“Except for gold, all other assets are just bubbles”, burned Chinese investor says

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With equity prices on the Shanghai stock market down about 40% since June 2014 and falling into bear territory last week, Chinese investors are renewing their love affair with gold.

In addition to its plummeting stock market, China is now on course to grow at its slowest pace since 1990. And with China devaluing the currency in an attempt to boost exports and reverse its downturn, money is flowing into perceived safe-haven assets such as domestic bonds, gold and the dollar, Reuters confirmed.

Faith in stocks fading: The news agency published some disturbing quotes from Chinese investors who have been snake-bitten by the startling decline in stock prices. I just have a small amount of money in the stock market. I had planned to sell when indexes got a little bit higher, but soon it dropped to this situation, said a 22-year-old investor in Guangdong named Zhou Junan. I dont have faith in the stock market any more.

Another unidentified investor in Beijing added, Except for gold, all other assets are just bubbles to me. I guess I am a pessimist. If there are really some global conflicts, even dollars and bonds could not buy a meal.

We notice a rise in gold investment whenever theres concern over yuan depreciation, said Richard Xu, the manager of Chinas biggest gold ETF. Buying gold also helps investors avoid risks in equities. It serves double purposes.

Increase in gold buying for new year: In addition to concerns about the bearish stock market and the weakening yuan, Chinese citizens also are buying in anticipation of the upcoming Lunar New Year holiday on Feb. 8.

With the spring festival approaching, there is some increase in demand as people are buying gifts. We expect the demand to pick up toward the end of the month as the spring festival is in early February, Shandong Gold Group analyst Shu Jiang told Reuters.

In the meantime, Chinas financial sector continues to take steps to boost the nations gold trade. Via the Shanghai Gold Exchange and the China Foreign Exchange Trading System, China has launched interbank gold trading at the beginning of this year, in an effort to open up the countrys bullion market, CCTV noted. At least 10 banks will be involved at the first-tier level, including the Australia and New Zealand Banking Group.

Before the new mechanism, banks were not allowed to trade gold with each other and could only buy the precious metal through the Shanghai Gold Exchange, CCTV added.

Whether Chinas economic crisis has the power to take down the rest of the globe with it is up for debate. But nowhere else on the planet right now is the need for gold so crucial than in China, home to an unbelievable bubble of stocks juiced up on massive debt.

Indias gold imports rocket higher by 179% in December

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Any concerns that the biggest consumer of gold in the world alongside China had lost its appetite for the yellow metal have dissipated with news that Indias imports exploded higher in December.

Indias trade deficit widened to the most since August as a 179% surge in gold shipments slowed an overall decline in imports, Bloomberg reported. Gold shipments rose to $3.8 billion, boosted by demand from the so-called wedding season in India that typically runs through mid-March.

Gold demand increased in December when prices were at the lowest level in 2015, and as retailers increased their inventory to optimum levels, said Sudheesh Nambiath of the metals consultancy GFMS.

Chart -Increased Demand

A separate report from Reuters confirmed that festive buying in India is picking up. Those who have weddings next month are purchasing gold, Kumar Jain of the Mumbai Jewellers Association said.

Smugglers defy import duty: The nations biggest imports after crude oil are gold and electronics. The new trade deficit has spurred talk that maybe the Indian government should increase import duties once again to correct the imbalance. However, some in official circles are having none of that talk, and of course Indias huge jewelry manufacturing and retail industry opposes any increases and is lobbying for further cuts.

There is already a high duty (on gold imports) now so doing higher and higher import duties can in fact become counter-productive, more smuggling avenues, etc., and that is why we do not want to try and take further aggressive measures from our end, Additional Secretary in the Commerce Ministry Arvind Mehta said. Mehta was referring to the explosion in gold smuggling that occurred after the government preceding current Prime Minister Narendra Modi imposed a 10% import tax.

Gold interest rises as stocks fall: Instead, the government is banking on monetizing the nations current stockpile of gold, much of it held in Hindu temples across the nation as well as in individual households. This week it launched another round of sales of its sovereign gold bonds, which pay interest.

