Market Summary —
November 2009
November was another record-setting month for precious metals as concerns about the weak U.S. dollar led to unprecedented investor demand. Gold continued its near-daily record-setting pace and closed up almost 14% on the month. The metal of kings achieved record highs in five of the final ten trading session before Thanksgiving. It reached a high of $1,213 before closing the month at $ 1,186. Silver followed gold upwards, surging 14% to close the month at $18.60. Platinum finished the month at $1,463, its highest since August 2008. Palladium continued its blistering run, closing at $372 and up a whopping 101% on the year.
Gold/Silver Ratio
During November, the gold/silver ratio – the quantity of silver (in Troy ounces) required to obtain one ounce of gold – essentially remained the same, opening and closing at almost 64 . November’s ratio tracks October’s close at 64 and is above September’s ratio – 60 – which is the yearly low to date.
| Nov Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $18.94 | $1213.40 | $381.00 | $1487.00 |
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| Low | $16.28 | $1043.52 | $318.50 | $1322.00 |
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| Open | $16.34 | $1043.90 | $324.00 | $1327.50 |
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| Close | $18.60 | $1186.70 | $372.50 | $1463.50 |
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CONTENTS
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Market Summary - November 2009 |
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Ross Hansen: Speculators vs. Investors |
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Gold - The Long View |
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Technical Take: The Trend is Your Friend |
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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 November, 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 November 2009.
Speculators vs. Investors
by Ross Hansen
“Speculator” [spec·u·la·tor]
noun.
1: A person who is willing to take large risks and sacrifice the safety of principal in return for potentially large gains. Certain decisions regarding securities clearly characterize a speculator.
“Investor” [in·ves·tor]
noun.
1: A person who considers safety of principal to be of primary importance. Investors frequently purchase assets with the expectation of holding them for a longer period of time than speculators.
- From Dictionary.com
These days, mainstream media is having a field day proclaiming “Bet on Gold” — and why not? Gold has been soaring and it seems like a big deal only when gold doesn’t hit another new all-time high. Given all the chatter and hysteria, knowing your financial strategy before you commit your funds is important. Success in precious metals investing is gained by keeping your impulses under control, and maintaining the discipline to stick to a strategy based on reason and analysis, not on emotion.
Those who do thrive on emotion are the speculators. They buy and sell quickly, always on the lookout for the next big profit-taking opportunity. This is a fine way to earn wealth — until, of course, it isn’t. Just as fast as the prices can shoot up, they can fall to earth as quickly.
Let’s take a look at the speculator’s mindset and how you can avoid it in order to receive the full benefits of precious metals ownership.
Recovery vs. reality
A speculator may look quickly at the recent unemployment numbers — down to 10% in November — and start to consider selling, moving out of precious metals for larger gains in other areas. Unemployment is dropping, the economy is improving, so why not? A less-twitchy investor might look into evaluating the rest of the Bureau of Labor’s November report, where it says the long-term jobless – Americans out of work 27 weeks or more — actually rose to its highest level since 1948 this past month. Even if the jobs outlook is “less bad” than usual, a Wall Street Journal article reported that corporate and consumer lending have shrunk by 7% in the last two years. With no credit, there’s no recovery.
Profit-taking vs. protecting wealth
Dollar signs are surely dancing in the eyes of those who bought precious metals as the hot new thing and are looking to sell right now. And there’s certainly profit-taking to be had. Gold is up 29% on the year; silver is up even more at 50%. If you bought them at the beginning of 2009, you could sell now for a healthy return. If you bought at the beginning of the decade, your return if you sold now would be 291%. That’s the speculator’s perspective: committed to what’s right in front, not what’s ahead. Those who bought at the beginning of the decade were looking ahead, because they know that owning — and not selling — silver, gold, platinum, and palladium offers them benefits that today’s prices alone can’t bring them.
Successful investors look at precious metals as a long-term partnership. Even when their metal gains or loses a few extra dollars, or more, at day’s end, they happily hold their investment. Why? Because they are rewarded by the protection and safe haven precious metals have offered for thousands of years and will continue to offer.
This is solace that the speculators will not enjoy. In turbulent times, this is the solace that you may want to consider.
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.
Gold – The Long View
by Timothy Green
For many years on the gold trail I was concentrating on the modern mines and markets around the globe, including the blossoming New York market once Americans were permitted to hold gold privately in 1975 (after a 40-year ban) and the rush to develop new mines out West in the 1980s. For the last decade, however, I have taken a longer view, tracking the metal from the earliest ornaments in the ancient world before 4000 BC, through its first use in coins by King Croesus in 550 BC, to today's applications, whether in the vaults of central banks, gold coins for investors, jewelry, or its vital use in electronics (as a great conductor of electricity) in our age of high technology.
Gold's prime credentials are its natural beauty and unique properties of conductivity, ductility, malleability and resistance to corrosion, which have meant it was valued in differing ways by successive ages. Its versatility made it adaptable in ornaments, the glowing tiles of Byzantine mosaics, the widely accepted ducat coin of the Venetian merchant or, today, in electronics for the integrated circuits and connectors of iPods and space probes. In short, gold is the metal for all seasons, particularly bad ones when your country or currency are under siege.
