October was a record-setting month for gold as it hit an all-time high of $1,072, well surpassing its previous February 2008 high of $1,030. Gold took off in the face of continued deficit spending by the Federal government and increasing inflationary fears from investors. Those who look at the “psychologically significant” $1,000 barrier saw gold maintain above the $1,000 threshold for the entire month, also a new record. The metal of kings eventually closed the month up almost 4% at $1,045.70. Silver’s high for the month reached 13% above its low before faltering to end down 2% at $16.32. Platinum closed the month up 3% and palladium, perhaps buoyed by stronger than expected auto sales, was the month’s highest gainer, up 9%.
Gold/Silver Ratio
During October, the gold/silver ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold – began the month in the low-60 range, then over two weeks declined to near 58. The ratio rose to end the month at above 64.
| Oct Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $18.11 | $1072.20 | $343.00 | $1382.00 |
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| Low | $15.97 | $988.42 | $292.00 | $1265.00 |
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| Open | $16.62 | $1008.72 | $298.00 | $1292.50 |
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| Close | $16.32 | $1045.70 | $324.00 | $1328.50 |
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CONTENTS
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Market Summary - October 2009 |
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Ross Hansen: The Psychology of Precious Metals |
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Two Kinds of Precious Metal |
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Letters to the Editor |
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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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CHARTS
The following charts display the daily low and high spot price of each metal for the month of October, 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 October 2009.
The Psychology of Precious Metals: On the Couch with a Precious Metals Dealer
by Ross Hansen
After 30 years of selling retail precious metals, I realize my job is a lot like being a psychologist.
Psychologists make their living because people bring their neuroses to the couch. I can relate.
A couple of years ago, a customer called my office on a Saturday, all out of breath.
“I just figured out that the Bush administration is lying to us.”
“You just figured that out?” I said.
“You know that asteroid in the news, the one the government said is supposed to miss Earth by about 200,000 miles? Well, it’s changed course and is going to hit the Pacific Ocean at 2:32 pm tomorrow. It’s going to create a tidal wave three miles high that washes all the way to Denver and over Japan and China. Those who don’t die in the tsunami are going to be killed because the asteroid will crack open the Earth’s mantle and spew molten lava into the air.
“I gotta buy gold and silver right NOW!”
“Let me get this straight. An asteroid is going to hit earth, we’re all going to die, and you want to buy gold and silver today?” I responded.
There was a long pause.
“Do you think I should buy something ELSE?”
“If you truly believe what you just told me,” I said, “maybe you should buy a Bible and make yourself right with the Lord before you die.”
A string of unmentionable words followed, then a dial tone.
Moral of the story: When people think about the worst, they can get a little bit… wacky. (And, by the way, the asteroid did miss Earth by about 200,000 miles.)
Just like a psychologist, I listen to my client’s concerns – both rational and irrational. After doing so, I may prescribe precious metals to soothe financial fears but I always recommend reading the label and taking ownership wisely. After all, precious metals, just like Xanax, can be abused if not taken with a strategy in mind.
Let’s go over some common concerns that may be standing in your way to making a rational precious metals investment:
- What to buy – Gold has generated a lot of buzz, rising 26% since the start of the year. Don’t overlook silver however – it has far outpaced gold; up almost 60% since January. Government-backed bullion – such as American Eagles – are trusted and traded worldwide. Private-label bullion from a reputable dealer is another option that typically offers lower premiums over spot. As in all investments – diversification is the key to success.
- Timing – ‘When should I buy?’ is less important than ‘Why am I buying?’ When you invest in precious metals for the long term, the dips and spikes of the market don’t matter as much. What does matter is that you commit some portion of your portfolio – 10-20% is one suggestion – to gold, silver, platinum, and palladium. Once you do, you’ll enjoy the best form of financial insurance available.
- Storage – There’s a variety of means to easily store your precious metals safely and securely. No matter how you store it, make sure you have a portion that’s easy to reach in times of crisis.
- Price – Just like any other commodity, bullion prices rise and fall in the short term. Yet, if you were to graph their historical price over time you would see an upward trend. However, this is merely a speculative view of their worth. Regardless of price, owning precious metals gives your portfolio the protection of universally recognized wealth.
