Exiting Federal Reserve Chairman Ben Bernanke doesn’t understand gold or its prices – this is apparent considering that he feels printing money forever is a superb monetary policy. Despite the drop in gold prices this year, physical gold demand is up and one of the leaders is central banks.
The United States Mint website suggests that American Eagle gold bullion coin sales are at their highest point since July. One-ounce coin sales have already doubled the amount of sales that transpired in August and September: as of mid-October, more than 20,000 one-ounce coins have been sold, compared to 9,000 in August and 8,500 in September.
Sales suggest that gold buyers are quite price sensitive and pay attention to declines, especially when it fell close to $1,200 per ounce. Gold experts say that even though the yellow metal has picked up this month, silver is receiving a boost just as much – silver is trading around the $22 per ounce mark.
Central banks are paying close attention to the price of gold, which is presently trading close to $1,400 per ounce. According to the World Gold Council (WGC), central banks will purchase about $15 billion, or 350 tons, this year, a growing trend since last year when central banks bought 535 tons. Russia still remains the biggest buyer of the precious metal – it has expanded its gold supply by about 20 percent.
Most on Wall Street believe gold’s decade-long bullish run is over because of three factors: the Fed tapering soon, the strength of the U.S. economy and the renewed confidence of the U.S. dollar. However, according to Peter Schiff, president of Euro Pacific Capital, it’s quite the opposite: the Fed will expand its quantitative easing program, the U.S. economy is headed for another recession and the nation’s troubling fiscal problems will lead to the decline in the dollar.
“Gold moved from $300 to $1,800 not because investors believed the government would hold the line on debt, but because they believed that the U.S. fiscal position would get progressively worse,” stated Schiff in an op-ed piece. “That is what happened this week. By deciding to once again kick the can down the road, Washington did not avoid a debt crisis. They simply delayed it. That is why I tried to inform investors that gold should rally if the debt limit were raised. Instead most investors put their faith in Goldman Sachs.
Gold experts still foresee exceeding $2,000 per ounce.