Physical Gold Demand Bids Up Common $10 and $20
By Patrick A. Heller
"Bailout" to benefit Wall Street that was signed
into law late last week has done nothing to
stabilize the global financial markets.
In fact, financial markets are declining around
the world. Last week, when the government of
Ireland announced that it would guarantee all
account balances in the nation's banks, German
Chancellor Merkel initially attacked the action.
The next day, Merkel announced that the German
government would guarantee all accounts in its
banks. Greece has also announced a guarantee of
all accounts in that nation's banks.
On Monday this week, stock markets around the
world fell anywhere from 4 percent to 15
percent. The Dow Jones Industrial Average hit
its lowest level in four years.
To help support the U.S. dollar, foreign central
banks have loaned the U.S. government hundreds
of billions in the past few weeks. By absorbing
U.S. debt, the central banks have helped prop up
the value of the U.S. dollar and also
artificially held down U.S. interest rates. As
soon as some of the "bailout" funds are
released, a lot of this debt will return to the
United States. The ultimate effect of this
returned debt will be to knock the value of the
U.S. dollar down so quickly that there is a
significant risk of a complete collapse.
These foreign banks will not be safe simply
getting rid of U.S. dollars. Pretty much all
paper currencies are at risk of significant
drops in their values. So, as the foreign
central banks cash in these "markers," expect a
substantial amount of the funds to be used to
purchase gold and silver.
In effect, almost as soon as any funds are
released for the "bailout," the U.S. dollar may
be doomed, other currencies could also be
crushed and gold and silver prices could explode
Gold and silver coins and ingots are almost
non-existent anywhere in North America, Europe,
the Far East and Australia. Premiums on what
merchandise can be had are far higher than
commodity market prices.
Banks in Europe, if they can find any, are
willing to pay 10 percent to 15 percent over
gold spot to buy Krugerrands or sovereigns. In
the United States on Monday, some dealers were
bidding well over 30 percent over intrinsic
value to purchase immediate delivery silver
coins or ingots. There are many reports of
retail buyers paying more than double silver
value to acquire U.S. silver American Eagles in
Partly in response to the lack of availability
of gold bullion-priced coins and ingots, several
buyers are purchasing common-date U.S. $20 and
$10 gold coins in all grades. Prices are up
sharply in the past few weeks, as much as 25
percent to 30 percent in some instances, with
supplies dwindling rapidly.
As difficult as it is to find and purchase
physical gold and silver now, I expect it to get
much worse in the next few days and weeks.
Effective Jan. 1, 2009, the Australian
government is imposing a requirement that
sellers of gold coins and ingots must keep
records on purchasers to have available for
reporting to the government. This is even more
onerous than the regulations for Section 352 of
the U.S. Patriot Act. Section 352 regulations
require most U.S. coin and bullion dealers to
obtain positive identification of buyers and
sellers of physical precious metals (above a
threshold amount), and keep this information
available to show to the Internal Revenue
Service on demand. In these turbulent times,
expect even more worldwide government reporting
requirements and restrictions on owning gold and
silver transactions in the near future.