Greysheet: PRECIOUS METALS TESTING LOWS

Precious metals have taken a beating lately, as both gold and silver have tested important support levels. Gold has tried to break below the $1,200 level but there has been enough buying support to keep it right at that price, which is the lowest since mid-January. Meanwhile, silver has broken slightly below the $17 level, also the lowest price since January. As of this writing, gold has traded lower for eight consecutive sessions. On a positive note, the last time the yellow metal traded in this pattern-towards the end of last May-it also tested the $1,200 price level and bounced off that to rally all the way to $1,350, which culminated in early July. The spot price also got a bump from a satisfactory February payroll report, as the jobs number came in line with expectations. A statistic that is now in vogue to track, labor participation rate, was also shown to be improving. This bodes well for future discretionary income, some of which of course flows into the coin market.

The next major policy event this month will be the Federal Reserve FOMC meeting, where it is widely expected for the committee to raise the base interest rate. There is now much debate on whether the Fed will increase rates three or four times during 2017. Most market observers agree that, regardless of how many times the rate is increased, balance sheet normalization will not come without some pain. Interest rate increases will certainly put the brakes on the soaring equity market, and there will be much consternation in the bond markets. This presents an opportunity for dealers to begin discussions with their clients to rotate some funds out of the market and into rare coins and/or bullion, especially while the strong dollar is keeping metals prices suppressed.

THIS WEEK’S MARKET

Gold Type:

Type III double eagles and Saint-Gaudens weaker on lower spot prices.

Classic Commems:

We complete our review of this series this week, with a focus on the dated Boone issues. Like last week, most of the activity is in the MS66 and MS67 grades. A few of the better types, such as the Grant w/Star, Hawaiian, and Hudson show some weakness.

Morgan dollars:

We begin a review of this series this week, and overall this market segment is healthy despite the presence of a few minus signs.