This past week two developments of concern appeared. First, The U.S. Mint announced that they will not produce a Silver Eagle Proof coin this year. According to the Mint they do not have enough silver blanks to produce both the Proof and the Uncirculated coin. Since they are required by law to produce the Uncirculated coin, they announced there will be no Proof Eagle this year.
Secondly, there was an immediate increase in the premium of silver eagles up to 10%. This is probably the first of similar type of increases to come in the future as the supply of available Silver and Gold diminishes.
This simply means that you will be required to pay higher prices again in the future. I’ve said this many times and that is at some point in the future Gold and Silver will not be available for purchase at any price. There will be just too much money chasing a limited amount of metal.
The bullion coin sales are motivated by fear, not greed. Gold is typically viewed as a store of value during times of economic and political upheaval.
Silver sales are rip-roaring, too. For the month to date, the Mint has sold 3,500,000 of the one ounce American Silver Eagles. This marks the third time during 2010 that monthly silver bullion sales have exceeded 3 million ounces.
If sales keep up at this pace, the Mint will run out of bullion coins again, like it did last year. Oh, sure, it will get around to minting more eventually. But for investors anxious to add to their coin stockpiles, that wait can be nerve-wracking. Especially if you have a nervous eye on Europe.
Let’s talk about Europe for a minute, because it might be a glimpse of our future. In Europe, a debt crisis in some of the weaker European nations has transformed into a crisis of confidence in the euro currency. Now, many Europeans wonder if their currency will be around next year.
The rush for gold is most visible in Germany, the economic heart of the euro zone and the richest country in the euro bloc. Germans are lining up to buy gold coins. As a result, the rand refinery in South Africa, which sells to many European gold dealers, often 2,000 gold krugerrands at a time, reported that it received a single order from one German bank for 30,000 coins. Another bank requested 15,000 coins.
German investors are notoriously afraid of inflation. While few are old enough to remember the hyperinflation that wrecked Germany during the Weimar Republic in the 1920s, the episode remains etched into the national psyche. And as the euro crisis played out, archive film from the period ran on the TV new.
Gold and silver coins are selling faster than the Mint can produce them!
Should the Europeans be scared? Yes!
The problem isn’t just Greece. The total debt of the so-called PIIGS nations (Portugal, Ireland, Italy, Greece and Spain) is a staggering $3.9 trillion. The PIIGS have about $600 billion in funding needs this year alone according to Bank of America. Total financing needs for the PIIGS over the course of the next three years is nearly $2 trillion.
More debt means another crisis around the corner. Eventually, we could see A) the financial breakup of Europe or B) Greece and the other PIIGS renouncing the euro and going back to their own currencies.
That’s why European citizens are voting with their pocketbooks and rushing to exchange euros for a currency with real value — gold! That’s one reason why gold rocketed to new highs recently.
It’s Not Just the Euro Anymore
Europe is just the tip of the iceberg. ALL fiat, or paper, currencies are coming under scrutiny. Governments can print paper currencies at will. And investors are starting to realize that governments will have to print a lot more to cover the debts that have come due after 30 years of wasteful spending.
As the Chart below indicates, Gold is setting all time records against most foreign currencies. I see nothing that will prevent this trend from continuing.
Just tonight, Reuters reports another record:
Euro-priced gold hits record as currency plunges
June 7 (Reuters) – Gold priced in euros hit another record around 1,022 euro on Monday after the single currency plunged to its lowest in more than four
years against the U.S. dollar. Investors ditched the euro and shifted to bullion on mounting worries about the region’s debt problems. [USD/ (Reporting by Lewa Pardomuan; Editing by Michael Urquhart)