Precious metals succumbed to April showers in the month, as all metals retreated further from 2009’s February highs.
April saw generally weakened interest in precious metals as a safe haven investment. On April 1, gold started at its high and declined from there, ending 3.5% down for the month. Silver finished down 4.5%, and was 6.5% off its April 26 high. Platinum and palladium were down 2% and 1% respectively for the month. Both precious metals reached their high mid-month, at April 13 and April 16 respectively, and both retreated quickly, down more than 11% from their monthly highs at close.
Gold/Silver Ratio
Silver fell against gold in the gold/silver ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold. At April’s end the ratio stood at just above 72, up from its settle of below 71 for the previous month. April’s ratio is well above the 2008 average of 58 as silver continues to remain priced remarkably low as compared to gold.
| April Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $13.27 | $933.65 | $245.00 | $1251.50 |
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| Low | $11.85 | $866.87 | $215.00 | $1076.50 |
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| Open | $13.00 | $920.78 | $222.00 | $1133.00 |
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| Close | $12.41 | $887.86 | $219.50 | $1111.00 |
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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 April, 2009. 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 April 2009.
The Economic Undertow
by Ross Hansen
The economic undertow of the global financial crisis is pulling down all demographics — young and old, rich and poor and everybody in between. In this murky environment, common sense seems to be in short supply as the slightest morsel of positive economic news has been greeted with balloons and parades from the financial talking heads. Though the markets have eked out a slight rebound as of late, several factors point to an economic environment that is not going to get better anytime soon.
In trying to steer through this financial riptide, precious metals can steward your investment portfolio towards a promising shore.
As a lead indicator of the economy’s financial health, unemployment is like rain in the mountains, headed down towards the river that is the economy below. The latest Bureau of Labor figures cite unemployment at a ballooning 8.5%. Not only is unemployment high, but underemployment (unemployment plus part-time workers wanting full-time work and unemployed no longer looking for work) has skyrocketed to close to 16% of the national labor force according to the Bureau of Labor’s most recent April 2009 statistics.
As the banks of the river began to swell, don’t look to sandbags stuffed full of the Fed’s water-logged notes for help — look for the universally recognized value of precious metals.
Things are no better in the corporate sector as former titans of industry, who built their names on the paper promises of stocks and bonds, are swiftly circling the drain. In times past, the value of GM stock attracted the life savings of widows and orphans, so safe was their name. Now GM is fighting to keep its head above water, desperate not to meet the fate of Chrysler at the bottom. Ford is the tallest midget of this bunch, a little better, but still in trouble. The banking industry, too, is filled with failures, bailouts, and shotgun weddings.
Into this whirlpool of floundering corporations, we have a captain who’s promised life boats for, well, just about everyone. The people voted for Obama and his message of change. Yes, he’s an honest politician and he’s honestly going to give you change. Big change. Ugly change. The Big Ugly in this case is going to be inflation.
While everyone and his banker has rushed to grade the president’s first 100 days, they’ve ignored the really important number – Two. As in the 2 trillion dollars deficit that’s the result of the Fed’s unbelievable strategy of monetizing debt. As the media pokes the hornet’s nest of public paranoia with dire reports of swine flu, they ignore the economic swine flu that Congress spreads wherever it sticks its snout. The pork barrel spending and feeding at the public trough pales in comparison to the pandemic of expansive spending Geithner is using to inoculate the globe.
This tsunami of funny money is only guaranteed to decrease your worth. As history has instructed us time and time again, you cannot spend your way out of economic trouble.
For a quick primer on the pitfalls of inflation in a fiat monetary system, take a look the Weimar Republic of 1920’s Germany. As the government kept making money out of thin air, the people found that their currency was put to better use as wallpaper or to burn in fireplaces than buying goods and services. The recent hyperinflation in Zimbabwe is another cautionary tale of where things might head if Federal Reserve Chairman Bernanke and Treasury Secretary Geithner keep pushing the printing presses into overdrive.
On January 16, just a couple of short months ago, Zimbabwe issued a 100 trillion dollars paper note.
If you never want to worry about using your wealth as wallpaper or kindling, then the safe haven of gold and silver provides the peace of mind that no other store of wealth can offer.
We discussed the idea of a tipping point some months back. As you recall, the tipping point is “the level at which the momentum for change becomes unstoppable.” Well, the tipping point has come, and change, as our president is fond of saying, IS here.
Unfortunately, the kind of change the president’s policies deliver brings to mind a quote often attributed to Scottish writer Alexander Tytler, “A democracy will continue to exist up until the time that voters discover that they can vote themselves largess from the public treasury.” It’s easy to see that when you’re robbing Peter to pay Paul, you will always have the support of Paul.
Even so, those with a sound understanding of where real value lies will use change to their advantage, and wise investors will increasingly turn toward the safe haven of precious metals. Desperation lies ahead for those who are caught up in a vortex of paper value swirling with euphemisms about quantitative easing — and desperate people make desperate decisions.
So, don’t be one of the desperate.