Hopes for the bonds are running high in some quarters. Given the correction in the stock market, interest is shifting in favor of gold, said Harish Galipelli at Inditrade Derivatives and Commodities. Investors are looking for safe-haven assets.

However, the first tranche of gold bonds were unpopular. Why? Because Indians are obsessed with physical gold, and paper representations simply dont measure up to the real thing.

Distrustful of banks: For centuries, East Indians have regarded gold as the primary source of wealth, noted Jeff Thomas of the International Man Web site. All Indians own gold if they can afford to. They keep it as close as possible, sometimes in coin form, but often as jewellery, since wearing wealth means that it can be kept very close. Theyre often especially reluctant to trust banks to hold their gold.

Hindus make up 80% of Indias population and, to Hindus, gold is sacred a symbol of purity, prosperity, and good fortune. It plays an important part in all Hindu ceremonial occasions and Hindus donate large amounts of gold to the temples. The temples are also distrustful of bank storage, although some do store gold in banks.

Chances are it will be a long time coming before the governments gold-linked bonds replace the love of coins and jewelry burned into the Indian psyche. In the meantime, demand is on the upswing in one of the biggest influencers in the global gold market.

Recession odds hit highest level since 2011 as JPMorgan slashes GDP forecast

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In the wake of news that the Atlanta Federal Reserves widely watched U.S. GDP forecasting model had slashed fourth-quarter growth to a mere 0.6%, now comes an even worse downgrade, this from one of the worlds largest banks.

In the wake of dismal December retail-sales and other economic data, JPMorgan Chase has officially grown more pessimistic, slashing its fourth-quarter GDP projection to an annualized 0.1%, from a previous estimate of 1%, and lowered its first-quarter forecast by a quarter of a percentage point to 2%, The Wall Street Journal reported.

Weak retail forces downgrade: The exceptionally weak December sales figure is a bit of a head scratcher, chief U.S. economist Michael Feroli said. Job growth was booming last month, gas prices were down, sentiment measures were up, and warmer-than-normal winter temperatures prevailed last month, which historically tends to boost retail sales.

Chart US Quarterly GDP

If JPM is right, and if the U.S. economy effectively did not grow in the fourth quarter, this would make it the worst GDP print since Q1 of 2014, and tied for the third worst quarter since 2009, Zero Hedge commented.

Moreover, JPMorgan also is cutting its expectations for the first quarter of 2016. We are also lowering some our outlook for Q1 GDP growth from 2.25% to 2.0%, its analysts wrote. While the inventory situation should turn to being roughly neutral for growth, the quarterly arithmetic on consumer spending got a little more challenging after this mornings retail sales figure, which implies flat real consumer spending in December. We now see real consumer spending in Q1 at 2.5%, versus 3.0% previously.

Recession chances now at 28.2%: Although JPMorgans growth figures remain in positive territory, the potential for further downgrades is possible, while a new poll finds that recession odds are on the rise.

The chances of a recession in the United States are at their highest levels since the fall of 2011, according to the CNBC Fed Survey, the news company reported. The survey also showed recession fears rising for the sixth straight time among respondents, and are now sitting at 28.8%.

Complicating this picture of Americas slowing growth are ongoing concerns about China as well as worries about slumping oil prices, which could roil the junk-bond market further as well as the big banks, and the likelihood of another negative corporate earnings season. The prospect of four straight quarters of earnings declines is staring investors in the face on top of the worst multiweek selloff for stocks in years, and the worst start of the year ever, noted MarketWatch.

Barrons experts see low rates ahead: The upshot of all this is that the Fed likely will be forced to backtrack on it interest-rate hiking program. The new edition of Barrons Roundtable recently weighed in on the current environment and thinks the Federal Reserve, which finally lifted interest rates in December for the first time in seven years, wont hike four more times during 2016, notwithstanding its stated intentions, Barrons summarized. Thats because market conditions simply wont allow it. Indeed, Fed Chair Janet Yellen might even be forced to ease again after lifting rates one more time.

