Weekly Market Report 02/13/12

This week’s Market Report provides you with an update on the precious metal markets and the latest reaction to the Greek debt crisis on the world’s financial and precious metal markets.

GOLD

Last week, Gold’s steady five week increase ended with a minor selloff of $15.90. Gold closed Friday at $1,725.30 per ounce, still up $159.50 since the start of 2012. Gold has been in an excellent trading range of $1,700 to $1,765 per ounce for over two weeks.

Last Friday’s gold trading was a good indication of the current overall market direction. Rumors surfaced during the week that a Greek deal would reach completion, but as of Friday, there was no announcement of any debt settlement or acceptance of any Greek austerity program. However, there were parliament resignations and strikes by the Greek people. With no positive news from Greece on a possible settlement for their sovereign debt crisis, the gold and equity markets sold off.  In both Asian and European markets, gold reached $1,706 per ounce (holding the important $1,700 support level) before starting a substantial rally on heavy volume of buying, and closing at $1,725.30.  Friday’s $19 gold rally off the lows was very impressive, as the trading volume of 100oz contracts was 179,969, the highest volume of the week, and it happened on a Friday.

Financial and Precious Metal markets are the focus this week regarding the ongoing European debt crisis, as Greek officials struggled with the aftermath of Sunday’s approved but hugely controversial new austerity laws.  These measures were required by the Troika in order for the debt laden country to receive the next tranche of €130 billion bailout funds from the European Union and IMF. These funds are needed ahead of next month’s deadline when some €14 billion in bond redemptions and paybacks are due. However as debt talks stalled last week, more and more investors and major institutions have now started to factor in a possible Euro-Greek decoupling as a flurry of rumors continued to circulate throughout the week. Widespread demonstrations across Athens turned violent over the weekend as a general protest saw thousands take to the streets, setting fires in opposition to the strict austerity measures. Greeks were spotted burning German flags in an obvious act of rebellion against German led ECU fiscal demands. We are seeing many Greeks (who are concerned about the future of the Greek economy) withdrawing their savings from Greek banks and buying British Gold sovereigns, a traditional way to protect the value of their savings.

Last week it was reported that the 2011 trade deficit between the U.S. and China had increased to $295.5 Billion. This deficit is the difference between what we export to China and imports from China. So far this year, the United States’ total trade deficit has risen 11.6% to $558.0 billion, the highest since 2008. We are clearly importing more goods than we are exporting; this, combined with our budget deficit, will continue to weaken the value of the U.S. Dollar.

The Congressional Budget Office said on Friday that it expects this year’s gap between spending and revenue to total $1.1 trillion, down from last year’s $1.3 trillion. It attributed this decline to stronger tax revenue and the smallest increase in spending in years. This is the fourth consecutive year that our national budget deficit is more than $1 Trillion.

President Obama will present his 2012/13 Fiscal Budget to Congress today. His budget calls for a $1.33 Trillion deficit in 2012 and $901 Billion deficit for 2013.  You might remember that in September of 2011, the White House had forecast that the 2012 deficit would be $956 Billion, and that the 2013 deficit would be $648 Billion.

A worsening Trade and Budget Deficit just add to the extraordinary fundamentals that are driving up the increasing global demand for gold.  Central banks around the world are exchanging their U.S. Dollar reserves for gold at a continually increasing pace. Central banks in 2011 purchased 430 tonnes of gold, five times higher than in 2010 and the highest since 1964. Much of this new demand has come from ‘emerging markets’ central banks like Mexico, Russia, Turkey, Brazil, South Korea, and of course China and India.

SILVER

Silver followed Gold’s price movement last week, ending the week down $0.14 per ounce at $33.60 on a respectable volume of trading.  Silver showed excellent support at $33 per ounce, and resistance and profit taking above $34 per ounce. It is very healthy for future increases if Silver can build a base above the $33 per ounce level as we watch the fundamentals improve.

Silver has shown itself to be as efficient as a leading chemotherapy drug for treating cancer and may even have fewer side effects, a new study has revealed. Results from the study at the University of Leeds showed that particular silver compounds are as toxic to cancer cells as the platinum-based drug Cisplatin, which is currently widely used to treat a range of cancers.

The Silver to Gold Ratio is now at 51.35 to 1

PLATINUM

Platinum has been outperforming gold since the start of the year, up $258 per ounce and trading at $1,659 per ounce last Friday.  The Gold premium over Platinum has dropped from $208 per ounce on January 6^th to $65.50 on February 10^th.

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% of investment capital

Diversification:  Gold 60%, Silver 30%, Platinum & Palladium 10%

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

It’s time to purchase U.S. Gold coins

There is now a unique opportunity to purchase PCGS/NGC certified Brilliant Uncirculated Pre-1933 U.S. Gold coins at record low premiums over the spot gold price.

Over the past three years, gold has increased 96%, based primarily on Central Bank and Asian buying, while the U.S. demand was negatively affected by the recession. This caused the normal premium that certified Brilliant Uncirculated U.S. $10 and $20 Gold carried over the gold spot price to decline substantially. This has only happened three times in my fifty plus year career. The premium went back to normal levels within 1 to 2 years. Therefore, we have an excellent opportunity to pick up U.S. investment quality gold coins at only 20% to 40% over spot, depending on type and grade, ranging from MS62 to MS65.  As the U.S. economy recovers over the next year, I expect that the premium, along with the gold price, to increase. Please email David or myself for the best values.

January 2012 CoinStats Available

My numismatic CoinStats report is the best investment tool for rare coin investors. CoinStats is an in-depth statistical analysis of popular rare coin series which allow investors to identify the best values in certified rare coins. I am proud to offer this unique and informative investment tool exclusively for our clients. The January 2012 CoinStats update is now available for $20 Gold Saint Gaudens, $20 Gold Liberties, and the Morgan & Peace Silver Dollar series.

While the collector coin market continues to be weak, the high end gold and silver investment quality rarities (over $50,000 each) did set record prices at last month’s FUN Heritage Auction. The best values and opportunities are in the middle area ($3,000 to $49,000) where the market is still undervalued. The CoinStats Report provides a list of my recommended certified Investment quality US gold and silver coins which are listed on the best value page.  These are not the overly hyped modern issue bullion coins or low grade circulated coins, they are PCGS/NGC Certified MS63 or higher gold and silver U.S. rare coins, dated prior to 1936, that have a proven track record of appreciation.

For the latest CoinStats analysis, just put CoinStats in the subject line and email me which series you would like to see.

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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.