Weekly Market Report 4/22/13
Gold
What really happened?
What am I seeing?
What do I think will happen with Gold?
Will history repeat itself?
Silver
The April 2013 CoinStats is now available
Recommended Investment Commitment and Diversification
Last week was an extraordinary week for precious metal owners and professionals. Gold dropped from the prior Friday’s (April 12th) close of $1,501, to last Tuesday’s (April 16th) low of $1,321, then back to $1,424 early last Friday (April 19th) morning, closing the week at $1,395 per ounce. I’ll never complain about Gold’s recent low volatility again. Volume was off the charts, hitting over 700,000 hundred-ounce contracts (70 million ounces – a record high) on Tuesday in the CME’s most active June contracts.
After Gold’s $63 drop on Friday, April 12th, the bears immediately dropped Gold $20 on the open the following Monday (April 15th) pushing Gold below $1,500 per ounce, and the technicians and chartists were all forced to short Gold. The margin calls started hitting on Friday (April 12th) and the market kept on dropping until we saw sizeable support at $1,321 per ounce last Tuesday (April 16th). At that point, some short sellers and fresh buyers appeared on sizeable buy orders. For the balance of the week, Gold consolidated in the $1,350 to $1,400 area, with another failed attempt at breaking the lows on Thursday night. Gold closed the week at $1,395.60 per ounce, down a whopping $106 for the week.
There is clearly a war going on between the paper Gold investors (contracts, options, puts, calls, and equities) and physical buyers of Gold investment products not on margin. While large investment firms can force out leveraged paper Gold investors with margin calls, they cannot discourage physical buyers. During the past week, Gold coin, bar, and jewelry buyers across the globe have increased their demand; in many cases, 10 times the normal pace. The U.S. Government sold 2 tonnes (65,000 ounces) of 1oz U.S. Gold Eagles in just one day. Indian Gold retailers in the Bazaar reported being sold out of Gold Jewelry within an hour of opening.
I lived through the 1979-80 Gold rally. When Gold dropped from $850 to $600 in a very short time, 90% of the people were lined up in front of my retail store to sell Gold and Silver when I arrived at 9am. What we are seeing now is not the same as the 1979-80 rally. In 2013, the global currency debasement has now positioned Gold/Silver as deeply entrenched assets with the prudent investor and any opportunity to purchase more, at a very attractive price, is jumped upon. In the past week I have had 12 sellers, and over 120 buyers, purchase/sell between $5,000 and $500,000 worth of Gold or Silver.
What do I think will happen with Gold?
That is truly the $64 million question. Gold needs to consolidate above the $1,400 per ounce price on good volume, and this week is the key. If it is driven down to $1,335 again and we don’t see an immediate bounce, I would be concerned about testing $1,300 for support. However, if it can consolidate in the current area next week, I think the worst is over and the weak investors have been shaken out. Gold should then start moving higher towards its next resistance level of $1,500 in May.
We have seen similar price corrections in the Gold market before, only to rally back to set new record highs. In October of 2008, Gold dropped from $1,011.25 to $712.50, based on news that the IMF would be selling major tonnage of Gold into the market. After the sale was completed, Gold rallied back to over $1,016 per ounce in 2009, a 42% increase within a year. Now it’s the Eurozone talking about Gold sales and the markets are reacting in a similar way. There is major long term price support at the 2011 lows of $1,309.00 per ounce, and being able to buy Gold at today’s low price is truly an opportunity of a lifetime.
Last week’s decline in the Silver price was more dramatic than Gold. Silver fell $3.37 per ounce, or 12.80%, in just five trading days, closing on Friday at $22.96 per ounce. At one point last Tuesday Silver reached a three-year low of $22 per ounce. After this month’s $6 per ounce decline, Silver needs to build a new base above $23 per ounce and that will take a while, if it doesn’t re-test the $22 per ounce support level again. Silver should take some direction from a higher Gold price, however, Silver doesn’t have the heavy central bank purchases that Gold does and a sudden sharp increase isn’t likely.
Global physical demand for Silver from investors has been overwhelming. The U.S. Mint has had extremely heavy demand for the 1oz .999 Silver Eagles and has suspended orders until it is able to catch up with back orders. The U.S. Mint has sold 16,610,000 1oz Silver Eagles since the start of 2013, and is running at a record 40,000,000 pace. Physical demand hasn’t just been for Silver Eagles, other Silver investment products are having record sales for the year as well.
The April 2013 CoinStats is now available
Our numismatic CoinStats quarterly report is the best investment tool for rare coin investors. CoinStats is an in-depth statistical analysis of popular rare coin series that allows you to identify the best values in U.S. certified rare coins. I am proud to offer this unique and informative tool exclusively to our clients.
The April 2013 CoinStats report is now available for $20 Gold Saint Gaudens, $20 Gold Liberties, Morgan & Peace Silver Dollars, and the Walking Liberty Half Dollar series. CoinStats provides a list of my recommended certified U.S. Gold and Silver coins which are found 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 1948. These investment quality rarities have a proven track record of appreciation over the past 60 years or longer.
For the latest CoinStats analysis, just put CoinStats in the subject line and email me which series you would like to see.
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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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.
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