GOLD
Gold keeps moving upward! After hitting $1,526.70 per ounce (a five month low) on Wednesday with 253,181 contracts being traded on the CME the buyers and volume have returned. At 11am PDT, Gold is up $15.40, trading at $1,588.20 per ounce on excellent volume. After all the negative news this week it appears that Gold will end the week higher.

The recent increase in the value of the U.S. Dollar versus the Euro and the decline in Gold was primarily caused by a run on banks in Greece and Spain. Let me explain, depositors in Greece and Spain are concerned about the solvency of their banks and the safety of their funds, combined with the possibility of their country leaving the euro-zone and defaulting on euro denominated debt. The respected sovereign credit rating company, Moody’s, Fitch, and Standard and Poor’s continue to downgrade the debt and credit ratings of Spanish and Greek government as well as many of the largest banks. Many of these banks have needed to sell their Gold reserves to meet the currency needs of their depositors.   

SILVER
On Wednesday, we saw Silver hit $26.73 per ounce (a five month low) on heavy volume of global trading. Silver is up $2.00 per ounce from this week’s low (7½%) virtually unchanged for the week. At 11am PDT, Silver is trading at $28.82 per ounce, up $0.80 on the day on average weekend volume

GOLD
Finally, some bullish Gold news today, which has driven up the value (see below.) Yesterday, the market action clearly showed that the Gold market was oversold, with a volume of 253,181 CME June Gold contracts traded and reaching a low $1,526 per ounce, closing at $1,536, holding above the $1,535 key support level. Yesterday’s big question was, are we going to see consolidation around the support level, or will it quickly retrace part of the decline? And today’s rally answered that question. At 11am PDT today, Gold is up $33.20, at $1,572.80 per ounce on very active trading.

QE3 On the Way!
The Philly Fed manufacturing index fell to a minus 5.8% from a positive 8.5% in April, well below expectations. Economists polled had expected the index to increase to 10.0. Reading below zero indicates that more companies are contracting instead of expanding. The new-orders index dropped to -1.2 from 2.7 in April and the employment index, a gauge of hiring expectations, also turned negative. This is one of those important indicators that the Federal Reserve monitors to make a decision on the next round of quantitative easing. QE3 will be unequivocally positive for Gold as it is an inflation hedge.

China Still Number One Gold Consumer
The World Gold Council just reported that China remained the world's top Gold consumer for the second quarter in a row, with its Gold consumer demand up 10 percent to 255.2 tonnes for the first three months of 2012.

Guess Who’s Buying Gold Again?
Prudent Money, with an understanding of Gold's long-term diversification benefits, continues to accumulate Gold as seen in the latest SEC filings. And, billionaire investor, George Soros, significantly increased his shares in the SPDR Gold Trust in the first quarter. Soros Fund Management nearly quadrupled its investment in the largest exchange-traded Gold fund (GLD) to 319,550 shares ($49 Million), compared with 85,450 shares ($13 Million) at the end of the fourth quarter.

SILVER
Silver trading pretty much mirrored what Gold was doing. After reaching an extraordinary low of $26.68 yesterday, the Silver price stabilized above $27 and today actually reached $28.98 before seeing any selling. Right now, at 11am PDT, Silver is up $0.80, trading $28.02 per ounce with excellent volume.

GOLD
Concerns about the ill-liquidity of Greek banks and the possibility of Greece leaving the Euro-Zone and going back to the Drachma is driving depositors to line up to withdraw their money in the form of Euro or U.S. Dollars. Many of the Greek banks are selling their Gold reserves to acquire needed U.S. Dollars and this is causing the price of Gold and the Euro to drop. The Wall Street Journal is reporting that Greek Depositors withdrew $898 Million from Banks Monday, and the situation is getting worse. We have major historical and physical support for the Gold price at $1,500 per ounce. I believe we are very near the end of this short term decline in Gold/Silver. Right now at 11am PDT, Gold is trading at $1,539.60, down $17.60 per ounce on active volume.


SILVER
Silver actually reached $26.68 per ounce early this morning before we saw heavy demand. At 11am PDT, Silver is down $0.90, at $27.22 per ounce on very active trading.

GOLD
Gold is showing excellent support at the $1,550 per ounce price level. Although we have seen heavy selling coming out of the European banks to raise their currency reserves, the buying from Asia at the current low prices has provided the incentive to make sizeable purchases. With the IMF’s Gold purchases (see below) the pressure to sell Gold from insolvent European banks will lessen. Adding to the weakness in the Gold/Silver prices is the strength of the U.S. Dollar versus the Euro, now up for the twelfth day in the row. At 11am PDT, Gold is at $1,557.20 per ounce, down $8.80 per ounce on very heavy trading.  

