Weekly Market Report 03/12/12

This week’s Market Report provides you an update on the precious metal markets and the reason you need to email me your numismatic want list immediately.

GOLD

The big question last week was could gold hold the psychological $1,700 resistance level. The concern being that if gold broke $1,700, it could cause a dramatic drop towards $1,600 level before any strong demand would appear.  All five days last week gold traded below $1,700 per ounce, reaching a low of $1,663 on Tuesday, before heavy buying appeared. Gold continued to rally and by Friday, closed back above the $1,700 resistance level at $1,711.50 per ounce. After a $48 high/low price range, gold actually closed up $1.70 for the week.

With the Greek Debt issue in our rear view mirror, I would expect to see Gold stay around the $1,685 to $1,715 price range for a while, awaiting short term direction from Fed Chairman Bernanke’s speech on Wednesday after the FOMC meeting, and Thursday’s Fed announcement on the results of the bank stress test. Later this month I believe we will see Gold resuming its rally, and go over the $2,000 level by the summer.  The procedure by which the European Central Bank (ECB) and the IMF settled this issue is now the prototype for Italy, Spain, and Portugal, as their debt problems get critical.

Gold was up $12 last Wednesday, with many gold mining stocks lower on a major negative news announcement from Indonesia. Indonesia announced a new rule on the mining ministry’s website, Southeast Asia’s largest economy, which would require foreign firms to sell down stakes in mines and increase domestic ownership to at least 51% by the 10th year of production. This is another nail in the coffin for gold equity investors versus owning physical gold. It comes on the back of an increase in the usual negatives for owning gold stocks: strikes, labor problems, environmental holdups, and government nationalization. 

The Industrial and Commercial Bank of China Ltd, one of the world’s largest lenders, said in a statement that its gold leasing business had reached 62.8 tonnes of physical metal in 2011. The bank, which started gold leasing in January of last year, has more than 100 clients, including jewelers, industrial users, refiners, and miners, who borrow gold for up to a year. The bank charges a fee for the leased gold, which is returned to them within an agreed time period. 

Why do jewelers and industrial users lease Gold at a very low bank interest rate?  Because it can take up to a month or more to design and manufacture a line of jewelry, and with the current volatility in the gold market, there is a risk that the market could drop. So, they lease the gold until the product is sold to the retailer, and at that point they end the lease, and purchase the gold.

SILVER

Last week the volatility in the Silver market ranged from a low of $32.49 per ounce to a high of $34.95. On the downside, it broke through the $34 and $33 support lines before sizeable demand hit the market at $32.49 per ounce.  I think that this was the “weak hands” clean out, which I had expected before the move to $40 per ounce.  Silver closed the week at $34.12 per ounce, down $0.31 on the week, and still up 22.71% since the start of 2012.

In a news release issued last Thursday, the Silver Institute said silver-based ETFs now account for 586 million ounces of silver, up from 576 million ounces at the end of 2011. "Demand for physical silver bars is also strong. According to several precious metals dealers, silver bar sales continue to be brisk," said the institute. Investor demand on the COMEX has also been strong this year. As of February 28, net long silver positions had increased by more than two-fold from year-end 2011. Total net long positions on February 28 were at their highest level since Sept. 13, 2011, said the Silver Institute.

When Federal Reserve Chairman Ben Bernanke was on Capitol Hill last week for a congressional hearing, Congressman Ron Paul held up an ounce of silver and told Bernanke that back in 2006 it would have bought over four gallons of gasoline. “Today, it’ll buy almost eleven gallons of gasoline,” he said, adding, “that’s preservation of value.” 

PLATINUM

Platinum took its lead from Gold for most of last week, closing at $1,684 per ounce. Platinum is trading at a $26 discount to the spot gold price.  Since the beginning of the year, Platinum is up $284 per ounce, a 20% increase (double the Gold 2012 increase).  With the increased demand for Platinum, the Royal Canadian Mint has decided to start manufacturing 1 oz .999 Platinum Maple Leafs again.  We have secured a quantity from the distributor so we will have them. We can sell them right now and you can lock in an attractive price, and we expect delivery by the end of March. If you have already picked up your 10% investment diversification, I would recommend buying while Platinum is still trading at a discount to gold.

Rare Coin Update

Within the next five weeks I will be attending two Major Rare Coin conventions. At these Coin Shows there will be tens of thousands of dealers, collectors, and investors, and major numismatic auctions. The first Show will be held in Baltimore between March 22nd to March 24th, and the second Show is the Central States Numismatic show between April 18th to 21st.

Since I will be examining hundreds of investment quality rare coins, I am asking my clients to update their numismatic want list. Please email me your current want list by March 16th. Please provide grading service desired, grade or price range, and any other criteria to [email protected].

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

REMEMBER THE BLOG

If you want to be updated on what is happening in the gold, silver, and rare coin markets any weekday, our company offers a daily blog Monday to Friday at www.stupplerblog.com

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.