Posted on 04/20/2013 7:00:07 AM PDT by blam
"People Running Through the Gate” to Buy Gold?
Commodities / Gold and Silver 2013
April 19, 2013 - 10:33 PM GMT
Michael Lombardi
By: Profit Confidential
As I have been writing in these pages, after a bull market that has gone on for 12 years, the recent pullback in gold bullion prices should be seen as a correction in an ongoing bull market in the metal. I see the pullback as a buying opportunity.
While news headlines flash a bearish sentiment towards gold bullion prices, the gold bears are screaming about how much money central banks have lost due to the plunge in prices and the gold miners are facing pressures. The usual gold bullion consumer countries, India and China, are seeing robust demand.
According to the All India Gems & Jewellery Trade Federation, India is experiencing its greatest demand this year as gold bullion prices have declined. (Source: Bloomberg, April 18, 2013.)
In China, customers are lining up to buy gold bullion. According to the director of sales and operations at Chow Sang Sang Holdings International Limited, the number of gold bullion products sold in the Hong Kong and Macau area during the weekend of April 13 soared 150%.
Other countries in the global economy are witnessing increased demand for the metal as well. As talk of gold bullion entering a bear market continues, consumers from countries like Australia and Japan have ramped up their gold buying.
Gold bullion sales at The Perth Mint in Australia have soared. The treasurer of The Perth Mint, Nigel Moffatt, commented on this situation by saying, “the volume of business that we’re putting through is way in excess of double what we did last week.” He added, “there’s been people running through the gate.” (Source: “Golden times for Perth Mint,” The Age April 17, 2013.)
In Japan, at Ginza Tanaka, a precious metal store in Tokyo, gold bullion buyers waited for three hours to buy the metal. (Source: Reuters, April 16, 2013.)
Regardless of what I hear from the gold bears, I am still bullish on gold. The reality is that central banks will continue to print paper money no matter what. They don’t have any other option. But the more paper money they print, the greater the fall in the value of their currencies.
Do the bears realize central banks have moved away from being net sellers of gold and have been net buyers now for a while? Readers of Profit Confidential know that in 2012, central banks bought the most gold bullion in 48 years.
It would not surprise me to see central banks rush to buy more gold bullion, just like consumers are doing right now in India, China, Japan, and Australia.
Michael’s Personal Notes:
Philip Morris International Inc. (NYSE/PM), an S&P 500 company in the consumer goods sector, reported disappointing corporate earnings for the first quarter of 2013. The company’s profits fell more than 1.6% from the same period last year. Wall Street analysts were expecting Philip Morris to show corporate earnings of $1.34 per share, but the company only earned $1.28 per share. (Source:MarketWatch, April 18, 2103.)
PepsiCo, Inc. (NYSE/PEP), another major company on the S&P 500, registered first-quarter corporate earnings that were 4.7% lower than the same period last year. (Source: Reuters, April 18, 2013.)
UnitedHealth Group Incorporated (NYSE/UNH), the largest health insurer in the U.S. and a constituent of the S&P 500, reported that corporate earnings fell in its first quarter due to rising medical and operating costs. UnitedHealth earned $1.16 per share—11.4% lower than last year’s first quarter, when corporate earnings were $1.31 per share. (Source: Reuters, April 18, 2013.)
Similarly, Nucor Corporation (NYSE/NUE), a steel producer on the S&P 500, reported a drop in corporate earnings of 39% in the first quarter of 2013. The company only earned $0.28 per share compared to $0.46 in the same quarter of 2012. (Source: CNBC, April 18, 2013.)
Dear reader, throughout history, the key stock indices have risen when their companies posted better corporate earnings. As it stands, big-cap companies haven’t performed as expected; rather, I see softer corporate earnings than before. In the first quarter, the S&P 500 companies are expected to show negative growth in their corporate earnings.
In the past, to boost their corporate earnings, some well-known companies on the S&P 500 bought back their shares and cut their labor forces to boost per-share earnings. These two practices can only last for so long.
