The U.S. Mint just reported that their American Gold Eagle sales reached almost one million ounces in 2016, the best sales total since 2011, despite a weak December, since 2016-dated Eagle production ended in November – which marked the highest Gold Eagle sales month of 2016. For the entire year, American Gold Eagle sales reached 984,500 ounces, easily topping each of the previous five years:
2016: 984,500 ounces
2015: 801,500 ounces
2014: 524,500 ounces
2013: 856,500 ounces
2012: 753,000 ounces
The Mint sold 1,000,000 ounces of American Eagle gold bullion coins in 2011. This year’s total would likely have surpassed a million if sales continued in December. On the down side, sales of the American Silver Eagle coin sales totaled 37,701,500 ounces, the lowest total since 2012, despite silver’s stellar year.
Gold Opens 2017 Up
Gold opened 2017 on a positive note, gaining 1.8% in the first nine days, defying the skeptics again. The recent low for gold was $1,125 on December 20, so gold is up $55 (+5%) in the last three weeks. Of the 17 gold traders surveyed by Bloomberg last week, 14 were positive on the outlook for gold prices, two were bearish and one was neutral. This was the highest sentiment in a year. One reason is the advent of the Chinese New Year, a high gold-buying season in China. (The Lunar New Year starts January 28.)
Gold Closed 2016 Up
Gold closed up 9.1% in 2016. Stocks performed slightly better, with the S&P 500 up 9.5%, but silver beat both stocks and gold, up 17.5%. In the 17 years since Y2K, gold has quadrupled in price (+307%) and silver has tripled (+211%), while stocks are up only 55% (S&P 500) or 73% (Dow industrials). Gold beat stocks every year from 2000 to 2012, while stocks beat gold in the last four years. For most of 2016, gold traded above stocks. The S&P 500 and gold closed 2016 very close but stocks narrowly topped gold.
Will Silver Beat Gold Again in 2017?
Barron’s Commodities Corner column for December 12 (“Silver to Regain its Gleam”) sounds a lot like an article we recently published (“Silver Shines in 2016 – and May Shine Even Brighter in 2017” by Rhiannon Hoyle, who writes about metals for the Wall Street Journal in Australia). She says that silver “is likely to strengthen gradually over the next year or two” since “a shortfall is expected to deepen as mine supplies shrink and industry and investment demand grows… exacerbated by geopolitical and other concerns.” The fact that the silver price has held up so well in 2016, despite a 24% global decline in coin and bar sales, lower bullish volume on the silver commodity exchanges and China’s slowing economy augur well for silver prices once industrial and investment demand picks up in a better 2017 economy.
Some of the leading positive fundamentals for silver in 2017 – taken from this Barron’s article – include:
“Silver mine production most likely peaked in 2015, and is apt to record repeated annual declines ahead. While there are new mines and expansions in places such as Peru, production of silver from gold and lead-and-zinc mines, where it is a common byproduct, is falling. GFMS expects a 3% decline in mine and other supplies, such as scrap, in 2016…. A market deficit of roughly 185 million ounces, equal to nine weeks of global demand, is forecast” for 2016, vs. a 119 million-ounce supply deficit in 2015.
HSBC precious metals analyst James Steel says “any revival in investor uncertainty, combined with price-sensitive buying at these levels and limited supply growth, is likely to be conductive to higher prices.” HSBC “projects a silver price of $18.75 an ounce in 2017 and $19.25 the year following.”
“Demand from industry – which includes sectors from automotive to medical and accounts for roughly half of all physical purchases – is expected to rise in 2017 after a lackluster, 2016, when it is projected to dip 1%. One particular hot spot: solar panels, which use the metal. GFMS forecasts an 11% rise in demand from solar sources this year, and HSBC thinks there will be another 10% increase next year.” *
* GFMS stands for Gold Fields Mineral Services Ltd, a London-based metals consultancy service; and HSBC stands for the Hong Kong and Shanghai Banking Corporation, a bank founded in Hong Kong in 1865.
What’s Hot in 2017
While gold bullion has declined since the November election, demand for extremely rare coins has risen. There’s a growing sense of optimism among entrepreneurs and collectors I talk with that business and income will generally improve during Trump’s presidency. This seems to be manifesting itself in a surge of high-end numismatic sales that is atypical for December. Shortly after the election, for instance, one major Texas dealer sold all eight $50 gold pieces he had in stock. A California dealer also told me there has been a resurgence in demand for coins priced at over $100,000. Perhaps this new demand is based on the fact that high-end customers believe that business will be better and high-end collectibles will soar in price.
I am often asked what dealers are getting the most calls about. In December, most collectors are focused on holiday gift-giving, so silver American Eagles and Royal Canadian Mint silver coins are in demand. I remember when I first started dealing in my hometown in the early 1970s holiday Franklin Mint silver and copper rounds in greeting cards and holiday-themed silver bars were popular.
As we enter 2017, I expect demand to continue to increase for coins with something special. That could be blast luster or a needle-sharp strike or a paucity of bag marks on key focal points. Key-date and historical coins are always in demand. For example, many dealers find it hard to keep 1794-to-1796-dated copper, silver and gold coins in stock, even in lower grades.
Key coins like 1870-CC double eagles seldom last long in inventory in any grade. Silver coins with original attractive toning are popular. Spectacularly toned examples can bring multiples of what an untoned coin in the same grade would sell for.
Coins in popular collector series at or near the scarce end of the PCGS and NGC population reports can trigger fierce competition, and bring significant premiums over the same type coin graded just a point lower. At a recent 2017 convention I could not find one acceptable MS-66 $2.50 Indian for our customer wish list. This is true in part due to rarity, but also in part to collectors wanting to have top-rated sets.