Weekly Market Report 12/14/15

Links to recent informative articles on precious metals and rare coins:

Gold & Silver prices will surge on fundamentals not technical analysis

Gold (coin) bugs: No, we’re not crazy for buying

China is playing the Gold game very carefully: Covert purchases of Gold

This Week’s Headlines:

Gold
Backwardation and Contango
Tax Benefits for your Gold & Silver holdings
Platinum
Silver
Recommended investment commitment and diversification

GOLD

Gold closed within a $4.50 price range (between $1,072 and $1,076.50 per ounce) all five trading days last week. Last Friday the bears took a run at breaking the Gold price down and were able to reach $1,063.40 in Asian trading. At that point major buying appeared, quickly rallying the price back above $1,070 on very heavy trading volume. Gold closed last Friday at $1,075.70 per ounce on the highest CME trading volume of the week. After setting a six-year low of $1,045 last week, Gold is up $10.40 since the beginning of the month.

Today: Gold fell this morning as the U.S. Dollar moved higher versus the Euro in anticipation of the Federal Reserve policy meeting this week to announce the first interest rate increase in nearly a decade.

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Backwardation and Contango

The CME exchange contract for Gold is trading with backwardation. This rarely happens with precious metal futures contracts. Last Friday the Gold spot price for the December 2015 contract closed at $1,073.10 per ounce, while the March 2016 contract closed at $1,072.00 per ounce; $1.10 less. Normally, contract dates further out trade at a premium to the spot price, which is called contango. Backwardation is considered very bullish for the price of the commodity.

What is Contango and Backwardation?

Simply speaking Contango refers to a situation where the future delivery spot price of a commodity is below the soonest delivery price. Typically people are willing to pay more (interest on the money and storage costs) for a commodity at some point in the future over getting it sooner at a higher price. When it switches to where the future price of Gold is lower than the earliest delivery price that is called backwardation. This can happen for many reasons as explained below.

Why is Gold futures price trading with backwardation?

There are four major reasons that spot Gold is trading in backwardation on future exchanges:

1. Strong physical global demand for Gold investment products (i.e., bars and coins).
2. Sizeable decrease in newly mined Gold is causing a major squeeze on physical supply.
3. Stockpiles of Gold in exchanges and depositories continue to drop to fill consumer demand.
4. Gold inventories of the popular ETF, SPDR Gold Trust (GLD), has dropped from over 1,000 metric tonnes of Gold in 2013, to 634 tonnes today.

Another positive sign for the short term outlook for the Gold price is the recent price increase in Gold equities. Many of the popular Gold mining stocks, i.e., Newmont, Barrick Gold, and Goldcorp, have rallied on days Gold traded lower, which you rarely see. I don’t recommend Gold stocks for several good reasons that I have explained in the past, however they are an excellent indicator.

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Look at the tax benefits for your Gold &;amp; Silver holdings

As we approach the end of 2015, I believe there is an extraordinary opportunity to take advantage of this year’s drop in Gold & Silver prices. Let me explain how you can turn your paper loss in your precious metal holdings into an Asset. I’ve explained your options and how this tax strategy works in the follow article: www.mintstategold.com/investor-education/cat/news/post/2015_tax_strategy/.

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PLATINUM

For most of 2015, the spot price of Platinum has traded at a discount to the Gold spot price. This has only happened four times in the past twenty years, and Platinum rarely stays at a discount to Gold for more than a year. Platinum closed last week at $844 per ounce, and 1oz Platinum Maple Leafs are trading at an amazing $180 discount to the 1oz Gold Maple Leafs. The Canadian Platinum Maple Leaf is the best bullion coin on the market, with the lowest premium over spot Platinum.

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SILVER

Silver reached a seven-year low last Friday of $13.75 per ounce, closing the week under the important $14 support level, at $13.88 per ounce. Friday’s trading volume of 51,090 March CME 5,000-ounce Silver contracts, again gave Friday the highest trading volume for two weeks in a row. Friday is normally the lowest trading volume day as traders leave early for a longer weekend. Silver is very likely to continue to head lower, as extraordinary physical demand for investment products has little to no bearing on the spot price.

Today: Silver is making new seven-year lows, hitting $13.63 in early morning trading. We should see some support around the $13.50 per ounce level, but the bears have complete control of Silver and I believe we will see the low of the year and a turn by Dec 31.

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Recommended Investment Commitment and Diversification:

Precious Metal commitment: Minimum of 30% 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 through 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.

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