In a changing world, what is the one constant? Precious metals. They are good in every nation of the world and their value has never gone to zero. As it’s said, “The definition of insanity is doing the same thing over and over and expecting different results.”
In the face of governmental insanity, preserving your wealth with precious metals is the sanest thing to do.
Ross B. Hansen
CEO, Northwest Territorial Mint
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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: Going Platinum? (Or Palladium?)
by Joe Nicholson
Last month’s charts in gold and silver are still working beautifully. Gold has found support at the 50-week moving average, which continues to be the support level to watch. A move below it can extend down to $800. Silver found long expected support between $11.50 and $12. It’s early in the season yet, so a new low is not necessarily out of the picture, but technically-oriented traders will be chasing the current rally and watching any retest of these recent support levels for clues to the next big move.
Meanwhile, interesting chart patterns have developed in the seldom discussed precious metals. The platinum group, particularly platinum and palladium, commonly move in patterns similar to gold and silver. Last year marked a major break in this trend, with platinum and palladium losing more than half their value. Because the industrial use of these metals is centered in the automobile industry, the woes in that sector of the global economy were a major drag. But, from the lows registered last fall, the platinum group metals have rallied considerably, and are now at a major inflection point.
Platinum has completed a 38.2% retrace of last summer’s dramatic plunge. The MACD shows a convergence in the moving averages that could either lead to support near current levels, or trigger a new leg down.
An Elliott wave technician would be tempted to count the rally off the lows in platinum as a fourth wave correction that will give way to new lows. Such waves will sometimes retrace the previous move in the Fibonacci ratio of 38.2%, before reaccelerating in the direction of the impulse (downwards in this case). The delicate nature of the situation is evident in the short term chart, which shows platinum breaking down through its recent uptrend, but forming a bullish crossover in the moving averages. This glimmer of good news suggests that consolidation above a previous resistance level at about $1010 can form a base for a renewed rally. Keeping the 50-day moving average moving upward and above the 200-day average is a positive sign. By the time the 200-day starts moving higher, a new upleg will be undeniable.
Platinum has lost its multi-month uptrend and now faces resistance at $1125. Support and consolidation above $1010, however, can allow the indicators to improve, launching a fresh rally.
Palladium, which is very similar to platinum but lighter and more abundant, trades in virtual lockstep with its pricier cousin. On a percentage basis, the rebound in palladium has not been as strong as in platinum, and this contributes to a look of considerable upside potential in the charts. Like platinum, palladium has experienced a convergence of its long term and short term moving averages, and is at an inflection that can break in either direction.
Palladium has traced an upward sloping trendline from its late 2008 low, also evident in the RSI. The 200-day moving average has proved considerable resistance, however, and the first of these to break will signal the direction of the next impulsive thrust.
The key areas to watch in palladium are the 200-day moving average, which so far has been resistance, and the uptrend out of last December, acting as support. The next big move will likely be in the direction of whichever of these is broken first. Regardless of any appearance of strength, a breakdown in platinum will almost certainly produce a similar result in palladium. Green shoots and signs of economic recovery undoubtedly benefit these economically sensitive metals, but the restructuring of the auto industry is not necessarily predicated on increased output, and economic growth in the near term is far from assured. Technical analysis of the market is most useful during periods of uncertainty.
...
Joe Nicholson is a contributor to www.tradingdanumbas.com. His work appears at Safehaven.com, Financial Sense University, Gold-Eagle.com, Market Oracle, and Trader’s Log, and he has written for Futures magazine.
Investment Demand’s Dynamic Effect on Silver Prices
by Chintan Parikh,
Commodity Analyst,
CPM Group
We’ve asked Chintan Parikh, commodity analyst for precious metals research firm CPM Group, for a look at the effect of investment demand on silver prices. The following is taken from the CPM Group’s 2009 Silver Yearbook, a comprehensive source of information on all aspects of the silver market. The CPM Silver Yearbook 2009 is available for purchase online at the CPM Group Store.
Silver’s role as a financial asset was well represented last year and in the first four months of 2009. Silver prices broke above $20 in March 2008 as growing economic and financial problems encouraged many investors around the world to move to safe haven assets. The combination of global financial market problems and recessionary economic conditions, with rising unemployment, a collapse in final demand for a broad range of goods and services, extremely volatile equity and bond markets, and deteriorating global economic conditions helped spur strong investment demand for silver this past year.
Investors bought an estimated 102 million ounces of silver in 2008, more than in any year since the early 1980s. Economic conditions have deteriorated further and faster over the last quarter of 2008 and the first quarter of 2009, meanwhile. In such an environment investors are expected to remain active buyers of silver. CPM Group projects that investors may buy 182 million ounces of silver on a net basis this year. This would approach the record 222.2 million ounces purchased worldwide in physical silver by investors when prices went from $5 to $50 in 1980.
