Many commodities experts predicted it would be tough to improve on last month's surge in precious metal spot prices. And despite some late-month gains, prices for the four major precious metals – gold, silver, platinum, and palladium – held at or below levels seen at the end of February. All four metals slipped early on, with silver spot falling nearly $2 to start off the first full week of trading. Gold spot also tumbled during trading on March 5, hitting a five-week low just above $633. After sinking to $1,164, platinum trended steadily upward, ending the first quarter of the year up nearly 8%. After following gold and the other precious metals downward, palladium traded in an extremely narrow channel for the remainder of the March, hovering in the $350 -$360 range, almost exactly where it had begun the month.
Gold/Silver Ratio
The gold/silver ratio – the quantity of silver (in Troy ounces) required to purchase an ounce of gold – spiked early in March, jumping nearly 2 points to touch 50.8 before retracing slightly. The ratio ended the month at 49.7. For a graphic view of this trend, please consult the chart contained in the sidebar at right.
| March Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $14.30 | $675.25 | $360.00 | $1257.00 |
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| Low | $12.45 | $633.10 | $338.50 | $1164.00 |
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| Open | $14.18 | $671.75 | $353.00 | $1240.00 |
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| Close | $13.46 | $665.53 | $356.00 | $1246.50 |
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CONTENTS
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 daily low and high spot price of each metal for the month of March, 2007. Source: Northwest Territorial Mint spot prices as posted at nwtmintbullion.com.
The following charts display the daily spot price range of each metal for the six months ending February, 2007.
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In A Fragile World, Gold and Silver Remain Strong
by Ross Hansen
There is a popular adage that warns, "Beware of living in interesting times."
On closer examination, this deceptively simple statement reveals a sophisticated idea– the notion that advantage and disadvantage are inevitably tied together. While sudden and rapid change – the hallmark of 'interesting times'– provides exciting opportunities for growth, it can send the unprepared into a fit of panic.
The purpose of this article is to illustrate how the price of gold, silver, and other precious metals continues to benefit from the 'interesting times' in which we live and how you can benefit too.
'Interesting Times' in 2007 Drive Surge in Precious Metals
The first three months of 2007 have been marked by a steady stream of interesting political and economic developments, which have had a marked effect on the precious metals market. Many commodities experts have stated that the developments cited below reveal conditions favorable for the continuation of the bull market for gold, silver, and other precious metals.
1. China's Stock Market Takes a Dive
On February 27, China's major stock market index plummeted, losing 9% of its total value in a single trading session. While stock markets throughout the world tumbled on the news (the Dow Jones lost more than 3%), gold climbed to $683.2. Iran Continues Its Defiance
On February 22, Iran's President, Mahmoud Ahmadinejad openly defied the United Nations deadline for inspections of the country's nuclear enrichment facilities. In response, gold soared from $660 to close just below $680 on February 23; likewise, silver spot gained nearly 5% on the news.
3. Zimbabwe's Future Hangs in the Balance
The nation of Zimbabwe, one of the world's leading gold-producing nations, appears to be falling apart. Reports say that civil unrest is rapidly rising there and world leaders are growing increasingly concerned about the potential for widespread violence. Unemployment in Zimbabwe has reached 80% and inflation stands near 1,500%. As a result of the growing political and economic crisis there, gold production has been severely limited in recent months, placing upward pressure on the price of gold.4. U.S. Dollar Still Shaky
Despite holding a slightly firmer position than it did at the start of the year, the American greenback is still struggling against rival currencies like the euro and Chinese yuan. The dollar suffered another setback on March 28 when officials from Iran's central bank stated that they may stop pricing oil for export in U.S. currency. Experts have suggested that if world demand for dollars continues to slip as a result of shifts like these in the currency markets, the dollar could face real trouble in coming months. According to many commodities experts, continued concern over the dollar's performance is causing a significant increase in global investment demand for precious metals.
Precious Metals and the Recent Past
The events of the past three months have affirmed the fundamental principle that precious metals typically hold steady, and even perform well, when other markets are slumping. This trend is certainly well-established over the past several decades, as the examples cited below indicate.
5. Oil Breaks $10 Barrier (1974)
From 1972 to 1974, the price of crude oil on world markets increased by 325%, climbing from $2.44 to $10.36 per barrel. During that same period, the price of gold jumped by 268% from $47.45 to $174.76 per ounce.6. U.S. Inflation Rate Reaches 14% (1980)
The inflation rate in the U.S. during the first quarter of 1980 averaged 14.3%, the biggest jump after five years of inflation. In January of 1980, gold spot spiked, soaring to $850. This example is often used to reference gold's historic importance as a hedge against runaway inflation.7. War in Iraq Begins (2003)
In March of 2003, American-led coalition forces commenced Operation Iraqi Freedom. Almost immediately following the invasion, the spot prices of gold and silver began to climb. By May, gold had risen to $375, up from $320 in March; silver followed gold upward, rising nearly 20% to touch $5 by the end of the summer.
