In some weeks, it seems like there are more developments that have, or will have, a significant impact on precious metals markets than in other weeks. Last week brought a plethora of such news:
On June 14, Texas State Comptroller Glen Hegar announced that the state government had signed a five-year contract with Lone Star Tangible Assets to operate the Texas Bullion Depository. Texas enacted a law in 2015 to establish this gold depository to hold the $1 billion of physical gold owned by one of the state’s pension plans, enabling the metal to be stored in-state rather than in and around New York City. A side feature – which could turn out to be the major angle – of the establishment of this depository is that private parties can also pay for storage of precious metals at this vault and will be allowed to transfer ownership of their holdings there. This would effectively establish an alternative currency payment system to compete with the U.S. dollar.
The government of South Africa announced that it was raising the minimum black ownership requirement in the country’s mining companies from 26 percent to 30 percent. The immediate impact of this announcement was a decline in the values of South Africa’s mining companies. The government’s previous requirement of 26 percent black ownership resulted in significant compliance problems. It also resulted in an overall decline in the value of these companies – effectively harming all shareholders. South African mines produced a peak of about 32 million ounces of gold in 1970 and have since declined to less than six million ounces annually. The impact of this new regulation may drive down production even faster.
The European Central Bank revealed that it had acquired about $600 billion of Chinese yuan currency reserves, which almost certainly meant a displacement of a like amount of U.S. dollars, euros, British pounds, or Japanese yen. This decline in central bank demand for U.S. dollars became a virtual certainty last fall when the International Monetary Fund added the Chinese yuan as a component of the Special Drawing Rights.
The Belgian central bank also announced that it had added Chines yuan and South Korea won to its foreign exchange reserves. As central bank holdings of U.S. dollars continue to decline, the dollar’s value will also decline. That means that precious metals’ prices, as measured in U.S. dollars, are destined to rise.
Last Wednesday, the Federal Open Market Committee announced another quarter percent increase in the federal funds interest rate. As happened with the previous rate increases going back to December 2015, look for the value of U.S. stocks to at least stall and quite possibly decline.
Demand for the most recent uncirculated America the Beautiful five-ounce silver quarters honoring the Ozark Riverways was so strong that the entire mintage sold out in just a few days. This is partly caused by the Mint reducing its mintages of this series. Prices for recent and many past issues of this series are rising.
On June 12, the U.S. Treasury issued a report titled, “A Financial System That Creates Economic Opportunities.” The next day the magazine Central Banking published an article titled, “U.S. Treasury Proposals Seek To Water Down Basel III,” attacking this report for weakening international bank stability and liquidity requirements. In the U.S., the Treasury report is mostly being hailed as freeing up the nation’s banking system to stimulate the economy. This issue has all the implications of being a major global controversy that will have far-reaching impact on the worldwide economy.
Australia’s Perth Mint put up for sale a unique 2017 three-coin proof set of kilogram-sized coins containing about $100,000 of intrinsic gold and platinum metal value among them. The set is offered for sale at $1.8 million Australian (about U.S. $1.35 million). What makes this set even more interesting is that each coin has an embedded colored diamond from Australia. If you might have an interest in owning this set, I suggest giving it a pass. If this set sells quickly, there will almost certainly be more of these “unique” sets issued in the future, which would have the effect of diminishing the value of any one of them.
The shooting of Republican legislators, Congressional staff, and federal police at a baseball practice in Alexandria, Va., early on June 14 quickly pushed up the price of gold more than one-percent and bumped up silver about three-percent before the U.S. government was able to arrange for precious metals prices to again be suppressed. This attack, however, also rattled investors in American paper assets such as stocks, bonds and currencies. Going forward, this will almost certainly result in higher demand for physical precious metals and lower demand for the U.S. dollar.
This list doesn’t include the Commerce Department’s report of the largest decline in month-to-month retail sales since January 2016. That is news that will only have an indirect impact on the U.S. dollar and precious metals prices, and mostly on a delayed basis.
Stay tuned for developments.
Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He was also honored by the Numismatic Literary Guild in 2016 for the Best Dealer-Published Magazine/Newspaper and for Best Radio Report. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).
This article was originally printed in Numismatic News. >> Subscribe today.
More Collecting Resources
• Check out the newly-updated Standard Catalog of World Coins, 2001-Date that provides accurate identification, listing and pricing information for the latest coin releases.
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