This chart on American Gold Eagle Coin Sales illustrates a point I made over the weekend in response to a question from JFT about gold as a deflation hedge. As you can see, the demand for American Gold Eagles, a bellwether for international physical demand, grew significantly in the period 2008 to present — a disinflationary period marked by widespread concern over the health of the financial system and the banks. Note too that the late 2012, early 2013 period bears some similarity to late 2008, a time when weaknesses in the financial system became all-too apparent to the investing public. The fact that the public jumped on price weakness is only part of the story. Something induced the interest in the first place. That to me is the most meaningful lesson from April’s huge spike in physical gold interest. These concerns are not likely to go away any time soon.
The chart on Silver Eagle sales shows a similar pattern, but illustrates too that the public now views silver as a safe-haven. Poor man’s gold has become the poor man’s systemic risk hedge. Almost completely ignored by the mainstream financial media, physical silver demand is one of the more interesting phenomena to develop in financial markets since the 2008 meltdown. It hints that the concern over the on-going financial crisis extends beyond the 1% to the middle class in general — something aspiring politicians might want to take into consideration. Our volumes at USAGOLD for both the silver Eagle and silver Maple Leaf have been off the charts for over two years running.
It isn’t just inflationary fears pushing these markets, at least not thus far.
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Mr. Kosares is the founder of USAGOLD and the author of “The ABCs of Gold Investing: How To Protect And Build Your Wealth With Gold,” now in its third edition.
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