The U.S. Mint has resumed selling its 2013 American Eagle One-Tenth Ounce Gold Proof Coin at a hefty $195 per coin as of last week. The Mint has set a 20,000-coin production limit for the coin. Sales of its smallest gold coin was suspended by the Mint in late April as year-to-date demand had increased by more than 118% until inventories could be replenished.
Here are some interesting statistics. So far at close to the half-way point of the year, the U.S. mint has sold more one-tenth ounce gold coins than it did in all of 2012. About 50,000 such coins have been sold thus far for this month, with a total of 350,000 sold so far this year. This compares to total sales of 315,000 such coins sold for the entire year of 2012. The U.S. Mint will continue to limit purchases of the American Eagle one-ounce silver coins. Sales were suspended earlier this year due to record-breaking demand.
Reuters reported Wednesday that the appetite for U.S. American Eagle gold and silver bullion coins is still at unprecedentedly high levels almost two months after the historic sell-off in gold. The U.S. Mint’s acting director told Reuters that the mint is buying all the coin blanks they can get their hands on to fulfill the pent up demand for gold coins unleashed by the decline in price.
The facts above suggest that there is fundamental strength in the gold market. On the other hand, some developments this week hint at its short- and medium-term weakness. Let’s move on to today’s chart section to see how the situation looks like. We’ll start with the USD Index short-term chart as we believe that what has happened on the U.S. currency market is the most important event this week (charts courtesy by http://stockcharts.com).
The reason for this is the price action seen on Thursday when the index declined sharply, pulling back a bit before the session closed to end the day very close to the level of the May low. In fact, it is possible that we have seen the final bottom for this correction. The breakdown which we see here below the rising support line was so dramatic that it just might be the decline that the breakdown was supposed to generate.
The most important and interesting implications are seen when we look at the reaction of the precious metals to Thursday’s decline in USD Index. Specifically, it is the lack of reaction in these markets that is most striking, even though the dollar index declined by about 1.5 index point and closed the day about 1 point lower. A huge rally in gold, silver, and the precious metals mining stocks would normally accompany such a significant move in the USD Index (say, a $30 - $50 rally in gold), but barely any move to the upside was seen. This is a very bearish indication for the precious metals sector.