Many analysts placed big expectations on the four major precious metals – gold, silver, platinum, and palladium – after major upswings in these metals during the first half of April brought back memories of last year's record highs during May. Bouncing back quickly from last month's decline, gold rose to a multi-month high of $694.95 before profit-taking ended the gold rally. Silver, which typically follows gold, also rose during the first two weeks of April, reaching a high of $14.16. Silver temporarily decoupled from gold during the third week of the month, trading sideways while gold stumbled, and finally ending the month virtually unchanged at $13.46. Palladium and platinum both posted big gains last month, with palladium touching an 11-month high of $389.00 and platinum spot soaring more than 7% before retracing to end the month near $1,292.50
Gold/Silver Ratio
The gold/silver ratio – the quantity of silver (in Troy ounces) required to purchase an ounce of gold – dropped more than a point from 50 to 48.7 during the first two weeks of April, as the rise in silver spot outpaced that of gold. Later in the month, the ratio climbed to a one-month high of 50.8, falling off slightly to 50.6 to end the month.
| April Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $14.16 | $694.95 | $389.00 | $1336.50 |
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| Low | $13.25 | $662.50 | $353.00 | $1240.00 |
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| Open | $13.44 | $666.00 | $356.00 | $1246.50 |
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| Close | $13.46 | $678.90 | $371.50 | $1292.50 |
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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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NORTHWEST TERRITORIAL MINT ON THE RADIO
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Money Matters Financial Network Northwest Territorial Mint President Ross Hansen interviewed by Gary Goldberg on April 30, 2007. |
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Check out Ross Hansen on GoldSeek.com Radio on Monday, May 7, 2007, at 1 pm Eastern/10 am Pacific. |
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CHARTS
The following charts display the daily low and high spot price of each metal for the month of April, 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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Taking the Long Term View on Precious Metals
by Ross Hansen
When it comes to precious metals, does anyone take the long view anymore? It seems like just when a surge in precious metals is getting started, a slight retracing of gold or silver prices prompts herds of self-described "bulls" to bolt from the market, pulling prices down even further.
Many commodities experts have suggested that this was the case this past month. By mid-April, gold spot was seriously testing $700 and silver had edged past $14 per ounce. But after the dollar rebounded slightly, investment fervor for precious metals cooled. As a result, spot prices for gold and silver, as well as futures prices for these metals, were trending lower by the end of the month.
Those with a bearish outlook on precious metals point out that gold's failure to push past the $700 mark in April is significant. They claim that the upward price trend this past month is similar to activity seen in February, when gold spot touched $685 near the end of the month only to sink to $635 by early March.
Could the Bears Be Wrong This Time?
In any kind of investing, perspective drives decision-making. Even given the exact same information, people are bound to reach different conclusions based on their unique point of view.
Some highly regarded commentators point to recent corrections in the precious metals market as proof that the excitement surrounding gold and silver is unwarranted. On the other hand, analysts who favor a more bullish view see the same price movements as a series of successive waves leading to higher and higher prices over time.
Who's right and who's wrong? I don't think engaging in pure speculation benefits any investor, but evaluating the facts is a different matter.
Analysts Say It's Hard to Ignore the Sinking Dollar
It's hard to ignore the dollar's role in the bullion market, especially over the past several months. At the end of February, as the dollar continued to struggle against rival currencies and foreign central banks renewed efforts to cut their dollar holdings, gold pushed past $680 and silver touched $14.50, its highest level in eight months.
And it was the same story throughout April. In fact, on April 27, when the dollar hit an all-time low against the euro, gold and silver both rose, despite the predictions of many analysts that market consolidation would continue well into May.
Clearly, the dollar's performance during the past several months has played an important role in determining precious metal prices on world markets. This stands to reason when you consider that gold and silver have long been viewed as highly viable alternatives to fiat currencies. Many analysts have asserted that demand for these metals could rise in the coming months if the dollar continues to lose ground against rival currencies. And some have even suggested that the dollar's decline could be a longer-term trend, reflecting deeper problems plaguing the U.S. economy.
The Ever-Present Oil Factor
For the second year in a row, the per barrel price of crude oil climbed in April to levels usually associated with the summer months. Typically, the price of oil surges during the summer as demand – driven primarily by U.S. consumers – rises in line with the arrival of the peak travel season. Last year, in April, oil jumped to $72 per barrel. This past month, oil markets showed considerable volatility, with supply concerns pushing oil up past the $65 mark at the end of April.
