Weekly Market Report 04/09/12

This week’s Market Report provides you with an update on the precious metal markets and the reasons why the Federal Reserve is not talking about another run of stimulus at this point in time.

GOLD

The volatility doesn’t want to go away. Last week Gold had a $72 per ounce trading range, from a low of $1,613 to a high of $1,685. The recent economic and monetary news is helping the bulls and bears make their case for the short price of Gold. Gold’s nine month trading range has been from $1,535 to $1,920 and any break below or above those prices would be a major move. However, the 2012 short term Gold trading range has been $1,566 to $1,792, and any break below or above those prices would provide an excellent indicator of the short term direction of the market. For right now, Gold is trading at the low end of the trading range, and I would recommend buying at current levels, unless gold breaks below the $1,566 per ounce support level. 

Late Tuesday, April 3rd, the minutes of the Federal Reserve’s March meeting were released. It was clear from the minutes that it is highly unlikely that we will see another round of monetary stimulus (Quantitative Easing, QE3) from the U.S. Federal Reserve any time soon. On Wednesday, April 4th, the world’s stock markets, energy, and precious metals overreacted on the downside to this news release, which normally happens; the drop came quickly, while the bond market and U.S. Dollar rallied.  

What does this mean? It means that the Federal Reserve basically said that if the U.S. economy continues to improve, QE3 will not be needed, however, should the United States economic indicators starts to look negative, QE3 will continue to be an option.

Last Wednesday, after the Federal Reserve’s minutes were released showing that it was unlikely that a new round of stimulus (QE3) will be coming soon, both the stock market and gold sold off dramatically. This morning, April 9th, the market reacted to Friday’s disappointing employment report, and again the stock market reacted negatively, while Gold is up $14.00 per ounce. It is clear that a QE3 will be bullish for gold. However, what is bullish for the stock market, if it reacts negatively to both good and bad economic reports?

Between the Federal Reserve’s past stimulus programs and the massive U.S. Government budget deficits, there have been trillions of new dollars added to the balance sheets. The handwriting of future inflation is on the wall, as I stated in my March 26th Weekly Market Report. The velocity of the money supply going through our financial system (banks making new commercial and residential loans) will increase dramatically by early next year, starting the inflation cycle. At that point, Gold and Silver at current prices will look like the bargains of the century. Take advantage of this opportunity; add some Gold, Silver and Platinum to your holdings, NOW.

Morgan Stanley forecasts

In the face of the Federal Reserve’s recent statement, which drove the gold prices down to $1,612 per ounce, Morgan Stanley forecasts that the gold prices will climb to $2,175/oz by 2013, with prices depending on 4 bullish factors:  1) the decline in producer hedging 2) the decline of developed market central bank sales 3) the inability of gold mines to increase gold supplies materially 4) the long term growth in physical investment demand.

Today, the gold market has rallied on Asian demand, trading up $14.00 per ounce to $1,644.00.  After Indian Jewelers brought their 3-week long strike to an end on Saturday the Gold market rallied. India’s jewelers were assured that the government would consider scrapping a budget proposal to levy excise duty on unbranded gold & silver jewelry.

SILVER

Last week Silver had a $2.27 high/low price range. At the end of the week we only saw a $0.75 price correction.  Silver showed extraordinary demand at the $31 per ounce support level.  Since January 20, 2012, Silver has managed to stay above $31 per ounce at the close of each day, a key support level.  Last Wednesday, Silver briefly touched $30.98 per ounce during trading before the demand increased sizably to drive the market up, and closed the day at $31.04, ending the week at $31.73 per ounce. It appears that the risk/reward for investing in silver, if under $33 per ounce, is excellent. You are risking $2.00 per ounce, with an upside from the current level of $8 (to $40 per ounce) in the short term and higher in the long term.

PLATINUM

While gold was down $41 per ounce last week, Platinum was down $34, closing the week at only $1,607.60 per ounce; a $22.50 discount to the gold price. This provides you an opportunity to purchase Platinum at a discount to Gold. Great timing, as the new 2012 1oz Platinum Maple Leaf was just released. The Canadian 1oz Platinum Maple Leaf is the most active platinum trading vehicle. For a current quote on this item please visit: http://www.mintstategold.com/platinum-1/bullion-coins-and-bars/platinum-canadian-maple-leafs.html

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% 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.