Most metals opened lower than they’d been most of the year, and then fell more, until the middle of the month. Starting the 16th, the trend was generally up. Prices were driven in June by the same factors that had generated interest and increases in precious metals since last November: the dollar’s relative weakness, oil-induced inflation, and a general commodities bull market. The bulk of the upward movement occurred on the last Thursday and Friday of June, which is very surprising considering precious metals tend to lay fallow during summer months.
Gold/Silver Ratio
During June, the gold/silver ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold – began the month at 52.5, saw two significant declines to 51.1 and 51.4 respectively, and rebounded at month’s end to 53 .
| June Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $17.90 | $935.65 | $486.00 | $2123.00 |
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| Low | $16.28 | $859.10 | $423.50 | $1979.00 |
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| Open | $16.84 | $887.35 | $438.00 | $2014.00 |
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| Close | $17.51 | $926.88 | $468.00 | $2083.50 |
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CONTENTS
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Market Summary - June 2008 |
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Ross Hansen: Where Were You at $862? |
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Joe Nicholson: With a Little Help From My Hedge |
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Your Strategy for Investing in Precious Metals |
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Precious Metals Worldwide |
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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New improved Charts
Our charts at bullion.nwtmint.com have changed. They contain more information about precious metals and are easier to read. You can now see not just the bid and ask price at the moment, but the day’s low and high, and see the change since the previous close. Price movement up will be displayed in green type; price movement down will be displayed in red type. See here.
CHARTS
The following charts display the daily low and high spot price of each metal for the month of June, 2008. Source: Northwest Territorial Mint spot prices as posted at bullion.nwtmint.com.
The following charts display the daily spot price range of each metal for the six months ending June, 2008.
Where Were You at $862?
by Ross Hansen
Before Star Wars, George Lucas had his first big hit movie with a film called American Graffiti. This nostalgic success had an advertising tagline asking moviegoers the question, “Where Were You in ’62?”
As the summer moves begins in earnest, seeing spot prices for precious metals beginning to move up is surprising. Traditionally, prices for silver and gold tend to spend the summer as the rest of us do, hanging out by the pool and drinking tall, frosty beverages.
And, on Friday, June 13, that might have been the appropriate thing to do. Prices had been falling for a week, and were already lower than they’d been in a month. And on that day, gold fell below $862. It was certainly no time to sell gold for dollars, but if you were thinking you could wait out the summer before acquiring more gold and silver, the past few weeks have proven you in error.
Will the rest of this summer be an exception?
Let’s review:
The last time the Fed met, it chose to leave the federal funds rate unchanged. This is like watching the weather reports prior to Hurricane Katrina and choosing to leave the levees open lest the storm damages them. The official inflation rate, published by the Bureau of Labor Statistics, is 4.1%, but those of us in the real world know that the cost of goods and services we must acquire daily is much higher. One of my favorite indicators continues to be gasoline, which costs 33% more at the pump since December 31, 2007 according to figures published by the Energy Information Administration of the US Department of Energy.
Though occasionally showing life, the dollar continues to fade against other currencies, especially the euro. While the federal funds rate currently stands at 2%, the equivalent European Central Bank rate is 4% and, at this writing, is expected to rise to battle inflation in several of its member nations. As the discrepancy between American and European economies grows, precious metals will only gain in luster in the eyes of those seeking to preserve their wealth.
Reliable reports are circulating that an attack against Iran is in the works. Whether conducted by Israel with the blessing and cooperation of the United States, or by the U.S. itself, at the very least such an action will throw the commodities markets into overdrive. Some investing may already be taking place, both in precious metals and oil.
Precious metals are actually lagging economic bad news. None has matched the rocket-like climb of oil (a 43% increase on the NYMEX so far this year), though platinum (35%) comes close. By contrast, gold (11%), silver (17%) and palladium (28%) are lagging.
Last month’s $862 may not be seen again for quite some time. Those who sit on the sidelines for the summer, then, may discover that precious metals prices may not be what they expect to see in the fall. And they might well be asking themselves, “Where were you at $862?” And they might not like the answer.
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.
Technical Take: With a Little Help From My Hedge
by Joe Nicholson
Last month, gold was seen attempting to climb out of its downward channel along a rising trendline from the May low. But various crosswinds including volatile energy and currencies kept gold moving generally sideways as traders assessed the need for an inflation and dollar hedge in their portfolio. As expectations for Fed rate hikes grew, gold lost the rising trendline and appeared to be moving towards the bottom of the downward channel. Those expectations began to ease, however, and gold responded by reversing its descent and retesting the top of the channel, as shown below. Going into the last Federal Reserve meeting, this was a compelling area to wait for the crucial policy decision.
Gold has been buffeted for weeks by fundamental crosswinds including fluctuating crude oil prices and currency rates. The FOMC decision provided clarity and seems to have restarted the uptrend, but strong resistance remains overhead.