Investment demand tends to have a very dynamic effect on silver prices, given the larger dollar volumes of money that can be involved, the speed and intensity with which investment demand trends can rise, fall and reverse course, and the ultimately total discretion that investors have over whether they wish to be involved in silver at all. Because of these trends, investment demand often has a greater effect on silver prices than do fabrication demand trends. This continues to be the case in the present economic environment. While a sharp and sudden drop in fabrication demand contributed to the precipitous decline in silver prices in late 2008, leveraged institutional investors liquidating their positions were more of a factor behind the price drop. Once those leveraged positions largely were liquidated, stronger investor demand for physical metal drove silver prices higher once more, and has kept silver prices relatively high compared to the prices of other commodities that are more dependent on fabrication demand than investment demand.
Silver prices have been rising in general over the past several years, as investors have become net buyers of silver. Last year marked the third consecutive year in which investors were net buyers of silver, after being net sellers for 16 years from 1990 through 2005. Investors worldwide have turned to silver for all the same reasons they have invested in gold: as a safe haven, a hedge against political, economic, and financial problems and uncertainties, and as a portfolio diversifier.
Mine production and secondary recovery of silver are the two largest components of total silver supply. Total silver supply rose to an estimated 803.2 million ounces last year, up 2.3% from 785.5 million ounces in 2007. Both mine production and silver recovered from scrap rose last year. Mine production of silver rose to 548.7 million ounces in 2008 from 534.4 million ounces in 2007. Secondary supply meanwhile surged to 254.5 million ounces from 243.1 million ounces in 2007. This year, total supply is forecasted to increase to 823.1 million ounces.
Fabrication demand for silver declined last year to 701.2 million ounces, down 3.1% from 724 million ounces in 2007. A large part of the decline in fabrication demand last year was attributed to global economic conditions coupled with relatively high silver prices. This year total demand for silver is projected to fall to 641 million ounces. The slowdown in the global economy has taken a toll on every aspect of consumer spending. Most major uses of silver from photography to electronics and batteries, as well as jewelry and silverware, are expected to be adversely affected this year. Jewelry demand could fall to 249.9 million ounces this year from 261 million ounces in 2008. Industrial demand meanwhile could decline to 383.7 million ounces from 430.3 million ounces.
Mine production, scrap supply, fabrication demand, inventory levels are important, but the key driver for silver prices is investor attitudes toward silver and how those attitudes are being reflected in investor buying and selling of this metal. Over the past couple of years investors have significantly increased their silver holdings and this has been reflected in relatively high silver prices. Investors are expected to continue buying silver throughout 2009.
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Precious Metals Worldwide
News & Trends from Around the Globe
China Increases Gold Reserves 76% Since 2003
Since 2003, China has added over 450 tons of gold to its state gold reserves, according to Reuters. The head of the country’s State Administration of Foreign Exchange said that its gold holdings now stand at 1,054 tons. China reported the change in its holdings to the International Monetary Fund (IMF). China now ranks 5th in the world in gold reserves by country, ahead of Switzerland, Japan and the Netherlands. The U.S., Germany and the IMF hold the top three spots, with the U.S. holding more than 8,000 tons of gold in reserve, followed by Germany with more than 3,400 tons World Gold Council data show.
Platinum Demand Plummets in 2008
Due to drastically reduced vehicle production, gross platinum surplus tripled over 260,000 ounces in 2008 according to Commodity Online. The precious metal is an essential component in catalytic converters and platinum demand for autocatalyst applications declined last year for the first time in the decade. Platinum jewelry fabrication also declined by 10% in 2008, another key factor in reduced demand for the precious metal.
Scientists Make New Palladium Metal
Chemists at the University of Amsterdam successfully created the first piece of chiral palladium metal, according to Insciences.org. These first ever “metallo-organics” combine a variety of organic molecules with the special properties of metals. The discovery of a new class of materials is significant as the possibilities of imprinting metals with organic molecules are practically endless. Chirality is a Greek term that means that an object, for example a molecule, has a mirror image, such as two hands. Palladium metal, which is not chiral, was made chiral in the experiment by using organic template molecules which were then later removed.
U.S. Mint Plans Significant Output Reduction in 2009
The Federal Reserve System has placed orders for 3 billion coins in 2009, a drastic reduction from 2008 production levels of 10.1 billion, according to Numismaster. The U.S. Mint has already struck 1.2 billion coins in the first three months of 2009, which would forecast just 1.8 billion coins produced for the remaining eight month of the year. The Mint plans to use the slowdown in production to make capital improvements and perform maintenance that would be difficult to do with presses operating at regular levels.
Information provided here should not be considered as advice or as an offer or enticement to buy, sell or trade. The contents of this publication, including any opinions and analysis, are strictly intended for educational use. Opinions expressed in bylined articles are those of the individual author and do not necessarily reflect the views of Northwest Territorial Mint. Furthermore, information obtained from all quoted sources is believed to be reliable and is offered in good faith. Northwest Territorial Mint does not accept responsibility for any trading losses incurred from reliance upon this information. Readers are encouraged to consult with a financial advisor before making major investment decisions.
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