The at-a-glance market recap to help guide your buy, sell, and trade decisions.
Throughout July, the spot prices for the four major precious metals followed a similar trajectory, with early gains eroded by mid-month declines.
Gold reached a seven-week high of $667.60 on July 14, only to give up ground in subsequent weeks on rumors of a pending ceasefire in the the Middle East. After dipping to $601.75 on July 25, gold regained momentum, rallying to touch $640 at the market close on July 31.
Throughout the month, silver traded in line with gold, building from gains at the end of June and climbing to a high of $11.81 on July 12 before slipping below the crucial $11 threshold. Like gold, silver recovered and finished the month strong, hovering near $11.40 at the close of trading.
Palladium showed remarkable stability and even realized modest gains through the first two weeks of the month, adding $6 on July 12 to close a touch under $335. Palladium's upward swing was halted by a significant downturn later in the month, as the white metal bottomed out near $300. Increased industrial demand for palladium gave the metal a boost in late-month trading, sparking a slow-but-steady recovery to $315.
Platinum soared to $1,275 before following gold and the other precious metals downward, hitting a low of $1,193 on July 24. Platinum bounced back during the final week of July, in part due to reports of new applications for platinum-based technology in the auto industry and health sciences. However, analysts aren't predicting any major moves in platinum for the remainder of the summer.
| July Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $11.81 | $667.60 | $334.00 | $1275.50 |
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| Low | $10.50 | $603.50 | $306.00 | $1197.90 |
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| Open | $11.39 | $625.30 | $326.00 | $1244.00 |
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| Close | $11.35 | $636.20 | $312.70 | $1232.00 |
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CONTENTS
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Market Summary - July 2006 |
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Political Crisis, Inflation, and the Future for Gold |
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Precious Metals vs. Mining Stocks |
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Precious Metals Worldwide News |
ABOUT NORTHWEST TERRITORIAL MINT PRECIOUS METALS MONTHLY
Combining market summary information and insightful analysis, this publication offers an insider’s perspective on the numbers, trends, and moves that drive the precious metals market, allowing you to stay on top of the most important investment news each month without investing hours of your precious time.
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CHARTS
The following charts display the low, high and closing spot price of each metal for the month of June, 2006. Source: Northwest Territorial Mint spot prices as posted at nwtmintbullion.com.
The following charts display the closing spot price of each metal for the six months ending July 31, 2006.
Political
Crisis, Inflation, and the Future for Gold
by Ross
Hansen
Market activity during the summer months tends to move along at a slower pace than the rest of the year. But July's dramatic events generated considerable movement among the major precious metals, especially gold.
The question remains: does gold's performance during this past month offer signs of its renewed strength or, rather, signal the likelihood of another impending correction?
Global Instability – Good for Gold?
On the heels of America's July 4 holiday, North Korea shocked the world by test-launching several long-range ballistic missiles. Just one week later, Israel initiated a full-scale retaliatory strike on targets inside Lebanon, precipitating a global political crisis.
While stock markets across the world reeled in response to these events, gold climbed steadily. For example, in the wake of the North Korean missile tests, the Dow Jones industrial average fell nearly eighty points. Overseas, Germany's DAX index fell nearly 2%. By contrast, gold experienced gains on the same news and closed the day strong, with gold futures reaching their highest level in more than a month.
Gold and Inflation
On July 19, U.S. Federal Reserve Chairman Ben Bernanke testified before Congress that the core rate of inflation had actually increased despite signs that the economy was beginning to slow down.
Stocks and gold both trended upward on the news, but the rise for stocks was short-lived. Seeming to ignore the evidence that inflation was still a reality, traders on Wall Street chose to focus on the probability that the Federal Reserve would soon suspend its campaign of interest rate hikes.
The result was the largest single-day gain in the stock market in over two years. Just a few days later, however, new fears about rising oil prices -- stemming from the protracted crisis in Lebanon -- caused stocks to tumble. On July 21, the Dow Jones average fell 135 points as oil edged above $76 per barrel.
At the same time, concerns over skyrocketing oil prices and threats of a tightening of supply by nations in the Middle East placed upward pressure on spot gold. On the same day that stocks sank, gold was testing $640 per ounce.
Some analysts argued that while the crisis in the Middle East and rising oil were factors in gold's strong performance compared to stocks, a widespread fear of inflation and concerns over a troubled U.S. Dollar are the real reasons behind the return to gold among investors.
Rising Oil Heats Up Gold Price
History has demonstrated that that rising oil prices are, more often than not, bad for stock markets. Just recently, in the wake of the widening conflict between Israel and Hezbollah, the price of U.S. light crude jumped to $78.40 per barrel and crude oil for April 2007 delivery rose to $80. Stocks fell sharply as a result, with the NASDAQ composite index sinking to its lowest level in 14 months.
