Weekly Market Report 12/12/11

GOLD

Last week was all about the European Central Bank (ECB) and the European Financial Minister’s meetings in Brussels. They met to hopefully agree on a “fiscal compact” which could be part of a badly needed solution to the debt crisis for European sovereign nations and banks.

During the meeting the ECB announced a ¼ % cut in interest rates, lowering the cost of money for European banks and providing longer term financing for up to 36 months. They expanded collateral requirements, added 200 billion Euros to the International Monetary Fund (IMF), and scaled back bondholder loss-sharing provisions.

Although these steps were necessary, the ECB fell short of announcing a major stimulus package to provide the liquidity needed to stabilize the global financial markets.  Reports in British newspapers over the weekend said that there is serious doubt about the legal basis for the ECB agreement on the “fiscal compact” and a renewed credit crunch could be coming this week. 

With all the news coming out of the European meetings, gold traded in a very tight $1,705 to $1,760 per ounce range, closing on Friday at $1,716.80 per ounce.  In the past two months gold has built an extraordinary base in the $1,660 to $1,800 price area.  Gold has shown during its 11 year run that after a price correction and the building of a trading range, the price hits the low end of the range as a final clean out (causing small investors to receive margin calls), before it returns to the previous high and sets a new all-time record high. 

Today, the Euro debt crisis caused the U.S. Dollar to strengthen versus the Euro.  Gold sold off on the news, reaching $1,660 in early trading, the low end of our recent trading range and an excellent entry point for new purchases.

If gold closes the year at over $1,706.50 per ounce, it will be up over 20% for the eleventh year in a row.  I see that trend continuing as we approach the very bullish seasonal holiday buying period for gold. 

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SILVER

Trading activity for Silver last week was actually more bullish than gold.  Silver traded between $31.42 and $33.30 per ounce all week.  Although there was resistance above $33.00, we saw a sizeable increase in demand and volume when silver traded below $32 per ounce.  Silver closed at $32.25 per ounce on Friday, right in the middle of the trading range.  Silver, with two exceptions, has stayed above the $31 per ounce level for the past eight weeks. 

I believe that 2011 will go down as a base building year for silver. It started the year off at $30.92 per ounce and even traded as high as $49.84 in June, before a major correction. It looks like it will close the year below $34 per ounce.  Even with slowing demand, lower inflation rates, and a high possibility of a recession in Europe and Asia, silver trading has been surprisingly strong.

Silver to Gold Ratio is 53.23 to 1.

RARE COINS

On January 3, 2012 I’m heading to Orlando, Florida for the Florida United Numismatic Coin Convention.   This convention is a major event for dealers, investors, and collectors, and I’ll be there for the entire week. 

If you haven’t already updated your numismatic wantlist with our company I would recommend that you email me an update.

PLATINUM

Platinum closed at $1,515 per ounce on Friday and is now trading at a $201 discount to the gold price, a historic high.  Although recent platinum trading has not been impressive, the long term value of platinum at this discount to gold is extraordinary. I recommend the popular 1oz .999 Australian Platinum Platypus coins. They are an excellent platinum investment and trade at a low premium. 

Recommended investment commitment and diversification:

Precious Metal commitment: Minimum of 35 % of investment capital

Diversification:  Gold 75%, Silver 20%, Platinum & Palladium 5%

Diversification includes long term investment quality rare coins and short term bullion products.

YEAR END GOLD and SILVER LIKE KIND TAX TRADES

As we approach Dec 31^st we have an opportunity to make some year-end like kind trades for gold and silver without any tax obligation. For Gold, we recommend trading 1oz Gold Krugerrands, Maple Leafs, and U.S. Eagles, for European Pre-1933 Gold coins. This like kind trade offers many benefits.

For Silver, we recommend trading 10 to 100oz Silver Bars and junk 90% U.S. Silver coins, for low premium Pre-1933 U.S. Silver Dollars.  Please contact us to discuss prices and availability.    

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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.