As you can see, the FOMC statement reignited inflation concerns and launched gold up and out of the downward channel. After a brief retest of the rising trendline, gold continued to climb into the next major resistance level. A potential attack on Iran has gold poised to move higher towards the March and April highs. Support above these levels makes new record highs later in the year a distinct possibility.
The policy meeting of the European Central Bank on July 3 will be crucial for inflation hedgers and may create a marked reversal. Like gold, silver has also improved substantially since the June Fed statement and is approaching strong resistance. Any initial rejection at the May high now has good support above $17.50 as traders digest the ECB decision and “permission” to take precious metals higher.
Silver has traded in a tight range since late March but may be approaching a technical breakout. Prices will now most likely remain in the upper end of the range until fundamental factors force a break through resistance or fail to spur further interest.
The tight range silver has described over the last three months suggests a powerful move is coming soon and, while fundamental factors will be important in determining the direction of that move, the reaction at crucial technical levels will also provide important signals and ultimate confirmation. Technical analysis is always a means of understanding traders’ thoughts about fundamental current and future value in an underlying market. In times of uncertainty, technical analysis becomes one of very few guides for navigating murky waters and a powerful tool for decoding price action.
Joe Nicholson is an independent analyst and the resident metals specialist at www.TradingTheCharts.com. His work regularly appears at Safehaven.com, Financial Sense University, Gold-Eagle.com, Market Oracle, and Trader’s Log, and has written for Futures magazine.
Your Strategy for Investing in Precious Metals
by Northwest Territorial Mint Staff
The free market for precious metals drives a demand for a wide assortment of products available for investors seeking to preserve their wealth by acquiring hard assets. At Northwest Territorial Mint, we are often asked by first-time investors how they should spend their dollars, and how much to invest. While the options are as varied as the market, here are some basic guidelines to consider.
1. Invest 10-20% of your investment portfolio in precious metals.
This near-universal recommendation from most investment professionals is made because silver, gold, palladium, and platinum are stores of value. When other investment options for your cash are delivering less than the rate of inflation, precious metals often command more cash.
2. Any beginning is a good beginning.
Don’t put off acquiring precious metals because the prices seem too high. Many alternatives are available to start out. Platinum may be trading above $2,000 an ounce right now, but by contrast, silver at $18 provides an easier cost of entry. Purchases usually must be made in minimum quantities in order to qualify for lower premiums. If you can’t buy bullion at the minimum, you can still buy in small quantities – as little as 1 gram – but you will pay a higher premium.
3. Silver makes a good first bulk purchase.
Because silver features the lowest price-per-ounce, it’s usually the easiest place to start. Coins from government mints – such as the American Eagle from the US Mint, the Maple Leaf from the Royal Canadian Mint, and the Vienna Philharmonic from the Austrian Mint – are easily recognized, but cost more to acquire. You can buy the same amount of silver by choosing to buy from recognized producers that aren’t governments, and save one or two dollars per ounce.
4. “Junk” silver isn’t junk.
U.S. dimes, quarters, half-dollars, and dollar coins minted prior to 1965 are 10% copper and 90% silver. The silver in these coins is worth more than the dollar value of the coins, and many dealers make markets in what are called “bags” of 90% silver (or “junk silver”). A bag is $1,000 face-value with 715 oz. of silver, but bags can also be purchased in smaller increments. They are also usually available for a lower premium over spot than other forms of silver bullion.
5. Trade up.
Wherever you start – with 90% silver coins, silver coins and rounds – trade up. Just as walking around with hundreds of pennies in your pocket is not practical, storing larger bars is easier than many individual coins. You can also trade for more valuable precious metals – a one-ounce gold coin takes up less space than 50 silver coins.
6. Diversify.
You’ll eventually want to have a little of everything. Have some silver and gold; but when you’ve matured your portfolio, be sure to also have some palladium and platinum. Have both 1-oz. silver rounds and larger bars. You’ll want to do this because diversification will spread the risk of price volatility in a single metal. Also, should you need to use some of the metal as money, you’ll want to have an assortment that will cover any exchange.
At all times, remember why you’re purchasing precious metals. They are a hedge against inflation, they are a store of value, and they are recognized around the world as money. In good times, they can be exchanged for the currency of any nation; in bad times, they will be accepted for their intrinsic value. Most important, they are not a promise of value; they are wealth itself.
Precious Metals Worldwide
News & Trends from Around the Globe
Mine Strikes Loom
In South Africa, the COSATU labor federation plans provincial labor actions throughout July, to end with a nationwide strike on July 30. Miners expect layoffs in the mining sector as a result of continued problems with electricity supply, which had already forced intermittent mine closures and production shortfalls. In Peru, miners seek
Power Issues in Ghana
As in South Africa, gold mines in Ghana, including those operated by AngloGold Ashanti and Newmont Mining Corp., face huge power rate increases as the government moves to end electricity subsidies. These operations seek to reduce the increase, saying that they may need to reduce workforce should the higher rates be implemented. Ghana is second only to South Africa for gold production on the African continent.