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Award-Winning Metals Market Report: June 2016 - Week 2 Edition

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

Two Big European Banks Update their Bullish Gold Forecasts

The big Dutch bank ABN AMRO reiterated its $1370 year-end target for gold, which they originally set last February, after gold’s first move above $1240. Last week, they said inflation may help precious metals follow crude oil’s rapid rise back above $50 per barrel. They are more bullish on silver, saying “We believe that silver will outperform gold, and also for gold to continue rallying in 2016 and 2017.”

Germany’s Commerzbank has long been one of the most bullish big banks in Europe, even before gold’s price increase earlier this year. They are still bullish on gold, even if we see a short-term drop following a Fed rate hike, saying “we do not expect the price to fall lastingly below [$1200] because such a price level is likely to be viewed by investors as an attractive opportunity to buy.” They added that “gold exchange traded funds recorded their strongest inflows for seven years in the first quarter. By contrast, there has only been moderate physical gold demand in India and China.” However, Commerzbank sees low prices generating higher demand in India and China, along with a comparative advantage in China:

“Given the lack of alternative investments – real estate is already very expensive in China and investing in Chinese stocks does not appear particularly attractive given the slumps in share prices and the disappointing performance of stock markets since last summer – private households can be expected to give preference to gold as a store of value.”

Gold Shot Up Over $30 Per Ounce In About 30 Minutes

Gold shot up over $30 per ounce in about 30 minutes Friday morning. Once again, gold responded quickly to downbeat economic statistics, which add to the perception that the Federal Reserve will not raise interest rates next week at their meeting of the Federal Open Market Committee (FOMC). In this case, the morning jobs report came out with only 38,000 new jobs in May vs. an expected 155,000. There were other disappointing numbers, but the jobs report is the most-widely watched statistic each month. Gold shot up from $1212 to $1243 from 8:30 to 8:45 am Friday, and then drifted a bit higher to $1245.

Update on Monthly Coin Demand at the Mint

Year-to-date, gold and silver are up 17.5% and 19.0%, respectively, but they just concluded their worst month of the year. During May, gold bullion prices declined 6.3% and silver prices fell 10%. That did not put a damper on gold and silver demand at the Mint. Last week, we reported that coin sales in the first three weeks of May at the U.S. Mint had already surpassed the full month of May last year. Now we know that gold and silver’s “worst” month of 2016 was one of the metals’ best months for coin sales.

May gold coin sales increased by over 200% vs. May of last year. The mint sold 95,000 ounces of gold in May, more than three times the 31,000 ounces sold in May 2015. Last month was the Mint’s best May since the super-bullish year of 2011, when gold peaked. Meanwhile, silver American Eagle sales more than doubled, up 122% over May 2015 – the fifth straight month of more than four million ounces sold.

Broken down by coin type, the Mint sold 76,500 of gold American Eagle coins in May, up 255.8% from May of 2015. For the full five months of the year, the Mint sold 427,500 gold American Eagle ounces, up 117% from the 197,000 ounces sold during the same five months in 2015. (The rest of the gold coin sales came from the Gold American Buffalo coin, which almost doubled from May 2016 vs. May 2015.)

Silver American Eagle sales reached 4,498,000 ounces in May, despite some rationing by the Mint. That was 122% higher than the total sold in May of 2015. With 23,413,000 silver ounces sold in the first five months, sales are well on their way to beating the record 47 million sales for the full year 2015. At the current pace, silver American Eagle sales are up over 38% above sales in the first five months of 2015.

Wall Street Still Bullish on Gold

Even Wall Street is still bullish, despite gold’s decline in May. Gold ETF flows added 80 metric tons of gold to their vaults in May, reflecting a net demand of 257,200 Troy ounces of “paper gold” during May.

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