uploads///US gold coin sales

Will Physical Gold Demand Rescue Gold Prices?

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Aug. 20 2015, Updated 11:06 a.m. ET

US precious metal coin sales surge

As we saw in the last part in this series, the Chinese physical gold buying has risen. In this series, we’ll see if US physical buying is also progressing along the same lines as shown by the US Mint sales of precious metals.

American Eagle gold coin sales rose in July to the highest in about two years. US Mint sold 170,000 eagle gold coins of one ounce each in July. This is 123.70% higher month-over-month and 466.70% YoY (year-over-year). The sales are responding to a steep correction in gold prices in July. As we discussed previously, like Chinese physical gold buyers, Americans are also taking advantage of the five-year low gold prices to stock up on the metal.

The US Mint’s American Eagle silver coin sales also rose in July. US Mint sold 5.53 million ounces of Eagle silver coins in July. This was a rise of 180% YoY and 14.20% month-over-month.

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Physical gold buying supports prices

Strong physical-bullion buying boosts the price of precious metals. Coin buyers are usually the most optimistic. After gold prices fell by 28% in 2013, physical gold buying came to the rescue. US Mint sales rose by 14% in 2013.

The above graphs show the spikes in January 2015. This indicates how much physical gold buying went on in the wake of economic and political uncertainty in the Eurozone and the removal of the currency cap by the Swiss National Bank. The current spike in July is due to the fall in prices.

The current strong physical gold demand in the US and China should support the bullion prices (GLD) (SLV) as well as equities associated with precious metals, including Primero Mining (PPP), Coeur Mining (CDE), Pan American Silver (PAAS), and Agnico Eagle Mines (AEM).

Agnico Eagle Mines forms 4.80% of the VanEck Vectors Gold Miners ETF (GDX).

Precious metals ETFs are large holders of physical bullion, so it’s important to track their buying and selling behavior. In the next part of this series, we’ll discuss precious metals ETFs and their holdings.

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