• Sprott Money
    05/06/2016 - 06:03
    The US, in its own decline, is showing this same self-destructive tendency. The worse things get, the greater the inclination of the citizenry to say, “Carry on, everything’s fine.”

Physical Gold Demand Soared As Gold Price Tumbled In 2013

Tyler Durden's picture




 

Sales of gold coins are booming even as the precious metal's price is falling (and it's not just central banks). Despite gold futures 28% drop in 2013 (its worst since 1981), the WSJ reports that demand for gold coins shot up 63% to 241.6 metric tons in the first three quarters of 2013.

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, notes on strategist, "they're not under any pressure to get a yield or a return in a year."

Still, the importance of gold coins has been eclipsed in recent years by the rapid growth of exchange-traded funds, some analysts say, "hedge funds tend to overpower the impact of physical gold purchases... relatively little money gets them an awful lot of market power." Unlike hedge funds, who may leave when prices fall, it is clear that coin buyers are in for the long haul.

 

 

 

Via WSJ,

Sales of gold coins are booming even as the metal's price is falling, a testament to gold's continued appeal for small investors and collectors despite its first bear market in more than a decade.

 

The heightened appetite for physical gold is a rare bright spot in a market that saw hedge funds and other large investors head for the exits last year. Gold futures prices tumbled 28% in 2013, their worst performance since 1981.

 

But at mints and coin shops around the world, gold continued flying off the shelves.

 

...

 

Sales of Gold Maple Leaf coins by the Royal Canadian Mint surged 82.5% to 876,000 ounces in the first three quarters of 2013 from the same period of 2012. The Perth Mint, Australia's national coin and bar producer, saw sales rise 41% to 754,635 ounces last year, while the U.S. Mint sold 14% more American Eagle gold coins than it did in 2012, along with a record amount of silver coins.

 

...

 

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, he added. "They're not under any pressure to get a yield or a return in a year," Mr. Melek said.

 

...

 

Some think the continued strength of physical gold buying will prevent prices from falling much further, as it becomes clear that a core group of investors is sticking with the market,

 

...

 

"It's obvious to me that at some point our dollar will see a downturn in its value," said Mr. McClintock, who runs a contract post office. "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."

 

...

 

Still, the importance of gold coins has been eclipsed in recent years by the rapid growth of exchange-traded funds, some analysts say.

 

...

 

"Folks like hedge funds tend to overpower the impact of physical gold purchases," Mr. Melek said. "Relatively little money gets them an awful lot of market power."

 

Unlike hedge funds, who may leave when prices fall, many coin buyers are in for the long haul.

 

...

 

"Most people who buy physical gold aren't doing it for the same reason you'd purchase a stock," said Mike Getlin, vice president with Merit Financial, a bullion and coin dealership in Santa Monica, Calif. "They tend to have a much longer investment horizon. They tend to hold onto them forever and pride of ownership is a huge factor in that."

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Fri, 01/03/2014 - 13:49 | 4296985 wee-weed up
wee-weed up's picture

The Fed-JPM Paradox.

Fri, 01/03/2014 - 13:54 | 4297004 nope-1004
nope-1004's picture

Bernanke said we are recovering, and QE is good for Main Street.

Bernanke also said that he doesn't understand gold prices, and that CB's buy it because of tradition.

Since I see no recovery, and see Main Street suffering bigtime, I have to assume that Bernanke is a liar who understands gold prices and knows it is much more valuable than just tradition.

I buy PM's regularly because of him.

Had he not been a habitual liar, I might think otherwise.

 

 

Fri, 01/03/2014 - 13:56 | 4297014 JohnnyBriefcase
JohnnyBriefcase's picture

I've never seen anything drop in price as the demand skyrockets.

We are living in magical times.

Fri, 01/03/2014 - 13:58 | 4297038 Ignatius
Ignatius's picture

Yes, the magic of manipulation.

