Gold Bearishness Is Rooted In Sentiment Not Fundamentals

Friday, January 29, 2016

gold bullion

Gold has been on a bearish trend for years! Unfortunately, since 2011, the value of the yellow metal has fallen dramatically. However, I've done a bit of research on the precious metal, and I have to say, what I found was incredibly interesting. The bottom line here is that the decline that we've seen in gold is not caused by fundamentals. Instead, it's caused by sentiment. The reality is that sentiment changes, and when that change happens, gold is going to skyrocket! The reason for my opinion on this really revolves around gold bullion.

The Key Here Is The Bullion

Gold bullion coins are printed by the United States Mint, and there's a very interesting story behind them. It all started in the early 1980s. At this time, national coins in South Africa, known as the Krugerrand was incredibly popular. So popular in fact that the United States didn't want to be left out of the trend. So, in 1985, the United States started the Gold Bullion Coin Act of 1985. Under this act, the United States mint was required to start producing a wide range of 22 karat gold coins. These coins were printed in denominations of the troy ounce including one, one half, one quarter, and one tenth.

Sure, the story above is interesting, but it doesn't prove that the bearish trends on gold ignore fundamental data, or does it? This is where things get very interesting. Under the act, the gold coins were to be created using, and I quote, “gold mined from natural deposits in the United States, or in a territory or possession of the United States, within one year after the month in which the ore from which it is derived was mined.” OK, now we're getting somewhere.

That's not all, the more important part of the story is the amount of gold-bullion coins that were to be produced. The act states that the gold-bullion coins must be produced “in quantities sufficient to meet public demand”. So, not only does the production of these coins tell us the supply of natural American gold, it also tells us a bit about demand for the precious metal in the United States.

So, What Does US Mint Sales Tell Us About Gold

On December 31st of 2015, the United States mint made a very big announcement. It stated that in the year 2015, gold-bullion coins were essentially flying off of the shelves. In fact, in the year 2015, the US Mint saw an increase of 53% in sales of the gold-bullion coins over 2014. That's incredible! This tells us that demand for physical gold climbed at an astronomical rate in 2015! Believe it or not, this trend isn't changing. In fact, the US Mint stated that demand for gold is still climbing. In fact, on the first day the new 2016 gold eagles were offered, the US Mint sold about 60,000 ounces of the coins!

The Bottom Line

The bottom line here is that if you want to know anything with regard to gold's demand, just look at the mint. By doing so, you take out the confusion caused by gold futures, gold etfs and other forms of paper gold. When looking at data from the US Mint, it's clear that gold's demand is climbing, and for good reason. After years of declines, gold is trading at an incredibly low price. Not to mention, now is a great time to get in on the trends. Considering bearish outlooks for the market and the global economy throughout the year 2016, it seems as though sentiment is going to change, and when the investors look at the fundamentals, gold is going to climb!

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report,, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at [email protected].