Weekly Market Report 9/17/12

This week’s Market Report provides you with an update on the precious metal market activities. As Gold breaks out above the $1750 per ounce level and starts its run to all-time highs, learn what’s next. I also discuss what should happen with Silver, which broke out above the $34 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 

Gold continues its bull move that started when Gold broke out above the $1,640 per ounce resistance level on August 21. Since that important break out, Gold has increased $130 per ounce, or 7.9%. The next minor resistance level for Gold is $1,790 (the 2012 high), with major psychological resistance at $1,800 per ounce; it should have excellent support on any retraction at $1,735.  Last week Gold had three days of consolidation from Monday to Wednesday, trading between $1727 and $1749 per ounce, before Bernanke’s QE3 announcement on Thursday. 

The U.S. Federal Reserve’s concerns over a slowing economy, a weak housing market, and the high unemployment rate, pushed them to approve a QE3 program, which was annouced on Thursday. With U.S. Banks showing a lack of eagerness to lend money (banks are sitting on $1.6 trillion in reserves), the Federal Reserve announced the following QE3 plan, with hopes of fueling more spending which would lead to more hiring, and inspire banks to loosen their purse strings:

• Fed said it would add $23 billion in mortgage bonds to its portfolio by the end of September, and continue at a pace of $40 billion in purchases each month for an unlimited time
• maintain low interest rates until mid-2015
• continue Operation Twist (selling billions of Dollars worth of shorter-term securities, and buying the same amount of longer-term debt to reduce borrowing costs)

Estimates from economists on the total amount of QE3 monetary stimulus range from $1 Trillion to $1.7 Trillion. To read more about the Fed’s QE3 announcement, please visit:
http://www.mintstategold.com/investor-education/fed_launches_QE3/

THE BIGGER GLOBAL ECONOMIC PICTURE

Last week’s European Central Bank and the U.S. Federal Reserve’s actions made the direction of the World’s economies and the future of record setting values of precious metals very clear.  Both Central Banks apparently gave up on their respective governments’ ability to establish credible fiscal policies to avoid severe economic contraction.  They are hoping that sizeable monetary stimulus and lower interest rates will result in gradual recovery. Let me say it differently, whether Central banks call it QE3 or ESM, they are just providing liquidity, not solvency. It now appears that the ultimate price that the ECB and the Fed are willing to pay is global currency debasement, leading to serious inflation over a high possibility of a coming global depression. I think that during the next month you will see many other G20 countries following the lead of the ECB and our Federal Reserve. 

Moody’s Warns on U.S. Credit Rating

The U.S. could lose its top credit rating status if policy makers fail to agree on measures to reduce the country’s debt to GDP ratio next year, Moody’s Investors Service warned on Tuesday. Budget negotiations during the 2013 congressional legislative session “will likely determine the direction of the U.S. government’s AAA rating,” Moody’s said, adding that if talks fail to produce stabilization followed by a downward trend in the ratio of federal debt, it may cut the country’s rating to Aa1.

SILVER

Silver continues to out-perform Gold and was up another 96 cents (2.7%) last week, closing at $34.65 per ounce. Silver did hit $34.98 per ounce on Friday before we saw selling. $35 per ounce should be major resistance, but if Gold breaks above $1,800 per ounce, Silver could quickly put $35 in its rear view mirror. Year to date, Silver has been the best price performer, up $6.78 (24.3%) since January 1. Because of the explosive move we are seeing, I am increasing the recommended investment diversification for Silver from the current 30%, to 40%.   

PLATINUM & PALLADIUM

Both of these metals have been the star performers for the past two weeks. With Platinum up $175 per ounce (11.4%) and Palladium up $70 per ounce (11.2%) I would not chase these metals right now and recommend taking a wait-and-see position before buying or selling. On Friday, Platinum closed at $1,712 per ounce and Palladium at $699 per ounce, both trading at their yearly 2012 highs. Platinum and Palladium prices have been the beneficiary of violent strikes in South African mines and a price breakout in precious metals. I have lowered the recommended investment diversification to 10% on these metals.

Recommended trade of the Week

During the major precious metal rally of the past four weeks, many of the Gold/Silver mining stocks and mutual funds have increased at a higher percentage than the physical metals. The problems of the global mining companies have not gone away and based on what we are seeing in South Africa, have gotten worse. Therefore, I would recommend selling your over-priced equities and funds and switching the money into physical Gold/Silver coins.

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35% of investment capital

Diversification:  Gold 50%, Silver 40%, Platinum & Palladium 10%

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

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/   

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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.