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Gold Coins: At the Mercy of…

During H1 2012, the claim for gold coins dropped considerably from the exceptionally high levels experienced in Q4 2011.

Despite this, gold’s demand is being endorsed substantially from ETFs and diversification upheld by central banks. This demand is nowhere near its end and should continue on upward. At the same time, we should continue to bear a deteriorating economic crisis. Nothing new on the horizon.

Or is there? Notwithstanding, the situation with gold coins, the US Mint data and other mints data shows that pursuit for the small treasure will prevail on top and may be stabilizing at this point. Looking at the data from a more historical context, Dr. Constantin Gurdgiev (GoldCore Investment Committee) has offered his expert breakdown and reasoning of US Mint coin sales in H1 2012.

At present, revision of H1 2012 figures for sales of the US-minted gold coins can be performed based on the data from the US Mint. Looking at the whole picture, Dr. Gurdgiev postulates that new coins released by the US Mint embody a closer and more prevalent association with fundamentals as the claim for such coins is somewhat divergent from the petition for gold as an asset. The demands for the two are not poles apart, though.

Another important observation is that coins are secured more by long-hold collectors and since they are more accessible at the consumer level as well as effortless to hoard, they are more beckoned upon by savers as opposed to speculative investors. His meticulous discernment also leads to the belief that coins are used recurrently to establish family savings schemes as well as accumulate inter-generational financial security.

What has been perceived throughout the historical and existing data is that the relationship, or rather the difference, between the price of gold and gold coins should be a bit more reduced. In the end, what will gold coins sales really look like? If we turn to the gold price for some help answering that question, we notice that it has been inclined to its side since April 2011 with some correlation over the 20-day averages. The gamut has been between $1,505.50 as a low (June 2011) and $1,813.50 as a high (August 2011). Currently we are at $1,581 (July 2012).

It will ultimately be the abridged speculative demand which will determine some restraint in demand for gold coins. Because this demand outlines a smaller section of coins demand as a whole, we should anticipate less demand for coins slipping us toward historical averages for the crisis stage. Simultaneously, outside the euro area, a period of equilibrium has been achieved which doesn’t exactly mean growth, but which means that the claim for gold as a safe haven instead of a hedge should be decreasing, too. This should have a less obtrusive influence on coins sales than on demand for gold and its ETF transactions.

And now we reach our main assumption…it should be presumptions of where inflation will end up, longer term savings, and investment intentions which will be the momentum behind the current demand for gold coins. In other words…the fundamentals.

Current data:

  • June 2012 – US Mint sold 54,000 oz of coinage gold (1,000 more than in May)
  • H1 2012 total – total weight sold of gold coins by the US Mint are down 41.3% on H1 2011 (and are also down 49.8% on H1 2010 as well as 50.3% on H1 2009)

So what happened? It falls on the drivers for 2009-2011 demand for coins being concurrent with great risks in different markets.

  • H1 average demand 2000 – 2007 – 165, 679 oz
  • H1 2008-2011 demand 531,750 oz
  • H1 2012 demand – 338,000 oz

We are looking at the same evil in the quantity of coins sold…a retreat into fundamentals.

Persistent with strong demand drivers:

  • H1 2000-2007 period average was 0.51 oz
  • H1 2008-2011 period average was 0.76 oz.
  • H1 2012 average coins sold contained 0.60 oz

Summing it up. The three ambits before-mentioned (coins sold, oz sold and oz/coin) are demonstrating that H1 2012 was abiding by restraint in demand at a distance from short-term safe haven reflections toward fundamentals-driven consideration and essentials of long-term hold demand. It is also observed that all of them exhibit existing demand dynamics for gold coins which precede historical mediums. Fortunately, both extremes of the panic cycle are not being experienced which means that if demand balances out at 10% above the norm, the longer term gamut will be more pleasant and once it is here, we should undergo economic advancement at the international level.

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