The U.S. economy is not witnessing economic growth. At the very best, consumers are watching their pockets. Consumer confidence is bleak. The number of Americans using food stamps is increasing. When consumers spend less, businesses sell less. As corporate earnings continue to soften, we’ll see the demise of the rally in the S&P 500 and other key stock indices. In fact, it may have already started.
He could be correct, But a part of me is hearing someone say. “Buy, BUY! so I can sell to you and not lose my money.”
I think the lesson here is that owning equities on margin is a dangerous proposition, even given today's low margin interest rates. My guess is that the recent increase in demand for the physical metal will put a floor in under the paper gold. Mining stocks, in particular, will be interesting trading vehicles, even if they don't go steadily up from here. I bought GDX and GDXJ a few days ago, near what I hope will be a short-term low. Not for the faint of heart, however -- not the place to put your kid's college fund.
Only part of you?
Yeah the part between mt ears. LOL
Yeah the part between mt ears. LOL
Should have been:
Yeah the part between my ears. LOL
LOL!
He could be correct, But a part of me is hearing someone say. “Buy, BUY! so I can sell to you and not lose my money.”
Paper gold is down. Physical metal in your possession, no way.
Just walk into any coin shop and ask the price of a gold or silver ounce, to see if their prices have also crashed.
The prices have not decreased in spite of the fall in prices. I can’t get silver anywhere near spot price. They just increase their margins. Heads they win, tails I lose.
Rickards told Business Insider:
What would make me bearish on gold, what would make me want to sell gold?
Well, if the President and the Chairman of the Fed came out and said, "We're going to raise interest rates, we're going to stop quantitative easing — in fact, we're going to reverse it a little bit — we're going to cut corporate taxes to zero, we're going to eliminate the capital gains tax, we're going to reduce regulation, we're going to make America a magnet for savings and investment. We're going to have an investment-driven model rather than a debt and consumption-driven model, and we're going to have positive real rates."
I would say, "Great. Sell your gold, or put it to one side, because gold is over."
But none of those things are true. Not one of those policies that I just mentioned is on the table.
Goldbug ping.
>> “Just walk into any coin shop and ask the price of a gold or silver ounce, to see if their prices have also crashed.” <<
.
‘Twas a false crash.
There is little physical gold or silver available to buy presently. Low prices quoted by news agencies are of no value if no one is willing to sell at those prices.
.
With hearing like that, you're going to be a hard working, low earning man for the foreseeable future.
Margins are very high on Silver Eagles. I bought a few around Christmas for $35 while silver was at $30. Since the crash silver is say $23.50/oz and you will pay $30.50 for a Silver Eagle. So the premium is now $7 while it was $5 just a short time ago. Larger premium on a lower price!
Buying in phys gold and silver seems as strong as ever. The buy side of paper gold is down otherwise the price would still be up>>>
Weak paper gold&silver demand
Strong physical gold & silver demand
*** the typical coin shop or retail bullion dealer sells the same dollar volume of gold as he sells silver. Eric Sprott found this out by asking them
just went to APMEX site
USA and Canadian gold coins one oz are available at reasonable premium
USA and Canadian one ounce silver are out!! You can place and order and they will be in stock soon. They have very high premium about $7.50 per coin
If someone wants to buy a bunch of silver right now I would get 100oz or 10oz bars. The premium is OK on them but APMEX is out of some of them right now
>> “They have very high premium about $7.50 per coin” <<
.
IOW, they are still selling for $33 / coin. (no significant change in last 6 months)
Gold is unavailable in retail stores presently unless you’re willing to pay $ 1600 / oz.
You can buy gold coins from APMEX easily...at their site or via eBay. So how can the the situation be much worse at retail stores?
$1479 for Canadian Maple leafs at APMEX http://www.apmex.com/Category/21/Canadian_Gold_Maple_Leafs_2013__Prior.aspx
APMEX is low on silver though
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