Theres no sugarcoating the fact that the Federal Reserves hawkish talk of an imminent interest-rate hike has spooked the precious metals market.
For the month of May, gold lost 6% while silver surrendered 10%. However, both metals remain up roughly 15% each for the year, and seasonally, May is often a weaker month for gold prices, historical data show.
A short-term pullback: And with a relatively positive Beige Book released Wednesday, the odds of a Fed rate hike are now at 24% in June and 53% in July. But remember what happened after Decembers rate increase? Stocks fell, and gold and silver rose. The price weakness in the metals before the Feds year-end move was a great time to get in. Is that happening again now?
Investors who can see the forest for the trees see golds dip as an opportunity in disguise. One of the hardest things to do is to be patient, Adam Koos of Libertas Wealth Management Group told MarketWatch. For now, if youre not in the trade, Id be looking to get in at these prices. The market is telling me that gold broke its long-term downtrend a few months ago and what were seeing today is simply a short-term pullback in an overall long-term positive trend.
Mints year-on-year gold sales pop: And Koos isnt alone in that buy the dip line of thought. The U.S. Mints bullion sales continue to go through the roof compared with this time last year.
In May the Mint sold 76,500 ounces of gold American Eagle coins. That totals down 27.5% from April but up 255.8% compared with May 2015. Year to date, sales total 427,500 ounces to more than double the 197,000 ounces sold during the January to May period in 2015, Coin News noted.
Gold American Buffalo coin sales hit 18,500 ounces in May a 5% dip from April but about double the total of 9,500 ounces purchased in May 2015. Year to date, sales at 98,000 ounces are 29.8% higher than the 75,500 ounces sold during the first five months of last year, Coin News confirmed.
Silver Eagle selling at record clip: And silver American Eagles remain absolutely on fire, with more than 4.498 million ounces sold in May despite rationing by the Mint up more than 10% versus Aprils sales and more than 122% higher than those sold in May 2015. With more than 23.4 million ounces sold so far in 2016, the Mint is well on its way toward breaking 2015s record sales tally of 47 million, with its current pace more than 38% higher than at the same time last year.
In addition to booming coin sales, gold ETF inflows increased by 80 tons in May despite the price dip. But for some gold experts, ETFs are no substitute for the real thing.
ETFs might not suffice in the future: Were getting to the point where people are going to be able to see the picture, and at that point gold is the answer, Vulpes Investment Management adviser Grant Williams said in a recent interview. Its not just an asset anymore; its the answer to a lot of peoples questions. When that happens, I think the most important stage of this completes itself and that is the resolution between the paper price and the physical asset. I think when we get to that point where people want to own gold, ETFs wont suffice anymore. A promise to deliver three months hence is not going to be sufficient anymore; people are going to want to own the asset. At that point you realize that there are multiple hundreds of claims per ounce, and those claims wont be worth anything anymore. Its going to be the asset, and thats the end game.
He added, I dont buy gold; I own it. I dont buy gold at $1,100 because I think its going to go to $1,200. I buy it for what it does, not what the price is. The price is the last consideration for me.
Dont be caught without the ultimate financial-crisis insurance: that is, physical gold and silver.