- Inflation – Commodities like gold and silver have always done well in periods of high interest rates and economic uncertainty and will continue to do so. Inflation won’t eat up your gains from gold and silver -- inflation will eat up what you don’t preserve in precious metals.
The View from My Chair
Confronting your fears head on and then making the rational decision with good information is the best way to get you up off the couch. Yes, acquiring knowledge and committing to research does take time, but, like therapy, the payoff is worth it.
Whether your view of the world is dark or bright, remember that gold and silver will always retain their luster – it’s been proven over thousands of years and it will be proven again long after paper currency fades.
Besides, just like Xanax, precious metals help me sleep at night.
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.
Two Kinds of Precious Metal
by Northwest Territorial Mint Staff
All precious metals investors should know the difference between bullion and numismatic coins, as well as privately minted rounds.
Any government coin is, at the very least, worth the metal from which it’s struck. By law, the government says a nickel can be traded for the value of $.05 U.S. On the other hand, if you have a rare nickel -- say one of five Liberty Head nickels bearing the date 1913 -- you may find a collector who will gladly pay you the face value of five cents + several million dollars more.
Bullion and Numismatic Fundamentals
If choosing to purchase bullion, you may consider buying a 1-oz. government coin. In the case of an American Eagle, with purity and content guaranteed by the US government, it will sell for the spot price of gold – roughly $1,100 per ounce – plus a premium that covers the dealer’s cost. The price is driven by the value of the metal and not the coin. For the most part, any gold Eagle is equivalent to any other gold Eagle, and, for that matter, any gold Maple Leaf is equivalent to any other gold Maple Leaf of equal purity.
However, some investors like collectible coins – numismatic items – because their collectible nature can leverage the intrinsic value of the metal in the coin. An ordinary Morgan silver dollar, which is 90% silver, is worth about $13.50 just for the silver in it. Add its general rarity, and you will see that it can be found for around $20 to $25, even for average condition coins with common dates. However, should one of the Morgans you own be one of the rare proof 1895 coins – of which only 80 seem to have survived – you could be looking at a coin like those that have garnered six figures at auction.
Keep in mind, numismatic investments have the same upside and downside as equity investments. Ten years ago, General Motors was a solid investment. Today, it’s not. If someone uncovers a cache of those 1895 proof Morgans, the one you own won’t fetch $100,000 any more. But, in inflationary times, collectible items can outpace inflation.
A Matter of Preference
The difference between the intrinsic value and appraised value is what separates these two precious metals investments. Taking ownership in one versus the other is a matter of preference, not right or wrong.
Bullion investors may prefer government coin and privately minted rounds for their intrinsic value alone and take comfort in knowing that the value of their investment is roughly equal to the current spot price. Because of the metal’s value, bullion coins are a reliably liquid asset anywhere in the world. Numismatic investors may look to enjoy the wealth of coins that have the potential of selling for many times their face value or metal value.
Of the recommended 20% of your portfolio you set aside for precious metals, you might do well to consider a mix of bullion and numismatic items. As in all investments, research and analysis is the foundation for a sound and successful strategy for long-term precious metals ownership.
Letters to the editor may be edited for length and clarity.
Regarding the article “Gold and Silver as Religion”
Wow, I am amazed! So many out there telling us to drop it all and buy every last precious metals you can find before the Earth catches fire. Now, I read from a very trustworthy source to approach with caution. Your candor and honest sounding words are a soothing thing to read in this rough economic time. I am always looking for that business man that I feel I can trust over the others in my dealings. Little as those dealings are, I am just a drop in the bucket. But if this honest attitude gets out to the general public, there will be a lot more drops like me put in the Northwest Territorial Mint bucket. Acts like this in times like this are what can carry businesses through all kinds of weather. I will definitely send the bulk of my new precious metals buying your way from now on.
THANK YOU, ROSS!
-J B
Happy to help inform your investment strategy. As in all matters, knowledge is power. -RH
You make some good points but...