But, as one analyst pointed out in a July 17, 2006 story posted on the Bloomberg.com news site, what is bad for stocks is typically good for gold, especially when it comes to the price of oil. The article pointed out that gold and oil have been in virtual lockstep for decades.Over the last forty years, whenever the price of oil has soared, gold has predictably followed. Analysis of shortened periods during this time frame reveal exceptions to the positive correlation between oil and gold, but the trend holds true over the long term.
As the crisis in the
Will the correlation between surging oil and strong gold continue to play out? No one knows for certain, but it is perhaps telling that
A Turning Point for Gold?
After a shaky June, analysts and investors again expressed their optimism in gold's future, dampening the criticism of those who claimed that gold's 'safe haven' status was overstated.
Does gold's strong performance in July amount to a turning point for the yellow metal? It is probably too soon to tell, but that hasn't stopped many gold bears from assuming a more bullish stance.
Precious
Metals vs. Mining Stocks
by Northwest
Territorial Mint Staff
Uncertainty in the Middle East coupled with concerns about a weak U.S. Dollar and looming inflation have caused many investors to turn to gold and other precious metals for security. One question often raised by those looking to invest in the precious metals sector is whether owning these physical metals is favorable to owning stock in mining companies.
Bullion and Mining Stocks Compared
According to commodities experts, gold provides the most reliable basis for evaluating the differences between owning precious metals and owning mining stocks.
Gold is a hard asset that is priced according to demand on world markets. Just like every stock, it is subject to a complex combination of global economic and political pressures. However, unlike stock, gold always retains some degree of value, regardless of world market conditions.
In fact, history has shown that pressures caused by inflation, rising oil prices, or international conflict all favor a rise in the price of gold. In other words, demand for the metal tends to increase as uncertainty in the marketplace increases.
This is not necessarily true of gold-mining stocks. Mining companies are businesses first and foremost. As businesses, they are subject to production costs that place limits on their potential for profit. Though demand for gold may be strong during a given period, the cost of doing business to extract gold from the ground may also rise during that same period, resulting in shrinking profits for mining companies.
While gold typically surges in the face of higher oil prices, mining companies are adversely affected by the attendant rise in fuel costs. Moreover, while gold fares well during political and economic crises, geopolitical concerns often interfere with mining operations.
Many analysts agree that precious metal mining stocks can be a good investment opportunity, especially during strong bull markets. They point to the fact that these stocks tend to rise in value faster than physical precious metals during major market upswings. However, they warn that these stocks tend to fall harder and faster in softer markets. During the stock market crash of 1987, for example, mining stocks declined by a larger percentage than equities in general, while the price of gold increased considerably.
Analysts seem to agree that several key differences
exist
between bullion and stocks. They point out that the most basic
difference is that mining companies are exposed to a full range of
risks that can force their stock prices to decline or even lose all
value. Bullion, on the other hand, has an inherent value that
can
never decline absolutely. The prevailing wisdom among commodity experts
seems to be that, while money can certainly be made by well-timed
investment in mining stocks, the sizable risk of these
investments generally outweighs their return potential.
Precious
Metals Worldwide
News & Trends from Around the Globe
New Gold ETF Tracks Mining Companies
The Market Vectors-Gold Miners ETF launched in June offers investors
yet another way to bet on gold. The fund, issued by New York-based Van
Eck Global, is the first exchange-traded fund in the U.S. to track the
gold mining sector. The fund, traded under the symbol GDX, tracks the
Amex Gold Miners Index, a collection of 43 mining companies.
World Silver Conference
Slated for September '06
From September 27-30, delegates from around the world will gather in
Panyu, China (Guangdong Province) for the 5th annual China
International Silver Conference (CISC). Those in attendance will
include representatives from the world's leading silver producers and
precious metal research institutions, silver traders, manufacturers,
and consumers. The event is being organized and sponsored by the Gems
& Jewelry Trade Association of China, with major funding
provided
by the U.S.-based Silver Institute.
Anglo Platinum Wins Approval for New Mine
Anglo Platinum, the world's largest platinum producer, received
approval from a South African court to proceed with a plan for
expansion of its operations. The new open pit mine, located at
Ga-Tshaba in northeastern South Africa, will be operated and managed by
Potgeitersrust Platinum and will add a projected 230,000 ounces per
year to the company's output.
Platinum Chosen for World's Priciest Phone
Platinum, currently the world's most expensive precious metal, is being
used as the material for the world's most expensive phone. The handset
of the new cellular phone, created by the Russian company JSC Ancort,
will be made entirely of platinum and the phone will retail for $1.3
million. Customers can also choose to have their platinum phone treated
with rhodium to give it a lustrous, black appearance.