John Rubino of DollarCollapse.com sees three possibilities for the Fed: 1) a new but modest round of QE; 2) an expansion of the existing QE program; or 3) a more ambitious and inflationary salvo that Rubino calls QE for the people, featuring negative interest rates, debt jubilees, and the helicopter money that Ben Bernanke long ago promised to use in case of full-blown deflation along with a nice selection of capital controls to keep unruly savers, investors and other enemies of society in line.

Under any of these scenarios, in which the Fed views its printing press as the solution to all economic problems, gold and silver bullion plus rare coins remain must-own assets for every portfolio.

Gold climbs almost 2% as Fed rate hike increasingly resembles one of the great economic blunders

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In a theme that seems to be recurring this year, gold was one of the lone bright spots on Wall Street as stocks stumbled deeper into bear territory and key economic indicators are all but screaming a recession in the U.S.

Gold rose by almost 2% on Friday, breaking the $1,090 barrier and trading near $1,089 early afternoon. We have had a good start to the year, with prices trying to consolidate into a higher range between $1,080 and $1,100, ActivTrades chief analyst Carlo Alberto de Casa said.

Chinas stock losses as well as oils continued decline below $30 sent fresh shock waves though U.S. markets and bolstered golds appeal. A recovery in bullion is prompted by the equity weakness overnight in China, and its been reinforced by the declines today, HSBC gold analyst James Steel told Bloomberg.

U.S. stocks were in the red Friday, with the Dow losing more than 500 points at the depths of its decline, while the S&P 500 broke below its Aug. 24 low, which several market strategists said would be tantamount to a major sell signal, MarketWatch noted.

So far in 2016, gold has acted as a fear asset as money has been flowing out of stocks, crude oil and copper, confirmed Taki Tsaklanos of Investing Haven.

U.S. economic momentum is slowing so quickly that the Atlanta Federal Reserve has once again slashed its fourth-quarter GDP estimate from 0.8% to 0.6%.

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Retail, manufacturing data tumble: U.S. stocks also were pressured by some dismal U.S. data that suggest the economy is falling into a recession-level malaise. Although Christmas is supposed to be the gift that keeps on giving for retailers, the monthly figures jolted analysts. Sales at U.S. retailers declined in December to wrap the weakest year since 2009, raising concern about the momentum in consumer spending heading into 2016, Bloomberg reported.

There isnt anything encouraging in this report, Jefferies economist Thomas Simons said of the 0.1% drop.

And just as jarring was a key report on the manufacturing sector, the Empire Fed survey, which printed a disastrous -19.37 the largest miss on record, Zero Hedge noted, recalling that the last time Empire Fed crashed to these levels was theimmediate aftermath of the Lehman bankruptcy and the global financial crisis and the peak of the recession in 2001.

Adding to the grim picture was news that U.S. industrial production plunged 1.8% year-over-year the fastest pace of collapse since May 2008 and a level that has never not produced a recession; U.S. producer prices fell in December, confirming that the Fed is falling short of its 2% inflation target; and Walmart announced that its closing 269 stores and laying off as many as 16,000 workers.

Fed already balking at more hikes: So, whats the gist of all these recessionary indicators and plunging stock indexes? Four weeks and one market meltdown later, the Feds decision (to raise interest rates in December) no longer looks quite so clever, Londons Guardian newspaper argued. Indeed, if things continue as they have since the turn of 2016, the increase in U.S. interest rates will go down in the annals as one of the great economic blunders.

Indeed, the slaughter in stock markets already seems to have the Fed backtracking on its announced tightening plans. St. Louis Fed chief James Bullard suggested Thursday that very substantial plunges in oil prices could influence the central banks hiking timetable, which its top officials have said could occur four times this year.

But maybe not, now. On Friday, New York Fed head William Dudley apparently indicated that if the U.S. economy weakens enough, the bank would consider not raising rates but imposing negative interest rates, in which banks charge fees on deposits to encourage monetary velocity. Negative rates would be wildly gold-bullish.

