Weekly Market Report 7/18/11

7/18/2011

GOLD IS HITTING ALL-TIME HIGHS, STILL SOARING PAST $1600, AND SILVER IS OVER $40!

In this week’s Market Report I discuss the reasons for Gold’s All-Time highs, and Gold as Monetary Catastrophe Insurance (MCI). My weekly reports keep you current on the latest happenings in the exciting Precious Metal and Rare Coin markets and we welcome your comments.

Thank you,
Barry Stuppler

 

GOLD

July has been a very profitable month for Gold investors, with an increase of  $107.30 (7.23%) in the price of Gold since July 1st. Going back five years, during the month of July the price of gold has normally been flat to lower.  This July we have seen Gold set a new All-Time high of $1,595 per ounce in active trading, not normal for July.

The real question is... What makes this July an exception? The European debt crisis, the continued uncertainty over the U.S. debt ceiling, and two debt-rating agencies who are considering lowering the U.S. Aaa credit rating, and our Federal Reserve Chairman, Ben Bernanke, giving us mixed messages about another round of quantitative easing. I believe that we will hear an announcement regarding monetary easing from the Treasury or Federal Reserve in August, after a settlement on raising the debt ceiling. Remember, it could take six months or more to see the results of a stimulus program, and next year we have a presidential election.  I also believe that the next round of monetary easing will drive gold to $2,000 within 6-9 months after the start of the program.  Any announcement of a comprehensive problem could cause gold to rally $50 or more in a day.

We are starting to see the media talk about what the public should do to protect themselves against the possibility of the U.S. Debt ceiling not being raised and the U.S. defaulting on its debt.  The financial analysts on T.V., radio, and newspapers are recommending Gold and AAA corporate securities. I cannot imagine a default on U.S. debt, but the politicians are playing with fire and anything can happen. The longer the delay in raising the debt ceiling, the more attention Gold is going to receive. Next week could be an exciting week for Gold. Today’s break above $1,600 could set off a sizeable amount of short covering, driving the price to $1,648 without much resistance. I am still looking for $1,800 by year end.

 

SILVER

Silver was up $2.53 per ounce last week, closing Friday at $39.07, with very active volume all week. Silver has been up $5.36 an ounce (or 15.90%) since July 1st, which is nothing short of phenomenal. Silver is taking its direction from Gold, but with higher volatility and more than doubling Gold’s percentage increase. With Gold trading at an All-Time high, many financial analysts believe that Silver is a much better buy, with a potentially much higher percentage on return than gold.  Today’s Silver break above $40.00 per ounce should run to its next resistance level of $41.07.

A report on July 15th in The Australian magazine by Robin Bromby points out that Silver demand is expected to climb dramatically over the next nine years as demand from Healthcare, clean energy and water purification dramatically increases. New technologies like crystalline silicon solar cells, radio frequency identification tags, and biocide (an agent capable of destroying organisms) plus bacteria removal in new water purification systems is expected to increase Silver demand by 6,600 metric tons in the next nine years. See The Australian article at www.mintstategold.com/investor-education/silver_soaring/

 

 

This Week’s recommended commitment and diversification:

Precious Metal commitment: Minimum of 30% of investible capital

Diversification:  Gold 60%, Silver 40%

Diversification includes long term investment quality rare coins and short term bullion products.

 

RARE COINS REPORT

In last week’s Rare Coin Market Report I said that the premium on U.S. $20 Gold coins was under 15%, the lowest level in the past 25 years. Well, no longer. With gold up $48.60 last week, the premium on U.S. $20 Gold coins is now at 18% over the $48.60 gold increase. So, it’s been a win/win for $20 Gold owners, and the $20 Gold Saints and $20 Gold Liberties are still under their historic average of 50% to 60%.

Premiums are starting to move up on the popular Pre-1933 small denomination European Gold coins due to heavy demand  caused by concern over a possible Eurozone sovereign default. It started with the Greeks, and now we are hearing reports from European banks that they are seeing heavy buying of French & Swiss 20 Franc Gold and British Soveriegns from Irish and Portuguese investors.  The sovereign credit default swap rate on Ireland and Portugal has doubled in the past two weeks, giving a signal that they, too, are bordering on sovereign default.

The next major numismatic event will be the American Numismatic Association’s World’s Fair of Money Convention in Chicago from August 15th to 20th. This is the largest coin and precious metals trade show and convention of the year.  I’ll be flying to Chicago on August 11th to look at some possible purchases, so if you haven’t already updated your rare coin Want List with me, please do it as soon as possible and email me a copy by August 5th. I am hoping to purchase two large collections of U.S. Gold and Silver Dollars while I’m in Chicago.

 

WHAT IS GOLD?

Federal Reserve Chairman, Ben Bernanke says that “Gold Is Not Money”

The following conversation took place between Rep. Ron Paul, R-TX, and Federal Reserve Chairman Ben Bernanke on July 13th, 2011 at the House Banking Committee hearing.

Paul: "Do you think gold is money?"

Bernanke: "No. It’s a precious metal."

Paul: "Even if it’s been money for 6,000 years? Somebody reversed that and eliminated that economic law?"

Bernanke: "Well, you know, it’s an asset. Would you say treasury bills are money? I don’t think they’re money either, but they’re a financial asset."

Paul: "Why do central banks hold it if it’s not money?"

Bernanke: "Well, it’s a form of reserves."

Paul: "Why don’t they hold diamonds?"

Bernanke: "Well, it’s tradition. Long-term tradition."

Paul: "Some people still think it’s money."

Bernanke is correct. There is no "economic law" that says gold bullion is, or that it must be, money. So what is it? Gold coins by definition are money. Only sovereign countries can mint coins that are used in commerce as money. One ounce Silver and Gold eagles, currently being minted by the U.S. government, have a denomination of $1 and $50 respectively. The ridiculously low denominations are meaningless, but they do serve a purpose to make the coins legal tender. Therefore, Gold and Silver coins are money. Being legal tender is very important since Utah has already passed a law making Gold and Silver legal tender coins exempt from State income tax. There are currently two legislative bills in Congress that could make Gold and Silver coins legal tender and exempt from Federal income tax (S.1287 & HR 1098)

 

I believe that gold coins are more than just Money... Gold is Monetary Catastrophe Insurance (MCI).

Let me explain.

Why do we buy life, auto or home insurance?  

We pay a premium to a life insurance company to provide monetary assistance for our families in case we suffer an early demise. Our auto and home insurance policies provide financial compensation if we have a minor or major catastrophe with our property.  We buy Gold to protect ourselves when the value of currency is devalued by excessive government spending and the value of our savings is being destroyed. The benefit of owning Gold as your Monetary Catastrophe Insurance is that the premium paid stays with you, and increases in value.

Currencies have come and gone over the past 3,000 years, but Gold continues to be your best store of value.

 

Stay current in the precious metal and rare coin markets with daily market reports and insights available in my Daily Blog at
http://www.mintstategold.com/investor-education/cat/blog/

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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