GOLD 00.00 1.20 0.00%
SILVER 00.00 1.20 0.00%

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Metal Market Report November 2019 - Week 3 Edition

November 2019 - Week 3 Edition

Gold Will Rise Again

Gold rose $15 Monday morning from 8 to 11 am Eastern time, and silver rose back above $17.00 on renewed pessimism over the Chinese trade deal. The rally is based on news that President Trump may not roll back tariffs on China and the mood in Beijing has also turned pessimistic about any possible trade resolution any time soon. Otherwise, stocks are hitting new all-time highs and investors are taking money out of gold ETFs to pour into the stock market, so we have seen a new buying opportunity in gold develop, even as the Trump impeachment drama escalates in the U.S. House hearings in Washington DC this week.

The Fed Has Undertaken a “Stealth” Program of “QE-4”

Gold staged its strongest bull market during the first two stages of Quantitative Easing (QE), massive additions to the money supply and to the Fed’s balance sheet after the Great Recession of 2008-09.

The various stages of “QE” are evident in this graph of the Fed’s rising balance sheet.

  • QE1 ran from December 2008 to March 2010, in which the Fed announced that it would purchase up to $600 billion in mortgage-backed security and agency debt, later adding an additional $750 billion. During QE1, gold rose from $778 in December 2008 to $1,136 in March 2010 (+46%).
  • QE2 ran from November 2010 to June 2011, in which the Fed purchased $600 billion of long-dated Treasuries at a rate of $75 billion per month. During QE2, gold rose from $1365 in November 2010 to 1,552 in June 2011 (14%). After that, gold spiked up to $1,900 in early September.
  • QE3 ran from September 2012 to December 2013, with $40 billion per month at first, then another $45 billion per month in December 2012. Gold declined about 29% during that time span, but that was just at the beginning of the dollar’s bull market and negative interest rates in Europe and Japan.
  • A “stealth” form of QE-4 began in September, with the Federal Reserve buying up to $60 billion in “repurchase agreements” per month. Since August 28, 2019, the Fed’s balance sheet has risen from $3.76 trillion to above $4 trillion ($4,047,882 or +7.7%) in less than three months.

In the latest instance, the Federal Reserve started adding liquidity after the “repo” market faced a crisis in mid-September and a big bank had to pay 10% (annual rate) on overnight interest for money that usually cost only 2%. The Fed denies that these additions to its balance sheet comprise any form of QE, but if the Fed’s balance sheet is growing and it is providing excess reserves for the nation’s banking system, it is still providing the same sort of liquidity it provided in all its previous forms of QE – more money.

This could provide gold with another launching pad going into 2020 – another “QE boost” for gold.

Project 20/20 is Gaining Steam

In May, I told you a little bit about Project 20/20, which will be our program for enlightened coin accumulation – using a “rifle shot” approach rather than a “shotgun” blast to find undervalued “sleeper” coins. As I said, we will begin by bringing you highlights of recommendations in the major types of coins we like most – for their sheer beauty, profit potential and historical importance. We’ll highlight the most undervalued coins, starting with $2.50, $3, $5 and $10 Indians and Type II and III Liberty Double Eagles.

By using the capitalization approach (coin population reports times market value), we now have one more tool toward determining better coin purchase opportunities – where the profit leverage is to your advantage.

Already, we have seen over 25% of our antique coin 20/20 recommendations rise in price and most of our 20/20 $10 and $25 American Gold Eagle coins also rose in price. This is just the beginning. Please contact your account representative to learn more about how you can benefit from this innovative 20/20 program.

There are some other factors that increase a coin’s popularity, like low mintage, first and last year of a series, etc. I still believe strongly in set building, which is a good way to diversify coin holdings. In past bull markets, this has often resulted in “set premiums,” resulting from the sale of special complete sets.


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