Grass Valley Buys 12 Times more Gold than National Average

(Cashforgold rips off the American Public, paying 41% of spot)

Silver Stock Report

by Jason Hommel, November 9th, 2009



The US Mint is on pace to produce just over 1 million oz. of gold Eagles this year, for just over 300 million Americans.  The last time the US Mint produced so much was before the year 2000 due to the Y2K scare.  The current Minting pace works out to be just under 1 gold Eagle sold per year for every 300 people in the nation.  That would be 100/year for a small town of 30,000 people. 

In our first two months of business at the JH MINT, we have sold about 100 gold eagles per month, for our area of 30,000 people, which is 12 times higher than the national average.  (90 in September, 112 in October).  Our local gold buying customers are very smart.  They know the historical importance of gold, and they are well aware of current market conditions such as the excessive short selling by banks that can only be discovered if you search heavily on the internet, such as can be found in this excellent overview of the gold market by Chris Powell, "Gold suppression is public policy and public record, not 'conspiracy theory" here: http://gata.org/node/8001

Why did we sell so much?  A better question might be, why does America buy so little?

Last week, India bought 200 metric tonnes of gold from the IMF, which is 6.4 million ounces.  How does that compare to US Gold Eagles sold?  The million one-ounce Gold Eagles that America bought is only 31 tonnes, 1/6th the amount that India bought.

For about ten years running, the Indian public used to buy an average of 800 tonnes per year.  But in 2008 it was down to about 675 tonnes, and is now down to 250 tonnes so far for Calandar year 2009, to add to India's central bank purchase of 200 tonnes.

Likewise, the American public also buys more gold than just Eagles, but not very much.

At the JH MINT, and our other coin Shop, over half of the gold sold to the public is in the form of Gold Eagles.  All other forms combined, such as Kruggerrands, Maples, Philharmonics, Gold bars, and foreign gold coins, are less than half of Gold Eagle sales. 

Thus, I think it's a fair assumption that Gold Eagle sales for the US Mint represent well over half of the gold purchased in America.   

This assumption would exclude all forms of paper gold, such as gold certificates, gold pools, gold futures, gold options, gold accounts, gold ETFs, and all forms of paper gold that don't typically result in any movement of any real physical gold, but only represent some kind of gold liability.  In our view, this kind of paper gold no more represents the real gold market than do paper dollars that used to be a valid form of gold liability.   This would also exclude gold jewelry, as that kind of gold is not suitable for investment.  This also excludes trading of old gold, since the net in any such trade would be zero.

The kind and type of physical gold sales at the JH MINT, and our other coin Shop, combined with the sales totals of the US MINT, imply that American investors buy less than 2 million ounces of new physical gold per year, out of the 80 million ounces produced by the world's mines each year.

Those 2 million gold ounces bought in the USA can be worked out as a percentage of Gross Domestic Product, GDP, which, in the USA, is $14.4 trillion.

America spends 00.013% of annual wealth (GDP) on less than 2% of the world's annual gold production.  In contrast, India is spending 1% of their annual wealth (GDP) on 18% of the world's annual gold production.

To put it another way, the median household income in the USA is $50,233, and  buys, on average, $6.53 of gold per year.  While in India, the per capita income is $1,016, and that person buys $10.16 of gold.

The per household numbers are a good way to put it into perspective, but they are somewhat misleading, since nobody spends $6 on a gold investment since a typical one troy ounce coin costs well over $1000.
 
The average gold purchase at the JH MINT far exceeds $1,500, which is the price level to get the California excemption from sales taxes on bullion.  The average gold purchase is probably well over $6000.  That implies that less than one household in 1000 is acting to protect themselves with gold.  Or, again, stated another way, what this means is that 99.9% of people in the US buy no gold at all.

The implications are clear, and important to note. 

Gold prices are not "sentiment driven," not by US investors, anyway.  And those who claim that it is "sentiment driven by Americans," are misleading people, because there is 0.01% sentiment for gold in the USA.  Those who claim that sentiment is a factor in the gold price seem to be suggesting that 1/3 or 1/2 of all American investors are swinging into gold and out of gold on a regular basis to affect the price.  The truth is vastly different.  Gold is completely off the radar screen of 99.9% of Americans.

