With the exception of palladium, precious metals had a bumpy June. Perhaps bolstered by the touted “green shoots” either seen or imagined in the equities market, investors pulled away from gold, down 5%, silver, down 14% and platinum, down 3%. Strong investment demand for palladium helped it rise over 4% in June. Other factors fueling palladium’s rise were supply concerns and positive forecasts of its growing role in the automotive sector.
At the midpoint of the year, precious metals have increased across the board as investors continue to recognize their value as a safe haven. Since January 1, gold is up 5%, silver is up 20%, platinum is up 26% and palladium has soared, up 31%.
In June the drop in silver increased the gold/silver ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold. Starting June at 62, by month’s end it had settled at just above 68. The current ratio is still well above 2008’s gold/silver ratio average of 58.
| June Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $16.26 | $991.10 | $267.50 | $1302.00 |
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| Low | $13.53 | $915.56 | $232.50 | $1158.50 |
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| Open | $15.89 | $985.90 | $241.00 | $1219.00 |
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| Close | $13.67 | $931.60 | $251.50 | $1180.00 |
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CONTENTS
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Market Summary - June 2009 |
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Ross Hansen: PGMs at Your Picnic |
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CPM Group: PGMs Set for Strong Year |
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The Gold/Silver Ratio |
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Precious Metals Worldwide |
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CHARTS
The following charts display the daily low and high spot price of each metal for the month of June, 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 June 2009.
PGMs at Your Picnic
by Ross Hansen
Summer is officially here, and, for many folks, warmer weather and longer days drive us outside to munch on the hottest food off the grill. Whether burgers, hot dogs or some other delicious item over an open flame gets your mouth watering, you know that the more variety you have, the more attractive your spread becomes.
This perspective is good to keep in mind when picking your precious metals investments. While Chef Obama and company are busy serving up massive amounts of heartburn-inducing quantitative easing – with a side of inflation for dessert – a variety of precious metals investments can offer you healthier ways to avoid financial indigestion.
As the meat-and-potatoes precious metals entree for most investors, gold and silver often get the most spotlight. That doesn’t mean that you shouldn’t be seeking other ways to diversify your portfolio. In fact, a closer look at the recent performance of the platinum group metals (PGMs) may offer a potential opportunity for savvy precious metals investors.
As we take stock at the midpoint of 2009, both platinum and palladium have strongly outperformed gold and silver. Gold and silver are up 5% and 20% respectively, while platinum – even with a 3% slide in June – is still up 26% since the start of the year. Palladium has turned in the best performance of all, up 31% since January 1.
Let’s take a look at some factors that may be driving this:
Industrial Outlook — The PGMs are key components in autocatalysts, emission-cleaning devices for the automotive industry. In Europe, where autocatalyst use is strong in a diesel-centric car culture, environmental standards are tightening and some analysts predict a potential boon for the PGMs needed to achieve these standards. And it seems China may have found a use for all of the U.S. Treasury Notes it owns. In February of this year, China more than passed the U.S. to become the world’s largest car market. Total U.S. auto sales are down more than 35% from January to June 2009, while total China auto sales have risen 21% in the same time. For precious metals investors looking for dollar value, these trends could bode well for the price of platinum and palladium in the long term.
Investment Demand — The unbelievable deficits and massive spending that Secretary of the Treasury Timothy Geithner and the Fed are whipping up may have had some nominal effect; the Dow’s bounce off its March 2009 low convinced many that force-feeding cheap greenbacks to the economy was working. However, this belly-ache can’t be cured by Stimulus Pepto Bismol. The U.S. Department of Labor reported that unemployment rose in June for the ninth straight month, to 9.5%. And that Dow bounce? It’s turned into a flop as the markets are already down more than 7% through July 10, from the mid-June 2009 high.
Precious metals investors have taken notice of these half-baked helpings and have broadened their safe-haven hunt past gold and silver, turning to platinum and palladium. According to Johnson Matthey’s 2009 platinum report, net physical investment demand for platinum grew to 425,000 oz. from 2007 to 2008 – more than 150%. Net physical investment demand for palladium grew strongly as well, rising more than 50% to 400,000 oz. when comparing 2007 to 2008. Clearly more and more precious metals believers are hearing the old mantra “diversify, diversify,” and applying it to their portfolio.
Taking Ownership — The upshot of all this is that platinum and palladium could be a strong buying opportunity right now. Whatever the reason you choose to invest, remember that you should always have some portion of your portfolio dedicated to physical ownership — portable, recognizable and easy-to-trade forms of platinum and palladium are an excellent store of wealth. You can add or start your physical holdings with 1-oz., 10-oz. or even 1-kilo bars.
So while you enjoy the sun and the scents drifting off the barbecue in these lazy days of summer, remember that adding a variety of physical precious metals to your holdings will keep you and your portfolio well-fed and prepared for the seasons ahead.
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.
PGMs Set for Strong Year
by Rohit Savant, Senior Commodity Analyst, CPM Group
We’ve asked Rohit Savant, senior commodity analyst for precious metals research firm CPM Group, for a look at the effect of investment demand on platinum group metal (PGM) prices. The following is taken from the CPM Group’s 2009 PGM Yearbook, a comprehensive source of information on all aspects of the PGM market. The CPM PGM Yearbook 2009 is available for purchase online at the CPM Group Store.