And Global Macro Investor publisher Raoul Pal went so far as to predict the Fed will be reversing course entirely because of deepening economic woes. If you look at S&P earnings, for example, they have not been at these kinds of levels ever outside of a recession, he told CNBC on Wednesday. There are so many indicators that were in a recession. You see global growth and its suggesting that the market should go lower and its based on the fact that the global economy is getting worse.

Because of this, Pal predicted the Fed will be loosening policy rather than continuing to tighten. I dont think itll be QE next time; I think itll be something else. Negative rates, some sort of targeted fiscal stimulus by the Fed, Pal said.

Although no one can be happy about the plunge in stocks and the deeper implications of the slowdowns in China and the U.S., those holding gold can take some measure of solace in the notion that the yellow metal is responding positively to current market turmoil, and if the Fed is forced to reverse course, the sky could be the limit for bullion prices as the implications of a Fed mea culpa sink in.

Sell everything and gold to $1,400: 5 financial forecasts from major players

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Billionaire investor George Soros grabbed headlines last week when he warned that China has a major adjustment problem. I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.

Not everyone thinks the current financial landscape is as bad as Soros was indicating, but given that hes worth about $27 billion and ran a hedge fund that returned an average of 20% from 1969 to 2011, one discounts his diagnosis at his or her own risk.

However, Soros is not a lone voice crying in the wilderness. Some very serious money managers and investment banks are issuing warnings of their own, particularly about stocks. Although the Chinese stock crisis has stabilized somewhat in the past week, plunging oil prices are among the distress signals indicating all is not right with the global economy.

Lets start with the bond worlds top investment guru, Jeff Gundlach, whose DoubleLine Capital firm beat 94% of its peer funds last year:

  1. Gold key to capital preservation: During a recent presentation Gundlach, who last year was criticizing the Federal Reserve for raising interest rates amid a nascent U.S. economic slowdown, expressed his concerns about 2016.

    Falling commodity prices are symptoms of Chinas struggling economy, he warned, and the sub-$30 oil prices that have jolted the junk-bond market will eventually spill over into the stock market and could even stoke geopolitical instability in regions like the Middle East.

    This is a capital-preservation market, not a money-making environment,he said. 2016 is not looking all that great, potentially. We could be looking at a really ugly situation during the first quarter of 2016. Its particularly more likely to happen if the Fed keeps banging this drum of raising interest rates against falling inflation.

    Gundlach, however, does see at least one bright spot in gold. He thinks the metal is showing signs of a bottom and sees the price reaching $1,400 an ounce.

  2. 75% decline in S&P 500: Now lets turn to a new forecast by Societe Generale strategist Albert Edwards, whose bearish stance shouldnt surprise anyone who follows his analysis. Still, even for Edwards, this is a pessimistic outlook: He sees the S&P 500 dropping below its March 2009 bear-market low of 666 in a 75% decline that would take the index to 550.

    Meanwhile, SocGen researcher Andrew Lapthorne said that now is not the time for bottom fishing in stocks. When we see equities starting to lose value, the immediate reaction is, Well things must be cheap. But because weve had such an outrageous increase in valuations, were a long, long way from seeing assets become cheap again, he said.

    As for Chinas problems, Edwards said the effects will be far-reaching. Investors are coming to terms with what a Chinese renminbi devaluation means for Western markets, he wrote in a note. It means global deflation and recession.

    As China exports its deflation, the Western manufacturing sector will choke under this imported deflationary tourniquet. Indeed, U.S. manufacturing seems to be suffering particularly badly already.

    Edwards is predicting a meltdown at least on the level of the 2008 crisis. The Fed and its promiscuous fraternity of central banks have created the conditions for another debacle every bit as large as the 2008 Global Financial Crisis, he wrote. I believe the events we now see unfolding will drive us back into global recession.

  3. Cataclysmic year ahead, RBS says: Could Edwards be wrong? Of course. But his bearishness is almost matched by that of the 20th-largest bank in the world, the Royal Bank of Scotland.

    Sell everything except high-quality bonds, its credit team advised, and its next statement sounded very similar to Gundlachs take. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.

    In predicting a cataclysmic year, the bank is bracing for 10% to 20% declines in global stock markets and oil prices below $20 a barrel. Theres no getting around Chinas slowdown, said one of its researchers.

