Gold Coins Remain Strong
Source: Bloomberg, Nicholas Larkin and Pham-Duy Nguyen (5/16/11)
"Sales of gold coins are on track for the best month in a year."
Sales of gold coins are on track for the best month in a year amid the worst commodities rout since 2008, a sign that bullion's longest bull market in nine decades has further to run, if history is a guide.
The U.S. Mint sold 85,000 ounces of American Eagle coins since May 1 as the Standard & Poor's GSCI Index of 24 raw materials fell 9.9%. The last time sales reached that level, bullion rose 21% in the next year. Gold will advance 17% to a record $1,750 an ounce by Dec. 31 and keep gaining in 2012, the median estimate in a Bloomberg survey of 31 analysts, traders and investors shows.
Investors in exchange-traded products backed by the metal accumulated $98 billion of gold as prices rose 74% since U.S. borrowing costs fell to near zero in December 2008 and the Dollar Index dropped 6.2%. With the gauge, a measure against six currencies, forecast to weaken through 2012 and the Federal Reserve expected to keep rates on hold through the fourth quarter, the rally may not reverse any time soon.
"People are buying gold on weakness," said Martin Murenbeeld, the chief economist at Toronto-based DundeeWealth Inc., which manages about $85 billion in mutual funds and brokerage accounts. "We're going to find that the U.S. economy is not very strong," he said. "A low interest-rate environment will remain for possibly all of 2012. The dollar goes down."