Since United States President Barack Obama won his reelection campaign last month, new data shows that the sale of American Eagle gold coins more than tripled in Nov. 2012 compared to the same time a year ago. Approximately 131,000 ounces were sold due in part to fears over the fiscal cliff and the collapse of the U.S. economy.
November’s sales were also the strongest in 14 years, but it won’t be the last, according to many analysts. Gold bullion experts suggest that the number will continue to soar because a significant percentage of investors will attempt to protect their wealth and try to profit from a possible financial calamity in the near future.
Gold Coin, a U.S. bullion dealer that also sells silver and platinum coins, projects that gold will go even higher than $2,000 per ounce next year. The reason why is because even if the U.S. avoids the fiscal cliff, it is still suffering a $16 trillion national debt and a weakening currency because of the Federal Reserve’s monetary policies, such as its rounds of quantitative easing.
“The fiscal cliff is causing a huge stir in investment markets, and this is precisely why gold coin sales skyrocketed in November,” said Arthur McGuire, vice president of Gold Coin, in a press release. “Many wise investors know that no matter what the fiscal cliff resolution is, the US economy is still in a deep financial hole, and this is good for gold.”
Economic Collapse News reported last month that some bullion strategists foresee gold going beyond $2,300 in 2014, while Peter Schiff, president of Euro Pacific Capital, confirmed his belief that it will hit the $5,000 mark eventually.
Although gold has remained steady by hovering around the $1,700 mark for quite some time now, the demand for gold among small investors is heavy, but it isn’t just akin to the U.S. as the Royal Canadian Mint had a strong November as well.
“The institutional investors cut back and are more on the sidelines now,” said James Steel, head of precious metals strategy at HSBC in New York, in an interview with the Financial Times (via CNBC). “But the coin market is dominated by retail investors and the man on the street is still pretty committed to gold.”
ECN sought comment from The Bullion Mart, a Canadian bullion dealer located in Toronto, but there has been no response as of yet.
It has been widely reported that central banks around the world have been purchasing large quantities of gold since 2009. A senior executive of the World Gold Council (WGC) told Forbes in October that central banks are increasing their gold holdings to as much as 50 percent of their reserves.
Some of the nations most notably are China, Russia and India. This chart suggests that the number of central banks with gold as a percentage of their reserves is quite high. For instance, India more than doubled its gold holdings, while the European Central Bank (ECB) increased its gold reserves by 10 percent.
During the Wednesday trading session, the price of gold rose in Europe ahead of the Federal Reserve’s monetary policy statement later in the day in which Chairman Ben Bernanke is expected to announce more stimulus measures to support the U.S. economy.
One aspect of the Fed’s latest measures will include $45 billion in monthly debt purchases on top of the $40 billion mortgage bond buying each month, which started in September. This comes as Operation Twist is reaching near its end, but there has been speculation that a fourth round of quantitative easing will transpire.
“Fresh purchases of Treasury bonds in magnitudes equivalent to the expiring program will effectively be QE4, a significant ramp up in the Fed’s stimulus measures,” wrote Sheraz Mian of Zacks.com. “This would also indicate that the Fed perceives the economy weak enough to be needing such help. That said, there is room for disappointment from the market’s perspective, particularly with respect to the size or duration of the new program. The Fed has also been thinking about replacing communication about its exit program from the current explicit calendar period (mid-2015) to specific economic targets.”
This caused gold to increase 0.3 percent at $1,715.55 an ounce (at the time of this writing) and U.S. gold futures were also up $7.50 at $1,717.10. Meanwhile, silver is trading at $33.30 and is up 0.86 percent (at the time of this writing).