The prices of the three major platinum group metals – platinum, palladium, and rhodium – rose sharply during the first half of last year. Platinum and rhodium touched record highs while palladium prices reached multiyear highs. Prices strengthened as a result of supply concerns from South Africa, healthy fabrication demand, and rising investment demand for these metals. Prices collapsed later in 2008, as the economic recession that began in the west started to grip other parts of the world and began to deepen in developed countries. This adversely affected fabrication demand, which weighed heavily on prices. Continued concerns regarding supply and healthy investment demand helped curb the decline in prices during the latter half of last year. Prices for these metals have begun to rise once more during the first half of 2009. Investment demand has been a crucial factor in driving higher the prices of these metals. Prices are expected to remain firm over the next few quarters.
Investment demand is forecast to remain healthy in the medium term, driven by a multitude of factors such as increased investor interest in commodities as an asset class, purchasing of these metals — especially platinum — for its safe haven attributes, the expectation of higher prices for these metals when the global economy picks up, and the introduction, in recent years, of exchange traded funds that make investing easier in otherwise illiquid markets.
Supply also is forecast to remain a concern during the medium term. The South African mining industry is plagued with several issues such as a shortage of electricity, the shortfall of skilled labor, and safety related issues, that are not expected to be resolved any time soon. South Africa is the largest source of platinum and rhodium mine supply and the second largest source of palladium mine supply after Russia.
The platinum group metals (PGMs) are produced as byproducts of base metals in Canada and Russia, and mine supply of the PGMs from these regions is forecast to decline at least during 2009. The expected weakness in base metals prices is expected to result in production cut backs from these base metals producers. In Russia, where Norilsk Nickel is the largest producer of these metals, some loss in output is expected as a result of lower grades of ore being mined at Norilsk.
Secondary recovery of these metals also is forecast to decline this year as a result of relatively weaker prices and a weak global auto market. The expectation that prices for these metals will rise going forward, is expected to result in reduced recycling from the jewelry sector. Meanwhile, weakness in the auto sector and the increase in demand for second hand vehicles -- typical of recessionary periods -- are expected to depress recovery of these metals from auto catalysts.
Fabrication demand for these metals has been the weakest sector in these markets, hurt largely by the ongoing recession. Present recessionary conditions have adversely affected the global auto market, which accounts for a majority of the fabrication demand for all three metals. The auto market is expected to show some signs of recovery during the fourth quarter of this year and into 2010. Strength in this market coupled with tightening emissions standards is expected to be positive for fabrication demand for these metals.
In conclusion, we expect prices to remain firm going forward based on the expectation of increased fabrication demand for the metals, healthy investment demand, and a curtailment in supply in the medium term.
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The Gold/Silver Ratio
by Northwest Territorial Mint Staff
The gold/silver ratio is a useful tool for precious metals investors looking to add real value to their portfolio. Rather than looking for an increase in dollar profits, the savvy investor can use this ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold – to acquire physical gold and silver for the long term. Of course you can just as easily use the ratio to make a profit in the short term but always remember the advantage you gain when investing in the safe haven of physical gold and silver. You gain the knowledge of possessing real money and neither inflation, war or any other unanticipated event can change this certainty.
By following the gold/silver ratio on a regular basis, you can track wide swings in the gold and silver market and use that information to increase your precious metals holdings. The ratio has averaged about 65 over the last two months so, using this example, 65 ounces of silver would buy one ounce of gold. An investor could decide to wait and hold out for the ratio to drop under 65 or decide that the time was right to trade and acquire one ounce of gold with his or her 65 ounces of silver.
In a hypothetical scenario, by following the gold/silver ratio, an investor holding 65 ounces of silver could add to his precious metals holdings. If the ratio dropped to 50, the investor could take 50 ounces of silver, receive an ounce of gold and still hold 15 ounces of silver. If the ratio then rose to 80, the investor could trade the ounce of gold and receive 80 ounces of silver. In this hypothetical scenario, the investor would have added 30 ounces of silver to his portfolio from his or her initial investment of 65.
Whether you choose to add to your position in gold or silver, using this ratio to increase your holdings of physical precious metals could be a great benefit to your portfolio. When you choose a longer-term strategy that emphasizes ownership over dollar value, you add a great degree of power to your investments.
Precious Metals Worldwide
News & Trends from Around the Globe
Central Banks Could Increase Gold by 50%, World Gold Council says
The World Gold Council (WGC), an association of the world’s leading gold mining companies, suggested that central banks may be justified in increasing their gold holdings to 40-50 percent of their reserves, according to Forbes.
“Central banks are justified in having high gold weightings. They are justified in having a 40-50 percent weighting in gold,” Marcus Grubb, WGC's managing director of investment, research and marketing said.
Grubb said the current macroeconomic environment supported gold buying: “It is not only about the dollar, not only about diversification, but also about future inflation.”
A number of Asian central banks showed signs of adding to their gold reserves, he added.
“Gold Should be a Better Choice” Against Dollar says Chinese Economic Researcher
A senior researcher with the Chinese Communist Party proposed China should add gold to hedge against the U.S. Dollar, according to Reuters.
Li Lianzhong, who heads the economic department of the party's policy research office, said "The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice." There was no confirmation that Li was enunciating an agreed party line.
Chinese leaders have recently questioned the U.S. dollar’s role as the global reserve currency and disclosed in April that it had increased its holdings of gold to 1,054 tons from 600 tons since 2003.
Northwest Territorial Mint Attending 2009 World’s Fair of Money, August 5-9
Northwest Territorial Mint, a trusted market maker in precious metal bullion and numismatics, will be attending the World’s Fair of Money at the Los Angeles Convention Center, August 5-9, 2009. Stop by Booth #848 and talk to company representatives about your bullion and numismatic questions.
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