Weekly Market Report 8/8/11

GOLD

What a week it was. There was the settlement of the Debt Ceiling Crisis, and a major announcement from the World Gold Council regarding the increasing number of Central Banks who are spending their U.S. Dollar reserves to buy Gold. Thursday we saw a 512 point drop in the DJIA (a total of a 700 point drop for the week) based on the Eurozone currency/debt crisis, and finished off the week with the Standard and Poor’s lowering of the U.S. Debt rating from AAA to AA+.  Standard and Poor’s also warned us of possible future downgrades on U.S. debt if Congress does not take serious actions to fix the increasing budget deficit problem. This downgrade of U.S. bonds and notes should be very positive for the Gold price and this morning we see gold trading over $1,700 per ounce.  

In the face of last week’s major events, gold continued to make all-time highs. Gold ended the week at $1,664.50 per ounce, up $36.30 for the week, and reached $1,684.40 on Thursday.  I mentioned last week that gold mining stocks and funds had dropped as physical gold set record highs, and this trend continues. Popular large mining companies like Gold Corporation, Barrick Gold Corp, and Newmont Mining Corp. were all lower by the end of the week. If you haven’t already changed your gold investments from mining shares over to physical gold to maximize the gold appreciation, I would act immediately. Here’s why I believe that the downgrading of U.S. debt to AA+ will drive the world’s equity markets lower, while sending the physical Gold price to new all-time highs.

A popular discussion these days between financial analysts has been “Why can’t the U.S. just sell off its gold and pay off the current $14.3 Trillion National Debt?”  It is mainly because that at present market value the United States gold holdings aren’t nearly big enough. Presently the U.S. Treasury says that they hold 8,133 ½ metric tonnes of gold (there are 32,150 troy ounces in one ton). Therefore, this total amount of gold is equal to 261,500,000 troy ounces of gold. At the present market value of gold at $1700 an ounce our total gold holdings are worth approximately $449 billion. If the U.S. wanted to use its gold holdings to pay off the $14.3 Trillion National Debt (and still growing) each ounce of gold would have to be worth $54,684!  

SILVER

Last week Silver displayed it’s volatility with an extraordinary trading range from $37.55 to $42.29.  Silver closed the week at $38.21 near the low end of this range.  Recently, Silver has been taking its direction from Gold, however it did not do so last week.  Last week Silver took its price direction from the other commodities, the stock market, and concerns of a double dip recession. To become short term bullish, Silver needs to get back to above $40 and stay there for a couple weeks.

Remember that many of the World’s Central Banks are saying that Gold is the best replacement for U.S. Dollars and is a proven hedge against monetary instability. Silver performs best when there is a serious threat of inflation and right now inflation is not the primary problem. When the next round of U.S. Quantitative Easing (QE3) is announced, which I expect the announcement within the month, Silver should be the biggest beneficiary. I believe that the recently announced monetary easing in Europe, and the future QE3 from the Federal Reserve, will start the inflation that we are expecting. Right now, physical gold is the best way to go, therefore I am changing my recommended investment commitment and diversification and increasing the precious metals percentage from 33 1/3 to 40% and making Gold 70% and Silver 30%.  See below for more information on why I am raising the investment into precious metals. 

This Week’s recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 40 % of investible capital  

Diversification:  Gold 70%, Silver 30% 

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

RARE COINS REPORT

This Thursday I leave for Chicago to attend the largest rare coin event of the year.  The American Numismatic Association holds its World’s Fair of Money Convention in August every year.  The show is a spectacular event for the numismatic community. Most of the World’s Mints create elaborate displays for their new and old coinage. The U.S. Mint and Bureau of Printing and Engraving offer their newly minted coinage and sheets of new currency along with other interesting numismatic products. Thousands of numismatic dealers have, and share, bourse tables to offer their numismatic specialties. Tens of thousands of collectors and investors attend club meetings and spend days viewing the displays, exhibits, the bourse floor, and auction lots. If you’re a numismatist and enjoy collecting or investing it is truly a must attend event.

