Weekly Market Report 05/14/12

This Market Report provides you with an update on the precious metal markets, and this week I discuss the support and resistance levels for Gold and Silver prices after their recent decline.

GOLD

On Friday gold closed at $1,584 per ounce, down $61.20 (3.72%) for the week on the heaviest volume of trading I have seen in months. Last week was not a pleasant week for precious metal investors.  The question I was asked by investors last week was, “With outstanding supply/demand fundamentals for Gold, how could it break below the key $1,600 per ounce support level?” We believe that there is a major seller in the market. Speculation as to who it is ranges from Spanish and Greek Banks needing Euros and Dollars, to heavy investor liquidation of Gold to meet margin calls or stop loss orders from losses in the global equity, currency, and energy markets.

Gold has major support at the $1,525 per ounce level and that level has shown extraordinary demand twice in the past nine months.  If we see another $60 drop in Gold to $1,525 per ounce, it could clean out the small investors with margin calls and stop loss orders. This is called by professional commodity traders ‘cleaning out the weak hands’ and happens many times before a major up-move starts. However, a sustained rally back above $1,600 for a few days could end this short term selloff.

I want to be very careful not to paint the short term outlook for Gold too bearish since the Chinese economy is still growing at a rate of 9.3%, and the Chinese investors (and their government) are known for becoming aggressive buyers of Gold at bargain prices.  

There is a great article by Julian Phillips on global gold demand available at:

http://www.mintstategold.com/investor-education/dmand_factors_driving_gold/

GOLDMAN SACHS IS BULLISH ON GOLD

With the gold price trading at $1,560 per ounce, Goldman Sachs (a Major Wall Street Bank) stated today that its 6-month and 12-month forecast for the gold price is $1,840 per ounce and $1,940 per ounce, respectively, citing weak US growth and renewed Euro zone risks, coupled with resilient physical demand.

SILVER

An ugly week for the value of Silver, down $1.54 per ounce (5.07%) closing on Friday at $28.89.

After breaking down below $30 per ounce last Tuesday, Silver could not muster the demand or trading volume to recover. On Wednesday we saw the price drop below $29 per ounce, with the market low of $28.44 per ounce on Friday.

For the past eleven weeks of trading, Silver has only had two up weeks. It is definitely in a short term bear trend.  The question is why? The answer is that Silver is caught in an economic nightmare; a combination of deteriorating global growth outlook, weaker than forecast output from China & India, selling in the gold market, and a stronger U.S. Dollar. All of these factors are anti-inflationary and have caused Silver to break the very important $30 per ounce psychological support level last week.

What’s next? Well, hopefully Silver will find support at $28.44 per ounce (last week’s low). But if it breaks down and $28 doesn’t hold,  $27.24 has chart support from 2010, with $26.14 being the December 2011 market low when massive buying appeared.  As for the upside of the silver price, $30 per ounce is the nearest resistance level, followed by $33.28 per ounce, which is the eight week high. 

PLATINUM

Last week with Gold down $61 per ounce, we saw Platinum drop $65, closing the week at only $1,471 per ounce. Platinum’s discount to the price of Gold is currently at an unbelievable $112 per ounce. This provides you with an opportunity to purchase Platinum at a 7 ½% discount to Gold. A discount of this size rarely happens, so last week I increased the recommended investment diversification for Platinum to 15% of your precious metal commitment. 

The Canadian 1oz Platinum Maple Leaf is the most active Platinum trading vehicle, and because it’s our #1 selling Platinum bullion item, we can offer them at only 5 ¾% over spot.  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 35%, Platinum & Palladium 15%

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

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