Weekly Market Report 7/15/13

This Week’s Headlines:

Gold
$1,000 per ounce Gold
Gold bounced after Bernanke spoke
Paper Investments vs Physical Demand
Silver
Platinum & Palladium
Trading Recommendation
July 2013 CoinStats now available
Recommended Investment Commitment and Diversification

GOLD

What a great week for Gold investors, Gold was up $65 per ounce last week, closing at $1,285 per ounce, the highest weekly increase since October of 2011. One of the bullish factors of last week’s increase was the sizeable volume and demand. The increase wasn’t accomplished on normal low summer volume; the volume of trading that helped drive up the price was at above average levels. On Thursday Gold attempted to break above the $1,300 per ounce resistance level, but only reached $1,297 before seeing short term profit taking. I would really like to see Gold trade between $1,260 and $1,295 per ounce for the balance of the month. Gold needs to consolidate at this price level while building a solid base for the next leg higher. That consolidation or a confirmed break above $1,300 per ounce would end the bearish sentiment that many analysts continue to talk and write about.

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$1,000 per ounce Gold

In January of 1980, after Gold had rallied from $134 to $850 per ounce in just three years, many analysts called for Gold to reach $1,000 per ounce. Now, 33 years later, after having Gold drop from $1,920 to $1,180 in 21 months, some analysts are still calling for Gold to reach $1,000. They were wrong in 1980 and they are wrong again now.

In January of 1980 Gold increased 66% in just 20 days, and was definitely over-priced, however the speculative enthusiasm was out of hand. At that time I had a retail coin store and I had a long line out the door of clients buying and selling their Gold and Silver coins, and bars. I had three sellers for every buyer, because I was calling and faxing clients nightly to sell and take their profit. In January 1980 banks were offering 16% interest rates, a great alternative, but many analysts and brokers on television and newspapers were calling for Gold to reach $1,000 per ounce within months. Many of my clients felt they would wait for $1,000 per ounce and less than 25% listened to me. Gold reached $852 by Jan 21, 1980 and within two months it dropped to $481, and kept on dropping to $284 by February of 1985.

On June 28, 2013 Gold reached $1,180 per ounce during trading and closed at $1,223 after an inter-day reversal on very heavy trading volume. While I do believe that we have reached the bottom of the correction in the Gold price and my clients should be purchasing, many analysts and commentators on financial news channels are still calling for Gold to reach $1,000 per ounce. Today, unlike 1980, we are seeing unprecedented demand for physical Gold investment products on a global scale. Now, many of the world’s largest developing countries are exchanging their paper currency for Gold because of the massive amount of currency debasement by the developed countries. Back in the 1980’s developed countries and the IMF were selling Gold. This is a huge difference.

Today, currencies are primarily being debased by the United States, the Eurozone nations, and Japan. The extraordinary amount of government quantitative easing and stimulus programs are creating trillions of U.S. Dollars, Euros, and Yen, and this ultimately will cause serious worldwide inflation and substantially higher Gold and Silver prices.

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Gold bounced after Bernanke spoke

Last week, during Chairman Bernanke’s question and answer period of his news conference, (right after the release of the FOMC June minutes), the Gold market moved up $32 per ounce. Bernanke spoke after the market closed on Wednesday, saying that the U.S. economy desires a highly accommodative monetary policy for the foreseeable future. The Fed wants to tell the markets that tapering the QE program does not equate to tightening the monetary policy, or raising the interest rates. The FOMC minutes showed that many Fed governors would like to see more signs of improvement in jobs before agreeing to tapering. Both risky assets and Gold reacted positively to these dovish comments by the Fed. The most recent weekly jobless claims report in the U.S. showed an unexpected rise from 16,000 to 360,000. Equities also got a boost after the Bank of Japan said that Japan is recovering moderately and had upgraded its growth forecast for seven consecutive months.

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Paper Investments vs Physical Demand

The CFTC reported that net short positions by speculators has reached a record high of 129,616 contracts as of July 2. On July 11, Bloomberg calculated that Gold-backed ETF holdings fell to 1,986.47 tons, the lowest level in three years. At the same time, physical demand has been at unprecedented levels. The COMEX Gold inventories have been depleting fast because the physical buyers in Asia have been taking delivery of their Gold. The total COMEX and NYMEX Gold inventories have declined from 11 million troy ounces in February 2013 to about 7.1 million troy ounces in July, a 35% drop with the bulk of the drop happening between April and July. This confirms that investor demand for physical Gold this year is running at an extraordinarily high level, showing that lower prices are driving new investors into physical Gold at an unprecedented rate.

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SILVER

The value of Silver increased $1.05 per ounce (5.6%) last week, the best weekly increase since January, closing the week at $19.79 per ounce. After reaching a three year low of $18.17 on Friday June 28, Silver continued to rally last week, reaching a high of $20.25 per ounce on Thursday July 11. Silver actually crossed the key $20 resistance level twice last week but couldn’t close above that level. If Silver can consolidate in the $19 to $20 per ounce level until the end of the month, or any close above $20 per ounce for three straight trading days, it would be a major bullish move, confirming that a new uptrend has started.

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PLATINUM & PALLADIUM

Palladium continued its recent move higher, closing last Friday at $722.90 per ounce, the first precious metal to be higher for the year. Palladium has increased $20.25 per ounce since January 1. Platinum was up $80.50 per ounce last week, closing the week at $1,406.90 per ounce and trading at a $129 premium to the Gold price.

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Trading Recommendation

In my August 13, 2012 Weekly Market Report I made the recommendation to purchase 1oz Platinum Maple Leafs while they were trading at a $223 discount to Gold. Today, Platinum is trading at a $120 premium to the Gold price, therefore I am recommending trading back into Gold and picking up approximately $300 per ounce.

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The July 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 July 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 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.

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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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