Gold and Silver Current Thoughts 8-4-2015

From the Trading Desk

US Mint coin sales figures for the month of July are in and they are fairly impressive, especially in comparison to last year and considering that summer is typically characterized by weak physical demand.  Gold coin sales in July totaled 202,000 ounces while last year’s July had a mere 35,500 ounces sold.  This was nearly a 500% increase year on year.  Silver coin sales for the month of July came in at 5.53 million ounces compared to 1.975 million ounces last July.   Given that the US Mint suspended sales of silver eagles for two weeks of the month and had allocations for the remainder of it, the July sales figures really are noteworthy.  The jump in demand for both gold and silver was predominantly spurred by gold selling off and reaching five year lows.

I have been telling readers that supply was drying up and there were delays in shipping from most every supplier. Now we can see what REAL demand looks like just from the U.S. Mint This does not include the Canadian and other foreign mints as well as the multitude of U.S. based private mints that are also experiencing delays. What will it be like at lower prices?

But alas i do think we are overdue for a technical bounce. The only thing that has me worried is the darn dollar which bounced today towards the 98 level. Before this is said and done, I think the dollar could approach 120 and this will coincide, if not before, the bottoming in precious metals. I am definitely leaning towards before though.

Daily

Of all my indicators I look at, the dollar being the overall directional indicator, it is supply that matters most, along with premiums on coins. We saw supply dry up a couple years ago with a Friday decline in price followed by a Monday crash. Some dealers were going 8 weeks out for delivery and then saying they are not taking anymore orders. Premiums on the American Eagles shot up to $6 per coin. This time was different though. Supply dried up faster with the increased demand and some suppliers simply said they are out of stock. But what was interesting is the premiums didn’t shoot up as much as in the past.

Suppliers who were going out further in delivery time take on the risk that the price can fall considerably. So to protect themselves they simply raise the premiums to protect their risk. They are in the business of making money remember.

I see many suppliers taking on more risk and going out 8 weeks or more again when we finally do bottom. But you will likely pay higher premiums and the delivery times will be extended as I said.

For now, while I do feel we get a bounce, keep an eye on the dollar and see if the 98 number is taken out. Even with the rise in the dollar gold, silver and the mining stocks rose today. Lets see if they can continue the trend into tomorrow. The metals are down just little as I type this 5:30pm PST.

About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534