Many analysts pointed out that several interesting political developments have placed upward pressure on the price of crude oil recently. The controversy surrounding the presidential election in Nigeria sparked widespread protests and violence throughout the country, threatening the disruption of supply from the world's sevent- largest oil exporter. Some analysts have suggested that the uncertainty in Nigeria throughout April played a significant role in gold's rise mid-month, as investors turned to gold for its proven stability.
The price of oil also jumped in late April after it was reported that terrorists in Saudi Arabia had planned to carry out a massive strike to destroy oil fields and other targets throughout the country. On Friday, April 27, oil soared $1.40 in early morning trading on the news. And gold spot responded, following oil upward. Both of these events serve as a reminder of the close connection between oil supply, global crude oil prices, and the price of gold. When major oil supply lines are threatened, or the price oil rises for some other reason, gold typically performs well.
The Long View
Investing in any market always involves evaluating "what if" scenarios. One recognizable trademark of serious investors is a well-honed skill in evaluating these scenarios and preparing for the contingencies that seem most likely to occur. Two issues that have grabbed the attention of many precious metals experts are the dollar's continued slide and uncertainty in Iraq and the rest of the Middle East. Looking long-term, many analysts have predicted that the dollar will continue to struggle throughout the summer, and that tensions between the U.S. and Iran will increase as the situation in Iraq worsens. But even if these predictions don't come to pass, recent history suggests that there are plenty of other factors placing upward pressure on gold, silver, and other precious metals.
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.
Questions Every Silver Investor Should Consider by David Morgan
I was contacted recently by a reporter from Dow Jones Newswires seeking information about trends in gold and silver prices. The questions raised by this reporter, which are included in the account below, are important ones to consider, especially if you're thinking about buying, selling, or trading silver right now. After you've read through my transcript of our interview, please also read my concluding note for further analysis and market tips.
Interviewer: As the anniversary of last year’s sharp tumble in gold prices approaches, I am looking at comparisons to this year and wondering what makes this year different or the same?
David Morgan: One of the main differences from last year is the fact that there was a huge amount of anticipation of the launch of the Barclays silver ETF. A large amount of speculation took place in the silver market. In fact, our newsletter was cautious – stating that it was most likely a "buy on the rumor and sell on the news" situation. Indeed, just after the official launch of the silver ETF, prices for silver peaked and then fell, and fell hard. Since last year, there have been many ups and downs, but it has really boiled down to one large consolidation period.
Interviewer: Do you expect prices to fall sharply come May? If not, why not?
David Morgan: Right now we are expecting a test of the breakout points, which are approximately the $15 level for silver and the $720 level for gold. We will be addressing what happens beyond that point once the market breaks through those levels or fails.
Interviewer: Do you recall what the main reasons were for the gold price rally in May, 2006?
David Morgan: The main reason for gold's rally last year was the move in silver.
Interviewer: And what triggered the fall? Are those same factors there now?
David Morgan: The main reason for the fall was that the market was very overbought due to all the anticipation surrounding the silver ETF. Obviously, that does not exist this year. All the fundamental reasons for buying precious metals have not changed, but the market is searching for some "news" to carry the rally forward. At this point in time, it appears that all anticipated factors are currently built into the price of silver.
P.S.
It is important to understand that news services are looking for "news" and seem to need an explanation for every move in the market. In reality, markets move for very simple reasons; do not let the simplicity of the following pass you by without putting in some thought. Markets move up because there is more buying pressure than selling pressure and, of course, markets move down because there is more selling than buying pressure. The price of silver and gold are set in a "paper" market (the futures exchange based upon paper contracts or derivatives). Therefore, you must understand not only how the futures markets operate, but also how to determine when buying pressure is near exhaustion. If you would like more information, I discuss this topic in greater detail in my paid seminars.
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.
Technical Analysis of Precious Metals: Understanding Support and Resistance Levels
by Northwest Territorial Mint Staff
If you read last week's edition of this publication, you may recall an article explaining the concept of 'technical analysis' and how it's used by those who follow the precious metals market. This week's article expands on that introduction and focuses on one particular area of technical analysis – the concept of support and resistance levels. This is especially relevant now given the much-talked-about failure of gold and silver in April to surpass important thresholds.
