Weekly Market Report 3/25/13

This Week’s Headlines:

Hyperinflation booklet
Gold
Cyprus agrees to €10bn bailout deal
Gold consumption in India to increase in 2013
Texas wants to establish a Bullion Depository to hold Gold
Silver
Platinum & Palladium
Recommended Investment Commitment and Diversification

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GOLD

Gold closed above $1,600 per ounce all five trading days last week. All five days the market tested the $1,600 support level, and held. Trading volume was higher than the previous week, which shows good demand. Sales of paper Gold equities (ETF’s, i.e. GLD) decreased last week, while the Gold price consolidated above $1,600 per ounce. This consolidation is very healthy for the long term bull market. On Friday Gold closed at $1,606.10 per ounce, up $13.50 for the week.

Two issues that had a direct effect on precious metal trading last week were the fear of a potential financial meltdown in Cyprus (see below), and our Federal Reserve’s announcement that it would stick to its current stimulus plan and keep its federal funds rate target unchanged at a record low range of 0 to 0.25%. Both issues are very bullish for Gold, therefore it wasn’t surprising that Gold was the only precious metal that rose last week.

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Cyprus agrees to €10bn bailout deal

Cyprus reached an eleventh-hour €10bn bailout deal with international lenders this morning that avoids a controversial levy on bank accounts, but will force large losses on big deposits in the island’s two largest lenders. This deal will allow the European Central Bank to keep its emergency lifeline open to Cypriot banks today, preventing a meltdown of the financial sector that threatened the country’s Euro membership.

The deal was reached in the early hours of the morning after a stormy meeting of 17 Eurozone finance ministers that lasted almost 12 hours, and included a threat by the Cypriot president to pull his country out of the Euro.

The plan does not need approval from the Cypriot parliament because the losses on large depositors will be achieved through a restructuring of the island’s two largest banks, not a tax. The parliament passed a new law governing bank failure just three days ago at Brussels’ urging.

Why is this event having such a dramatic effect on the World’s financial markets, given that the Cyprus economy is equal to only .2% of Europe’s total GDP? It is because there is a deep concern by investors around the world that this proposed Eurozone bailout action may be a harbinger of things to come in other Eurozone countries.

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Gold consumption in India to increase in 2013

The World Gold Council (WGC) reported today that rising incomes and inflation in India have boosted investment demand for Gold. For the quarter ending December 2012, India’s consumption surged by 41% to 261.9 tons from a year earlier. Demand for jewelry rose 35%, while investment in coins and bars jumped 51%. The WGC stated that India’s consumption may total 960 metric tons of Gold this year, compared to 864.2 tons in 2012.

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Texas wants to establish a Bullion Depository to hold Gold

Texas lawmakers have proposed a new piece of legislation that would create a Texas Bullion Depository, allowing the state and its citizens to store Gold bullion in its own facility in Texas, for protection of the state. Read the complete story at: http://www.mintstategold.com/investor-education/texas_hoarding_gold/

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SILVER

Silver continued to have a difficult time staying above $29.00 per ounce last week. It had excellent support at $28.50, even though the volume of trading was light. The Silver price isn’t showing the same strength and support as Gold, but I am seeing the same tight spreads and technical selling at resistance levels. On Friday Silver closed at $28.69 per ounce, down $0.15 for the week, with a 55.97-to-1 Silver-to-Gold ratio.

Physical demand for Silver keeps growing. The U.S. Mint reports that 13,304,500 1oz Silver .999 Eagles have been sold so far in 2013. I expect to see similar numbers for Canada, Australia, and other countries when they report their 2013 1st quarter sales in April.

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PLATINUM & PALLADIUM

Platinum and Palladium both had minor down moves last week in the face of Gold’s small rally. Platinum closed down $11 per ounce, at $1,581 per ounce, trading at a $23 discount to the Gold price. Palladium closed at $761 per ounce, down $14 for the week.

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Recommended Investment Commitment and Diversification:

Precious Metal commitment: Minimum of 35% of investment capital

Diversification:  Gold 55%, Silver 40%, Platinum & Palladium 5%

Diversification includes 50% in long term investment quality rare coins and 50% short term bullion products

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