IMF Buys $2.3 Billion Worth of Gold
After years of selling Gold to help finance developing countries projects, the IMF is now forced to purchase $2.3 billion worth of Gold $(1.5 million ounces) on account of rising global risks. The IMF currently holds around 2,800 tonnes of Gold, but facing increasing credit demand and risk from many Euro-Zone countries, it needs to increase the Fund’s Gold reserves. This announcement comes as no surprise, because many Greek, Spanish and Italian banks are badly in need of Euros and U.S. Dollars and have been selling Gold into the global commodity markets to raise funds.   

SILVER
Trading in Silver this morning has been active, with a low of $27.87 per ounce and a high of $28.56 on excellent volume.  At 11am PDT, Silver is down $0.40, trading at $28.12 per ounce on excellent volume.

PLATINUM & PALLADIUM
Both Platinum and Palladium made new 30-day lows this morning and turned up on excellent demand. Both are trading higher on the day with Platinum up $9.00 at $1,451 per ounce, and Palladium up $10 at $603 per ounce.

GOLD
Gold dropped $25 per ounce on the opening based on negative news from the Euro-zone and a very strong U.S. Dollar versus the Euro. After the initial price drop, Gold demand appeared and Gold rallied up $10 per ounce. Gold has been in a surprisingly narrow $12 trading range from $1554 to $1566 with active trading. At 11am PDT, Gold is down $17.30 per ounce, trading at $1,566 per ounce with excellent demand on volume of CME contracts traded.
 
On Saturday, the People's Bank of China delivered a 50 basis point cut in banks' reserve requirement ratio (RRR), effective from May 18, the third cut in six months and one that investors had called for after data on Friday showed the economy weakening, not recovering, from its slowest quarter of growth in three years.

Last week, it was the election in France that brought in a new socialist president, and this week it’s Germany, where the citizens gave Chancellor Angela Merke’s party a major defeat. In both countries the citizens are voting to reject harsh fiscal austerity policies as their countries are in the midst of a recession. The Euro-zone ministers are seeing major pressure to loosen monetary policies and provide more quantitative easing (print more money) to stimulate the economy, and ease up on the call for austerity.  

SILVER
Silver has followed Gold on the opening, downing to $28.15 per ounce before rallying back. At 11am PDT, Silver is trading at $28.52, down $0.38 per ounce on a normal volume of contracts.

This Market Report provides you with an update on the precious metal markets, and this week I discuss the support and resistance levels for Gold and Silver prices after their recent decline.

GOLD

On Friday gold closed at $1,584 per ounce, down $61.20 (3.72%) for the week on the heaviest volume of trading I have seen in months. Last week was not a pleasant week for precious metal investors.  The question I was asked by investors last week was, “With outstanding supply/demand fundamentals for Gold, how could it break below the key $1,600 per ounce support level?” We believe that there is a major seller in the market. Speculation as to who it is ranges from Spanish and Greek Banks needing Euros and Dollars, to heavy investor liquidation of Gold to meet margin calls or stop loss orders from losses in the global equity, currency, and energy markets.

Gold has major support at the $1,525 per ounce level and that level has shown extraordinary demand twice in the past nine months.  If we see another $60 drop in Gold to $1,525 per ounce, it could clean out the small investors with margin calls and stop loss orders. This is called by professional commodity traders ‘cleaning out the weak hands’ and happens many times before a major up-move starts. However, a sustained rally back above $1,600 for a few days could end this short term selloff.

I want to be very careful not to paint the short term outlook for Gold too bearish since the Chinese economy is still growing at a rate of 9.3%, and the Chinese investors (and their government) are known for becoming aggressive buyers of Gold at bargain prices.  

There is a great article by Julian Phillips on global gold demand available at:

http://www.mintstategold.com/investor-education/dmand_factors_driving_gold/

GOLDMAN SACHS IS BULLISH ON GOLD

With the gold price trading at $1,560 per ounce, Goldman Sachs (a Major Wall Street Bank) stated today that its 6-month and 12-month forecast for the gold price is $1,840 per ounce and $1,940 per ounce, respectively, citing weak US growth and renewed Euro zone risks, coupled with resilient physical demand.

SILVER

An ugly week for the value of Silver, down $1.54 per ounce (5.07%) closing on Friday at $28.89.

After breaking down below $30 per ounce last Tuesday, Silver could not muster the demand or trading volume to recover. On Wednesday we saw the price drop below $29 per ounce, with the market low of $28.44 per ounce on Friday.

For the past eleven weeks of trading, Silver has only had two up weeks. It is definitely in a short term bear trend.  The question is why? The answer is that Silver is caught in an economic nightmare; a combination of deteriorating global growth outlook, weaker than forecast output from China & India, selling in the gold market, and a stronger U.S. Dollar. All of these factors are anti-inflationary and have caused Silver to break the very important $30 per ounce psychological support level last week.

