Weekly Market Report 9/3/13

This Week’s Headlines:

Gold
Citigroup Analyst sees Gold at $3,500 per ounce
The War on Gold has spread to India
Silver
U.S. Mint reports sales of 1oz .999 Silver Eagles on record pace
Recommended Investment Commitment and Diversification

GOLD

August ended the same way July did with Gold continuing to move higher. In July Gold was up $89.30 (7.3%), and August showed an increase of $83.10 (6.3%) per ounce. Gold closed the month of August at $1,396.10 per ounce with the uptrend firmly planted. At this current rate of appreciation, and with September’s strong fundamentals, we could easily see Gold reach $1,500 per ounce by the end of September.

Those fundamentals include two political events that will drive the Gold price higher. The first will be the congressional budget debate (starting this month) which could create the possibility of having to close down parts of our government services. The second event, which has sizeable republican descent, is the needed increase in the federal debt ceiling, which has the potential to lower the U.S. debt rating. Both events are bearish for the equity markets and very bullish for Gold and Silver.

I continue to recommend that my clients make additional purchases and increase their Gold holdings immediately.

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Citigroup Analyst sees Gold at $3,500 per ounce

Tom Fitzpatrick, a technical analyst from CITI (Citigroup Banking Corporation), said “We believe we are back into that track where Gold is the hard currency of choice, and we expect for this trend to accelerate going forward. We still believe that in the next couple of years we will be looking at a Gold price of around $3,500.”

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The War on Gold has spread to India

In my 36 page Hyperinflation booklet which I released in February (the booklet is available at www.coinmag.com) I give you historic details on how governments place monetary controls on their citizens as the value of their currency is debased. Also, in earlier Weekly Market Reports I shared what monetary controls and restrictions have been placed on purchasing and shipping Gold and Silver coins and bars in European countries. Now I am sharing information on what is currently happening in India.

The value of the Indian Rupee has declined over 20% against the U.S. dollar since the beginning of this year. The Indian Rupee reached 68.80 Rupee’s to 1 U.S. Dollar today, compared to 56.75 to 1 on January 1. Indian citizens are running away from their currency by purchasing Gold at an extraordinary pace.

The following are the monetary restrictions that the Indian government has placed on Gold and Silver to discourage their citizens from cashing in their rupees for precious metals:

• Jan 21 - The government raises the Gold import duty by 2% to 6%.
• Jan 22 - The government more than doubles the duty on raw Gold to 5%.
• Jan 30 - Finance Minister P. Chidambaram says there are no plans for additional taxes or curbs on Gold imports.
• Feb 1 - The Reserve Bank of India (RBI) plans to introduce three or four Gold-linked products in the next few months.
• Feb 6 - The RBI says it would consider imposing value and quantity restrictions on Gold imports by banks.
• Feb 14 - The central bank of India relaxes rules on Gold deposit schemes offered by some banks by allowing lenders to offer the products with shorter maturities.
• Feb 20 - The Indian Trade Ministry recommends suspending cheaper Gold jewelry imports from Thailand.
• Feb 28 - India keeps its Gold import duty unchanged in its annual national budget, defying industry expectations.
• Feb 28 - India proposes a transaction tax of 0.01% on nonagricultural futures contracts, including precious metals.
• March 1 - The Finance Minister of India makes an appeal to its people to not buy so much Gold.
• March 18 - The Reserve Bank of India says it is examining banks that sell Gold coins and wealth management products to identify "systemic issues", with a view of closing any legal loopholes.
• April 2 - The Indian Finance Ministry suggests it is unlikely to raise the import tax on Gold any further to avoid smuggling. It would instead introduce inflation-indexed instruments.
• May 3 - The RBI restricts the import of Gold on a consignment basis by banks.
• June 3 - The Finance Minister says India cannot afford high levels of Gold imports and may review its import policy.
• June 5 - India hikes the Gold import duty by a third, to 8%.
• June 21 - Reliance Capital halts Gold sales and investments in its Gold-backed funds.
• June 24 - India’s biggest jewelers’ association asks members to stop selling Gold bars and coins, about 35% of their business.
• July 10 - India’s jewelers announce they might continue a voluntary ban on sales of Gold coins and bars for six months.
• July 22 - The RBI moves to tighten Gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.
• July 31 - India hopes to contain Gold imports well below the 845 tonnes that were shipped last year, the Finance Minister says.
• Aug 13 - India hikes the import duty on Gold for a third time in 2013, to 10%. Duties for Silver and Platinum are also increased to 10%. The customs duty on Gold coins and bars is increased to 8% from 6%.
• Aug 14 - India turns the screws on Gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.
• Aug 30 – India’s Commodity Market Commission hikes the margin on Gold futures to 5%.
• Aug 30 – India hikes import tariff again on Gold by another 6.7% and Silver 16.6%.

It is clear that the Indian government is desperate to stabilize its currency by making it more costly and difficult to purchase precious metals. History has shown us that whether it is by smuggling or buying it off-shore, the citizens will protect their wealth and exchange a devaluing currency into precious metals.

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SILVER

Silver had a more stellar month than Gold. It closed the month at $23.51 per ounce, up a whopping $3.89 per ounce (19.8%) on volume much larger than normal for a summer month. Last week, Silver closed above the $24 per ounce resistance level the first four days, then sold off on Friday on short term profit taking with volume at the lowest for the week. Based on August’s spectacular price performance Silver could easily test the $23 level, but most professional traders would probably buy if it held. The Silver/Gold ratio has strengthened for Silver and is now 59.38 to 1, down from 66.89 to 1 at the end of July.

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U.S. Mint reports sales of 1oz .999 Silver Eagles on record pace

At the end of August the U.S. Mint reported that they have sold over 33 million 1oz .999 Silver eagles. Considering that the total production for 2012 was 33 million and we still have four months left in the year, my estimate for 2013 year end is 42 million, an all-time record.

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Recommended Investment Commitment and Diversification:

Precious Metal commitment: Minimum of 40% of investment capital

Diversification:  Gold 50%, Silver 45%, Platinum & Palladium 5%

Diversification includes 50% in long term investment quality rare coins and 50% short term bullion products

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If you want to be updated on what is happening in the Gold, Silver, and Rare Coin markets any weekday, our company offers a daily blog Monday through Friday at www.stupplerblog.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.

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