Weekly Market Report 5/2/16
Links to recent informative articles on precious metals and rare coins:
Dollar Down, Equities Down, Gold Up, Silver Up More
Why Platinum is Overtaking Gold this Year
Silver May Touch as High as $20 an ounce in Near Term: Deutsche Bank
Using Gold to Combat Currency Debasement
Gold
What is the future outlook for Gold & Silver Prices?
Gold’s 12 Most Bullish Fundamentals
Silver
Rare Coin Market Update
Recommended Investment Commitment and Diversification
Gold closed last Friday at $1,290, up $60 for the week and up $230 (21.71%) since the beginning of 2016. Gold reached a high of $1,299 per ounce in late trading last Friday on over 250,000 hundred ounce June contracts, the highest volume of the week, and the highest price in over a year. At that point, many professional traders took short term profits going into the weekend. Friday, was just the first test of Gold’s $1,300 per ounce resistance level.
Last Wednesday, when Gold clearly broke above the key $1,250 support/resistance level, the professional traders and fund managers became aggressive buyers. Then, on Thursday, the U.S. Commerce Department announced that the U. S. economy has expanded at the slowest pace in two years. This news clearly confirms that interest rates aren’t going higher and Gold/Silver prices should continue to be very bullish.
The positive sentiment in the global Gold markets is picking up momentum and Gold should move above the $1,300 per ounce resistance level this week. Many analysts, mutual and hedge fund managers are raising their 2016 prediction from $1,400 to $1,500 per ounce.
Today: Gold had its 2nd attempt at breaking above the important $1,300 per ounce level. In early European trading Gold reached a high of $1,304 based primarily on a weaker U.S. Dollar. Then trading volume picked up and Gold sold off, moving back to $1,290 before finding sizeable buying.
What is the future outlook for Gold & Silver Prices?
Since the beginning of the year, I have spoken with and emailed many clients about adding to their Gold and Silver holdings. A good number are happy they took my advice and a fair number wanted to wait for lower prices. Why? Because Gold/Silver has been in a downtrend since 2011 and waiting for a lower price has been a good strategy for five years.
I believe that the downtrend in Gold and Silver prices ended in 2015 and we will see new all-time highs within the next few years. Gold started the year at $1,060 and last Friday Gold closed at $1,290, an increase of $230 (21.71%) in just four months. Silver started the year at $13.77 and last Friday Silver closed at $17.81, an increase of $4.04 (29.51%).
Is this year’s increase in the Gold & Silver price impressive? Yes, but, remember that Gold reached $1,920 per ounce on Sept 6th 2011, and Silver reached $49.84 per ounce on April 25th 2011. I believe, based on the current fundamentals (shown below), that there is no reason why Gold/Silver will not trade above their 2011 highs within the next few years. That means you have a potential increase in Gold of $630 and $32 in Silver, substantially higher than you have seen already seen in 2016.
What do I believe are the best physical investment Gold and Silver bullion products?
Gold: Pre-1933 U.S. and European low premium mint condition Gold coins.
Silver: Mint Condition U.S. Morgan/Peace Silver Dollars & 1 ounce .999 Silver Trade Units.
Why do I recommend the above items? I believe these Gold/Silver items offer the best possible increase while offering excellent privacy and liquidity.
Gold’s 12 Most Bullish Fundamentals
- Physical demand for Gold and Silver investment products is at the strongest level in years. Many world mints report record 2015 sales for bullion coins and are showing double digit percentage increases this year.
- Worldwide interest rates are at historic lows, with nine major countries quoting negative interest rates.
- Global quantitative easing (money printing) in the U.S., China, Japan and Europe is increasing debt at an unbelievable rate. The U.S. National Debt has passed 19 trillion.
- The World Gold Council is reporting mine production falling dramatically as the cost of production goes higher.
- Central banks continue to trade their U.S. Dollars for Gold, thus building their Gold reserves.
- Stockpiles of Gold in depositories continue to drop, filling heavy physical demand. This could soon cause a short squeeze on sellers of Gold.
- ETF Gold investors have been aggressively buying in 2016, with GLD holdings up 162 metric tons since January 1, a 25% increase in less than four months.
- Chinese investors, the world’s most aggressive Gold buyers, are switching out of equities into physical Gold and Silver. Gold buying is continuing to grow.
- The U.S. Dollar is continuing its recent trend of weakening against the Euro, which will increase premiums on Gold, especially on the British, French, and Swiss pre-1934 Gold coins.
- The financial consultants, money/fund managers, and commodity professionals that are being interviewed on financial media have become bullish on Gold and Silver. Why? Gold is up 21% and Silver is up 29% this year, compared to a 4.5% decline in the NASDAQ.
- More countries are repatriating their Gold being held at the NY Federal Reserve Bank.
- In the Basel III agreement, which is being implemented by the world banking system from 2013 to 2019, Gold will be upgraded from a Tier III asset to Tier I asset. This will encourage many large banks to increase their holdings of Gold.
Silver is the precious metal super star for the month of April, closing at $17.81 per ounce. Silver was up $2.35 (15.2%) in April and $4.04 (29.31%) since the beginning of 2016. During the month of April, Silver broke above the $16 and $17 per ounce resistance levels. Silver is currently trading at the highest price since January of 2015.
Silver briefly reached a high of $18.02 per ounce last Friday, before seeing weekend profit taking by professional traders. This quick move to $18 per ounce is impressive, but Silver badly needs some price consolidation in the $17.50 to $18 range to stay long term bullish. But, history has shown that when Silver makes this type of bullish move, the bears are on the run due to margin calls and could continue to cover their short sales.
Demand for physical Silver remains strong worldwide. Many official and private mints are reporting record demand, with storages of supply. The U.S. Mint has been averaging over 4.5 million ounces in monthly sales of 1oz Silver Eagles in 2016. 2016 sales are now 18,914,500 1oz .999 Silver Eagles. This is higher than last year and on a 50,000,000 coin pace.
Last week’s Silver rally caused the Silver/Gold ratio to continue dropping - it is now 72.42-to-1.
Today: Silver briefly traded above $18 again this morning in European trading. Then, Silver sold off to $17.60 per ounce before the buyers came back. Price consolidation in the $17.60 to $18 area would be good after April’s 15% increase.
I just returned from the Central States Numismatic Association (CSNA) coin convention in Schaumburg, IL. This convention is a major event for the rare coin community with thousands of dealers, investors, and collectors in attendance. In addition to having a trading floor with over 200 rare coin dealers, there was also a major rare coin auction. The activity level was excellent on the convention floor with a lot of demand for many of the high-grade certified new issues. Many of the dealers were actively purchasing a limited amount of high quality U.S. rare coins.
It is estimated that the overall rare coin market in the U.S. was at about $5 billion in 2015. That includes major auctions, private transactions made at coin shows, mail order, internet, and coin store sales. That figure does not include bullion coins, PCGS/NGC bullion items, or the modern coins sold directly by the United States Mint.
Recommended Investment Commitment and Diversification:
Precious Metal commitment: Minimum of 30% of investment capital
Diversification: Gold 50%, Silver 40%, Platinum & Palladium 10%
Diversification includes 50% in long term investment quality rare coins and 50% short term bullion products.
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All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Stuppler & Company’s knowledge at this time. Stuppler & Company disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein. Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability. All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions.
