Weekly Market Report 9/10/12

This week’s Market Report provides you with an update on the precious metal market activities. As Gold breaks out above the $1700 per ounce level and starts its run to all-time highs, learn what’s next. I also discuss what is should happen with Silver, which broke out above the $32 an ounce level and has become very bullish on its way to $35 per ounce.

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

For 3 ½ months (May 8^th to August 21^st) I have been talking about the fact that Gold was consolidating in the $1,520 to $1,630 price range, and that when it did break out we were off and running. Finally, on August 21^st Gold broke out, closing at $1,642 per ounce on heavy volume. Now, from August 22^nd up until last Friday, Gold increased $98, closing at $1,740.50 per ounce. The bullish fundamentals that I have discussed for years have caused the breakout and will continue to drive the price to all-time record highs.

Let me quickly provide a short overview of Gold’s bullish fundamentals.

1)    Demand: Fifteen different central banks have been reported by the World Gold Council to have purchased Gold tonnage, setting yearly records for Gold demand while exchanging Euros, Yen and Dollars for Gold in order to build up their countries’ reserves.

2)    Supply: Strikes, mine closures, fear of governments nationalization, and increasing cost by labor unions and conservationists are all resulting in lower mine production. Just compare the performance of mining stocks to the increase in Gold to confirm this fact.

3)    Government actions: Sovereign governments in Asia, Europe, South America, and the United States are providing monetary stimulus packages to stimulate their economies. This results in devaluing their currency, leading to future higher inflation rates.

Long term precious metal investors; please don’t wait for a pull back to add to your Gold holdings.

Recent history has shown sharp price increases after a consolidation followed by a break out. Last year, Gold consolidated in the $1,400 to $1,580 per ounce price range that lasted five months (February 2011 to July 2011.) Gold then broke out on July 25, 2011, to close at $1,607 per ounce, and by August 23, 2011 had reached $1,912 per ounce.

What to expect in the short term; as we approach the Federal Open Market Committee (FOMC) September 12-13 meeting (which is highly likely to provide another round of quantitative easing) Gold should quickly move to $1,788 per ounce, the 2012 yearly high it reached on Feb.28, 2012 . There should be some resistance at $1,800 per ounce, and possibly a quick 3% sell off from the high. 

Physical investment demand for Gold bullion coins and bars is picking up worldwide as Gold returns to the headlines. Remember, Gold valued in Euros and Indian Rupees is already trading at record highs. Now that the ECB has embarked upon another round of monetary stimulus to bailout troubled Eurozone countries and banks, Gold demand is picking up in Europe. Late last week banks were reporting an increasing demand for the popular small British, Swiss, and French Gold coins.

The national debt topped $16 trillion on September 4, 2012

Many people believe that China has been doing most of the lending; however, you might be surprised to learn who really holds our federal mortgage. Fully two-thirds of the national debt is owed to the U.S. government in the form of American investors and future retirees, through the Social Security Trust Fund and pension plans for civil service workers and military personnel. China, it turns out, holds less than 8 percent of the money that our government has borrowed over the years.

SILVER

After a $2.25 increase (7.16%) last week, Silver is now trading at the highest price since March 12, 2012. Last week I said “if Gold breaks above $1,700 per ounce, Silver could quickly break above $32 on its way to $35 per ounce.”  That is exactly what happened last week, and now Silver is at $33.69 per ounce, up 20.84% since January 1, 2012.  Remember, governments’ increasing their monetary base leads to devaluation of their currencies, which affects Silver to a greater degree than Gold because it is ultimately highly inflationary.

PLATINUM & PALLADIUM

Both Platinum and Palladium kept pace with Gold’s increase last week. Platinum increased $53 per ounce and at $1,590 per ounce, is still trading at a $150 discount to the price of Gold. Palladium increased $27 per ounce last week to close on Friday at $656 per ounce. The price of Palladium is virtually unchanged for the year. With the major mining strikes going on, the South Africa Palladium represents the best value at this very low level.

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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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 to 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.