Uncertain world good for gold

Last week I predicted a more than 50 percent chance that the price of gold would exceed $1,300 and silver more than $20 by the end of April. As of Tuesday, April 11, the price of gold reached a five-month high and had moved more than one-third of the way toward that target while silver was actually down slightly from a week earlier.

From the middle of last week onward, there was a major attempt to suppress precious metals prices. While they did drop, gold down into the $1240s and silver as low as the $17.70s, they did not fall to the same degree as occurred in past years after a major attempt to knock down prices.

The bounce from last week’s bottoms mostly occurred on April 11. There were certainly enough global problems to spark safe haven gold and silver purchases. Among the uncertainties were:

• The US Navy firing cruise missiles into Syria in response to that government’s use of chemical weapons to attack civilians

• More saber-rattling by the leader of North Korea

• The U.S. Navy quickly changing the assignment of an aircraft carrier group heading toward Australia to instead turn toward North Korea

• China stationing 150,000 troops near North Korea’s border

• The prospect that Venezuela state-owned oil company Petroleos de Venezuela may default on a loan repayment and lose control of its wholly owned US-based Citgo subsidiary (partially put up as collateral for the loan to Russian oil giant Rosneft). Citgo provides 4 percent of U.S. oil consumption.

Even though silver was lower at the April 11 close than it was on April 4, its price still rose almost 2 percent that day.

Over the past few weeks, the effort to suppress silver prices consisted of major short sales of futures contracts on the New York COMEX. By the close on April 10, the number of open silver contracts was more than 1.1 billion ounces and within 15 million ounces of the highest open positions ever on that exchange.

Yet, I made my prediction before any of the uncertainties listed above were an issue. There are growing signs of tightness in physical gold and silver supplies and rising demand. In my judgment, this shift in supply and demand could be sufficient to push up prices to my targeted levels absent any other influences. With these additional concerns, the possibility of prices shooting up by the end of the month are greater.

At my company, we have experienced a significant surge in people liquidating precious metals over the last few days. Some of this is related to the upcoming tax filing deadline, where some people simply need cash flow to pay taxes. Although our retail sales of bullion-priced gold coins and ingots have remained flat, our retail demand for comparable silver products is approximately matching what people are selling.

Any further increase in military actions beyond what has already occurred is almost certain to further boost gold and silver prices. But, even if there isn’t, I think gold and silver markets have sufficient momentum to reach higher prices by the end of this month.

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).