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Award-Winning Metals Market Report: June 2016 - Week 1 Edition

The opinions expressed by columnists are their own and do not necessarily represent the views of

Mint Sales Continue at a Torrid Pace

Coin buyers aren’t fooled by the mantra that “gold doesn’t offer interest income” in a rate-rising cycle. As of May 24, the U.S. Mint has sold 61,000 ounces of Gold American Eagle coins in May vs. 21,500 for all of last May last year. Total gold sales will likely triple in May 2016 vs. May 2015. Year-to-date, the Mint has sold 418,000 ounces of Gold American Eagles vs. 197,000 ounces through May 31 of 2015.

Last year, the U.S. Mint sold 2,023,500 ounces of Silver American Eagles for all of May. Through May 24 of this year, the Mint has already sold 3,919,000 million ounces – almost double. Through the first five months of 2015, the Mint sold 16,915,000 Silver American Eagles, vs. 23 million so far this year.

The Royal Canadian Mint is also setting records – to the point of generating a supply crunch. The RCM’s first-quarter 2016 sales report shows that its silver Maple Leaf coin broke its all-time quarterly sales with 10.6 million ounces sold (the previous record was 9.5 million ounces.) The Mint said that “sales of silver bullion have been driven for several quarters by demand that exceeds supply in North America and Europe.” Meanwhile, sales of the Gold Maple Leafs rose 18.7% vs. sales in the first quarter of 2015.


Wise buyers will take advantage of this “fear of the Fed” to load up on gold and silver at low prices.

Why Gold Investors Shouldn’t Fear Interest Rate Increases

We have already shown here (several times) that gold had its longest and strongest bull markets during a time of rising interest rates – including the late 1970s and the first decade of the 21st century. Rising interest rates usually cause an economic slowdown, which hurts both stocks and bonds. When rates rise, for instance, bond prices fall. Yet the mainstream press doesn’t seem to understand this connection.

In 1980, gold rose to $850 while interest rates were skyrocketing – up over 20% at one point. During the last interest rate-raising cycle, 2004 to 2006, the Fed raised rates 17 meetings in a row, pushing the Fed Funds rate from 1% up to 5.25%. During that same time, gold rose from under $400 to over $600.

During the last four rate-rising cycles – from 1986, 1994, 1999 and 2004 – gold either remained stable or rose throughout the entire interest-rate-raising cycle. Here is a quick summary of those four instances:

· From December 1986 to September 4, 1987, the Fed raised rates four times, from 5.875% to 7.25%, but gold rose from an average of $391 in December 1986 to $465 on September 4, 1987.


· From February 4, 1994 to February 1, 1995, the Fed raised rates six times, from 3.25% to 6.0%. Gold was flat throughout that entire year, seldom wavering outside of a range of $370 to $390.

· From June 30, 1999 to May 16, 2000, the Fed raised rates five times, from 4.75% to 6.5%. During that time, gold rose gradually from $262 to $276.

· From June 30, 2004 to June 29, 2006, the Fed raised rates 17 times, by 0.25% each time, from 1.0% to 5.25%. During that time, gold rose from $395 to $613.

Far from falling in price during a time of rising interest rates, gold usually holds steady or rises when the Fed raises interest rates. Even if the Fed raises rates twice this year, short-term rates will still be under 1%, hardly an attractive yield for a paper currency subject to manipulation, over-printing or devaluation.

Gold Corrected Once Again

Gold corrected once again after Fed Chair Janet Yellen and other Federal Reserve officials kept talking about an expected interest rate increase this summer, probably in mid-June or late July. Gold touched a bottom near $1200 over the Memorial Day weekend. It hasn’t closed below $1200 since February 10. As we have been saying over the last several months, gold has usually gone UP during a Fed rate-rising cycle, partly because higher rates punish stocks and bonds more than gold, but traders have a knee-jerk reaction of selling gold when rates might increase based on the excuse that gold offers no interest income.


A Time to Remember

While I was representing our company at the latest NRA convention in Louisville, May 18-22, I was able to talk at length with one of three CIA participants who were in Benghazi at the time four American heroes were slain. I talked with Mark “Oz” Geist, who along with Kris “Tanto” Paronto and John “Tig” Tiegen, were available to help but were held back. The State Department had already left the Benghazi compound woefully undefended amid threats of violence on the anniversary of 9/11. These three CIA security staffers were ready to respond within five minutes after distress calls came from the U.S. consulate less than a mile away, but they were repeatedly told to “wait.” Their story has been told in the 2014 book “13 Hours in Benghazi” by Mitchell Zuckoff, and the movie “13 Hours” (released last January), which dramatizes the documented accounts in the book. I highly recommend seeing the movie.

The well-planned attack indeed took place on September 11, 2012 – the 11th anniversary of the 9/11 attack on America – but Americans were falsely told that it was the result of a “spontaneous” riot in reaction to an offensive new movie. That was clearly a lie. Then, we were told that help was on the way, but that was not true, either. During this Presidential campaign year, it’s important to tell the real story.


These three CIA security contractors have previously provided their account to the House Intelligence Committee, but the official report contradicted their testimony, stating that no “stand down” order was given in Benghazi. The three men asserted that they were told to “stand down” (once) or “wait” (twice). When they were finally allowed to intervene – much later – it was too little, too late. For instance, there was no armed air support.

Let us honor those who died in Benghazi: U.S. Ambassador to Libya Christopher Stevens, his communications specialist Sean Smith and Navy Seals Tyrone Woods and Glen Doherty. Watch “Heroes of Benghazi to Megyn Kelly: 'We Were Told to Stand Down'

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