Can You Handle The Truth?

| January 31, 2014 | 0 Comments

coinsWith last year’s dramatic downturn in precious metals, one could come to the conclusion that demand for gold and silver coins has gone down the toilet.  After all, if investors are sending prices to multi-year lows, that means they want less of these metals… right?

Actually, that couldn’t be further from the truth…

Demand for gold and silver coins is skyrocketing.  In fact, 2013 was one of the busiest years on record for US mint.  The government agency sold a whopping 42.6 million American Silver Eagles last year. 

That’s the highest annual sales number since the mint started producing the coin in 1986!

As for gold, the number comes in at 856,500.  In other words, the mint sold more American Gold Eagles than it did in 2012, and the highest number since 2011.

Why are investors gobbling up physical gold and silver?

In spite of the recent gains in the US stock market, investors are still worried about the health of the global financial system.  After all, the only thing that pulled the US out of the jaws of deflation in recent years was Federal Reserve Chairman Ben Bernanke plowing over $3 trillion into the US economy.

And even though inflation isn’t a concern at the moment, I find it very likely that the worrisome monetary phenomenon will present itself at some point.  And when it does, gold and silver will see another major run to the upside.

But if you’re interested in buying physical metals, now’s the time to act…

You see, gold and silver are currently trading at bargain levels. 

Gold traded at $1,800 an ounce in late 2012, while silver crossed the tape at $35.  Picking up bullion at today’s prices gets you a 30% and 45% respective discount to those highs.

And as far as fear of additional downside for the metals go, listen to this…

Gold is already trading at, or slightly below, the cost of production for most miners.  

As a matter of fact, the average “all-in” cost to mine the metal has surged to around $1,300 an ounce thanks to rising energy and labor costs.

For silver, analysts estimate most miners are paying all-in costs in the range of $20- $25 an ounce.  Clearly, silver at $19 an ounce (as it is now) is not a sustainable situation.

So while I can’t say gold and silver are going to explode higher in the very near future, prices must rise from the current oversold levels at some point. 

The relatively simple economics of the mining industry say so.

But before you rush out and plop your hard earned money on a stack of coins, know what you’re getting in to… 

There’s a lot you need to know before you make your first coin purchase.  After all, the coin industry has the unfortunate reputation for being a bit on the “slick” side.

To assist you in making these important purchases, I’m writing a series of articles covering the ins and outs of coin investing.  So stay tuned to Commodity Trading Research over the next few weeks!

Until Next Time,

Justin Bennett

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Category: Gold, Silver

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.