Weekly Market Report 11/18/13

This Week’s Headlines:

Gold
World Gold Council’s 2013 Third Quarter Report
Tax Loss Strategy
Silver
Rare Coin Report
Recommended Investment Commitment and Diversification

GOLD

Our incoming Federal Reserve Chairman, Janet Yellen, testified before Congress last week that she was prepared to continue the current U.S. monetary stimulus program ($85 billion per month) until the U.S. unemployment rate improves. Given that Ms. Yellen’s testimony was considered to be modestly bullish for Gold,Gold closed Friday at $1,287.40 per ounce, up only $2.80 per ounce and trading in a narrow $30 range all week.

World Gold Council’s 2013 Third Quarter Report

The World Gold Council (WGC) issued its 2013 third quarter report last week. The report showed that world demand for Gold jewelry was up 5%, while investment demand for Gold coins and bars was up 6%. The WGC also stated that new supplies of Gold coming to market were down 3% for the quarter. To read the complete WGC report click on the following link. http://www.mintstategold.com/investor-education/cat/news/post/wgc_q3_2013_gold_report/

Considering both the Yellen testimony and the WGC report, I was very disappointed in Gold’s price performance last week. These bullish announcements should have pushed Gold back to above the key $1,300 per ounce resistance level. I’ll give the major buyers in Asia some time to digest this news, but I need to see Gold move above $1,300 by early this week, otherwise we could test major support of $1,250 per ounce sometime this month.

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Tax Loss Strategy

After 11 straight years of Gold increasing in value, it appears that the price will close below the December 31, 2012 price of $1,645 per ounce by year end. This gives long term Gold and Silver investors the opportunity to use any of their losses (in Gold or Silver) to offset long term capital gains from other investments.

How does it work?
If you have sold profitable stocks, real estate, or other assets this year and owe income tax on the capital gain profits, you can sell enough Gold Maple Leafs, Eagles, or Krugerrands (which have declined from your original cost) to offset your profits thus eliminating your capital gain liability. Then, 31 days after you sell your Gold, you can buy back your Gold bullion coins, or buy other pre-1933 low premium Gold coins that provide you better privacy. This strategy will also work for Silver bullion purchases.

I recommend that you look at your capital gain liability and the cost basis of your Gold and Silver bullion and coins, talk to your accountant, and then call me.

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SILVER

While worldwide physical demand for Silver investment products is soaring (Bars and Coins), the recent market price activity has been very disappointing.

Examples of the extraordinary worldwide demand for physical Silver are:

• The last estimate from India shows demand for Silver products is up over 80% this year due to the depreciating Rupee and heavy import taxes on Gold that are driving Indians to buy Silver.
• The U.S. Mint announced that year-to-date sales have surpassed 40 million for the 1 ounce .999 Silver Eagles (an all-time record high) with 1 ½ months still left to fill orders.

However, since the start of November Silver has declined $1.14 per ounce (5.2%), closing last Friday at $20.72. Silver has been unable to hold support at $22 or even $21 per ounce. $20 per ounce is a major long term support level for Silver and I believe it should hold that level if tested.

Last week the Silver/Gold ratio weakened and is now at 62.11 to 1.

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Rare Coin Report

Last weekend, November 15 - 16, Heritage Auction Galleries sold Part II of the Eric Newman rare coin collection. This part of the collection was primarily Silver U.S. rarities and sold for $23,377,620. Fifty rare coins sold for over $100,000 at the auction, which featured many well-known U.S. Silver rarities. Two of the finest known rarities set all-time record highs.These were the 1796 Draped Bust Quarter, graded MS67+ by NGC,which sold for $1,527,620, and the 1795 Draped Bust Silver Dollar, graded MS66+ by NGC, which sold for $910,625. Last week, Christie’s Auction house sold $691 million worth of collectible art; a record high.

The demand for scarce high value collectibles isn’t just happening in rare coins and art. Classic autos, antiques, and many other investment quality collectibles (investibles) have recently set all-time record highs. There is great demand from wealthy investors wanting to get out of paper money,which continues to increase the demand for investment quality rare coins.

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Recommended Investment Commitment and Diversification:

Precious Metal commitment: Minimum of 40% of investment capital

Diversification:  Gold 50%, Silver 45%, Platinum & Palladium 5%

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

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