Gold prices have climbed in the past month, and that shouldn’t come as a surprise. With the Fed printing trillions of dollars as it attempts to offset the economic damage brought on by the coronavirus pandemic, investors have sought the safe haven of going to buy gold to protect their wealth.
Since hitting a low around $1480 per ounce back on March 19, gold has climbed to as high as $1740 an ounce recently. This shows a rise of 17.5% in less than a month.
Not bad for an investment that many use as a store of wealth.
The last time the Federal Reserve printed vast sums of money in an attempt to pull the country through an economic slowdown was 2007 through 2011.
Gold was around $650 an ounce for most of 2007, and as the Fed printed more money, gold hit a high of $1900 an ounce in late 2011.
That’s a gain of nearly 200% in a little more than 4 years.
If, like us, you expect the Fed to continue printing money and are looking to buy gold as either a store of wealth or as an investment, here are the different ways you can own the precious metal.
Gold bullion can be bought online or in stores (coin dealers, pawn stores, etc.). It can be acquired in either gold coins or gold bars. Coins are generally easier to transact with due to their wide acceptance and greater liquidity.
Gold coins are referred to as either a “sovereign” coin or a “round.” Sovereign coins are minted by a government and carry an implied guarantee of their face value. The most common sovereign coins are the 1-oz. Canadian Maple Leaf and 1-oz. American Eagle. Other popular coins are the American Buffalo, South African Krugerrands, Austrian Philharmonic and Chinese Panda.
“Rounds” are produced by a private mint and carry no face value. Here in the US, an example would be gold coins produced by the Franklin Mint. These coins are less popular than sovereign coins but still trade fairly easily.
“Numismatic” gold coins are rare coins that aren’t valued on their gold content but rather their rarity and condition. These are typically only bought by collectors as they can trade for significantly more than the spot price of gold based on demand. Unless you plan on becoming a collector, it’s best to avoid buying numismatic coins.
Gold bars are available in both gram and ounce weights, depending on your preference and budget. Nearly all gold bars will be from private mints.
When it comes to investing in gold via the stock market, an investor has a few options. You can buy gold ETFs (exchange-traded funds) that track the price of gold. The benefits include ease of buying and selling as well as liquidity of the market.
The most popular choices are the SPDR Gold Shares ETF (GLD) and iShares Gold Trust (IAU). These two both seek to reflect the price of gold bullion.
You can also invest directly in large gold mining companies like Newmont Corp (NYSE: NEM), Barrick Gold (NYSE: GOLD) or Kinross Gold (NYSE: KGC). Or you can invest in junior mining stocks, which are typically much more speculative and offer a greater risk-reward. Some options here are Eldorado Gold (NYSE: EGO) and Pretium Resources (NYSE: PVG).
Alternatively, you can also buy ETF for gold miners like VanEck Vectors Gold Miners ETF (GDX) or VanEck Vectors Junior Gold Miners (GDXJ).
There are also leveraged ETFs, which offer 2x or 3x the leverage, but we won’t discuss those here.
As we mentioned earlier, with the Federal Reserve printing money at an unprecedented rate, there are plenty of reasons you should have gold in your portfolio. You can use it either as insurance to protect your wealth or as an investment to generate profits. Research the different options and choose the one that best fits your investment goals.
Gold Becoming ‘Unavailable’ Due to Overwhelming Demand
If you can find gold coins or gold bars available for purchase, it might be a good idea to get your hands on them.
Major gold dealers are reporting that gold bars and coins are virtually unavailable right now as investors flood into the precious metal as a safe haven.
Yesterday, Kitco announced that it is almost completely sold out of the most common one-ounce gold coins. American Eagles and Buffaloes from the U.S. Mint are out of stock. The same goes for Canadian “Maple Leaf” coins, Great Britain’s “Britannias,” Australia’s “Kangaroos” and South African Krugerrands.
Josh Strauss, a partner at Pekin Hardy Strauss in Chicago says “There’s no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually it’s like 2%. I can buy a one ounce American Eagle for $1,800… $1,800!”
The U.S. Mint does have American Eagles for sale, but they are listed at $2,175 for a one ounce coin, a massive 33% premium over yesterday’s spot price of $1,630 per ounce.
Ludwig Karl, a board member of Swiss Gold Safe Ltd., said “It’s absolutely crazy what’s going on. Right now, if somebody wants to buy gold, I wish them all the best in finding it. Most of the bullion dealers are closed.”
Debra Thomson, sales director at IBV International Vaults, added “The last time I saw this amount of chaos in the market was with 9/11.” IBV offers safe-deposit boxes and the purchase of precious metals worldwide.
And Seamus Fahy, co-founder of Merrion Vaults, says “A buyer would have been fussy about the coins they want two months ago. Now they will buy anything they can get their hands on. They are desperate to get physical gold.”
If Goldman Sachs strategist Jeffrey Currie is right, gold coins will continue to be scarce as demand skyrockets over the coming months with every newly-announced government stimulus plan.
During this month’s massive selloff, gold initially dropped as well. It did the same thing at the beginning of the 2008 financial crisis, dropping around 20%. But in November 2008 when the government announced the first of many quantitative easing plans, gold stabilized and climbed higher.
