Weekly Market Report 03/05/12

This week’s Market Report provides you with an update on the precious metal markets and the reasons why Phase Two volatility is showing signs that a major gold rally is on its way.

Phase Two – The Volatile Ride to Higher Gold

In my January 2012, 32 page booklet called “Is Hyperinflation the US Government’s Only Way Out”*, I compared the gold rally of 1977-1980 with the current rally in Gold. I discussed the three major phases of Gold’s 1977-1980 movement (from $134.50 to $850) and the gold rally that started in 2001. In August of 2011, I said that we have entered Phase 2 of the gold rally, based upon the dramatic increase in volatility.

When did the increasing volatility start Phase 2 of the Gold rally? 

Looking at trading from 2010 and 2011 it was easy to see.  Between Jan 1st of 2010 and July 31st 2011 (577 days), gold traded between $1,121 and $1,628 per ounce. There were only 8 days (1.3% of the 577 Days) when the gold price increased/deceased more than $30, and 0 (zero) days with a move of $40 or more. Between August 1st and Dec 31st  2011, there were 153 days when gold traded between $1,520 and $1,920 per ounce, and there were 34 days (22% of the 153 Days) when gold increased/deceased more than $30, with 8 days when the move was over $50 (including 2 days when the gold price changed more than $100 in just 24 hours.)

What will result from Phase 2 volatility?

I believe that in Phase 2 of the current gold rally we will see the average annual gold price increase over the next 3 years, surging from the 20% average of the past ten years, to 40%. Gold will reach $4,000 per ounce by 2015 before we get to the final Phase Three, when the gold market explodes.

Phase Three will be short and explosive.

Back in 1980, Phase Three only lasted for 21 days, but increased 66% in that time span. Considering the ten year time span of Phase One, and my projection for Phase Two, I feel that Phase Three (which starts in 2015) will last for six months and drive gold up to over $6,000 per ounce. If the world’s financial leaders decide to return to a Gold Standard, or if gold bullion confiscation becomes the government’s reaction to severe inflation, my projections would escalate. Possible other government reactions that can affect my projections negatively are: limiting gold ownership, restrictions on transporting or trading, and any Gold windfall profits tax.  

* “Is Hyperinflation the US Government’s Only Way Out” is available on line at http://www.coinmag.com , or email [email protected] to request a booklet.

GOLD

Last week was a very exciting week for gold and silver. Gold had over a $100 price range, with a low of $1,688 to a high of $1,792 per ounce. CME Wednesday’s trading volume of 344,994 hundred Gold contracts was the highest since September of last year, when gold hit $1,923.  The market ended the week on Friday at $1,710 per ounce, down $66.40 per ounce. Today is a key day in the latest Gold market bull/bear war.  The bears need to drive gold down to close under the $1,700 per ounce support level today.  While the bulls, supported by Asian buying, would like the $1,700 level to hold.

Last Wednesday, Leap Day, was a day worth remembering.  Gold was trading at $1,789 per ounce when Fed Chairman Bernanke released the testimony that he was going to give to a congressional committee. His text did not allow for the possibility of another round of government monetary stimulus or quantitative easing (QE3).  The Gold Market’s reaction was negative, with the gold price falling as low as $1,689 before seeing a sizeable demand drive the price back up to $1,711 per ounce.

Mr. Bernanke’s congressional testimony does not change any of the fundamental reasons to own gold. The tone from investors is that QE3 and/or new economic stimulus being off the table did cause some investors to pull the trigger to sell. It’s not surprising that QE3 is less likely to happen due to recent positive economic data. Remember, we won’t be seeing the inflationary results from the U.S., British, European, and Japanese monetary stimulus until six to eighteen months from now. A combination of velocity from the trillions of Dollars, Pounds, Euros, and Yen in government stimulus is working its way through the Global financial system, while the World’s Central Banks will continue to trade their paper assets for Gold, causing severe currency devaluation and a sky-rocking Gold price for the next 3-4 years.

SILVER

The volume of trading in Silver last week was also extraordinarily high with approximately 115,000 contracts being traded (each contract represents 5,000 ounces of Silver) compared to an average weeks trading of 60,000 contracts. With this surge in volume, silver reached a high of $37.58 per ounce and a low of $33.82. Silver closed on Friday at $34.52 per ounce, down $0.81 for the week. Silver continues to raise the support level from $30 to $34 for the past six weeks. Increasing demand for physical silver investment products has been coming from Asia every time there is a correction in the silver price. This coming week, I would like to see Silver stay above $35 per ounce to keep its upward movement intact. 

PLATINUM

Have you been watching platinum over the past three months? I recommended purchasing it on Dec. 12^th 2011, when Platinum was trading at a $201 discount to gold. It has since then rallied dramatically. On Friday, platinum closed at $1,691.80 per ounce, that’s only $18 less than the price of gold. You have another opportunity to buy. With today’s Chinese official announcement that they have lowered their GDP growth rate forecast from 8% to 7.5%, we have a $30+ drop in Platinum. We still recommend the 1oz .999 Australian Platinum Platypus.

The Royal Canadian Mint has announced that they will be making 1 ounce .999 Platinum Maple Leafs starting later this month. We will be offering them as soon as we receive our shipment.

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% of investment capital

Diversification:  Gold 50%, Silver 40%, Platinum & Palladium 10%

Diversification includes long term investment quality rare coins and 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.