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Metal Market Report January 2022 - Week 3 Edition

January 2022 - Week 3 Edition

Gold Will Rise Again

Gold maintained its $1,820 starting position (for the year) over the long holiday weekend, buoyed by a dip in the Dollar Index and high inflation numbers.  However, gold opened lower on Tuesday, January 18, at one point dipping to $1,805 before recovering to around $1,815 at the same time silver staged a dramatic +3% jump from $22.80 to $23.50 at 8:30 a.m. EST, on news of rising physical demand.  Thursday morning gold has risen to $1,846.

Meanwhile, the stock market is having a horrible January 2022 so far, with the S&P 500 down almost 4% and the popular tech-heavy NASDAQ is down 7.3% so far in 2022 and down over 10% since Thanksgiving.

Our Regular Mid-Month Dollar, Deficits & Inflation Update

The U.S. Dollar Index (DXY) began the year with a dip, falling from an 18-month high of 96.32 on Thursday, January 6, to 94.79 a week later – a 1.6% decline. This was the dollar’s largest weekly decline in eight months. It was mainly caused by the high inflation numbers released last week. Over the long weekend, however, the dollar index recovered most of the loss; DXY is down only 0.2% year-to-date.

The Federal Deficit for the first three months of FY22 (October 1 to December 31) was better than the previous year, coming in at $378 billion (a $1.4 trillion annual rate).  Receipts rose 31% to a record $1.052 trillion, while outlays rose 4% to a record $1.430 trillion, due to the end of many stimulus programs and the failure of Congress to pass any large new spending packages in the past few months.

The Consumer Price Index (CPI) continues at the highest levels in 40 years. The Labor Department announced last Wednesday that the that CPI rose 0.5% (a 6% annual rate) in December, and the core CPI, excluding food and energy, rose 0.6% (over 7% annually). For the full 12 months of 2021, the CPI rose 7.0%, and the core CPI rose 6.8%, both the largest annual rise since 1982.

The Producer Price Index (PPI) was up even more, rising 9.7% in 2021. There are some indications that producer prices will rise more in the next six months, as the number of containerships sitting idle off the coast of southern California is back above 100, as many crane operators and longshoremen have called in sick due to COVID-19. We also still have a huge chip shortage, pushing used car prices up 37.3% in 2021.

Another inflationary factor over the next three months comes in the form of winter storms ...

Biden’s Energy Policies are a Big Cause of Soaring Inflation

With another big storm hitting the East Coast and Midwest this week – like Texas in February 2021 – we should see energy prices rising.

Here are some U.S. energy price increases in the last 52 weeks – since Mr. Biden was sworn in:

In the year since President Joe Biden took office, the cost of driving a car and heating a home is up 63 % to 88%, and that is a crippling burden to every poor household and most middle-class households, as well.

Heating oil has almost doubled in a year, and it will likely rise sharply in coming weeks as the weather worsens, since inventories have fallen sharply in the past few weeks and OPEC is exporting less oil.

The situation is far worse in Europe, where gas prices have risen 5- to 7-fold since the Green Revolution is even more radical over there, and natural gas prices are up to five times higher in Europe than the U.S.

Now, with the advent of electric vehicles (EVs), the sad truth is that prices are rising for cobalt and lithium for batteries which raises the cost of EVs.

Lithium from China costs over 500% more than when President Biden took office, and cobalt costs have doubled.

Uncertainty, like inflation, has typically helped create an increased number of precious metal and rare coin buyers.  In 2021, we saw a significant increase in new customers buying our products which was very healthy for the overall market.

Many Rare Gold Coin Prices Are Rising

Many dealers have told me that the current market is very active. Dealers are struggling to find product in their areas. These dealers were very optimistic. Their inventories are at lower level than this time last year, and they are all rushing to meet demand. On the rare coin side, many series have escalated in price as we enter the New Year. For over four decades, I’ve contributed to price guides like, The Official Red Book – Dealers Guide Book to United States Coins. The 75th annual (2022) edition is now out. Prices change so rapidly that most consult daily price guides. I was recently talking to the editor of a leading daily price guide, who said that in a rising market like we’ve seen in recent years, it’s hard to keep up, even monthly, with the price changes in many series. He said, “prices change horizontally and vertically across a series,” meaning that prices must change by both date and grade in fast-moving markets. I empathized with him as I have done this job in the past.

Specifically, he was significantly raising prices on some popular series, like the $5, $10 and $20 Carson City gold coins, which have been appreciating substantially, as are most $3 Gold pieces. Many other gold coin prices were being raised at the start of this New Year. I advise customers to find a “trusted dealer who has the experience, reputation and expertise” in rare coins as their source for “current pricing in a consistently hot or cold market.”

Lastly, I am currently working on a new updated fifth edition of my Type II Double Eagle book. My Type Three Double Eagle book won the overall “Book of the Year” from the Numismatic Literary Guild in 2015. This new book should be available by this summer. It is an update of the original books I released between 1996 and 2008.


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