Starting August 12th I will be attending some important meetings prior to the convention opening. I am also scheduled to look at some coin collections that I am hoping to purchase. So, if you haven’t already updated your rare coin Want List with me, please do so as soon as possible and email me a copy by August 5th. I hope to buy two large collections of U.S. Gold and Silver Dollars while I’m in Chicago.

I will provide daily updates of the happenings at the convention starting Friday. Checkout my daily blog to see what is happening at the World’s Fair of Money Convention and all of the events that surround the show.  You can read my update by visiting http://www.mintstategold.com/investor-education/cat/blog/

What does lowering the U.S. Debt rating to AA+ mean for Gold and Silver Investors?

The Standard and Poor’s rating move is a pivotal point for the U.S. Dollar

First of all I applaud Standard & Poor’s (SP) for being the first to say that the Emperor is not wearing clothes. Being the first to downgrade U.S. debt makes SP subject to criticism and scrutiny by the World’s central bankers who hold U.S. Debt securities as part of their countries reserves. Lowering the rating on U.S. Debt securities by Standard and Poor’s has set off a whole series of ramifications.

I believe that we will see the following:

• A negative effect on the World’s Stock & Bond Markets
• The largest holders of U.S. debt vehicles will now need to review their holdings
• Rating agencies like SP will need to look at the major banks that hold U.S. securities as the primary asset
• The debt of U.S. government guaranteed companies will be downgraded (Fannie Mae & Freddie Mac)
• Insurance companies and financial institution that have U.S. Gov’t counterparty risk will be downgraded
• The interest rates on credit cards, home and car loans, as well as installment loans will increase.
• The World’s Central Banks will accelerate programs of exchanging U.S. dollars in their reserves for Gold
• The largest holders of U.S. debt securities will look into upgrading to AAA with the 15 countries listed below.

The following countries have an AAA rating with S&P and Moody’s.

Australia                      Austria                         Canada                        Denmark                     Finland

France                         Germany                     Isle of Man                  Luxembourg                Netherlands

New Zealand               Norway                        Singapore                    Sweden                        Switzerland

United Kingdom

No More waiting for Gold to correct downward, now is the time to exchange your Dollars into physical Gold.

Back in May, I sent out my 24 page study about *Hyperinflation.  On pages 2-3, I explain about gold moving from Phase 1 (which has had an average of a 20.29% annual increase) into Phase II, which would start to increase at 50% per year.  As I stated in the study “ I believe that during Phase II we will see 50% annual increases over a period of about two years (with a number of +$50 and +$100 days), taking gold to around $3,000.

The SP announcement and its ramifications listed above is the pivotal point in Phase II of the gold move. Having US Debt lowered from AAA, we will see Dollar denominated assets like stocks, bonds, CD’s, T-Bills, and Notes are less desirable to the world as the ultimate safe investment. As I have said before, the World’s Central Banks will accelerate their programs to exchange U.S. dollars in their reserves into Gold.

I think that we are about to see a very explosive gold move higher. This is a bold statement considering that this is August, normally the weakest month of the year. Strong gold demand normally starts in September when the Jewelry manufacturers return from Holiday and begin to acquire gold to start making jewelry for the holidays. Indian Gold buyers have traditionally bought gold in seasonal patterns, dictated by festivals such as Akshaya Tritiya in May and Diwali in September, and the wedding season, which runs from September to December.

There are three popular ways to purchase physical Gold.

1.  A direct purchase of investment Gold products shown on www.stuppler.com .

2. Sell your gold mining shares or funds and use the proceeds to purchase investment quality physical Gold.

3. Set up a Precious Metal IRA and transfer funds from your current conventional IRA into physical gold.

            To set up a Precious Metal IRA contact [email protected]

Whichever way you select to purchase gold, please DO IT NOW. Because, while Standard & Poor’s has downgraded U.S. Debt, I have upgraded my year end prediction for Gold from my earlier projection of $1,800, up to $1,900 per ounce. Gold ending the year at $1,900 would be a 33.6% annual return, well ahead of the 20% average for the past ten years and in line with a Phase II breakout.

*Hyperinflation 24 page study is available for viewing at www.coinmag.com

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