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Gold Prices Virtually Flatline in November, But U.S. Sales of the Popular Gold Eagle Take Off
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(12/1/00) Despite all that's going on in the world, gold prices stayed in a trading range of complete boredom. November’s daily prices show a high of $269.95 and a low of $264.10. But U.S. gold Eagles are flying off the shelf. If gold is becoming obsolete, why are so many buying it?
As we publish this, we are living under the curse of interesting times. 24 days after the so-called election, The U.S. still has no President-elect, everyone’s favorite high-tech stocks are collapsing to the tune of tens of billions of dollars of lost paper wealth, oil prices remain stubbornly over $30 per barrel, and Mideast hostilities continue with no end in sight.

And gold, once a sensitive barometer that would have reacted sharply to any of the above conditions, just lies there like a hound.

Not only were fluctuations in the gold price a scant $6 range from high to low for all of November, we actually had three days in a row (11/20 – 11/22) in which the bellwether 2nd London fix didn’t even change from day to day, but stayed exactly $266.15. Gold traders must have wondered why they even bothered to get out of bed.

We’ll leave it to others to ponder why gold prices are so moribund. There are worse things than having a steady value placed on this timeless commodity that we call gold. Just ask the owners of many stock portfolios – their recent shaky performance makes the steadiness of gold seem like a very desirable thing.

Despite stagnant prices, physical gold bullion demand in the U.S. for November picked up sharply. American gold Eagles sales by the Mint took a substantial leap, reacting both to demand by investors attracted by low gold prices, and the usual seasonal demand for the 2000-dated coins as gift items.

The Mint produced 30,500 of the popular $50 face value 1-ounce gold Eagles in November, a huge increase considering that in the first ten months of 2000 a total of only 24,500 coins were produced and sold. As we pointed out earlier this year, in some months of the year 2000 the Mint sold exactly zero gold Eagles. But all sizes of gold Eagles sold well in November. We refer you to the Mint’s website at usmint.gov for up-to-date mintage totals for the bullion Eagle coins, as sold and delivered in year 2000.

But treat the figures on the Mint's website with caution!

When viewing the Mint’s production figures on their website, keep in mind that tens of thousands of 2000-dated gold Eagles were sold in December of 1999 for delivery in 2000, and these coins are not reflected in the mintage figures you can view on the Mint site. We mention this as a caution to those speculating that year 2000 Eagles will carry a substantial collector premium in the years ahead – in truth, that may not happen.

There has been no official word on the 1999 sales of year 2000 gold Eagles, but early next year the Mint will release final figures. Sales will no doubt be a fraction of the amount sold during 1998 and 1999’s pre-Y2K frenzy. But whether that will translate into some additional collectors’ premium in the future is another question.

In his newsletter, Leonard Kaplan of Prospector Asset Management called this incredibly stable bullion market “watching the paint dry in the halls of gold.” As long as the dollar is strong and retains its place as the world’s reserve currency, gold really is of no use as a monetary instrument. Does that mean that gold is obsolete?

The markets are certainly treating it that way - today, gold is barely trading above a 21-year low price. Complacency over the strength of the dollar is keeping gold out of the financial picture entirely.

But we don’t think it's a good idea to bet against gold’s 4,000-year history as the ultimate store of wealth. Gold will still be around when the dollar, the euro, and every other monetary construct we know today are long gone.

Today it may be lying there like a hound…

But every dog has its day.

 

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