Fri, 01/03/2014 - 14:08 | 4297064 BaBaBouy
BaBaBouy's picture

IF Physical GOLD Is A "Barbarous Relic", Then WHAT ARE
All The Paper GOLD Futures That Keep Being PRINTED Mysteriously???

Fri, 01/03/2014 - 14:13 | 4297077 Ignatius
Ignatius's picture

I think Keynes* actually said the gold exchange standard is a barbarous relic not gold, FWIW.

 

* Sorry.  I normally try not to swear.

Fri, 01/03/2014 - 14:14 | 4297095 Clint Liquor
Clint Liquor's picture

I want my money back for my ECON101 class. Everything they taught me about supply and demand was wrong.

Fri, 01/03/2014 - 14:23 | 4297119 BaBaBouy
BaBaBouy's picture

Not Really, In Todays Context Of GOLD Barbarous Relic... READ

 

Barry Popik, reports:

Although Keynes is credited with calling the gold standard a “barbarous relic,” many other people had written similar terms (“gold is a relic of barbarism”) well before 1923. John Austin Stevens wrote to the New York (NY) Times in October 1873, stating that “gold is a relic of barbarism to be tabooed by all civilized nations.” Tennessee merchant John T. Goss testified before the U.S. Senate in 1894, saying that “Gold is a relic of barbarism and should be discarded by all civilized nations as a medium of exchange.” The book Civilized Money (1895), by Charles M. Howell, also declared that “gold is a relic of barbarism.” In December 1921, Thomas Edison said that “”Gold is a relic of Julius Caesar and interest is an invention of Satan.” Barry’s impressive etymology page is here. - See more at: http://marginalrevolution.com/marginalrevolution/2011/10/who-first-calle...

AND Well, Thomas Edison Was Half Right...

Fri, 01/03/2014 - 14:32 | 4297150 Ignatius
Ignatius's picture

"Gold is wealth."  --  me

Fri, 01/03/2014 - 14:49 | 4297220 Handful of Dust
Handful of Dust's picture

"Paper is Porverty."

 

---Grampa

Fri, 01/03/2014 - 15:36 | 4297394 Pinto Currency
Pinto Currency's picture

 

857,000 oz of gold coin sales - interesting.

Now about those 68 million oz. of gold bullion delivered and withdrawn from Shanghai Gold Exchange vaults in 2013 (and not to be retraded as the serialized bars are not permitted back on the exchange once withdrawn).

http://www.ingoldwetrust.ch/sge-delivery-16-20-december-55-tons-2128-tons-ytd

 

Fri, 01/03/2014 - 15:42 | 4297422 boogerbently
boogerbently's picture

Hey, wait just a darn minute.

If demand increases, supply decreases, and price......

Fri, 01/03/2014 - 15:57 | 4297486 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

 

Press Release

=========

The Central Bank of DoChenRollingBearing advises to whom it may concern that the gold it holds will never be sold.  Most likely given away.

 

***

Would the Central Bank with the below account please contact us if they want their BTC back or if they wish to communicate with our Central Bank:

1B8xPxmHwkaAAzULkVLYiNQthXM1DuMEKt

Fri, 01/03/2014 - 16:48 | 4297683 Dark_Horse
Dark_Horse's picture

 

Gold is down on rising demand because the supply side of the equation is hidden.

They are pushing paper gold supply into the market with Fractional Reserve. I wonder how far from recursive 10:1 ratio level they will reach to advance their fiat paradigm? (and save their own skins)

Dark_Horse

Fri, 01/03/2014 - 15:14 | 4297317 Soul Glow
Soul Glow's picture

Most gold mines have been shut down too so I'm not sure where the gold will come from in 2014 to supprt demand.