Clearly, precious metals have responded well to political turmoil and economic strife over the past several decades. And for those who have recognized advantage in the midst of rapid change and uncertainty, our own 'interesting times' in 2007 have yielded big gains. Only time will tell if the surge in precious metals will last. It will likely depend on how the developments listed above take shape in the coming months. But even if things do calm down for awhile, it's a pretty safe bet that more 'interesting times' are right around the corner.
Ross B. Hansen
CEO, Northwest Territorial Mint
Ross Hansen is the founder and CEO of Northwest Territorial Mint and has more than 30 years of experience as a precious metals trader and broker.
What One Mexican Bank Is Doing for Silver by David Morgan
This month, I was asked the following question from a Northwest Territorial Mint Precious Metals Monthly reader:
Question:
Mr. Morgan, you have stated many times in your work that investment demand for silver isn't nearly as high as demand for gold. Is this likely to change?
Answer:
Yes. In fact, it has been changing significantly ever since the Silver ETF was started in late April 2006. Since that time, nearly 130 million ounces of silver have been purchased through this investment vehicle according to the Barclays Global Investors website.
In the February edition of the Morgan Report, I uncovered another subtle, but perhaps even more significant development affecting the global silver market. At the end of February, Banco Azteca launched a new program for those who want to save silver. Banco Azteca, which operates approximately 1,000 branches throughout Mexico, is the first Mexican bank to offer this service; other banks are expected to follow suit. At least for now, the new service called "Plata en Boveda" (translated "Silver in the Vault"), is available only to Mexican citizens.
It provides those interested in accumulating and saving physical silver with a place to store their one-ounce silver Libertad coins, which Banco Azteca also sells. Only Libertad one-ounce coins are currently accepted for this "Silver in the Vault" program. What I like about this is that the silver is segregated from fiat currency and secured in Banco Azteca's vaults. And while the bank assumes responsibility for custody, the coins in the vault remain the exclusive property of the depositor.
Those who already own silver Libertad coins can bring them to the bank for deposit into "Silver in the Vault" accounts. Silver transactions can be done over-the-counter or electronically. Understandably, there is a small charge for this service, which can be paid quarterly.
As I expected, the announcement of Banco Azteca's "Silver in the Vault" program has largely been overlooked by the mainstream financial press. This is not all that surprising, since it will likely be several more months before the true significance of this program is known. But silver watchers everywhere, and those who appreciate silver's historic role as an inflation hedge, know that the potential for this to catch on with Mexican citizens is huge. The Mexican people are acutely aware of what has happened to the peso in the past, and many are looking for a way to protect against the peso's devaluation in the future.
Mexico has a population of more than 100 million and is the world's second-largest silver producer. If interest for silver Libertads among Mexicans is anywhere near the level of interest shown by Americans for silver Eagles (now in their 21st year of issue), the "Silver in the Vault" program might produce an off-take of 10 million ounces annually. In fact, because this program is designed to be very easy to access and participate in, the total amount of silver stored could be even higher. Whatever the exact number turns out to be, millions of ounces of silver that would normally reach world markets will now never leave Mexico, further shrinking supply and placing upward pressure on the price of silver.
This is certainly a development that I plan to track closely. If you're serious about silver, you should too. Stay tuned for more news as it develops.
Until Next Month,
Get Real, Buy Real
David Morgan
We highly encourage all of our readers to visit and become familiar with David Morgan's web site www.silver-investor.com, the world's leading source for serious investors. Add yourself to his free e-mail list. The first thing you will receive — for free — is the "Ten Rules of Silver Investing," written several years ago for The Global-Investor Book of Investing Rules: Invaluable Advice from 150 Master Investors, published in the United Kingdom. These rules are pithy, timeless, and will pay big dividends to new investors and seasoned professionals alike. You can opt out of the list at any time, but we doubt you will. Being on his list is a way to be certain you can closely follow the silver story and big economic picture.
Market Analysis : A Tale of Two Approaches
by Mark Burgess
Long-time readers of this publication may recall my series several months ago on the gold/silver ratio (please see our October 2006 edition at www.preciousmetalsmonthly.com for a good primer on this topic). Some may not have realized that, even though I didn't label it "technical analysis," I was actually explaining a technical approach to precious metals investing in those articles.
