Weekly Market Report 10/10/16
Links to recent informative articles on precious metals and rare coins:
3.2 million oz of COMEX paper Gold crashed the price on Tuesday 10-4-16
Gold holds near three-month low on rate putlook before jobs data
Gold
Ex-Fed Chairman Greenspan warns of serious inflation on the way
Gold’s 14 most bullish fundamentals
Silver
Recommended investment commitment and diversification
Last week, we saw Gold decline $65.20, closing at $1,251.90 per ounce on Friday, Oct. 7th. This decline was not the result of a major news event or any change in the basic bullish fundamentals in the long term outlook for higher precious metal prices. The decline in the Gold price last week was caused by Gold breaking below the important $1,300 per ounce price level. This decline was focused on cleaning out the short term speculators and weak investors. Once the Gold price dropped below $1,300 per ounce, many commodity futures market investors were hit with margin calls and stop loss sales programs, while professional traders shorted Gold/Silver. On Friday, and again today, many long term buyers are aggressively adding to their holdings at today’s lower price.
Today: This morning Gold found excellent demand and opened $10 higher, at $1,260. I believe Gold has bottomed out and will gradually move higher toward the important $1,300 per ounce level.
Ex-Fed Chairman Greenspan warns of serious inflation on the way
Greenspan warns about serious inflation on the way. The U.S. M2* money supply is accelerating, doubling from 6.5 billion to 13 billion in the past 10 years. After growing at 6% for the last couple of years, it has now grown at 8½% for the past six to nine months. One of the primary reasons for this extraordinary growth in money supply is entitlement spending. U.S. entitlement spending has been increasing at a yearly rate of 9% since 1965. This type of growth in money supply is a sign that serious inflation is coming within the next 18 months.
Greenspan said negative rates seen in Europe and Japan are not good. "If you have negative interest rates, and stay too long, a number of the financial intermediaries drop out. And they are on the edge," he said. Greenspan added that the easy money policies of the Fed and other central banks, including maintaining historically low rates, have done as much as they can without the help of fiscal measures, including entitlement reform.
With today’s extraordinary opportunity to increase your precious metal holdings at what I believe to be a bargain price, it is important for my clients to understand that the long term fundamentals for Gold and Silver have never been so bullish.
* M2 is a measure of the money supply. M2 includes all elements of M1 (M1 is cash and checking deposits) as well as assets that are highly liquid but are not cash (i.e., savings deposits, money market securities, mutual funds, etc.) M1 and M2 are closely related and economists like to include the more broadly defined M2 when discussing the money supply, because modern economies often involve transfers between different account types.
Gold’s 14 most bullish fundamentals
- Physical demand for Gold and Silver investment products is at the strongest level in years. Many world mints report record 2016 sales for bullion coins, showing sizeable increases.
- 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 is approaching $20 trillion.
- The World Gold Council is reporting mine production falling dramatically as the cost of production rises.
- Central banks around the globe 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 (paper) Gold investors have been aggressively buying in 2016, with GLD holdings increasing 316 metric tons since January 1st; up 49.2% in nine 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 in the financial media have become bullish on Gold and Silver. Why? Even at today’s low prices Gold is up 18% and Silver is up 26% this year, compared to a 6% increase in the NASDAQ.
- More countries are repatriating their Gold being held at the NY Federal Reserve Bank.
- U.S. M2 money supply is accelerating, doubling from 6.5 billion to 13 billion in the past 10 years. After growing at 6% for the last couple years, it has now grown to 8½% for the past six to nine months. This will lead to serious inflation and a much higher Gold and Silver price within the next 12 to 18 months.
- Many precious metal professionals and analysts strongly believe that China is accumulating massive amounts of Gold in an effort to replace the U.S. Dollar (as the world’s reference currency) with the Chinese Yuan. If this happened, it would diminish the value of your U.S. Dollars. Last week, the International Monetary Fund (IMF) formally added the Chinese Renminbi to the basket of reserve currencies. If the Renminbi became the world’s reserve currency, there would be a dramatic increase in the price of Gold valued in Dollars.
- 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 a Tier I asset. This will encourage many large banks to increase their Gold holdings.
Last Friday, Silver closed at $17.38 per ounce, down $1.83 (9.55%). Last Tuesday, when Silver broke below the key $19 price level, programmed short sales hit the market driving the price to $17.75. For the remainder of the week, Silver traded below $17.20 per ounce numerous times. At that price there were substantial amounts of bargain buying in the physical and contract Silver markets around the globe.
Last week, the Silver/Gold ratio increased to 70.03-to-1.
Today: Like Gold, Silver opened higher this morning and is picking up more and more demand. Silver bottomed out late last week and should gradually move back to the $18 per ounce level very soon.
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.
