Gold and precious metals - lots of news

A lot of interesting things have been happening in the precious metals world during the past few days. Here's my selection.

Eric Sprott launches yet another physical gold ETF:

(Marketwire - May 25, 2010) - Sprott Physical Gold Trust (TSX:PHY.U)(NYSE:PHYS), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, announced today that it plans a follow-on offering to the public (the "Offering") of 18,000,000 transferable, redeemable units of the Trust ("Units"). As part of the Offering, the Trust expects to grant the underwriters an over-allotment option to purchase up to 2,700,000 additional Units.

(Reuters) Sprott Physical Gold Trust said on Wednesday it had priced a follow-on offering at $11.25 per unit, pulling the price of its traded units down by 7.1 percent to sit just above the offer price.

Sprott Asset Management, known for its gold-focused mutual and hedge funds, launched the trust -- essentially an exchange-traded fund -- in February to cash in on increasing investor appetite for direct investment in the metal.

The trust raised $443 million in the initial offering, and the secondary offering will result in gross proceeds of $243 million, rising to $279 million if an over-allotment is exercised.

Greeks rush into a gold buying frenzy and have to turn to the black market because the government has imposed restrictions on gold purchases:

(Coin Update) Since 1965, the Greek government has imposed restrictions on trading British Sovereign gold coins (gold content .2354 oz).  Despite those restrictions, the Bank of Greece reports that it is selling an average of more than 700 coins per day to worried Greeks.

In the first four months of 2010, the Greek central bank sold more than 50,000 sovereigns at its main downtown Athens office.  Bank officials estimate that at least 100,000 other coins changed hands on the black market.  The Bank of Greece has received as much as $409 per coin, which works out to a price of more than $1,700 per ounce of gold! Prices paid on the black market are reckoned to be even higher.

The GLD ETF needs to expand its number of shares to allocate for massive influx of money.
GLD Files 239.3 Million Shares Shelf, Opens Purchase Capacity For Up To $28 Billion More In Gold

World Gold Council reports record sales of gold coins around the world:

Currently, European gold investment demand is exceptionally strong, especially from German and Swiss investors. This is mainly attributable to concern over public debt levels in the Eurozone and the potential inflationary impact of the European Central Bank’s (ECB) announcement of a US$1tn (€750 bn) rescue package to purchase Eurozone government bonds to address the Greek debt crisis. In the USA, American Eagle gold coin sales volumes have surged as concern over the Eurozone debt crisis has spilled over into US. The US Mint reported that sales of gold coins were double their usual rate during the week commencing 3 May 2010.

IMF sells some gold, Russia has been a net buyer (via Zero Hedge)

The IMF has announced its gold reserves declined to 2,966.4 in April from 2,981.5 tonnes in March, a 15.1 ton decline. And while the IMF sold well over half a billion worth of gold in April, Russia was once again taking advantage of what some are calling firesale prices, bulking up its gold holdings by 5 tonnes, which increased from 663.7 to 668.7. Russia has now been adding gold every month since February. As has long been known, in 2009 the IMF announced it would sell 403.3 tonnes of gold, of which 212 was purchased in prearranged deals by India, Mauritius and Sri Lanka. This means the IMF, after accounting for all disclosed sales, has 152.1 tonnes of gold left to sell from its original quota. Bloomberg discloses who has been doing the most buying recently: "Central banks and governments added 425.4 tons last year to 30,116.9 tons, the most since 1964 and the first expansion since 1988, data from the World Gold Council show. Official reserves may expand by another 192 to 289 tons this year, according to CPM Group, a research and asset-management company in New York." Keep your eyes on Russia: "Russia’s central bank bought 142.9 tons of gold last year, raising its holdings of the metal by 29%, RIA Novosti reported last month, citing Bank Rossii’s annual report submitted to parliament."

US mints are not able to produce enough coins to satisfy the current enormous demand, they have to halt production of other products.

(Reuters) - The U.S. mint sold 190,000 1-ounce American Eagle gold coins in May, the largest number since January 1999, and the most in any month so far in 2010, according to a spokesman for the U.S. agency.

(USMint.gov) Production of United States Mint American Eagle Silver Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Silver Bullion Coins. Currently, all available silver bullion blanks are being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins “in quantities sufficient to meet public demand...”

The United States Mint will resume the American Eagle Silver Proof and Uncirculated Coin Programs once sufficient inventories of silver bullion blanks can be acquired to meet market demand for all three American Eagle Silver Coin products.

Update: Due to the continued, sustained demand for American Eagle Silver Bullion Coins, 2009-dated American Eagle Silver Proof Coins will not be produced.

1. American Eagle Gold Proof Coins:
Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand...”

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.

Update: Due to the continued, sustained demand for American Eagle Gold Bullion Coins, 2009-dated American Eagle Gold Proof Coins will not be produced. 

2. American Eagle Gold Uncirculated Coins:

Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand...”

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.

Update: Due to the continued, sustained demand for American Eagle Gold Bullion Coins, 2009-dated American Eagle Gold Uncirculated Coins will not be produced.

Platinum and Palladium ETFs need to expand dramatically in order to satisfy investors demand.

(Index Universe) ETF Securities, the money management firm that has made a name for itself as a purveyor of precious metals ETFs, expanded the number of shares available for purchase on both its platinum and palladium ETFs amid robust demand for each.

The company raised the number of the ETFS Physical Platinum Shares ETF’s (NYSEArca: PPLT) shares not yet purchased to 11.22 million. It initially filed to offer 4.78 million. The increase was effective May 26, the company said in a press release. It first filed with the Securities and Exchange Commission to raise the number of shares in late April.

The company meanwhile raised the number of registered shares of its Physical Palladium Shares ETF (NYSEArca: PALL) to 18.8 million. The company originally filed to sell 12.88 million shares. The change on the palladium fund was also effective on May 26, and its initial SEC covering the request was in late April as well.
[...]
In markets as small as these, some analysts are concerned that PPLT and PALL could potentially move the prices of the underlying metals they track. As of June 1, PPLT currently holds just over 334,000 ounces of platinum (equivalent to 3.35 million shares), equivalent to roughly 6 percent of total 2009 platinum supply and 117 percent of last year's surplus.

Likewise, PALL holds about 788,000 ounces of palladium (equivalent to 7,900,000 shares), or 11 percent of total 2009 global palladium supply and 104 percent of last year's surplus.

All these news are excellent ones for a gold bug and hard currency advocate like me. It's also a bad news for governments and central banks: it's a clear proof of the public's unwillingness to trust them and their demise is getting closer and closer.

That said, gold sentiment is extreme: a correction will happen, and it's not going to be a minor one.

(Trader’s Narrative) [...] there is nary a whiff of inflation anywhere but we find gold close to its multi-decade high. And gold sentiment is running at a euphoric 98% (according to the Daily Sentiment Index).