Neils Christensen Tuesday June 06, 2017 14:29
(Kitco News) - U.S. Mint sales data show gold bullion demand is seeing its weakest first half in 10 years, but one analyst expects sales to pick up in the second half of the year as consumers adjust to stable prices.
As of the end of May, the U.S. Mint reported sales of 172,000 ounces of gold in various denominations of American Eagle gold bullion coins, a decline of almost 51% compared to 351,000 ounces of gold sold in 2016.
In an interview with Kitco News, Maxwell Gold, director of investment strategy at ETF Securities, said that coin sales are highly price sensitive so it is not surprising that bullion sales have struggled as gold has rallied almost 13% since the start of the year. Tuesday, August gold futures hit a seven-week high, last trading at $1,295 an ounce.
“A lot of retail investors are on the sidelines right now waiting for a better entry point,” he said. “If we see prices stabilize between $1,250 and $1,300 an ounce, we could expect to see a resurgence in coin sales.”
Despite the weak sales numbers, Gold said that this one sector of the market has limited impact on overall prices. Institutional investor demand will continue to be the biggest driver of prices going forward, he added.
The main catalyst for gold and bullion coin sales are Federal Reserve interest rate hikes, said Gold. CME 30-Day Fed Fund futures are pricing in a 96% chance of a rate hike next week. However, the outlook after the June meeting remains highly uncertain. Markets are pricing in a less than 50% chance of a third rate hike by the end of December.
“A slower pace of interest rate hikes and higher inflation could push gold to last year’s highs,” he said.
It isn’t just the U.S. Mint that is seeing weaker sales so far this year. For the first quarter of 2017, the Royal Canadian Mint reported a 1% drop in bullion sales. The Canadian mint sold a total of 208,300 ounces of gold in the first three months of the year, down compared to 210,600 sold in the first quarter of 2016.