Investing in Gold: A Q&A session with APMEX Director of VIP Services, Peter LaTona

We recently have been hosting a series of Q&A sessions on Facebook and Twitter for our fans and followers to partake in. Previous topics that we have covered were about Investing in Silver and Investing in a Precious Metals IRA.  For this Q&A session, Peter helped answer questions about Investing in Gold. Here below is a recap of that session.

If you like to join us on our upcoming Q&A sessions, make sure you like us on Facebook and follow us on Twitter. We look forward to answering your questions.

Q- Does APMEX utilize any hedging strategies? If so why do their premiums remain so high?

A- APMEX hedges 24/7 when the Precious Metals markets are open.  (Markets close at 5PM Friday ET and reopen on Sunday at 6PM ET). Hedging allows us to lock in prices at the time you place your order. All Precious Metals dealers have experienced unprecedented demand as of late, which has drastically cut into available products. The manufacturers had no way of anticipating this sudden increase in demand. When supplies are low and demand is high, they charge more for their products. APMEX pays more to purchase the products, so premiums go up. APMEX is also paying higher prices to our customers who wish to sell their products to us. It does work both ways.

Q- Do you see a split coming in the way paper and physical Gold and Silver are priced?

A- The paper products (ETFs) claim they correlate to the actual spot prices of the metals. However, the recent drop in spot prices demonstrated that this is not always true. The paper products fell even more than the spot prices. Jim Cramer has always recommended Gold through GLD…He now says buy the physical coins. I do not see how there could ever be a split in how they are priced. They are both based on spot prices.

Q- In your opinion, why has gold dropped so much?

A- Most of what I read says gold dropped because of the paper markets (ETFs). (Speculators) The big hedge funds, who always leverage their purchases, started taking money off the table.  As prices dropped, automatic sell signals hit computers and a snowball effect took place. At the same time, the physical market (Investors) bought at levels we had never seen before.  There is a re-balancing between investors and speculators. The basic reasons for owning Gold as an investment would seem more valid than ever….as a long term investment

Q- Do you see Precious Metals reacting to the over flooded market of Gold and Silver certificates? Do you believe the Silver incident is coming?

A- I do not know if the certificate market is big enough to move the overall market. If you are referring to ETFs, then yes, they definitely move markets. I am not sure what you mean by Silver incident, but I am not seeing anyone predict an explosive move up or down.

Q- Taking into account Gold’s recent volatility and the current economic environment, what are your thoughts as to where Gold is headed in the short/mid-term?

A- I only think of Gold as a long term investment strategy. Many analysts advise that a 4-12% insurance policy should be considered by all. I am not aware of anyone who consistently predicts short term prices with accuracy. Short term becomes more of a bet than an investment.

Q- My local coin dealer says don’t go for 90% junk. Rather go for bouillon bars and rounds. Thoughts?

A- Our customers who believe there could be a time they need real money to buy food, often buy 90%. If purely for investment purposes, I would not disagree with your dealer. Keep it simple and buy 1 oz. coins, rounds or bars.

Q- It reminds me of what happened to Silver a few years ago when it dropped from like $30 to $10 but yet you couldn’t find any physical Silver at $10.

A- Yes, similar for sure. It is not that Gold and Silver are in short supply. The problem is that the manufacturers who make products cannot keep up with demand.

Q- Peter, personal question. What is your personal favorite product, round, bullion and manufacturer?

A- I like the simple Gold & American Eagles. It is just a personal choice, many of my colleagues like Maple Leaf, rounds or bars. If you want rounds I would go APMEX rounds because most of the time they are the best price. They are made by the Sunshine Mint. For bars, I personally like the Pamp Suisse in assay.

Q- Why did the mint suspend production of the 1/10th oz Gold round?

A- I do not know, but I am fairly sure the reason was they were struggling to keep up with production of 1oz. coins

Q- Is there a shortage in physical Silver? I still see people selling plenty of Silver.

A- It is not that there is a shortage of Silver; there is a shortage of Silver products. The manufacturers did not anticipate the buying frenzy. They are struggling to catch up to demand.

Q- Exactly how does the paper futures market effect the Precious Metals market and how much can the price be manipulated through the futures market?

A- This is not an area of expertise for me, but I think of it like this. The future markets allow speculators to place leveraged bets on whether prices are going up or down. Other speculators can monitor the direction of the bets and either jump on board or play the opposite view. The reason it can really move markets is that they control much more Gold or Silver than they actually had to pay for. It is a leverage bet. I might buy a Gold contact at 100 oz. but I only have to put 10% down. The market reacts as if 100 oz. has been sold. Hope this helps.

Q- If APMEX hedges when they make their sale instead of when you purchase from your suppliers, aren’t you basically helping to drive down prices after you have sold your product?

A- it is actually the opposite. If we sell 100 oz. of Gold we buy a futures contract.  If we buy 100 oz of Gold we sell a futures contract. Our goal is to stay neutral.

