After a bumpy June, precious metals picked up steam in July as all the metals rose. Both investor and industrial demand spurred the rise as gold closed up 2.5% while silver was up 2%. Platinum and palladium’s industrial use, particularly in the automotive sector which enjoyed a “less bad” month in July, pushed both metals to rise. Platinum closed up 3% and palladium was the strongest performer up 6%.
Due to gold and silver both rising in tandem, July’s gold/silver ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold – remained virtually unchanged at just above 68. The current ratio is well above 2008’s gold/silver ratio average of 58 signaling a potential buying opportunity for investors looking to buy affordable silver.
| July Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $14.12 | $960.95 | $267.00 | $1229.50 |
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| Low | $12.50 | $906.82 | $229.00 | $1092.50 |
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| Open | $13.69 | $932.95 | $251.50 | $1180.00 |
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| Close | $13.96 | $956.30 | $266.50 | $1217.00 |
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CONTENTS
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Market Summary - July 2009 |
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Ross Hansen: Here We Go Again |
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Technical Take: A Quantum of Solace |
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Precious Metals in Your IRA? |
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Precious Metals Worldwide |
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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 July, 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.
Here We Go Again
– Breathless Investing
by Ross Hansen
The speculators – notice I didn’t say “investors” – are at it again.
Encouraged by the temporary bubble from the massive government spending sprees and the willing media’s supposed sighting of “green shoots” (that’s political double-talk for “weeds”), the stock market has rallied. The July close was the highest in nine months, and overall was the best July since 1989, in the pre-GameBoy era. The five-month run of the DJIA over the past five months is the best since 1938.
Hooray.
First of all, 1938 was scary. The world economy was in depression, and foreign powers were building for war.
Second, that sheen on the economy you’re seeing is nothing more than the ever-expanding balloon of bailout bucks shoveled into banks before being lent to all the bank executives’ best friends at the hedge funds.
Then we have some unassailable facts. Unemployment, at 9.5%, though still short of all-time highs, is the worst it’s been for 26 years. Go to USCourts.gov, and you’ll see that bankruptcies are at record numbers; check with the Mortgage Bankers Association, and they’ll tell you that foreclosures and delinquencies are at the highest levels since they began keeping records.
So, if the Dow’s little jump in July has seemed like good news, may I remind you of former Federal Reserve Chairman Alan Greenspan, who famously warned against “irrational exuberance” not long before the tech bubble burst.
The sky is always darkest before the dawn, right? And yet, it seems to me that dawn is quite far away. Congress has created a Financial Crisis Inquiry Commission – and the president’s choice to run it is Phil Angelides, California state treasurer from 1999 through 2007. At this time, California is the world’s eighth-largest economy (down from sixth when Angelides was sworn in) – and is bankrupt.
What about the government’s mortgage modification plan – the program that’s supposed to help those with troubled mortgages get out from under them? Hardly anyone is using it – and a vast majority of those who do still wind up failing.
So why are people throwing their wealth at the stock market? Well, they’re anxious for any good news, facts be damned. But if I could slow them down for one minute before they run into their broker’s office, I’d ask them whether they were thinking through their wealth management strategy. Have they really thought about what they’re flinging their decreasing net worth at? Or are they exhibiting the non-clinical definition of insanity – doing the same thing over and expecting a different result? I lost all my money in the stock market once, it can’t possibly happen again!
Except that it can.
Remember that the Dow Jones Industrial Average is composed of 30 companies. Except two months ago, GM and Citigroup had to be dropped from the Dow 30 in the wake of bankruptcy and economic disaster (not to mention huge drops in valuation). Not quite a year ago, AIG was dropped as its assets were seized by the US government.
So, what ISN’T the US government seizing? Precious metals.
Those it sells. American Eagles in gold, silver, and platinum (and they’re talking about palladium). GM (1908), AIG (1919), and Citigroup (1812) were around for a century or two, but precious metals have been a store of value – that’s money – for thousands of years. Pick a company in the Dow today and it can be gone tomorrow. Put precious metals in your portfolio today, and guess what – they will be there when you look for them again, and people will still want them.
So, are you getting all hyped up about what to buy in this “recovering” economy? Take a deep breath. Then take possession of silver, gold, palladium, or platinum. And relax.
