2013 was a tough year for the gold market. Gold futures had their worst year since 1981, finishing the year down 28%. Gold coins, however, stood out as a bright spot in 2013, with demand increasing by 63% last year, according to the World Gold Council.
In a recent article, The Wall Street Journal points out that despite hedge funds and large investors mostly ignoring gold, the appeal of physical gold to collectors and smaller investors allowed the market for coins to see significant gains around the world last year.
Australia’s national coin and bar producer, the Perth Mint, saw a 41% increase in sales. Sales of Gold Maple Leaf coins by the Royal Canadian Mint were also up 82.5% in 2013. Back in the United States, the U.S. Mint sold almost 15% more American Eagle gold coins than it did in 2012. The U.S. Mint also sold a record amount of silver coins.
Bart Melek, a senior commodity strategist with TD Securities Inc., told the Journal that “Coin buyers tend to be small investors who view gold as an insurance policy against financial stocks.” He also added that “Because these investors intend to hold onto their gold for years or decades, many see the recent drop as an opportunity to buy more at a cheaper price. They’re not under any pressure to get a yield or a return in a year.”
According the article, gold-market participants tend to keep a close eye on gold & silver coin sales. Some believe that strong buying in the physical gold market will keep prices from falling much further than they are now. Jeffrey Christian, managing partner of research consultancy CPM Group LLC in New York, says, “The gold price is largely determined by physical supply and demand, with investment demand being the single most important determinant for gold prices.”
Physical gold supporters are continuing to take advantage of low prices, looking to hedge their portfolios against a down equities market and inflation. With the stock market continuing its strong run into the early stages of 2014, fear of a pull-back may soon start to permeate the market and concerns about inflation may soon be justified.
Jimmy McClintock, a gold coin buyer in Rockwall, Texas, believes that a market reversal may be near. “It’s obvious to me that at some point our dollar will see a downturn in its value. Gold is just a good comfort, it’s a commodity that anybody in the world knows and you don’t need to be an expert to understand.”
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