Weekly Market Report 9/4/12

This Market Report provides you with an update on the precious metal market activities, as Gold breaks out and approaches the $1700 per ounce level and starts its run to all-time highs. I also discuss what is next for Silver, which broke out above the $30 an ounce level and became bullish.

I am again asking my clients and friends to contact their Congressman and ask him/her to support HR 5977 (Collectible Coin Protection Act of 2012). This proposed legislation would stop the flood of high quality Chinese counterfeit U.S. rare coins currently being imported into our country and sold as authentic. 

GOLD 

After having waited for five months, last week Gold finally broke out. What was the catalyst that caused this break out? It was Friday’s statement from Federal Reserve Chairman Ben Bernanke that did the trick. Bernanke’s remarks suggested, many economists say, that the central bank will launch a new round of economic stimulus when the Fed’s policy board meets in two weeks.

After having read Bernanke’s statement, I feel that the Fed is likely to embark on a new round of massive bond purchases. This would result in record-low interest rates going even lower and making it even cheaper for people to buy homes or refinance mortgages. Economists say it is more likely that the Fed will take the more modest step of extending its plan to keep interest rates near zero for another year, from late 2014 to late 2015. Why would the Federal Reserve do this? The Fed, if you remember, has a dual mandate to keep inflation under control and to stabilize employment.

With the exception of Friday, last week Gold traded in a very narrow $27 price range with a low/high range for the week of $1,652 to $1,679 per ounce. On Friday however, after Bernanke’s statement was released, Gold soared $30 per ounce, breaking through the $1,680 resistance level. Gold closed the week at $1,687.60, up $14.70 per ounce; the highest price since March 17, 2012. The price of Gold should approach its major resistance level of $1,700 per ounce this coming week. If the world’s Gold markets can absorb any selling that occurs at that price point we should be off and running to new all-time highs. 

Speaking of all-time highs, the value of Gold is reaching all-time highs around the globe. Many countries in Asia and Europe are having contractions in their economies and their currencies have declined against the U.S. Dollar. The combination of a weak currency and Friday’s increase in the Gold price is causing Gold to hit new all-time highs. In India, Gold is trading at RS 98,300 per ounce, and within the Eurozone countries at 1,344.75 Euros per ounce.  

Physical Demand for Gold Picking Up

Gold jewelers in India are upbeat on the marriage and festival season that has just begun. The expansion of branches is keeping the business in good stead despite the higher Gold prices. Bulk purchases for marriages are still continuing, though coin sales have declined. Most of the jewelry chains are now targeting rural and semi-urban areas particularly in Southern India, where the "marriage season" has just begun. This indicates that the September quarter may fare better as compared with the previous one.

In the United States, the U.S. Mint has just reported that sales of U.S. Gold Eagles climbed to an estimated 39,000 ounces, up 28% from 30,500 ounces in July 2012.

Iran’s Gold Buys Aid Turkey

Turkey’s Gold sales to Iran extended a record streak in July. Iran became Turkey’s top export market this year as $6.2 billion of gold sales, or 86% of the total, propelled the Islamic republic ahead of Germany. Gold exports in the first seven months of the year are already five times more than the total in 2011 owing to rising demand from Iran, which accounted for only 4% of sales two years ago, when its purchases started. Read the full article at: http://www.mintstategold.com/investor-education/iran_gold_aids_turkey/ 

SILVER

Last week the Silver price appreciated at a greater percentage than Gold. Silver not only held above $30 per ounce, but it rallied to close Friday at $31.44 per ounce, up $0.82 or 2.67%.

The trading volume was up slightly from the previous week, while physical demand has been increasing.  Silver is now trading at the highest price since April 20, 2012, up 12.77% for the year. It is facing some resistance at the $32 per ounce level, and showing excellent support above $30 per ounce.  If there is a quick break above $32 per ounce on Tuesday, look for light resistance at $33 and $34, and $35.00 per ounce is major resistance. 

Last year, Silver broke through the $30 barrier on Feb 8th, and by April 25th it had reached $49.20 per ounce. On Jan 12, 2012, when Silver broke out above the $30 per ounce level, it ran up to $37.20 per ounce within 6 weeks. To say that Silver has had a recent history of making incredible price increases over a short period of time is an understatement. Will history repeat itself? I would like to see Silver stay at between $30 and $32 per ounce, consolidating its recent gains. However, if Gold breaks above $1,700 per ounce, Silver could quickly break above $32 on its way to $35 per ounce.

HR 5977 (Collectible Coin Protection Act of 2012)

HR 5977 needs to be passed into law this session of Congress.

Please contact your Congressman to ask for their support of HR 5977

As Chairman of the Gold & Silver Industry’s Political Action Committee (G&S PAC) I have been privileged to help our numismatic community build support for our anti-counterfeit legislation. HR 5977, introduced on June 20, 2012 (Collectible Coin Protection Act of 2012) helps to stop the flood of high quality Chinese counterfeit U.S. rare coins currently coming into our country. This legislation provides badly needed enforcement “teeth” for the Hobby Protection Act of 1978, focusing on any manufacturer, importer, or seller of U.S. counterfeit coins.  

I am asking my clients and friends to email or call their Congressman and request that they co-sponsor or support HR5977. According to our industry lobbyist, the more Republican and Democratic Congressmen that support our legislation, the better the chance we have to bring the bill to the House of Representative’s floor for unanimous consent by year end.  

If you want to keep track of the progress on this important legislation you can follow it on: http://www.goldandsilverpac.com/Coin_Protection_Act.html  

To find the name and contact information for your local member of the United States Congress visit http://www.contactingthecongress.org/ and enter your complete zip code.

If you are willing to call your Congressman see http://clerk.house.gov/member_info/mcapdir.aspx to find the Washington D.C. office phone number of your representative.  

Please email me when you have contacted your Congressman with the results of your communication.

For more information on HR5977, see http://www.mintstategold.com/investor-education/cat/news/post/collectible_coin_protection_act/   

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% of investment capital

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

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

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