Weekly Market Report 7/01/13

This Week’s Headlines:

Gold
Window Dressing might have been the real problem
Looking at the Big Gold Picture
Central Banks keep buying Gold
Silver
Collectible Coin Protection Act
Recommended Investment Commitment and Diversification
 

GOLD

During last Friday’s Gold trading I saw an excellent example of what technical analysts call “an inter-day reversal” with Gold, while making new lows ($1,180 per ounce) and closing up on the day, near the highs. This is a very bullish sign, it could represent a short term turn if Gold can stay above $1,200 per ounce this week and trade with good volume. This would show good support from new buyers and an end to the heavy liquidation that we have seen for the past two weeks.

June was a truly ugly month for Gold investors. Gold closed the month at $1,223 per ounce, while setting a new three year low of $1,180 per ounce on June 28th. Gold has lost an unbelievable $372 per ounce (23%) since March 31, 2013, the start of the 2nd quarter. However, I believe that the worst is over.

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Window Dressing might have been the real problem

June 28 was the end of the 2nd quarter of this year. Many hedge funds, mutual funds, financial advisors and fund managers provide updates at the end of each quarter. In the 2nd quarter, Gold dropped $500 per ounce, down 31.25%, due to sizeable liquidation. GLD (The largest Gold ETF) sold off over 239 tonnes (19.8%) during this same period. Any quarterly statement from a financial advisor showing Gold’s major decline over the past three months would not look good.

Data shows that many institutional investment companies, fund managers and financial advisors did liquidate all or a good amount of their Gold positions in the last two weeks of June. I believe this was done for month-end or quarter-ending *“window-dressing”. If my assessment is correct, the heavy liquidation of Gold and Silver by many financial companies is over, and given that today is the start of a new quarter, we should see lots of new purchases from financial companies wanting to restore balance to their investment portfolio.

I believe Friday’s high volume Gold rally from a low of $1,180, to a close of $1,223 per ounce, with after-market electronic trading reaching $1,235 was a sign that professional traders closed their short positions. Many professionals seeing the heavy “window-dressing” sales in the middle of June hopped on board and shorted Gold. Many of these commodity professionals took their profits and covered their short sales on Friday.

*Definition of financial “Window Dressing”
A strategy that is used by portfolio managers near year end or quarters end to improve the appearance of an investment portfolio or fund performance before it is presented to clients or shareholders. To “window dress”, the fund manager will sell stocks, commodities or bonds that have large losses and purchase high flying investment vehicles near the end of the quarter. These securities are then reported as part of the fund’s holdings. Window dressing may make a fund appear more attractive, but you can’t hide poor performance for long.

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Looking at the Big Gold Picture

The biggest threat to Gold and Silver right now is the potential for a global deflationary environment in which consumer spending declines. The big question is: Will the massive monetary stimulus, provided by the ECB, IMF, and the Japanese & Chinese governments, be enough to turn their economies around? Emerging market nations like China and India have been the largest buyers of precious metals, however, the slowdown in their economies and their governmental pressures may slow down Gold/Silver buying. In addition, the strengthening of the U.S. dollar acts as a headwind for the price of these precious metals. Despite last quarters devastating losses and the downward momentum, physical demand for Gold & Silver investment products in the U.S., Europe and the Middle East is growing, while new supplies from mines is slowing down.

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Central Banks keep buying Gold

Russia and Kazakhstan joined Turkey in expanding their Gold reserves for an eighth straight month in May. According to the International Monetary Fund data, Russia, whose Gold holdings are the seventh largest by country, added 6.2 metric tons of Gold last month, a 4% increase to 996.2 metric tons, keeping pace with last year’s 8.5% increase. In 2012 Kazakhstan reported a 41% expansion. This year Kazakhstan’s hoard grew 4 tons totaling 129.5 metric tons, a 12% increase.

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SILVER

Considering the major $70 decline (5.29%) in Gold last week, Silver dropping only $0.48 per ounce (2.45%) was impressive. In the past month Silver has dropped at a greater percentage than Gold. Last Friday Silver closed at $19.47 per ounce, after reaching a three year low of $18.17 early that morning. I believe that Silver suffered from the same “Window Dressing” scenario as Gold last week, and the heavy liquidation is over. $20 per ounce still represents short term resistance, and any confirmed break above $20 would signal that Silver is bullish and should be purchased.

Sales of one ounce .999 Silver Eagles from the U.S. Mint are heading towards their best year ever as the price of Silver declined. As of June 28, 2013 the U.S. Mint has sold 25,043.500 Eagles, compared with 17,392,000 for the same period in 2012. This is an increase of 7,651,500 (44%) in just six months, and at an all-time record pace. With the recent drop in Silver prices, demand and premiums have increased. That’s the highest in the first six months of a year since production of Silver Eagles began, with one more week to go. Demand remains at an “unprecedented level,” and sales of Gold and Silver coins may reach an annual record this year. Richard Peterson, the acting Director of the Mint, said on June 5th that Silver coin sales were suspended in January for more than a week because of a lack of inventory.

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Collectible Coin Protection Act

As chairman of the Gold and Silver communities’ Political Action Committee (Gold & Silver PAC), I am proud to share the introduction of HR 1849, the Collectible Coin Protection Act, into the House of Representatives on May 7, 2013. This Federal legislation amends and updates the Hobby Protection Act passed over 30 years ago. HR 1849 allows both law enforcement and civil action against manufacturers, importers, and sellers of counterfeit coins and bullion products, as well as providing enforcement against the unauthorized use of registered trademarks belonging to collectible certification services.

This legislation is non-partisan and has no financial effect on the budget; therefore I am asking my friends who have a relationship with their local congressman to contact them and request they be a co-sponsor of HR 1849. Please let me know of any positive replies.

On June 19, 2013 I walked the halls of Congress in Washington D.C. and met with a number of Congressmen. I showed them Chinese made counterfeit U.S. coins and discussed the many good reasons for them to become a Co-Sponsor of HR 1849 (Collectible Coin Protection Act). My congressman, Henry Waxman from California was especially helpful, offering to send out a “Dear Colleague” letter to other congressmen about supporting HR 1849.

If you haven’t already contacted your congressman about supporting HR 1849, please visit http://www.goldandsilverpac.com/Coin_Protection_Act.html Please email your congressman’s reply to me.

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Recommended Investment Commitment and Diversification:

Precious Metal commitment: Minimum of 40% 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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