop in its tracks at $14.80. Currently, Gold is hovering around $1158 and silver is around $15.40 at the moment. Surprisingly, most of the safe-haven demand was swallowed up by the US dollar and Treasury debt. We believe that the uncertainty and volatility occurring in global markets has not yet reached that phase where precious metals will start getting a piece of those safe haven bids. By ignoring gold, we think the larger money market has not reacted correctly to the underlying issues pending in Greece and China. As the situation continues to deteriorate (which it looks like it will, see our commentary below) we expect this to change.
Perhaps the biggest story in metals markets is that the the US Mint has halted production of Silver Eagles for the next 3 weeks. This has already caused delays in shipments and an increase in premiums across the board on all nationally minted coins including Canadian Maple Leafs and Austrian Philharmonics. The following article by the Perth Mint Research team does a great job explaining the dynamics of the physical silver bullion market under heavy demand. To put it simply, even a marginally increase in physical demand can wipe out a significant portion of the "on the shelf" silver supply. In other words, gold and silver never stay on the shelf for very long. In periods of volatility, this phenomena is only exacerbated and they almost disappear altogether.
New Research Report: Why Buy Gold Now: A Sober Economic Analysis of the Looming Financial Crisis.
We dive deeper into this reality in our newly released research report, Why Buy Gold Now? A sober economic analysis of the looming financial crisis. You can sign up for this free report, here.
We can still lock in orders, for an update on your order or an updated price quote on our gold and silver inventory, please give me a call at 888.465.3160 ext. 112
Greece and China: Different Bubbles bursting at the same time
Greece and China are the principle culprits of the volatility we have seen recently. The situation in Greece has finally reached a short term conclusion. In some ways, this new deal is actually worse than the first one! And you can be sure that this so called deal will NOT be the final word on the Sovereign Debt crisis in the Eurozone. This is simply another example of governments kicking the can down the road and it's anyone's bet how long it will be before all these problems resurface. Personally, I give it six months or less.
On the tails of Greece, we have China's stock market absolutely imploding. The central bank of China has agreed to intervene in drastic ways, cutting rates for the fourth time this year, relaxing margin requirements, and outright buying stock. But that's not the half of it, they also promise to arrest anyone who is "maliciously" selling stock. Whatever you may say about the Chinese economy (and however you define "malicious for that matter), that is not a free market response to asset prices declining. Despite those efforts, it has not stopped over 30% declines in recent weeks. Smaller cap indexes have lost over 40%.
This is what bubbles bursting looks like.
Bubble #1: Sovereign debt in Greece.
Bubble #2: Financial Assets in China
Where do you see other bubbles forming?
Please reach out to me if interested in placing an initial order or adding to your existing position.
And enjoy your summer!