What’s next? Well, hopefully Silver will find support at $28.44 per ounce (last week’s low). But if it breaks down and $28 doesn’t hold,  $27.24 has chart support from 2010, with $26.14 being the December 2011 market low when massive buying appeared.  As for the upside of the silver price, $30 per ounce is the nearest resistance level, followed by $33.28 per ounce, which is the eight week high. 

PLATINUM

Last week with Gold down $61 per ounce, we saw Platinum drop $65, closing the week at only $1,471 per ounce. Platinum’s discount to the price of Gold is currently at an unbelievable $112 per ounce. This provides you with an opportunity to purchase Platinum at a 7 ½% discount to Gold. A discount of this size rarely happens, so last week I increased the recommended investment diversification for Platinum to 15% of your precious metal commitment. 

The Canadian 1oz Platinum Maple Leaf is the most active Platinum trading vehicle, and because it’s our #1 selling Platinum bullion item, we can offer them at only 5 ¾% over spot.  For a current quote on this item please visit: http://www.mintstategold.com/platinum-1/bullion-coins-and-bars/platinum-canadian-maple-leafs.html

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% of investment capital

Diversification:  Gold 50%, Silver 35%, Platinum & Palladium 15%

Diversification includes 50% in long term investment quality rare coins and 50% short term bullion products

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We have looked at central bank gold market demand and showed just what a dynamic force it's becoming, just below the surface of the gold market. It's a relatively price-insensitive force that's strong day-to-day, clearing the market of stock when available. It enters the market in a way that leaves the market relatively undisturbed. But the rest of demand is very different. It's this other demand that will drive the gold price. Some of it is price sensitive, some not. Some is price sensitive in a surprising way. Some simply take up tonnage without being in itself a driving force. There are some forces that have no intention of holding gold for longer than their short-term view persists and then will sell it again. Within the above parameters, it's extremely difficult to define gold demand accurately. The major difficulty lies in the . . . .

GOLD
The value of the U.S. Dollar versus the Euro is up for the 11th day in a row, based on the Spanish bank reforms and other Euro-zone sovereign debt problems.  A stronger U.S. Dollar means a lower Gold price as measured in the U.S. currency.  Earlier this morning, we saw Gold reach $1,572 per ounce (a four month low) based on liquidations to cover European credit and financial market losses. At 11am PDT, Gold is trading at $1,583.30, down $13.70 per ounce.

With gold trading at under $1,600 per ounce this week, there is exceptionally heavy volume of buying during the week on the world’s Gold markets. In June, we will learn which central banks were the buyers. I believe we are seeing a weak hands shake out (margin call and stop loss selling) ahead of a major rally in Gold.

SILVER
The Silver price continues to decline as it takes its lead from Gold. At one point this morning in Asia, Silver traded down to $28.41. Buying appeared late in the Asian trading and rolled into the European and U.S. markets. At 11am PDT, Silver is down $0.34, trading at $28.90 per ounce on normal weekend type volume.

Goldman Sachs Group Inc. (GS) stood by its forecast for a rally in gold this year, saying that the precious metal will advance to $1,840 an ounce over six months as the U.S. central bank embarks on a third round of stimulus in June. “The case for higher gold prices remains in place,” the analysts wrote. “U.S. economic and employment data has now. . . . .

GOLD
In the past 24 hours, Gold has traded from $1,585 to $1,602 per ounce on normal volume. I am concerned that unless Gold can rally above the $1,600 price level by next Monday, that level will start to act as a resistance. Gold is finding more and more support on down days; I am not sure if its sovereign buying, but it is truly massive. I think about the Gold super fundamentals of lower supplies and increasing demand. Remember, the 50 metric tonnes of Gold purchased by the world’s central banks in March and the 79 metric tonnes of Gold purchased by Chinese buyers in the first two months of this year and think the buying must be increasing in April and May with Gold at current price levels. At 11am PDT, Gold is up $1.597 per ounce virtually unchanged from yesterday at the same time.

Goldman Sachs is bullish on Gold
With the Gold price trading at $1,598 per ounce, Goldman Sachs (major Wall Street bank) stated today that its six-month and 12-month forecast for the Gold price is $1,840 per ounce and $1,940 per ounce, respectively, citing weak US growth and renewed euro zone risks, coupled with resilient physical demand.

SILVER
Within the past 48 hours, the Silver price dropped to as low as $28.54 per ounce, but quickly rallied back above $29 per ounce on heavy buying. Today, Silver is showing excellent demand above $29 per ounce. At 11am PDT, Silver is down $0.29 per ounce, trading at $29.24 per ounce.