    China has set off a major correction and it is going to snowball, said Andrew Roberts. Equities and credit have become very dangerous, and we have hardly even begun to retrace the Goldilocks love-in of the last two years.

    The bank also warned about repercussions from the Feds current tightening policy, accusing the U.S. central bank of playing with fire by raising rates in the current setting, in which U.S. manufacturing is in contraction. There has already been severe monetary tightening in the U.S. from the rising dollar.

  4. Cash and gold if bear market erupts: And across the pond from Scotland, J.P. Morgan Chase has issued a sell recommendation to its clients for the first time in seven years.

    Our view is that the risk-reward for equities has worsened materially. In contrast to the past seven years, when we advocated using the dips as buying opportunities, we believe the regime has transitioned to one of selling any rally, strategist Mislav Matejka wrote.

    One reason: Expectations for the most recent earnings season, with reported results soon coming due, are not high. We fear that the incoming fourth-quarter reporting season wont be able to provide much reassurance for stocks, he said.

    Given that history shows that the first five trading days of any given year are sometimes a valid indicator for the rest of the years performance for stocks, and given that nearly half of U.S. stocks are already in a bear market, perhaps J.P. Morgans diagnosis is worth prudent consideration.

    Meanwhile, another top J.P. Morgan analyst, Marko Kolanovic, specifically endorsed gold as a possible safe harbor. In case an equity bear market materializes this year, investors should benefit from increasing allocation to cash or gold, he wrote. Cash has zero correlation to all risky assets, while gold has recently exhibited strong negative correlation to risky assets (e.g. -40% to equities).

  5. Rail cargo levels look recessionary: The crashing Baltic Dry shipping-activity index, now at record lows, is often cited as a primary indicator that Chinas slowdown is deeply affecting global trade. And in this age of intermodal commercial transportation, one doesnt have to look too far to see trade sputtering in the U.S.

    Railroad cargo in the U.S. dropped the most in six years in 2015, and things arent looking good for the new year, Bloomberg reported this week.

    As a result, Bank of America has sent out a note suggesting that the repercussions from slowing railroad volumes point to an overall slack in the U.S. economy. We believe rail data may be signaling a warning for the broader economy, its analysts wrote. Carloads have declined more than 5% in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last weeks -10.1% decline, has not occurred since 2009.

    In a survey of 30 years of railroad data, BofA analysts found that similar periods of weakness have occurred in only five otherinstances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) severalweeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of2009 all either overlapped with a recession,or preceded a recession by a few quarters.

Taken individually, perhaps each one of these five forecasts could be rationalized and marginalized into potential nonissues. But taken together, its hard to ignore the fact that so many voices are warning that the problems in the global economy are too large to dismiss. Now more than ever, investors need to protect their wealth through prudent portfolio diversification, including defensive measures like substantial allocations to cash and tangible assets such precious metals (gold and silver) and rare coins.

Global economy cant stomach 4 Fed rate hikes, ex-Treasury chief warns

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The Federal Reserves controversial decision to raise interest rates in December has generated its fair share of accolades as well as criticism.

Fans of the move say the rate hike was long overdue, while foes say the central bank is tightening monetary policy at exactly the wrong time, just when the Chinese economy is slowing and threatening to take down global markets with it.

Top central bankers are forecasting as many as four more interest-rate increases over the course of 2016. Supporters of this track point to Decembers employment report from the Labor Department, issued Jan. 8, which showed that job creation surged to 292,000 positions that month, with the unemployment rate holding steady at 5%.

Wages, inflation missing expectations: However, stagnating wages remain a concern. Average hourly earnings slipped by a penny in December from November, The Wall Street Journal reported. Wages were up 2.5% from a year earlier, among the best annual gains of the current expansion, but the improvement remains below historical averages.

Meanwhile, inflation expectations are simply not materializing. Since the Fed hiked rates in December, the markets inflation expectations have collapsed in yet another clear indication of policy error, Zero Hedge commented.