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: A Quantum of Solace
by Joe Nicholson
Gold does best in periods of inflation and uncertainty. And, if the past month brought anything, it brought these two bullish factors for gold. The dollar weakened as traders unwound their risk-aversion trades on hints of a possible economic recovery. Quantitative easing, low rates, and fiscal stimulus sparked reflation and a modest new inventory build, but it’s still anybody’s guess whether the U.S. consumer will actually create some consumer demand growth by the end of the year. In the meantime, precious metals have given investors some solace in the face of potential runaway inflation if a true recovery takes hold.
Despite the huge run-up in equities, gold remains in a trading range last visited in early 2008. Nearby support and resistance sits at about $920 and $980, respectively, and traders will watch these areas for signs of the next trend move. Gold bears point to the series of lower highs so far this year as signaling an impending correction. Bulls, however, can point to the rising 50-week moving average and the rising short term trendline. (Moving averages summarize past data points over a set period of time, smoothing out the data series to enable investors to quickly spot trends and market cycles.)
Gold has returned to the same trading range it traced in early 2008. Lower highs in February and June of this year look to be bearish, but traders will be watching for a break in either support or resistance as evidence of whether gold will again break downward or launch to new highs.
Gold remains above a rising year-to-date trendline on this daily chart, which also currently coincides with the long-term support level at $920. In August, gold will have to remain above this trendline if a break to new highs is to occur.
The fact that silver has recently outperformed gold reflects the fact that the rally in metals has been a broad-based commodities rally built on perceptions of economic recovery. Unlike gold, silver has produced higher highs and higher lows, and has recently retaken its upward trendline. This level, currently just above $14 and rising, is now near-term support. If the trend continues, a new high in silver would be above $16.
Silver has produced a series of higher highs and higher lows thus far in 2009, a bullish sign. Having recently traded above the 50-day moving average and the rising trendline, silver could be poised for a move above $16 if the economic recovery stays on track.
If actual growth in consumer demand fails to materialize in the second half of the year, and high inventory levels lead to declines in profitability – the currently derided double dip –metals could trade lower as the recent trend reverses. Investors, however, could ultimately seek solace in precious metals again if the dollar continues its decline or if inflation persists in spite of a new leg down in the economy.
We hear lots of conflicting predictions and little clarity about the impending recovery. Though companies are reporting stable earnings based on cost-cutting, the underlying economy is still plagued by unemployment and the recent GDP figure was artificially inflated both by declines in imports and downward revisions to the previous month. If the economy truly is set to recover, a continued rally in gold and silver is almost assured, at least until the Fed provides more clarity on its exit strategy.
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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.
Precious Metals in Your IRA?
by Northwest Territorial Mint Staff
In the current economic climate where fears of inflation and a weak dollar are at all time highs, there’s substantial interest in owning and investing in all forms of physical precious metals. In just one example of the heavy investment demand, the U.S. Mint has seen sales of gold American Eagles spike more than 370% in 2009 when compared to the previous year.
Those looking to profit from this trend through buying and selling in the short term can certainly do so and have. However, what about investors who have an eye toward owning precious metals for the long run, as a means to protect their wealth and fund their retirement? The development of precious metals IRAs over the last two decades have proven to be an attractive way to add real value to investment portfolios. Let’s take a look at how precious metals became and continue to be an option for investors seeking a reliable safe haven.
History of Precious Metals IRAs
In 1986, when the U.S. Mint began striking gold coins for the first time since FDR’s Presidential Executive Order 6102 in 1933, investors were able to add gold and silver American Eagle coins to their IRA. Precious metals IRA requirements were relaxed further in 1997 with the passing of the Tax Payer Relief Act and gold and silver precious metals bullion of certain fineness, not just Eagle coins, were allowed to be added to an IRA. Today, a variety of gold, silver, platinum and palladium precious metals bullion (numismatic and rare coins are not) that meet certain purity standards are eligible for inclusion in a precious metals IRA.
Tax Deferred and Secure
As with any other tax-deferred retirement account, a precious metals IRA gives investors the benefit of adding value to their holdings without a substantial tax penalty. Additionally, a precious metals IRA delivers the benefit of adding gold, silver, platinum, or palladium bullion to a recognized depository for safekeeping. Physical gold and silver held at a secured facility may give the investor more confidence than a basement or backroom might.
How it Works
For the investor, the process involves working with up to three parties – the bullion dealer, a precious metals custodian, and an approved depository of the custodian’s choosing.
- The investor contacts a specialized IRA custodian that will handle precious metals and open a precious metals IRA.
