Weekly Market Report 11/26/12

This week’s Market Report provides you with an update on the precious metal market activities and the status of Gold and Silver’s support and resistance levels. I am also sharing a World Gold Council report on the 2012 Central Bank Gold demand.

GOLD

After last Friday’s $23 Gold rally (caused by a weaker U.S. Dollar and labor unrest at South Africa’s Harmony Gold mine with the death of two miners) Gold reached its highest level in the past seven weeks. Gold closed the week at $1,751.40 per ounce, up $36.70 for the shortened holiday week. The close was above the key resistance level of $1,740 per ounce, which means that the next leg of this rally should take us to the $1,800 resistance level. I would expect to see a little consolidation in the $1,740 to $1,750 per ounce price range early this week.

Gold is now up $185 per ounce (11.85%) since January 1. Most U.S. and Foreign precious metal and financial markets have priced in some sort of Congressional agreement on the potential Fiscal Cliff issues by December 14, when Congress breaks for the Christmas Holidays.

MARCUS GRUBB, WGC MANAGING DIRECTOR OF INVESTMENT, GIVES GOLD OUTLOOK

Marcus Grubb of the World Gold Council (WGC) said in a recent interview that by the end of September, central banks will have now bought 373.9 tons of Gold. Last year through September, they bought 343.9. So we’re looking at another 450-500 ton year for central banks, which is a record since the 1960’s.

Mr. Grubb said “The most recent name that’s popped in, after many years of not buying Gold, is Brazil. Brazil’s buying confirms a trend we’ve seen. If you look back over this year and in this quarter, the buyers are Latin American countries — Mexico, Bolivia, now Brazil; they are Central Asian countries — Russia, Kazakhstan, Ukraine; and Far Eastern countries such as Thailand, Philippines and South Korea. The developing country central banks are the ones doing the purchasing”.

The bottom line is that these central banks are diversifying away from the dollar. They are also diversifying away from the Euro because of the sovereign problems and currency issues in Europe. To read the complete World Gold Council interview see http://www.mintstategold.com/investor-education/WGC_Grubb/

BASEL III RULES ARE EXTREMELY BULLISH FOR GOLD IN 2013

The Basel Committee for Bank Supervision (BCBS), as part of the Bank of International Settlement (BIS), is arguably the highest authority for world banking supervision. It is their role to define the capital requirements for financial assets, which includes Gold, in their Basel III rules. In short, they are considering making Gold a Tier 1 asset for commercial banks with a 100% risk weighting, as opposed to the way Gold stands today as a Tier 3 asset with just a 50% weighting. At the same time, they are set to increase the amount of capital that banks must set aside. The Basel III rules are potentially a double win for Gold in 2013.

Currently banks have a dis-incentive to hold Gold, while being encouraged to hold assets such as equity capital, currencies, and debt instruments. With this potential change in capital adequacy requirements, bank purchases of Gold would drive up Gold’s value relative to other high-quality qualifying assets. I believe that this should result in Gold setting new records highs (above $1,920 per ounce) in 2013. For more information about Basel III, please read: http://www.mintstategold.com/investor-education/goldrealmoney.com/  

CHINESE GOVERMENTAL AND INVESTOR DEMAND FOR PHYSICAL GOLD IS GROWING

Long term Chinese economic and monetary policies have had, and will continue to have, a dramatic effect on the price of precious metals, especially Gold. To better understand the short and long term effects of these policies I would recommend reading an article by Jan Skoylesj called “Chinese Golden Plan” at the following link: http://www.mintstategold.com/investor-education/cat/news/post/chinese_gold_plan/  

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 go 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

Silver followed Gold’s lead last Friday and rallied $0.76 per ounce, closing the week at $34.11 per ounce, breaking above the $34 resistance level and closing at the highest price since October 12. Silver was up $1.75 per ounce for the week, and up $6.24 per ounce (22.37%) since January 1. The Gold/Silver price ratio is currently at 51.34-to-1.

PLATINUM & PALLADIUM

Platinum was up $55.30 per ounce last week, while Palladium increased $41.15 per ounce in the same period. Platinum is now trading at $1,617 per ounce, an attractive $134 discount to the Gold price. Palladium closed the week at $667.60 per ounce.

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.