What is Technical Analysis?
For the benefit of those who missed last month's article, technical analysis provides a way of evaluating stocks and commodities through the use of statistical measures, such as price and trading volume. The purpose of this tool is to attempt to forecast market trends using systematic analysis.
Understanding Support and Resistance Levels
It's commonly understood that markets move up and down based on buying and selling pressure. New information sparks either an increase or a decrease in the demand for a stock or commodity, driving its price up or down accordingly. But have you ever wondered why commodities like gold and silver tend to move up or down within certain defined limits?
Gold and silver, for example, are often described as trading within in a range. Indeed, for much of April, gold traded within a fairly narrow range between $675 and $690. Many analysts stated that gold had found strong 'support' near $675, but that it was testing 'resistance' at higher price levels. In this context, 'support' describes the price below which the market would not let gold fall while 'resistance' describes a price above which the market would not let gold rise.
Recent Examples of Support and Resistance
Support and resistance can be recognized by looking at the spot price chart for any of the precious metals shown above. As these charts suggest, support and resistance levels provide a basis for what the market will bear with regard to fluctuations in price during any given period of time. Below are some recent examples of gold and silver trading within a defined range.
Gold
When you look at the six-month chart for gold above, for example, it's easy to see a series of low points and a series of high points. Spot gold began this year near $600, climbing in January to touch $650 and subsequently soaring throughout February to break the $680 barrier. Even though gold spot dipped in March, it found strong support near $639. In April, gold rose steadily, but the monthly price chart above clearly indicates that it found resistance near the $690 level. Therefore, the data provided in these charts indicates that the support level for gold over the past several months is somewhere near $650 and that the resistance level is near $690.
Silver
Silver, more than gold, has been trading in a range recently. From November of 2006 and through January of this year, silver traded consistently in the range between $12.50 and $14. During this period, each time silver spot approached $14, as it did during the first week of December 2006, it met resistance at the $14 level and then declined. Silver traded in this range until the end of February, when it abruptly pushed past the $14 level, rising to a multi-month high near $14.50. When a market trend drives the price above resistance, as it did briefly in this case, it's called a "breakout." Conversely, when a trend pushes the price of a commodity below the support level, market analysts refer to it as a "fallout."
How Some Investors Use This Information
Traders who are familiar with the concept of support and resistance keep close watch on patterns like those described above to make decisions about when to increase or decrease their positions in gold, silver, and other precious metals. They use the concept of support and resistance to maximize their advantage in trading within an established range and to try to identity potential breakouts and fallouts. Clearly, understanding these concepts can be a valuable asset for anyone interested in investing in precious metals. But investors should consider that it is just one tool among many that can be used.
Precious Metals Worldwide
News & Trends from Around the Globe
Gold Mining Costs Increased by 17% in 2006 While Output Dropped
London-based GFMS, a leading provider of analysis and reporting for the precious metals market, has published its annual report evaluating the cost of gold mining worldwide. In its report, published this past month, the company's analysts stated that the cost of gold production had risen by more than $45 per ounce in 2006, an increase of approximately 17% over the precious year. In addition, the report found that global gold output was down by more than 3% over 2005 production levels.
Scientists Say Silver Could Be the Key to Cheaper Solar Power
Scientists at the University of New South Wales' ARC Photovoltaics Centre of Excellence have developed the technology to improve the light-trapping capacity of solar cells by up to 50%. The researchers discovered that when a thin film of silver was placed on the surface of a solar cell and heated at high temperatures, the film breaks into 100-nanometer "islands" of silver, each of which captures solar energy with tremendous efficiency, thereby raising the light-trapping potential of the entire solar cell.
Could Platinum Exchange-Traded Fund (ETF) Be Next?
Derek Engelbrecht, Marketing Director at Impala Platinum announced in April that a large, but as yet unnamed, U.S. bank has been in consultation with the company about launching a platinum exchange-traded fund (ETF). To date, no timetable for the release of the fund has been mentioned. Spot platinum spiked in November 2006 on rumors that a platinum ETF was imminent, soaring to a record high of $1,412.00. In April 2006, London-based Barclays Global Investors backed the release of the first-ever silver ETF, known as the iShares fund. The release of iShares was cited as the major factor behind the dramatic rise in the spot price of silver in April and May of 2006. At that time, silver touched a 25-year high of $15 per ounce.