This article aims to formally introduce the two major methods of analyzing the precious metals market (or any market for that matter); describe the specific utility of each method; and explain how you might incorporate these approaches into your overall investment strategy.
A Tale of Two Approaches
Market analysis can be divided into two general categories: fundamental and technical. Though these approaches are based on different assumptions about what moves markets up and down, they share the same goal: to predict future prices for the purpose of investment gain. Since accurately forecasting the future of any market consistently is impossible, these approaches have built-in limitations. Therefore, their value is derived from helping investors understand trends, identify and manage risk, and make informed decisions.
Focusing on Fundamentals
Fundamental analysis is based on a macroeconomic approach. It focuses mainly on evaluating supply and demand in the precious metals market over time. For example, an investor relying on this method might take the aggregate increase in demand for gold in India and China over the past six months as an indicator that now is a good time to invest in gold.
This type of analysis also takes into consideration established market triggers, such as shifts in the price of oil. Volatility in the global oil market has historically been correlated to movements in the respective spot prices of gold and silver. Additionally, fundamental analysis is concerned with evaluations of the major players in the precious metals market (think Warren Buffet before he liquidated his 130 million ounces of silver, precious metal mining interests, ETF holdings, etc.).
Getting Technical
Technical analysis zeroes in on minute details and can be thought of as a microeconomic approach to trading. It focuses not on broad trends, but rather on precise data from hourly, daily, and monthly trading activity. For example, a proponent of technical analysis might evaluate spot gold during any given trading session against a pre-determined "resistance point" to judge whether to buy or sell the metal.
One can apply countless technical analysis tools to the precious metals market. Some favor point-and-figure charts, which track only the most significant price movements over a given period of time. Others place a lot of stock in moving averages, which compare the current spot price of gold, silver, and other precious metals to prices averaged out over extended periods (10, 30, 60, 200 days, etc. ). This gives investors a clearer picture of the trend lines for these metals and enables them to make decisions based on this information.
Choosing the Right Approach for You
Each approach mentioned above has strong advocates. Technical traders vehemently argue in favor of using charts and numbers-driven analysis to get a more accurate read on movements in the precious metals market. On the other hand, those who support using an analysis of global market fundamentals claim that technical analysis is too limited in its scope.
Who's right? In my experience trading precious metals over the past three decades, I think the market reflects the validity of both methods. I have found the fundamental approach valuable in gauging long-term trends and gaining historical perspective on the market. For example, it helps me to have an understanding of how inflationary pressure in the past has affected gold and silver. But I also appreciate the utility of technical analysis in pinpointing short-term trends. If gold is consistently trending above its 30-day moving average, or if it pushes past a key resistance point, I factor that information into my decision to buy or sell.
As I stated earlier in this article, investing has no "silver bullet." Experts agree that the best we can do is to try to evaluate and manage risk. In my experience, both the fundamental and technical analysis approaches have proven valuable. But, the best piece of wisdom I've learned after 30 years of trading precious metals is that buying, holding, and trading these metals over a long period of time is the best way to realize a return on your investment and build real wealth at the same time.
Mark Burgess has been an active trader of precious metals for over 30 years.
Precious Metals Worldwide
News & Trends from Around the Globe
Newmont Mining Plans to Stock Up on Gold
Denver-based Newmont Mining Company, one of the largest gold producers in the world, has stated its plan to try to add 10 million ounces of gold per year to its reserves over the next several years. In order to achieve this goal, the company has projected that it will need to spend $170 million on exploration alone in 2007. Meanwhile, the share price of Newmont Mining stock continues to decline. Experts have stated that Newmont's recent struggles reflect broader industry problems, including the rapidly rising cost of operations in countries plagued by political and economic upheaval.
Silver Institute Releases Silver Jewelry Report
The Silver Institute has just released its much-anticipated Silver Jewelry Report, part of a larger series on global demand and consumption of precious metal jewelry. The report stated that, over the past decade (1996-2006), the overall value of silver jewelry items has jumped by nearly 50%. Indicated in the report was the fact that, despite this dramatic increase in price, demand for silver jewelry has grown. It was concluded that silver jewelry remains a much sought-after alternative to gold jewelry worldwide.
In China, Platinum is All the Rage
According to a recent report by the Reuters news organization, the demand among young people in China for platinum jewelry is far outstripping demand for the more traditional gold jewelry. The report stated that younger consumers in China – mostly men and women in their 20s and 30s – are gravitating en masse to platinum because they favor its color. Experts believe this shift could have a major impact on the world gold market, since consumer demand for jewelry in China is a significant factor affecting the gold spot price.