Just because apocalyptic events didn't happen back then doesn't mean they won't this time, because today we are no longer the country we once were. We were the greatest creditor and manufacturing nation in the world, with a strong dollar, until Nixon defaulted on our obligations to the world in 1971 (Bretton Woods "annulment").
Now, our dollar is weaker than ever with China, Russia, etc., no longer wanting to pick up our tab by buying our debt. Our trade profile is similar to a 19th century third-world colony and unemployment continues to increase with no end in sight.
One of the main reasons that inflation was muted in the 1980s was simply because Paul Volcker restricted liquidity, mostly by raising the short term Fed Funds rate to double-digits. The medicine for inflation is recession, yet today we are already in recession at zero percent interest rates! How can the Fed raise rates without plunging us into the "Greatest Depression" ever?
No, The Fed will continue to debase (destroy) our money without question!
Anyone who has bothered to study monetary history cannot come to any other conclusion than America has crossed the Rubicon of debt and we are at the same point as Rome in 472 A.D.
History repeatedly shows that fiat schemes always collapse and zero out. Heck, they were designed by the private bankers to do that very thing.
Amazingly, the bankers have even warned us — yet who listens?
"Only gold and silver is money and nothing else."
—J.P. Morgan (yeah, the banker).
Thank you for your feedback. While I don’t necessarily agree with your whole assumption of the country’s economic demise, I do think the recent heightened profile of gold and silver in the media and among general populace is proof that people are taking notice of the protection against uncertainty that holding real wealth can deliver. —RH
Regarding the article “Breathless Investing”
I have enjoyed your comments every month and I am sure I will enjoy them in the future. You recently mentioned that the only thing the US government has not seized is precious metals. I expected a "yet" after metals. The government has done it before and what is to stop them from doing it again? Your comments on that subject would be appreciated.
—DW
I’m not concerned with the government seizing precious metals. For, unlike 1933, our populace is much more fiscally literate, better educated, and better connected. It would also be completely unpractical because who would do it? The same “unnamed government agents” who fly the black helicopters?
Besides, it’s my experience that the same people who buy gold and silver also buy guns and any government agent that was assigned the task of seizing precious metals could measure his life expectancy in mere minutes. —RH
Precious Metals Worldwide
News & Trends from Around the Globe
Russia to Sell Gold on World Market
Russia plans to sell gold on world markets to cash in on high prices as the government faces its first budget deficit in a decade, according to Yahoo! News.
Russian Finance Minister Alexei Kudrin said that precious metals depositories were planning to sell up to 50 metric tons of gold, or 1.6 million ounces, in London by the end of the year.
With gold prices maintaining record highs of over $1,000 per ounce, the sale could bring Russia some $1.7 billion.
Russia's gold and foreign currency reserves -- the world's third-largest -- stood at $423.4 billion as of Oct. 16, according to the Russian central bank. The gold reserves have risen 14 percent this year, to 19 million troy ounces, currently worth nearly $19 billion.
Russia is running a budget deficit of 7.7 percent of gross domestic product -- its first in a decade -- and expects a 6.8 percent deficit next year.
China Expected to Continue Gold Investment
Analysts are predicting that China’s investors and its government are likely to continue increasing purchases in gold bullion according to Reuters.
The government itself -- also looking for a safe haven for its foreign currency reserves -- is also likely to increase its gold holdings, which now officially stand at 1,054 metric tons.
Only around 1.6 percent of China's Forex reserves are held in gold, and that figure is expected to rise, Sun Zhaoxue, chairman of the China Gold Association, said earlier this year. China is already the world's biggest gold producer and, in the first half of this year became the biggest consumer in the world, overtaking India.
Silver Wound Dressing Introduced
British specialist technology company, Advanced Medical Solutions (AMS) has announced a new silver-containing dressing according to MineWeb. The advanced wound care dressing has already been launched in the U.S. and is being introduced into the European and other international markets.
It should have application in the military market as well as for accident applications, and demonstrates the growing usage for silver in medical use.
In 2003, AMS developed a range of wound dressings using silver fibers. This global silver alginate market is currently estimated at around $350 million and growing at 15% per annum.
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