October sales of American Eagle gold bullion coins from the U.S. Mint have almost tripled September sales. With one week left before the end of the month, the Mint has sold 38,000 ounces of Eagles, compared with 13,000 ounces for all of September and 11,500 ounces for all of August.
While far short of 2013's high in April of 209,500 ounces, this jump tells us three things.
First, reports of gold's demise as a safe-haven investment seem to be greatly exaggerated. When the going got tough, some of the tough ran into the comforting embrace of physical gold. The partial shutdown of the federal government and the last-minute temporary reprieve on the debt ceiling crisis served as a wake-up call to some investors discounting gold's value as a safe haven, and September's weak jobs numbers became the snooze button on the alarm.
Second, it seems that the demand for American Eagle gold bullion coins exceeded existing supply. When U.S. investors buy gold coins, they buy them in the marketplace, which should have been flooded with gold supply from other investors selling off their gold. But that existing supply fell short of surging demand and investors had to buy newly made coins directly from the U.S. Mint.
Third, the realization is starting to set in that the modest and fragile economic recovery still needs life support, courtesy of the Federal Reserve's quantitative easing (QE) programs. The shutdown has put uncertainty in the October and possibly November economic numbers.
Congress and the president punted with little hope for a different outcome next January, though the Fed may wait to see the results of the negotiations before deciding whether to taper. And without sound fiscal policy, there is even a possibility that the Fed will increase QE and not taper it if the economy needs more help.
There has been a lot of hype about gold falling out of favor. What the hype does not take into account is the data that physical gold sales remain strong worldwide and that demand is starting to perk back up in the United States.
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