Currie believes that with the announcement last week that the Federal Reserve would start buying $700 billion worth of Treasurys and mortgage-backed securities, once again we are mirroring what happened in 2008, and that means gold’s massive rally is likely underway.
Not only could the Fed’s quantitative easing measures send gold prices soaring, the supply imbalance will likely get worse, adding more fuel to the fire.
Switzerland’s refining industry, which is a major international hub and has three of the world’s largest refiners, is shut down in an effort to slow the advance of the coronavirus and mines across the globe are seeing production slow or come to a complete halt as governments close anything deemed non-vital in the wake of the outbreak.
“There’s no gold” is likely to become a common refrain in the coming months.
Gold Climbs Again As Fed Turns On “Unlimited” Printing Press
Gold just had its single largest one-day gain going back to at least 1984, climbing $31.10 an ounce to close at $1582.30, all thanks to the Federal Reserve cranking up the printing press for the latest round of quantitative easing (QE).
Yesterday, the Fed announced that it would start buying mortgage-backed securities and Treasurys in an unlimited amount in an attempt to add liquidity to the financial markets.
What makes this round of QE unique is that the Fed hasn’t put a monetary limit on how much it is willing to spend to keep the markets afloat.
With an ‘unlimited’ amount of money being printed, it shouldn’t come as a surprise that investors have flocked to gold recently as a store of value during these turbulent times.
“The endless QE to trillions in global liquidity programs are all in gold’s favor among the general turmoil,” Peter Spina, president and chief executive officer at GoldSeek.com told MarketWatch. “Gold is returning back to its function as a global currency.”
Spina also said he wouldn’t be surprised to see gold climb to $1,700 an ounce by “Friday of this week or next,” and that prices could climb to $2,000/ounce and higher in the second quarter.
Yesterday Goldman Sachs said in a note that gold bullion is “probably at an inflection point and it is a time to buy” due to the concerns over the dollar being debased with all the money being printed.
“Accordingly, we are likely at an inﬂection point where ‘fear’-driven purchases will begin to dominate liquidity-driven selling pressure, as it did in November 2008” the note added.
An interesting twist to the increased demand for gold right now is the very real possibility of a shortage in the near future, which could absolutely cause prices to scream higher.
The coronavirus is taxing supply chains, and could make it very difficult to get new gold supply to the market.
Spina from GoldSeek.com added “So with a true gold rush underway, there is a perfect storm brewing for the gold and gold miners.”
Three of the largest gold refineries (Valcambi, Argor-Heraeus and PAMP) announced yesterday that they will be closing down their production facilities in Switzerland for at least a week as part of an effort to control the spread of the coronavirus.
The three produce nearly one-third of the annual global supply of gold.
GoldCore, a bullion provider based in Dublin, said Monday that it has “experienced record demand in recent days and the global supply of gold and silver bullion coins and gold bars has quickly evaporated.”
“Most of the largest gold refineries and mints in the world have closed their refining and minting operations for the next two weeks, and this suspension in production may become longer which …will badly impact supply,” GoldCore said.
Mark Mobius, a veteran investor told Bloomberg TV in an interview “(Gold’s) recent sell-off alongside risk assets such as stocks and oil was a sign of pure panic, with investors selling everything as the pandemic spread.”
“I think it’s a mistake,” he added. “People should have gold and this may be a good time to increase holdings in gold — in fact I’m thinking that myself.”
Dow Plummets Despite Rate Cut
Stocks fell in volatile trading on Tuesday after the Federal Reserve slashed interest rates by half a percentage point in an emergency effort to stem slower economic growth from the coronavirus outbreak.
The Dow Jones Industrials stumbled 352.4 points, or 1.3% to break for noon at 26,350.92. The 30-stock average gyrated between sharp gains and solid losses after the decision was announced.
The broader S&P 500 dropped 37.03 points, or 1.2%, to 3,053.20.
The tech-heavy NASDAQ let go of 98.41 points, to 8,853.75.
Bank shares fell broadly, led by a 3% drop in Bank of America shares. JPMorgan Chase skidded 2.5% and Citigroup slid 0.4%.
The decision came two weeks before the Fed’s scheduled meeting as the central bank felt it was necessary to act quickly to combat the effect of the virus spreading worldwide. It’s the first such emergency action coming in between scheduled meetings since the financial crisis.
Investors have been fretting over a potential economic slowdown as the coronavirus spreads around the world. More than 89,000 coronavirus cases have been confirmed globally along with more than 3,000 deaths related to the virus.
Prices for the 10-Year U.S. Treasury gained sharply, dropping yields to 1.03% from Monday’s 1.15%. Treasury prices and yields move in opposite directions.
Oil prices gained 63 cents to $47.38 U.S. a barrel.
Gold prices $43.00 to $1,637.80 U.S. an ounce.
Copyright © 2020 Baystreet.ca Media Corp. All rights reserved.
Investing9 months ago
How To Invest In Drones
News6 years ago
The Federal Reserve Is A Ticking Time Bomb
News6 years ago
How to Invest in Graphene
News6 years ago
How To Invest Money in Oil and Gas Today
Business10 months ago
Why is Small Business in America Dying?
Dividend Stocks9 months ago
Mcdonalds the Worst Slump in a Decade
News6 years ago
3 Reasons to Invest in the Russian Stock Market Right Now
Commodities9 months ago
Latest Update On Oil – Expected to Settle Between $45 and…