Weekly Market Report 8/22/11

GOLD

Gold continues its upward breakout, up $109.50 last week and up $250 for the last month. Friday’s call closed at $1,852.50 per ounce, reaching a new all-time high of $1,881.40 in Friday’s Asian trading, and almost $1,900 during U.S. trading this morning.  This increasing volatility in the gold market is beginning to concern me. I believe that the World’s Central Banks will continue to lose confidence in our currency, and that we will see gold at $5,000 by 2014. This $250 per ounce increase in one month, without a reasonable correction, is not healthy for the long term. Seeing some profit taking next week and having gold fall back into a $1,750 - $1,800 trading range (and staying there for a few weeks) would be highly supportive for the rally.

In my May Hyperinflation booklet I talk about the various phases of gold’s 1977 to 1980 rally.  Gold moved from $134.50 to $850 during a three year period in three distinct phases, (see page 2 of booklet to review).  I feel that we are entering into Phase II of this gold rally. The volatility and the price swings will increase in this range. Phase I has lasted for over 10 years. I think that phase II could last 2-3 years making it right in-line with my 2014 prediction of gold reaching $5,000. Any move to a gold standard might accelerate my prediction.

Last week’s news that Venezuela nationalized it’s Gold mining industry and repatriated $11 billion worth of their gold reserves is just the beginning of a trend in third world countries. Many third world countries want a larger share of the profits from their natural resources, especially in Gold and Silver. The labor unions in these countries want better compensation and benefits for their miners. Demand for Gold is now increasing dramatically worldwide, particularly in China and India. Their imports are projected to be over 1,000 metric tons by years end. On the supply side, we are seeing lower and lower projections from the World Gold Council for production over the next five years. The fundamentals continue to look very bullish for the gold price over the next 3-5 years.

I had some informative conversations with several major Asian precious metal dealers while in Chicago and will share that information in my World’s Fair of Money Convention report below.

 

SILVER

Silver finally broke out on Friday, increasing $1.74 for the day and up $3.32 per ounce for the week. Silver closed at $42.43 per ounce on Friday after reaching a high of $42.97 during the day. Trading volume on Friday was its highest for the week, adding more credibility to the rally. I need to see how the Asian markets will react to this sharp increase next week, since Silver hit its highest level since May 3rd.

The silver/gold ratio is now at 44 to 1. Silver buyers are encouraged by its value compared to the current gold price. Renewed press coverage of the possibility of a QE3 announcement coming out August 26th at the Jackson Hole, WY Federal Reserve meeting should increase the volatility in the markets.

 

PLATINUM & PALLADIUM

While Gold continued to hit new all-time highs in July, Platinum and Palladium were selling off. The fundamentals of these metals are substantially different than gold; Platinum and Palladium are primarily used for industry and auto production. With a global recession considered a high probability, demand and price could drop. The same reasons driving investors to buy Silver also affect Platinum and Palladium.  The price of Platinum is virtually the same price as Gold yet it is 30 times scarcer.  Therefore, I have added both metals to the recommended investment commitment diversification below. 

 

This Week’s recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35 % of investable capital

Diversification:  Gold 50%, Silver 30%, Platinum & Palladium 20%

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

 

ANA WORLD’S FAIR OF MONEY (WFM) REPORT

I have divided this WFM report into two sections: Precious Metals and Rare Coins. 

I’ll update you on the many Industry Affairs meetings in next week’s WMR.

 

PRECIOUS METALS

Two or three times a week I read the London’s Financial Times, India Business Standard, China Business News, Arabian Business.com, and other International websites and publications in order to better understand the global demand and supply of gold and silver.  Therefore, the opportunity to discuss market conditions with major dealers in these areas at the WMF was a good reason to spend the 9 days in Chicago. 

 

What did I learn? 

First of all, the demand for Gold and Silver Jewelry and ornaments in Asia is decreasing because of price, with the demand for Gold and Silver bars and coins increasing substantially.

In China there are almost 2 million people who purchase gold and silver on a monthly accumulation program, and that number is growing.  Regardless of the price of gold and silver, they purchase a set amount each month and the bank stores their metal. In India there have been shortages of supplies of gold and silver bars and coins; twice in the past three months many retailers sold out of many of the popular items. When the sellers were able to replenish their inventories, the buyers were lined up to purchase.

The main worldwide driving force to own gold and silver points to the loss of faith in the U.S. currency and great concern about continuing food and commodity inflation. 

 

RARE COINS

During WFM week two, major auction houses held coin and currency auctions.  The estimated combined sales were well over $70 million and many of the rarities sold brought record high prices.  There were over 500 dealer tables on the bourse floor, and trading was active all week. With Gold and Silver prices up every day last week, the buzz on the floor was amazing.  Investors and dealers were aggressive buyers for what are considered underpriced gold and silver rare and bullion plus coins.

The focus of many buyers was directed at U.S. Gold Type Coins and Morgan/Peace Silver Dollars. For the past two years, these series of coins have seen heavy activity in the bullion plus area, along with high end rarities (over $50,000), while the middle of this market ($5,000 to $49,000) has been very quiet and prices were flat.  Not anymore. Demand for gold type coins ($1, $2.50, $3, $5, $10 and $20 Gold Indians, Liberties, and Saint Gaudens) in the mid-price range were in big demand at the WFM. This area of rare coins represents excellent value because they are virtually unchanged in price over the past two years, when gold was under $1,000 per ounce.

Please use the latest version of CoinStats (June 2011) to identify the best values.  NOTE: A free subscription to CoinStats is available to all Stuppler/Mint State Gold clients. If you are not receiving the quarterly CoinStats reports, let me know.

 

My 24 page research study on Hyperinflation is still available for a limited time. After three months of research I am proud to share the information with clients and friends.  The title of the booklet is “U.S. Hyperinflation is Coming Soon, will Gold Confiscation or a Gold Standard be Far Behind?”

For a free copy of the booklet for yourself or a friend, just email  [email protected]

 

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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