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Gold Blows Through the $320 Barrier Like It Wasn't Even There
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(May 23, 2002) Gold in New York today gained almost $5, closing at a 2-year high of $322.50. Gold prices have enjoyed a nearly uninterrupted upward run of eight weeks since the $300 level was first breeched. In the U.S., demand for physical bullion is increasing as gold's "perfect storm" continues to gather momentum, attention, and respect.
In any fledgling bull market, especially one so long dormant and ignored as has been gold until recently, it takes a while to start to make believers out of the general public. For instance, some two months ago when gold first reached $300 we at Onlygold.com were hit with a wave of selling. People who had held gold for years, or even decades, found the opportunity to sell at a price above $300 to be irresistible.

At the same time that sellers of physical bullion were out in force, the steady buyers that we at Onlygold.com have served over the past few years were hesitant to buy at the new higher price levels. Consequently, we were flooded with bullion, and no matter how many 'special' deals we ran, interest in gold bullion dried up almost entirely.

To demonstrate the amount of gold flowing back into U.S. dealer hands in April and early May, let’s take a look at the US Mint’s sale figures for gold Eagles (see USMint.gov). Over the past five years, the Mint has sold a monthly average of about 65,000 1-ounce gold Eagles to their designated distributors. Yet the COMBINED sales for April and May of 2002 of new 1-ounce gold Eagles from the Mint is a grand total of only 4,500 coins as of May 23rd.

Why so few? Because demand for gold bullion in the U.S. was completely sated by the overhanging supply of Eagles and other bullion product sold back to dealers by the general public once gold spot hit the magic number of $300 an ounce. At Onlygold.com, we were in there with the busiest of them. As a matter of fact, we single-handedly sold more older gold Eagles in those two months than the Mint produced new for the whole country!

But now that gold has 'settled in' into the $300 plus range, new buyers are coming in who are attracted by a rising market, and our long-time clients who are steady accumulators have returned, no longer so spooked by the new price levels. Both new and old buyers are afraid that if they wait, gold will soon be even higher.

Thus, the demand/supply picture has completely changed in the past few days.

With demand surging, the net result is that a gigantic reversal in retail gold bullion flow has occurred. As of the first week in May, many gold dealers had accumulated large stocks of gold Eagles, Maples, and Krugerrands that they had bought back from investors over the past few weeks. As recently as Monday, May 13th, literally tens of thousands of these older bullion coins were available from wholesale sources. By Friday, May 17th, the deep wells were dry and the premiums had started to swell.

Here at Onlygold.com, our focus is on presenting values in gold bullion at all times. We always offer a complete line of newly-minted gold bullion coins and bars, competitively priced in quantities. As well, we are constantly buying gold coins and bars from old investment holdings, collections, and other dealers. The fruits of these buying opportunities are reflected on the “Specials” pages on this site.

But a bull market is, by definition, a surplus of buyers amidst a paucity of sellers. So as the run on gold continues, "bargains" in gold may be scarce for a while, and we will increasingly depend on the world’s mints to continue to produce gold bullion coins on demand.

 

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In addition to gold, silver, platinum, and palladium in coin and bullion form, we also purchase a wide range of numismatic coins and currency for our retail business. Feel free to call us for quotes or price indications on anything in coins, bullion, and paper money.

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