Fri, 01/03/2014 - 22:23 | 4298612 TheReplacement
TheReplacement's picture

Barbarous relics +1

Inventions of satan -1

Fri, 01/03/2014 - 14:20 | 4297120 1000 splendid suns
1000 splendid suns's picture

Hey WSJ, why don't you say why people are REALLY buying gold. If I wanted to hold something for a long time, I could always go with the Fidelity 2040 fund, eh? The writing's on the wall with debt/war/prison/drug backed Yellen Bux.

Fri, 01/03/2014 - 14:50 | 4297226 Kirk2NCC1701
Kirk2NCC1701's picture

@BaBaBouy: "IF Physical GOLD Is A "Barbarous Relic", Then WHAT ARE All The Paper GOLD Futures That Keep Being PRINTED Mysteriously????

A: Barbarous Ponzi.

Fri, 01/03/2014 - 15:37 | 4297402 Antifaschistische
Antifaschistische's picture

The following is from "Oil Trader Insider" email, regarding Venezuela.

"Ford’s concern stems mainly from an anticipated currency devaluation, one that Bloomberg analysts estimate could come as soon as March. The bolivar will likely be weakened from 6.3 per dollar to 10.3 per dollar, allowing the government to boost domestic currency revenue from each foreign dollar used to purchase oil exports."

Perhaps gold is a barbaric instrument of trade. Whatever.  If you live in Venezuela, you better get your hands on as much of it as possible then figure out who is barbaric later.

Fri, 01/03/2014 - 14:07 | 4297068 Alea Iactaest
Alea Iactaest's picture

You might want to reconsider your line, "I've never seen anything drop in price as demand skyrockets".

It happens in manufacturing all the time (think personal computers).

It happens as a result of trade when goods can be moved from a point of production to a point of consumption (think spice trade in Europe).

It can also happen with commodities as new sources of supply are discovered for a previously scarce material.

All manipulation, I'm sure.

Fri, 01/03/2014 - 14:09 | 4297080 redpill
redpill's picture

Except in the case of gold, the "new sources of supply" is imaginary paper gold that never exists.

Fri, 01/03/2014 - 14:24 | 4297132 Alea Iactaest
Alea Iactaest's picture

I'm sure once we hit the Freegold price of $55k/oz we'll see some ingenuity.

The oceans reportedly hold enough gold particles that "each person on Earth could have nine pounds of the precious metal."
http://oceanservice.noaa.gov/facts/gold.html

Near Earth Objects (aka asteroids and comets) likely will be targeted for mining.
http://news.yahoo.com/nasa-teams-asteroid-mining-company-crowdsource-spa...

Fri, 01/03/2014 - 14:46 | 4297185 chubbar
chubbar's picture

Unless they get right on it, all that gold coming out of the ocean will be radioactive for the next million years or so along with the salt water they are processing to get to it. Say, what do you figure the energy required to process all the ocean water would cost? Guess it wouldn't hurt to use nuclear at this point,eh?

Fri, 01/03/2014 - 18:42 | 4298014 Agstacker
Agstacker's picture

The oceans reportedly hold enough gold particles that "each person on Earth could have nine pounds of the precious metal."

 

Yea, good luck collecting all that and coining it.

Fri, 01/03/2014 - 14:18 | 4297108 Al Huxley
Al Huxley's picture

...which would be fine, if the all-in cost for mining gold had dropped substantially, and major new discoveries had caused the supply from mining to skyrocket.  However, that's not what's happened at all.  What's happened is that there's been an incredibly successful campaign to market paper gold (futures) as the REAL market, and physical gold as an antiquated relic of the past that tags along now out of tradition rather than serving any real purpose.  This can only work for gold, due to the fact that most of the time the physical metal serves no purpose and the majority who don't care to study history forget what its for.

Fri, 01/03/2014 - 16:10 | 4297536 toothpicker
toothpicker's picture

Hunger has been replaced with malnutrition

Fri, 01/03/2014 - 14:01 | 4297048 Missiondweller
Missiondweller's picture

Then you haven't been reading much here in the 1 year 48 weeks of your membership.

