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Weak bullion casts long shadow

While I remain bullish on metals simply because of worldwide monetary problems, we should consider the other side of the coin. There is a good case for deflation as we approach another probable recession.

How do you explain the weak tone in precious metals? I came across this quote courtesy the Reuters Africa wire: “The bark in the euro zone and the spat between Germany and France is pulling gold down,” Credit Agricole analyst Robin Bhar said. “It is a bit surprising that gold continues to act like a risk asset rather than as a safe haven, but in the short-term there is more need for dollars rather than need to hold profitable positions in gold.” I believe Robin succinctly makes the correct observation. Although demand from Asia, Europeans and central banks continues strong, there is greater demand for the dollar. This will change when inflation takes over in the next 1 to 3 years as the Fed continues to pump the economy in the name of job creation and elections. I believe we will then see a truly parabolic rise in precious metals.

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Meanwhile, bullion-related items are generally weak, although low-grade Morgan and Peace dollars remain in demand. Better date issues remain constant. The DMPL sector has been active with over a few dozen increases.

Peace dollars have shown some additional corrections in several San Francisco issues in MS-65 as noted two weeks ago. The 1928 key in circulated grades has also declined a few percent, no doubt the result of low promotional activity of complete circulated sets.

Mint and proof sets while showing a few notable increases are by far one of the least positive market areas.


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