US Mint Gold Eagle Sales Up 240%

The United States Mint completed the month of February 2013 with a year over year increase from February 2012 in mintage and sales of the 1 Oz Gold American Eagle of 240%, the largest year over year increase in any monthly sales since the financial crisis of 2008. This increase followed the January year over year increase of 47% in mintage and sales of the same Gold coins.

US Mint Monthly Gold 1 oz Eagles

In a similar manner, the United States Mint reported an increase in the mintage and sales of the 1 Oz Silver American Eagle for February 2013 over February 2012 of 126%, the largest increase in sales during the month of February over the same month for the previous year since the financial crisis in 2008. For January 2013, the increase in sales of the Silver coin was 23% as compared to the sales in January 2012.

US Mint Monthly Silver 1 oz Eagles

“The increase in sales by the United States Mint of the 1 oz Gold and Silver coins is evidence of the significant demand for the physical precious metals in the market place. According to the communications with our customers, more buyers are turning to physical Gold and Silver because of concerns over the U.S. Debt and the crisis this huge debt level may bring to the U.S. Economy over the next several years,” stated Michael Haynes, CEO of APMEX.

Weekly Market Recap – February 17, 2012

Though recent movement has tracked currency fluctuations, geopolitical tensions remained a key driver for the price of Gold this week. Lately, Gold prices in the short-term have become more sensitive to moves in the euro/dollar exchange rate. According to one precious metals analyst, “Significant macroeconomic and geopolitical risk and the appalling fiscal state of most major industrial nations means that Gold will almost certainly eke out further gains in all currencies in the coming months.” In a recent letter to investors, noted billionaire hedge fund manager John Paulson said, “By the time inflation becomes evident, Gold will probably have moved, which implies that now is the time to build a position in Gold.”

According to the World Gold Council’s annual report, the demand for Gold reached an all-time high in 2011, largely due to increased buying in China, India and Europe. Marcus Grubb, managing director for investment at the World Gold Council, said, “It is likely that China will emerge as the largest gold market in the world for the first time in 2012.  What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity.” Another significant Gold-buying event covered in the report was the fact that in 2011, Gold purchases by central banks far exceeded purchases in 2010. In 2010, central banks bought 77 metric tons of the yellow metal. In 2011, they bought 440 metric tons, an increase of 471%.

All this week, true to form, as the chances of a Greek bailout improved, the dollar went down while pushing the value of the euro up. Greek lawmakers voted 199-74 at the beginning of the week to pass the austerity measures demanded by eurozone finance ministers. The city of Athens experienced violent protests and rioting in response to the austerity vote. Despite the passage of the measures, the mood in the eurozone was mostly negative, as many pointed to the fact that such measures had been previously agreed to, but were never implemented. The Financial Times reported that some European nations were considering only giving conditional approval for a bailout until they could be convinced that the latest austerity measures will be implemented fully.

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Gold and Silver Prices Down. Is this an opportunity to invest?

As the Greek saga continues, gold and silver prices are sharply down. What does this mean for investors? Does this present an opportunity to invest in gold and silver? To answer these questions and more we hosted a live chat on our Facebook page with Pete LaTona, VP of Sales at APMEX. Pete is responsible for managing the entire sales team.  Below are a few select questions from the chat today.  Head over to our Facebook page to see the full conversation and like us on Facebook to stay informed about upcoming chats.

Q: Do you think gold and silver will continue to slowly drop throughout the day then rebound starting first of the week?

PL: I learned long ago not to try and predict daily fluctuation in prices. Consider what you think gold and silver prices will be 3-5 years from now because you will hold physical gold and silver for at least that long. Based on what you think of future prices, think about whether today’s price is a good price. You cannot time the markets, but if there is news that a deal has been struck with Greece over the weekend we will probably see an increase in prices.

Q: What % of your portfolio is gold and silver?

PL: What is right for me is not necessarily right for anyone else. Jim Cramer says 5% should be gold and you hear everything from 4% – 20%. I say it should not be 0%. Gold is an insurance policy for the rest of your investments. How big of an insurance policy do you feel you need?

Q: What’s are your thoughts on Asia and the Middle East purchasing so much gold over the last two years?

PL: The rest of the world has been buying gold and silver for thousands of years. We are new to this. It is ingrained in their culture that gold is a store of wealth. This will only increase as the Chinese central bank is predicted to try and catch up with the rest of the world’s central banks. According to the World Gold Council, last year China and India bought 48% of the gold purchased.

Q: Do you think the U.S., Japan & Europe will face orderly or disorderly defaults? When? What order?

PL:  I do not know, however, I am concerned. There is a reluctance to accept the facts as to our financial condition and the measures that must take place to fix it. If the U.S, Japan, and Europe were to face defaults gold prices would probably explode, but the world we live in would not be so pleasant. Defaults are a possibility if we continue to do nothing. Doing nothing is a decision and often a poor one.

Q: Are you having any issues maintaining inventories of standard bullion? Is there evidence to indicate shortages?

PL: We are not having issues at this time, but our reach and list of direct suppliers is much larger than most other dealers. There have been occasions in the past couple of years where silver was scarce due to extreme run ups in silver price. It can happen again, but it is not happening now.