With Fed Vice Chairman Stanley Fischer having said that four hikes this year are in the ballpark, critics are coming out of the woodwork to say thats too much too soon, particularly because of the volatility already seen in global stocks as well as the collapse in oil prices.

Slowing U.S. growth: Recent market turmoil is furthering the concern that global growth has slowed significantly, as well as raising the possibility that domestic growth could be slowing, Boston Fed chief Eric Rosengren said Wednesday.

Rosengren urged caution about the pace of future hikes. While monetary policy should not overreact to short-term temporary fluctuations in financial markets, policy makers should take seriously the potential downside risk to their economic forecasts and manage those risks as we think about the appropriate path, he said. These downside risks reflect continued headwinds from weakness within countries that represent many of our major trading partners, and only limited data to support the projected path of inflation to target.

Further tightening will require data continuing to be strong enough that growth will be at or above potential, so that Federal Reserve policymakers can be confident that inflation will reach our 2% target.

Atlanta Fed chief Dennis Lockhart also advised patience, saying the central bank likely should keep watching incoming data until April before considering another rate hike.

Perfect storm near, Summers says: The two Fed presidents found a serious ally in one-time Fed-chairman hopeful and former Treasury Secretary Lawrence Summers, who warned that risks are substantially tilted to the downside in 2016.

I would be surprised if the world economy could comfortably withstand four hikes, and I think that basically the markets agree with me, and thats why, despite the statements that are being made, markets arent expecting four hikes, Summers argued, saying Chinas slowdown has created almost a perfect storm of problems for the rest of the world. Really, what policymakers need to think about is, it is insurance against the more negative scenarios.

Summers said he sees a significant risk that the Fed will have to start loosening the monetary spigots once again as the U.S. economys slowdown becomes undeniable.

Huge mistake could repeat 1937: Given the ongoing risks in the world economy, at this point in time its very unlikely that the Fed can maintain its promised pace of rate increases. Low rates will continue to support gold prices. And if the Fed continues to tighten into the growing deflationary winds, it also could spark a renewed flight into gold by digging an even deeper bearish hole for stocks.

Dont repeat the mistakes the Fed made in 1937, one investing pro recently told CNBC. One and done is OK. Its not that damaging, BK Asset Managements Boris Schlossberg said of the Feds first rate hike.

But he warned that further increases would be a huge 1937-type of mistake, when the Fed raised rates during a breather in the Great Depression, sparking another downturn.

Were in a real serious pickle now. Theres little policy flexibility left, Schlossberg said. This is going to be the year to sell rallies, not to buy dips.

Gold could double if Chinas credit bubble gets messier, Marc Faber says

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With some analysts predicting that the gold price could fall near $1,000 later this year, especially if the Federal Reserve follows through on several interest-rates hikes, HSBC is going against the grain with a modestly bullish forecast.

The safe-haven-inspired demand for gold rests on the interconnection between the state of the gold market and the financial markets of countries, the investment bank said in a recent research note highlighted on Bloomberg TV. Long-term structural arguments for gold accumulation in the emerging markets lead us to reaffirm our 2016 forecast for average prices of $1,205.

Thats not a gangbusters forecast, but its one contingent upon ongoing, steady consumption in the Asian markets, especially China. And so far, thats a no-brainer presumption: The financial crisis erupting there has kept the fires of interest in gold burning in Beijing, Shanghai, Hong Kong, and all points in between.

With Chinese officials devaluing the yuan currency to navigate the tremors occurring in the stock market and the slowdown in the overall economy, gold priced in yuan has responded by moving higher, according to a recent analysis by Zero Hedge. Just look at the chart below:

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If China does spring a 15% devaluation on the already-wound-too-tight leveraged speculating community, the impact should be, well, amusing for sure, but otherwise a little hard to predict, Zero Hedge observed. About the only thing that can be said with near-certainty is that the above chart will have to be updated with much higher left and right axes.

Switch to gold gathering pace: Meanwhile, a Jan. 11 Wall Street Journal story confirmed that the turmoil in Chinas financial markets is increasing interest in gold. Chinas stock-market volatility is driving up the price of gold as investors seeking safety pile into the yellow metal, it reported.

