Weekly Market Report 10/1/12

This week, as Gold stabilizes 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.   

The October 2012 CoinStats update is now available for $20 Gold Saint Gaudens, $20 Gold Liberties, Morgan & Peace Silver Dollars, and the Walking Liberty Half Dollar series. CoinStats is an in-depth statistical analysis of popular rare coin series which allows you to identify the best values in certified rare coins. With this recent breakout in Gold/Silver we are seeing demand for investment quality U.S. rare coins increase dramatically, and prices are starting to move higher.

GOLD 

I couldn’t be more impressed with last week’s Gold price performance. The Gold price never closed below the $1,753 price all week; closing on Friday at $1,773.90.  Friday was the end of the third-quarter of the year, and for that period Gold increased $168 per ounce (10.4%). For the month of September, Gold was up $85 per ounce (5%). 

Gold is building an extraordinary base while preparing for the breakout above the 2012 high of $1,790. The only question I ask myself is, “How long will Gold trade between $1,750 and $1,790 per ounce before it breaks out?” It may be days or weeks, but it will surely happen in October. That breakout should quickly be followed by a move above $1,800 per ounce, on its way to setting a new all-time high by year end.

The pattern that I mentioned last week of Gold having its largest weekly increase on Thursdays or Fridays continued for a seventh week. I finally got some input on this pattern from a couple of professional commodity traders. They believe that a move up could come over concerns that the European debt crisis could easily explode over a weekend and short term traders do not want to be short, so they cover their shorts on Thursday or Friday.

IMF REPORTS HEAVY CENTRAL BANK GOLD BUYING

The IMF has reported that more and more of the World’s Central Banks are aggressively purchasing Gold. Emerging markets’ Central Banks have bought Gold in reaction to the sovereign-debt crisis affecting traditional reserve currencies like the Dollar and the Euro. This has become an important support for Gold prices since it not only absorbs the supply, but boosts investor sentiment toward the metal. Many Central Banks do not report monthly Gold purchases, preferring to wait for annual reports to the IMF, however, in July and August six Central Banks provided interim reports. The six countries’ Central Banks were South Korea, Turkey, Russia, Ukraine, Paraguay, and Kazakhstan, who all boosted their Gold reserves. These six Central Banks added 96.2 Metric tonnes of Gold.

GOLD DEMAND CONTINUES TO GROW

Investors continued to pile into Gold, sending holdings of physically backed exchange-traded funds (GLD) to a record high of 1,326 tonnes. Expectations are that recent stimulus moves by Central Banks will support further strength in bullion. The total holdings of all Gold ETFs also hit an all-time high last week at 73.765 million ounces, or 2,294 tonnes.

LAST CALL FOR GOLD

Gold at under $1,800 per ounce still represents an excellent entry point for new purchases. However, as we get closer and closer to the all-time high of $1,920, the risk/reward ratio does not look as good as it does right now. I believe that we will see Gold above $2,000 per ounce very soon, so why wait? Look at the Recommended Investment Commitment and Diversification section below, and if your Precious Metal commitment isn’t a minimum of 35% of your investment capital, make those purchases now.

SILVER

If you are happy with the third-quarter increase in the Gold market, you are going to be ecstatic about the performance of Silver. In the third-quarter of 2012, Silver increased $6.96 per ounce (25%). With Silver closing at $34.57 per ounce on Friday, it means that for the month of September Silver increased $3.13 per ounce (9.9%). The next resistance number is $35 per ounce; after that it is $38, on its way to break above $40 per ounce. During the past month, physical demand for Silver increased dramatically and Silver has outperformed Gold; just look at the numbers.

MORGAN STANLEY PREDICTS SILVER WILL INCREASE FASTER THAN GOLD

Morgan Stanley says if history is any guide, “Silver will beat Gold after the Federal Reserve announced a third round of debt-buying, and Central Banks from Europe to Japan pledged more action. Silver rose about 53% in the Fed’s first quantitative easing from December 2008 through March 2010, twice as much as Gold; and 24% during the second phase ending in June 2011, three times that of Gold. Silver will probably keep beating Gold in the next several quarters.”

PLATINUM & PALLADIUM

Platinum and Palladium prices behaved well last week based on the news coming out of South Africa. In South Africa, miners stopped working at AngloGold Ashanti’s Kopanang mine to demand higher wages, mere hours after Lonmin signed a deal to end a strike at its Marikana Platinum mine by offering a pay rise to striking employees. The National Union of Mineworkers said that the strikers at Kopanang are demanding a wage increase to 12,500 rand per month. Workers at Marikana ended their strike Wednesday after agreeing to a 22-percent raise and a one-time lump payment of 2,000 rand. Several market observers have warned that the Lonmin deal set a dangerous precedent and that further disruption to the sector was likely to follow. Last week Platinum closed at $1,669.30 and Palladium closed at $640 per ounce.

The October 2012 CoinStats is now available

Our numismatic CoinStats report is the best investment tool for rare coin investors. CoinStats is an in-depth statistical analysis of popular rare coin series that allows you to identify the best values in certified rare coins. I am proud to offer this unique and informative tool exclusively to our clients. The October 2012 CoinStats update is now available for $20 Gold Saint Gaudens, $20 Gold Liberties, Morgan & Peace Silver Dollars, and the Walking Liberty Half Dollar series.

The CoinStats Report provides a list of my recommended certified U.S. Gold and Silver coins that are found listed on the Best Value page. These are not the overly-hyped modern issue bullion coins or low-grade circulated coins, they are PCGS/NGC Certified MS63 or higher Gold and Silver U.S. rare coins, dated prior to 1936, that have a proven track record of appreciation.

For the latest CoinStats analysis, just put CoinStats in the subject line and email me which series you would like to see.

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

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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.