Fri, 01/03/2014 - 15:07 | 4297295 midtowng
midtowng's picture

Wall Street can move things any way they want - temporarily.

In the long run the market does what it wants to do.

The hedge funds cashed in their gold profits this year because you sell your winners, not your losers.

When that gets done playing out, which it will this year, gold will move up again.

Fri, 01/03/2014 - 16:45 | 4297681 bwh1214
bwh1214's picture

Sure in financial assets, sure, but you have seen it.  You see it every Black Friday.  If you want to see a real market at work, go to the market, Walmart.

Fri, 01/03/2014 - 17:42 | 4297878 JohnnyBriefcase
JohnnyBriefcase's picture

That is different. They slowly raise the prices prior to Black Friday so that it feels like your getting a deal but even at the sale price you are still paying more. Most products are sold for "30% off!" Even though they never had the 30% on the original price to begin with.
Might as well sell soda like:

Original price- $1,000.00
Sale price- $1.00

Wow what deal! I better buy two while this deal lasts!

Fri, 01/03/2014 - 17:40 | 4297863 americanreality
americanreality's picture

It's simple really.  Parker Schnabel got a new washplant and Todd Hoffman hit a paystreak in Guyana.  Supply is going through the roof.  

Fri, 01/03/2014 - 13:52 | 4297015 SamAdams
SamAdams's picture

FED Advisory Council Minutes, Dec 2013:  http://www.federalreserve.gov/aboutthefed/fac-20131206.pdf

Fri, 01/03/2014 - 13:56 | 4297025 jbvtme
jbvtme's picture

i'm hoping there is enough gold when the time comes to plate the blade of the guillotine

Fri, 01/03/2014 - 14:19 | 4297103 ArrestBobRubin
ArrestBobRubin's picture

My vote is for the blade to be dull and rusty.

Fri, 01/03/2014 - 19:05 | 4298109 Bendromeda Strain
Bendromeda Strain's picture

Sharpened edge of a weighted toilet seat!

Fri, 01/03/2014 - 14:22 | 4297118 Ignatius
Ignatius's picture

Silver is preferred here.  It disinfects as it cuts!

Fri, 01/03/2014 - 14:05 | 4297059 thunderchief
thunderchief's picture

Just a another physical Tit Ringer.  More to come.

Fri, 01/03/2014 - 13:49 | 4297000 CrashisOptimistic
CrashisOptimistic's picture

Sorry folks, but pretty much all gold articles here are clickbait.  That's just reality.

Fri, 01/03/2014 - 14:06 | 4297065 Mad Mohel
Mad Mohel's picture

Go away! Batin!

Fri, 01/03/2014 - 17:22 | 4297813 JohnnyBlaze
JohnnyBlaze's picture

Good shit man!  That one made me spit up.

Fri, 01/03/2014 - 17:19 | 4297814 JohnnyBlaze
JohnnyBlaze's picture

Spit up 2 fucking posts.

Fri, 01/03/2014 - 13:54 | 4297002 USA USA
USA USA's picture

"Relatively little money gets them an awful lot of market power."

 

And one HELL of an loss when it goes against you!

 

edit: For the little guy....

Fri, 01/03/2014 - 13:55 | 4297012 Four chan
Four chan's picture

“The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin. Bankers own the Earth. Take it away from them but leave them the power to create money, and with a flick of a pen, they will create enough money to buy it back again. Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. But if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.”

—Sir Josiah Stamp, president of the Rothschild Bank of England and the second richest man in Britain in the 1920s, speaking at the University of Texas in 1927.

Fri, 01/03/2014 - 13:57 | 4297016 Ignatius
Ignatius's picture

Not a lot of 'news value' for folks here at ZH.

Fri, 01/03/2014 - 13:57 | 4297019 Sufiy
Sufiy's picture


Albert Cheng: Gold Markets Move East | McAlvany Commentary


  Albert Cheng the head of World Gold Council in China discusses the Gold market in China and how Gold has became the foundation for wealth preservation and saving. http://sufiy.blogspot.co.uk/2014/01/albert-cheng-gold-markets-move-east....