A Hong Kong-based banker whose company is a large supplier of bullion to the region said the switch to gold was gathering pace not only in China, but other countries in the region as well, the newspaper added.

In China it was evident already for two years that the economy was slowing down, contrarian economist Marc Faber recently told Bloomberg. We have a colossal credit bubble in China and how it will unwind we dont know. It may happen through significant weakness in the renminbi, although its not sure. It could also happen through significant weakness in the economy. I would rather be overly cautious on China than be overly optimistic.

Buy low, sell high: Where would Faber turn to weather this uncertainty? All the asset markets like the Titanic will crash, he predicted except for gold. I would also own some gold and gold shares. This is the asset class that is very, very depressed, and where I could see a doubling of prices easily, with a limited downside risk.

With gold still a culturally important commodity and a key means of saving in China, where many members of its increasingly wealthy populace have little experience with stock investing, bullions allure is on course to shine brightly as darkness descends on Chinas overleveraged, debt-fueled equities market and the risks of an even harder landing there escalate.

Silver, gold American Eagle coin sales off to a roaring 2016 start

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After the U.S. Mint logged a record-breaking year for silver American Eagle coin sales and also saw impressive demand for its gold American Eagle and gold Buffalo bullion, 2016 is off to a blistering start as well.

On the very first day of sales to its authorized network of wholesale purchasers, American Eagle silver coin sales jumped on Monday, Reuters reported. The high demand was pretty much expected given the turbulence in the Chinese stock market that has spilled over into U.S. and other markets worldwide.

2.75 million purchased: The Mint announced a weekly allocation of 4 million of the 1-oz. bullion coins, only to sell more than half of them on the first day of availability. The single-day sales tally of 2,756,500 ounces was higher than the entire January total for every year from 1987 to 2009. For proper perspective, the silver Eagle product was introduced in 1986, and the years after the 2008-09 financial crisis saw the Federal Reserve launch massive money-printing programs that helped drive bullion prices to all-time highs.

This past Mondays pace fell just short of last years 2015 kickoff day, when 2,958,000 ounces were sold. Now, just 1,243,500 coins remain for the remaining four days of this week. The almost 3 million sold Monday compare favorably with the 5.53 million ounces that sold in the entirety of January 2015.

 

Meanwhile, gold sales also are off to a great start, with 60,000 ounces of the 2016 gold Eagles being sold and 21,000 ounces of gold Buffalos being purchased. Those figures have bested 2015s opening-day performance, which saw 42,000 American Eagles and 16,500 Buffalos sold.

Call Blanchard for 2016 coins availability: Its too early to say whether the Mint in particular and the world in general will see a repeat of the unprecedented supply squeeze that swept the silver bullion market last year, or whether some or all of the gold Eagle products will sell out, as occurred in late 2015.

However, should the epic demand for precious metals from the first day of sales persist, we are confident that the Mint will run out of gold and silver within a few days, Zero Hedge noted.

Please get in touch with Blanchard and Company for updates on the availability of both the 2016 silver and gold American Eagle coins as well as the 2016 gold Buffalos!

Coin grading: Why CAC matters in todays era of slabbed coins

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By Douglas LePre, Senior Portfolio Manager at Blanchard and Company, Inc.

Over the last 30 years, the coin market has changed dramatically. Initially this market was primarily for collectors who built sets as a hobby there were no grading services and very few auctions where coins sold for six figures, let alone seven. Its truly impressive to see how this market has matured.

One of the more recent additions to the market has been Certified Acceptance Corporation, or CAC. This firm was established in late 2007 by John Albanese, who also founded the Numismatic Guarantee Corporation (NGC) in 1987. The reason I refer to CAC as a recent addition even though it is nearly nine years old is that only in the last three or four years has CACs effect on the market really become apparent.

The two primary grading services, Professional Coin Grading Service (PCGS) and NGC, had not entered the market until the late 1980s, and prior to their existence it was far harder to accurately determine a coins grade or value because grading is a subjective science one dealers MS64 could be another dealers MS63, which could have easily been another dealers MS65.