- The investor funds the account by rolling over funds from an existing IRA or through a direct contribution.
- The next step is to direct the custodian to a reputable bullion dealer of your choosing, lock in a price for the bullion you choose and have the dealer ship the metal.
- The metal is received at a recognized depository chosen by the custodian.
- The physical precious metal that you purchased is stored at the depository, available to keep or withdraw at your direction.
What’s Allowed
Gold
Aside from gold American Eagles, eligible gold bullion includes legal tender gold coins with at least a .995-fineness such as: gold Maple Leafs and gold Philharmonics as well as .9999-fine gold bars such as the gold Credit-Suisse-PAMP bars. Some popular gold bullion coins, such as Krugerrands and some older U.S. gold coins, are not eligible because they fall below the required purity standard.
Silver
Eligible .999-pure silver bullion includes: silver American Eagles, and silver Maple Leafs. Silver from private mints that meet the .999 purity levels are also eligible. Pre-1964 U.S. 90% silver coins are not eligible.
Platinum and Palladium
Platinum and palladium bullion that meet the .9995-fineness requirement are eligible. This includes platinum Maple Leafs, platinum Koalas and palladium Maple Leafs as well as .9995-fine platinum and palladium bars such as the Credit-Suisse-PAMP bars.
Does a Precious Metals IRA Make Sense for Me?
Depending on your investment philosophy and financial outlook, it might. In uncertain times, no other investment is as reliable a safe haven as precious metals bullion. Adding gold and silver to your retirement portfolio may be the next step towards protecting your financial future and reducing the volatility of your holdings. As with any major financial decision, due diligence is the name of the game. Ask around, do your homework and then make your choice based on the research you’ve done.
Precious Metals Worldwide
News & Trends from Around the Globe
U.S. Mint Bullion Sales Up Sharply in 2009
Bullion coin sales rose sharply for the first half of 2009, as reported by the U.S. Mint’s website. According to the U.S. Mint’s totals, 670,500 one-ounce American Eagle gold bullion coins were sold in the first six months of the year, compared to only 180,000 one-ounce gold Eagle coins sold in the first half of 2008, a rise of 372%. Silver bullion coins surged as well -- 13,824,500 one-ounce American Eagle silver bullion coins were sold from January – June 2009, an increase of 52% from the first half 2008 total of 9,060,500 ounces.
Net Gold Sales Drop in First Half of 2009
Precious metals consultancy GFMS reported that net gold sales from official sources in the Central Bank Gold Agreement (CBGA) group was only 39 tonnes in the first half of 2009, according to GFMS’ latest gold report. The drop represented a hefty year on year decline of 73%.
The biggest seller with the CBGA group was France -- the country’s central bank sold nearly 44 tonnes of its reserves in the first five months of the year. The second biggest seller was the European Central Bank with 35.5 tonnes.
The GMFS forecasts that 2009 will result in an annual total for net official sector gold sales of 140 tonnes, a figure that would be the lowest calendar year total since 1994’s total of 130 tonnes.
Fresnillo Has Record Silver Production
Mexico’s Fresnillo, the world’s largest pure silver producer, reported a record first half silver production of 18,805,000 million ounces according to Mineweb. This represents a year-on-year increase of 7.8% over the first half of 2008. The record growth was due to an increase in ore milled at the Fresnillo mine and higher ore grades at the Cienega and Herradure mines.
The Mexican Peso/US Dollar exchange rate also was favorable for the company, resulting in a fall of Fresnillo’s costs for both the first and second quarters of the year.
Palladium Coin Bill Proposed
House Resolution 3405, calling for the production of .995-pure palladium one-ounce UHR $20 Saint-Gaudens Double Eagle coins was proposed in the U.S. House of Representatives by Rep. Dennis Rehberg [R-MT], according to CoinNews.
Rep. Rehberg’s bill joins an earlier year Senate bill also calling for legislation to have the U.S. Mint strike the palladium coins with a likeness of the original obverse and reverses designs by Augustus Saint-Gaudens which appears on the famous 27-millimeter version of the 1907 Double Eagle ultra-high relief gold piece. Both bills attempt to produce coins “in palladium to provide affordable opportunities for investment in precious metals.”
The palladium used within the coins would be restricted to deposits mined in the United States, which would be a significant boon to Montana’s Stillwater Mining Company— the only US producer of palladium.
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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