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The Mike Fuljenz Metals Market Report
The Mike Fuljenz Metals Market Report

January 2012, Week 4 Edition (Published by Texas Coin Company Universal Coin, an Award-Winning Gold and Rare Coins Dealer)

Last Friday in New York, precious metals surged well above their London closings to reach $1667 gold, $32.20 silver and $1540 platinum. On Monday, January 23, Gold is up another $10 to $1677 as of noon (EDT), partly in celebration of China's New Year's Day (see below). Silver is up to $32.40 and platinum us up $24 to $1560. Stocks are also having their best January since 1997, based on strong growth in Asia, rising growth in the U.S., lower inflation numbers and a temporary abatement of financial fears in Europe.

  • Gold 52 weeks ago (January 24, 2011): $1343
  • Gold's average price during 2012: $1633
  • Gold's London Low for 2012: $1590 on January 3
  • Gold's London High for 2012: $1664 on January 19

Last Week In Metals: In their third-straight rising week, silver and platinum rose 2.5%, stocks rose 2.1% and gold rose 1.1%.

Happy New Year! China Begins the "Year of the Dragon" This Week

Monday, January 23 marks the first day of China's Year of the Dragon. In the Chinese zodiac, the years named after animals (mythical or real) fall every 12 years. The Year of the Dragon has particular significance in a nation which reveres the dragon symbol. The most recent dragon years were 1964, 1976, 1988 and 2000.

In preparation for the dawn of the Dragon this year, demand for gold in China has been rising over the last three months. Last November, the latest month for which we have records, China imported a record 100+ tons of gold. A key way of measuring China's gold imports is the total shipments of gold from Hong Kong to mainland China. That totaled 102 tons in November, a 20% increase over October and six times the purchases of November, 2011. This means that China is still in the gold-buying mood, even though Beijing has temporarily limited the number of retail gold shops in China.

Gold Mining Operations are Being Resisted in Peru and Other Lands

It's amazing that China imports any gold at all, considering that they are the leading gold-mining nation on earth, digging up 391 metric tons last year, over 15% of all gold mined on earth in 2011. It's a safe bet that the Chinese don't place too many environmental or worker-safety constraints on their gold-mining operations, but a lot of the rest of the world does. There are already strict and well-established regulations in the 2nd and 3rd leading gold producers - the U.S. and Australia - while regulations in Canada have pushed that nation down in the list of global gold producers. In response, many Canadian-based miners have turned to Third World nations to ply their trade, places like Peru, Ghana, Indonesia and Uzbekistan:

Top 10 Gold Producers in 2011 (by metric ton)

China 391 15.6%
Australia 298 12.0%
United States 261 10.4%
Russia 220 8.8%
South Africa 209 8.4%
Peru 165 6.6%
Canada 121 4.8%
Ghana 110 4.4%
Indonesia 110 4.4%
Uzbekistan 99 +29.24%
+All Others 516 20.6%

In recent years, as we have written here, there has been backlash against the raping of primitive soil for gold, especially in the Peruvian rainforest. Smithsonian magazine featured an article on "Gold Fever" in their February 2012 issue. The subhead encapsulates their view: "Rapacious mining to satisfy worldwide lust for the precious metal is destroying pristine rainforest in the Amazon." The 10-page article focuses on Peru, the world's sixth largest gold producer, where most of the mining (90% or more) is done illegally. In Peru, over 100 square miles have been razed by gold miners burning the forest and "stripping away the surface of the earth, perhaps 50 feet down. At the same time, miners are contaminating rivers and streams, as mercury, used in separating gold, leaches into the watershed. Ultimately, the potent toxin, taken up by fish, enters the food chain." Deforestation, they say, has grown six-fold from 2003 to 2009.

The scientists and local activists have a point. For decades, the "gold bug" community has actively funded and otherwise supported the exploration and development of new mines "at all costs".

Some common-sense restraints on gold mining would also help those of us who own gold coins and gold bars today. Since gold is becoming ever scarcer, more men will take more risks to find gold, especially if the price exceeds $2000 per ounce. Deep exploration and chemical extraction of gold may cost the earth and the nearby human settlements dearly, as the price of gold rises. With all the easy gold being already above ground in the form of jewelry, coins, bars and industrial uses, perhaps some common-sense local regulations against despoiling their neighborhood will mean that gold becomes even more rare, and more costly.

Gold Rush Memories: "I Left My Heart in San Francisco"

Last Sunday, the NFL's San Francisco 49ers lost narrowly in overtime to the New York Giants. There is a historical parallel lurking in that outcome. For another spooky co-incidence, consider that it was exactly 50 years ago today, January 23, 1962, that Tony Bennett recorded his mega-hit, "I Left My Heart in San Francisco." He could have been referring to the first California miners, John Sutter and James Marshall.

On January 24, 1848, James Marshall discovered gold on John Sutter's mill at the junction of two rivers, the American and Sacramento Rivers in present-day Sacramento. But Sutter and Marshall were unable to profit from the gold or defend their claim against thousands of 49ers raiding their land. Both died broke.

Rare Coin Funds Impact Early 2012 Coin Market

Not since the late 1980s has there been so much chatter about the impact of rare coin funds on the market. While these funds were an important factor in the remarkable market gains from 1988 to 1990, they weren't the only factor. I will be closely monitoring some of these funds to see if they raise the capital they expect. If they do, the old adage, "a rising tide raises all ships," may apply.

That was certainly true when I was involved with the Kidder Peabody fund during their record 1989 auction purchase of the Dexter specimen 1804 dollar for $990,000. I later helped sell that coin for well over a million dollars. The 1804 dollar is considered the "Mona Lisa" of coins. Similarly, in early 2012, rare gold and copper coins set impressive price records in private and auction sales of well over a million dollars each.

Important Disclosure Notification:
All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Publisher's knowledge at this time. They are not guaranteed in any way by anybody and are subject to change over time. The Publisher disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein. Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability. All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions. Arbitration: This company strives to handle customer complaint issues directly with customer in an expeditious manner. In the event an amicable resolution cannot be reached, you agree to accept binding arbitration. Any dispute, controversy, claim or disagreement arising out of or relating to transactions between you and this company shall be resolved by binding arbitration pursuant to the Federal Arbitration Act and conducted in Beaumont, Jefferson County, Texas. It is understood that the parties waive any right to a jury trial. Judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. Reproduction or quotation of this newsletter is prohibited without written permission of the Publisher.

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