Oddly enough, prior to the grading services, all of these varying dealers opinions would have had a legitimate leg to stand on because they would each have diagnostics that led them to their conclusion. Its for this very reason that the grading services helped to create a stable market environment for both buyers and sellers.

PCGS and NGC have done for the coin market what PayPal has done for secure online purchases. The grading services have created nonpartisan intermediaries that dont have any monetary interest outside of their service fees, therefore creating a completely objective environment in which coins can be graded.

In their early days, the grading services were very conservative in their grading practices, which makes sense as they were new to the industry and had to be extremely careful as they built their reputations and proved their value to a skeptical market.

Over time, grading standards have matured and established an equilibrium in the current day marketplace, but as most collectors know, there are really pretty MS64 Morgan Dollars and there are unattractive looking MS64s as well. This is where CAC has found its place in todays market as an asset to coin enthusiasts and the industry as a whole.

CAC has created a means of earmarking coins that are of superior quality by using a holographic sticker bearing its initials. Like the grading services, CAC also keeps an updated population report of the coins it has certified as well as offering a means of verification by using the unique data located on every coin graded by either PCGS or NGC. CAC, unlike the grading services, has a system in place that prevents the same coin from being submitted repeatedly with the hope of a recognition of premium quality. Once a coin has been submitted to CAC and doesnt meet their standards, it is earmarked in their system and turned away should it be resubmitted.

When first entering the numismatic market, there were many that doubted the need for such a service, but the market has spoken and proven the naysayers wrong. Today, CAC is considered another layer of pedigree that collectors and investors pursue and prefer to own.

CAC coins generally carry a premium over their non-CAC counterparts, but in the long run CAC coins tend to appreciate better and have a higher liquidation price in the marketplace.

Another noteworthy fact is that CAC adds an additional layer of rarity to already rare coins. For instance, if a coins total graded population is 100 coins, one example represents 1 percent of the entire market. However, if CAC has only earmarked ten of those coins and a collector owns a CAC example, then that one coin represents 10 percent of the superior quality market.

I think you will agree that with the trend in this market having turned toward quality over quantity, CAC can only add value and peace of mind to your numismatic purchases and in the long run make your coins more desirable!

Rare coin market in U.S. worth about $5 billion in 2015, PNG finds

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A major industry group has issued a new eye-popping estimate on the monetary value of the rare coin market in the U.S.

According to a survey of knowledgeable players conducted by the Professional Numismatists Guild, the overall U.S. rare coin market in 2015 was between $4.5 billion to $5 billion, although one expert estimated it at $6 billion.

The amazing thing about the PNG estimate is that it excludes numismatic bullion items and modern coins sold directly by the U.S. Mint, as well as collectible paper-currency notes and world coins. Therefore, were talking about real numismatic items from Americas golden age of coinage (in general, up to 1933 for gold coins and up to 1964 for silver coins), not any sort of modern issues.

Demand for superb-quality, historic U.S. rare coins remained strong in 2015, PNG commented, and by its calculations, a record 17 coins commanded more than $1 million each during the past year, compared with 12 in 2014. Of the 17 $1 million+ coins (most of which Blanchard and Company listed in a Dec. 23 2015 blog post), seven carried green stickers from John Albanese‘s CAC verification service more proof of the value-enhancing capability of the CAC endorsement.

Although the drop in gold and silver bullion prices affected demand for more common collectible coins, the clamor for trophy coins or those that combined historical significance, rarity and superb condition was robust in 2015.

PNG’s findings jibe with conclusions made by some of Blanchard and Company’s numismatic analysts. Senior portfolio manager Douglas LePre has argued that collectors and investors should focus on the ideal of quality over quantity, or focusing on purchasing the rarest coin you can afford, while senior portfolio director Bruce Smith has recommended that numismatists never skimp on pricing or competing for the chance at supreme quality.

With 2016 already having seen its first coin sell for seven figures (the 1894-S Barber dime, for almost $2 million), the new years prospects continue to look bright for ultra-rarities, while the uptick in bullion prices also could lift the market for more common collectible coins if the impressive momentum seen so far has longevity.