KWN: “The Most Remarkable News In The Gold & Silver Markets” 

 

 "King World News has published very interesting long term charts for Gold, Silver and Gold Mining Shares."

Fri, 01/03/2014 - 13:58 | 4297022 Obama_4_Dictator
Obama_4_Dictator's picture

I'm shocked at this most releaving revelation! 

Fri, 01/03/2014 - 13:58 | 4297034 Fight-Club
Fight-Club's picture

Actions speak louder than words.  The Chinese wall of money is hell bent to acquire physical by crushing gold ETFs.  When they have "enough" is anyone's guess, but that is when the manipulation will end.

Fri, 01/03/2014 - 14:02 | 4297051 Quintus
Quintus's picture

When the ETFs have handed over their last ounce?

Fri, 01/03/2014 - 14:02 | 4297044 Newager23
Newager23's picture

 

My grandfather gave me $10,000 in 1991. As soon as I held the check in my hand, I only had one thought: gold! That was a long time ago, and that investment paid off big-time. But my motivation for investing in a gold mutual fund in 1991 is even stronger today. Let’s take a look at the global macro situation and see how likely gold will increase in value in the near future.

The U.S. is the largest global economy and is in a mess that is only getting worse. Starting in 1972, the U.S. stopped generating enough wealth to increase real wages for the middle class. Subsequently, the real-wage for the middle class peaked in 1972. By the end of the 1970s, we were faced with what was called economic malaise, another term of the time was stagflation. I remember buying my first car in 1980 and paying a 20% interest rate.

Reagan was elected in 1980 and our national debt was less than $1 trillion. What did he do? He asked his economic advisors what would get the economy going. They gave him Keynesian economics. Subsequently he stimulated the economy with huge budget deficits, and guess what? It worked! By the time he left office in 1988, the economy was roaring. However, to get this growth, the deficit had nearly tripled in size to $3 trillion. And because it worked, every president that followed him used the same playbook. Today we have a deficit of $17 trillion, and if interest rates rise a mere 2%, the U.S. is bankrupt, unable to pay its debt obligations.

Keynesian economics was also called voodoo economics back in the Reagan era. And rightfully so, because you can’t print your way to prosperity. But the Fed, Congress, and the President do not know of an alternative. And it isn’t just the U.S. that is using this dangerous game of utilizing debt to stimulate growth. Both Japan and Europe are also caught up in the debt fiasco.

What you need to understand is that the U.S. has no right to be living high on the hog with perhaps the highest standard of living in the world. We have not earned that right since 1972. We should have seen our standard of living drop in 1980s. But Reagan chose the devil’s alternative – debt - and soon we are going to pay the piper. The U.S. has been avoiding the inevitable for over 30 years and the clock is ticking. Our standard of living is going to drop, and when it does the dollar will no longer be the global reserve currency. This will lead to a devaluation of the dollar and all kinds of fallout.

Another key thing to understand is that the financial system is a house of cards held together with over $500 trillion in interest sensitive derivatives. The derivative nightmare was the outcome of the Keynesian economic policies of the last 30 years where debt created abnormally high risk. A derivative is supposed to be insurance to protect you. However, your insurer has to be solvent. This is called third-party or counter-party risk. If these derivatives start to melt down, no one is getting paid. It’s very similar to FDIC insurance. The insurance fund is only big enough for small to medium size banks. Anyone who has money in a large bank is deluding themselves if they think their money is insured. Likewise, a derivative is only good if it is used during a period solvency.

The financial system is highly integrated. It is a global system. It works fine if you have wealth generation and low debt. However, both of these have been eroding, and at a faster and faster rate. With $100 oil, generating wealth has become more difficult. And with low GDP rates, debt has been growing at nearly exponential rates.

