Weekly Market Report 11/12/12

This week I discuss the status of Gold and Silver’s support and resistance levels.  I also offer my opinion on the Obama Gold rally, now that he has been re-elected for the next four years, as well as what happened to the price of Gold in the last four years as a result of Obama and the Federal Reserve’s fiscal and monetary policies.

GOLD

As a result of last week’s Presidential election, we saw a major turn in the precious metal markets. Friday Gold closed at $1,730.90 per ounce, up $55.70 per ounce for the week. More importantly, Gold was up $46.60 since the Obama Rally began last Tuesday.

Why do I call it the Obama Rally? A history of a trillion dollar plus annual budget deficit fiscal policies, and ultra-loose monetary policies from the Federal Reserve, have led to a 131.25% increase in the price of Gold during President Obama’s first term.

If you recall, four years ago (November 4, 2008) when Barack Obama was elected President, the price of Gold was $741.15 per ounce; today, four years later, the price of Gold is $1,714.10 per ounce. This is an increase of $972.95, or 131.25%, in just four years (an average annual increase of 32.80%). In an environment where a 1% interest rate is the norm, Gold has provided an extraordinary return for Gold investors.

Now, with the fiscal situation in the United States steadily deteriorating, it is extremely concerning from nearly any perspective. The U.S. national debt is now over $16 trillion and the administration continues to run a staggering trillion dollar plus annual deficit. During President Obama’s first term we have had three rounds of quantitative easing with minimal results so far. The likelihood of more economic stimulus is great, resulting in the continued debasement of the U.S. Dollar.

The potential stimulus for the Gold price with Obama’s victory is based on the fact that a large part of our country does not trust his administration and its policies. There is a widespread belief, deservedly or not, that Barack Obama represents a threat to our economic freedom and the American way of life. Our country is divided along political lines and the atmosphere has become extremely hostile. President Obama’s re-election gives individuals who hold deep suspicions about his agenda, encouragement to buy more Gold and Silver.

With the European Central Bank keeping interest rates at a record low, and Great Britain, Japan, and China pledging more fiscal and monetary stimulus to boost their economies, more and more liquidity will be put into these systems and therefore will create inflation fears and concern about currency devaluation.

WHAT DO PRECIOUS METAL ANALYSTS THINK OF THE GOLD PRICE?

Twenty-five out of thirty-three analysts surveyed by Bloomberg expect prices to rise next week; three were bearish. Another five were neutral, making the proportion of bulls the highest since Aug. 24, 2012. Investors boosted their assets in Gold-backed exchange-traded products to an all-time high of 2,596 metric tons on Nov. 8, valued at $144.9 billion.

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 highs of $1,920, the risk/reward ratio will not look as good as it does right now.  I believe that we will see Gold above go $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

Silver closed at $32.60 per ounce last Friday, up $1.74 per ounce (5.65%) for the week, breaking through the important $32.00 per ounce resistance level. Silver is moving up on optimism of President Obama and the Republicans reaching a deal to avoid the Fiscal Cliff. If we go over the Fiscal Cliff, the price of Silver will drop dramatically. Right now the Silver-to-Gold price ratio is at a very attractive 53.10-to-1. 

SILVER CONFISCATION IN 1934

Many Gold investors know that in 1933 President Roosevelt signed Executive Order No.6102, which resulted in U.S. Gold confiscation. However, investors are unaware of Executive Order No.6814. In 1934, President Roosevelt signed Executive Order No.6814, the Silver Purchase Act of 1934, which forced American citizens to turn in their Silver or have it confiscated by the government. The following is a link to an article that provides more information about Order No.6814:
http://www.mintstategold.com/investor-education/silver_confiscated_by_roosevelt/

PLATINUM & PALLADIUM

Platinum was up $14.50 per ounce last week, while Palladium increased $11.40 per ounce in the same period. Platinum is now trading at $1,559.40 per ounce, an attractive $171.50 discount to the Gold price.

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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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.