In the gold market, 99.9% pure gold effectively means "100% pure".  There is no real way to get gold significantly more pure than that.  Some refiners sincerely question whether it is possible to even make .9999 gold, or if that is merely marketing hype.  In other words, in gold terms, if 99.9% of Americans don't own gold, then America is "100% purely out" of the gold market.

Imagine what gold prices will do, as even 1-2% of American wealth starts to buy gold, as is sure to do at some point.  After all, at least some prudent Americans will move to protect their dollars from inflation.

Well, we don't have to imagine, we can calculate it to get a rough estimate.  One percent of $14.4 trillion is $144 billion.  In a gold market that sees annual production of 80 million oz., such buying could double or quadruple the price, depending on how tight the market gets from competition from other nations buying.  $144 billion / 80 million = $1800/oz.

If another tripling of the gold price attracts even 2% of American wealth into the sector, as Americans like to jump on trends, that would be $288 billion, and in that way, the gold price could easily start to run away well beyond $3,600 per oz.  ($288,000 million / 80 million oz. = $3,600), especially when other, poorer nations, such as India, are already buying about 6 times more gold than Americans.

You should buy gold.  Call the JH MINT today at (530) 273-8175

We are buying gold, too, like Cashforgold does.

Cashforgold in the Roseville Galleria Mall (GoldRushStores.com) was paying $13 per pennyweight for 14k gold on the weekend of Nov. 7-8, when gold was about $1097/oz..  1 troy ounce = 20 pennyweight.  14k gold is 14/24 = 58.3%  58.3% of $1097/oz. is $640.  Cashforgold offered $13 x 20 = $260. Cashforgold offered $260/$640 = 40.6%.  Cashforgold is a rip-off.

We pay at least 60% of the spot price for all scrap gold, and up to 85% of the spot price if the gold is over 5 total gold ounces.

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Figures and sources:

US Mint Gold Eagle 2009 Sales Totals:
2008:  860,500 oz.;
2009: (Jan-Nov.  1,098,500 oz.)
http://www.usmint.gov/mint_programs/american_eagles/index.cfm?flash=yes&action=sales&year=2009

USA Population: 308 million, as of Nov, 2009
http://www.census.gov/population/www/popclockus.html

World annual gold production: 80 million oz.
http://www.dailyfutures.com/metals/

USA GDP: $14.4 trillion
http://en.wikipedia.org/wiki/Usa_economy

India GDP: $1.2 trillion
http://en.wikipedia.org/wiki/Economy_of_India

India annual gold imports: 250 tonnes + 200 tonnes by India's central bank.
http://www.stockwatch.in/india-s-gold-imports-decline-63-23584
http://www.lewrockwell.com/rozeff/rozeff319.html

450 metric tonnes = 14,467,836 troy ounces
http://www.google.com/#hl=en&source=hp&q=troy+ounces+per+450+metric+tonnes&aq=f&aqi=&oq=&fp=db658cc5049dc510

14,467,836 / 80,000,000 = 0.18084795  = 18% of world gold production.

14,467,836 x $950/oz. = $13,744,444,200

$13,744,444,200 Dollar value of Indian gold bought / $1,200,000,000,000 Indian GDP = 0.01145 x 100 = % of Indian GDP spent on gold.

JH MINT Estimates gold sales are over 1/2 as Gold Eagles, so total American gold consumption is under 2 million oz.

$2 billion USA Gold bought / $14.4 trillion GDP =  2 / 14,400 = 0.000138888889 x 100 = 0.013% of USA GDP spent on gold.

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I strongly advise you to get real gold and silver, at anywhere near today's prices, while you still can.

See the JH MINT, and some of our gold inventory, at Youtube here (we also now have Gold Buffalo 24k coins):

http://www.youtube.com/watch?v=9-ocXNbdEeU