Have you seen a U.S. debt chart since 1980? Here, check this one out:

 

 

By the end of 2014, the U.S. will have $18 trillion in debt. That is a huge number, but since we only know Keynesian economics, the number just keeps growing. At some point, either the Chinese or the Japanese, who both own more that $1 trillion of our debt, will realize they are not going to be paid back. At that time, they will begin a game of chicken – who will sell first. I find it interesting that they don’t like each other. Do you really think that one of them will sit back and let the other sell half of their bonds? Not a chance. Once one of them begins to sell, it will be game on, and a race for the exists.

Currently, the U.S. can only generate about $2.7 trillion in annual income. However, we are currently spending about $3.5 trillion. And if interest rates rise by 2%, we will need about $1 trillion just for interest payments. That’s called bankruptcy. The Fed cannot come to the rescue and print money to pay the interest. If they try, at some point you get hyperinflation.

When Lehman Brothers declared bankruptcy, I was pretty sure that was it for the U.S. At the time, I didn’t realize the Fed could get away with printing money to keep the economy from imploding. But this game of trying to print your way to prosperity has its limits, which we are approaching. You are already seeing the Chinese steadily move away from the dollar in their international transactions. And you are seeing the Chinese buy gold in large quantities knowing the U.S. economy is playing a dangerous game. They smell blood in the water.

Abenomics in Japan is another dangerous game. This is not normal behavior for a very large economy. They have devalued their currency by 30% in less than a year against the U.S. dollar (80 yen to 105 yen). That is a sign of desperation. They also have 200% debt to GDP, and they have the Fukishima disaster which seems to be getting worse.

Europe is on life support. The economy is not improving and the debt situation has not gone away. It seems like their only policy is sell all of their gold to China. I think Europe is in a holding pattern and will continue to bailout any crisis that erupts. They seem to be waiting for a miracle, and will do whatever they can until it arrives. However, once either the U.S. or Japan begins to falter, Europe will go down hard with them.

For those of you who think the global economy can come back to life, consider that shale oil requires at least $80 oil. And without shale oil, you have an oil shortage and $150 oil prices. Thus, the floor for oil is about $80. In other words, we will not see cheap energy in the near future. And without cheap oil, it is going to be nearly impossible to get a global growth rate above 3%. What is more likely to happen is a stagnant global economy until the debt situation unravels. As I like to say, we are in a countdown. And the outcome will be much more like a bomb than a new year’s eve party. Scary? Yes, but that is the reality of what we are facing. Unless, of course we get that miracle that Europe seems to be waiting for.

Okay, you have read my analysis. If I am right (and I think the facts are on my side), then gold is the one asset that will benefit. It has to. I knew this in 1991, and I am more sure today. Even if you dismiss the huge increase in the global money supply since 1980, when gold reached $850, the number of wealthy people who can afford gold is probably 10 fold what is was in 1980. If there is even a minor trend of people converting their assets into gold, the ramifications for the gold price could be staggering. I don’t know if we will see $10,000 gold, but $5,000 will not surprise me.

I do want to add one caveat. While I am confident a bottom in gold will get set, and then we will see much higher gold prices, the actual bottom and the timing of the bottom are unknowns. Many people are predicting $1,000 gold and Harry Dent is predicting $700 gold. The bottom might be much lower than I am anticipating. If we do get $700 or even $1,000 gold, you can expect mining shares to fall hard. So, substantial risk still exists. On a positive note, if that happens, the average mining stock will be a 10 bagger, and I will finally get to buy Endeavour Silver at $2.50 a share. 

www.goldsilverdata.com


Fri, 01/03/2014 - 14:17 | 4297107 Unpopular Truth
Unpopular Truth's picture

Newager

Agree with the facts, but the end is not that near yet. Before that, there will be legislation to "protect" the $6+ trillion now in IRAs, by having them invest in "safe" (/sarc) govt bonds.

 

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