Researching my latest book, The Ages of Gold, I found that, over the last two thousand years, just five gold coins served as internationally accepted currency, each for centuries at a time: the Roman aureus, Byzantine nomisma, Islamic dinar, the Venetian ducat and the British sovereign. It was like a family title, with each assuming the role when the preceding monetary standard waned. The Venetian ducat of 356 grams/0.11 t.oz. at .995-fine was first struck in 1285 and minted for the next five hundred years, weight and fineness unchanged. In Britain, the price of gold was set at £4.25 per troy ounce in 1717 by Sir Isaac Newton, then Master of the Mint. This 'Gold Standard' price lasted over two hundred years with only minor hiccups. Such stability built its reputation.
Gold's aura is enhanced, of course, by the gleaming creations of the goldsmith's craft, wondrous ornaments that can be seen in museums around the world. My favorites are the sensuous death mask of Tutankhamen, boy king of Egypt from 1327 BC; a delicate model gold chariot with two passengers pulled by four gold horses from the Oxus treasure of Afghanistan from around 400 BC; and a graceful flying fish in Bogota, Colombia, dating from before AD 900. And the most moving moment of my travels was stepping into the gloom of a subterranean tomb in northern Greece where a burnished solid gold casket containing the ashes of Philip of Macedon, father of Alexander the Great, rests in a softly lit niche. Alexander himself supervised the funeral in 331 BC and probably placed his father's remains in the casket, which then lay undisturbed until discovery in 1977.
Throughout history people have trusted gold more for protection than profit. Only in the last 40 years has the gold price been free to 'float'. Before 1968 it was always fixed, often for long periods. The last 'fixed' price was $35 per troy ounce set by President Franklin Delano Roosevelt in 1934, which continued until 1968.
The price, thereafter, became a moveable feast, with profit, not protection, often the buyer's motive. So it has soared from $35 to over $1,000, spurred recently by the economic crisis. But what is interesting is that many people are again buying gold coin or small bars, along with Exchange Traded Funds, with an eye on protection. Gold is again perceived as a 'safe haven' (even central banks in China and India have been building stocks). In my view that is true of the long-term role of gold; it is not a 'casino chip.'
Timothy Green has been writing about gold for 45 years. His first book, The World of Gold, came out in 1968; his latest, The Ages of Gold, is the most comprehensive history of the metal ever published. Tim was also a consultant on the annual GFMS gold survey for three decades. He was a regular speaker at North American gold conferences.
The Ages of Gold can be ordered online from:
http://shop.gfms.co.uk
Technical Take: The Trend is Your Friend
by Joe Nicholson
One of the easiest investment strategies is to simply follow a strong trend. With stocks it’s easy to keep piling into a position and enter trailing stops to get you out with profits when the trend inevitably reverses. With longer-term investments like physical metal, this isn’t as easy to do, so it can be a bit more daunting to buy at record high prices. Unless, of course, high prices are only going higher.
Back in October I said the extended rally in gold was probably due for a breather once the Relative Strength Index (RSI) got back into oversold territory. The only way this wasn’t going to happen was for gold to go parabolic and suddenly shoot straight up several hundred dollars in a few weeks. Well, after exactly the sort of break we expected, gold resumed its steady uptrend -- and it now looks as though a parabolic ascent is indeed underway.
Going into October, I warned that that an oversold reading in the RSI could put the rally on short-term hold unless a parabolic rise was occurring. The rally was temporarily stymied in October, but a parabolic ascent now appears to be underway. The support band in green represents an entry opportunity — that is, a chance to buy at a price lower than current — if the rally stalls again.
History shows us that commodities are given to superspikes that can reach unprecedented levels very quickly. So it’s hard to know just how high gold could go. Theoretically, there is no limit. One way to gauge the extent of the trend is to follow the Elliott Wave pattern formed by gold for most of the year. As seen in the chart below, gold spent most of 2009 in a corrective triangle (a pattern created by drawing trendlines along a price range with lower tops and higher bottoms) following a sharp rally. In a perfect wave, the upward thrust should retrace the full length of the prior wave. Here, that would be from the 2008 low up to the spring high at about $1,000. Based on this measurement, gold should top $1,260, probably in the next two months.
For most of 2009, gold traced a corrective, sideways triangle, which is a series of five three-wave moves that make successively lower highs and higher lows. The thrust out of this Elliott wave pattern should clear $1,260 by about the start of the new year.
The triangle pattern shouldn’t cap the rally, but it isn’t enough to send gold rising forever. For that, there will have to be some calamity in the real world, such as a sudden rise in bond yields or a collapse of the dollar. (With central banks supposedly making unusually large acquisitions of the precious metal, maybe something is in the works.)
Absent some such catalyst, though, at some point gold will probably have to work off its overbought condition -- as it did in October, which we’ve seen still does not mean the end of the trend. But even if a real superspike continues, history also tells us that what goes up must also come down. It’s just a matter of how much. Even in a bull market there are corrections downward. The support band in the first chart -- between $1,075 and $1,125 -- represents a potential entry point should there be a correction. The 38.2 percent Fibonacci retracement of the entire move from the 2008 low is now at $1,000, and a 50 percent Fibonacci retracement is at about $950. If gold continues to put in new highs, these levels will gradually rise, but absent a significant new rally from here, we could probably expect a normal retracement to reach to about these levels.
At about $1,200 per ounce, a key Fibonacci retracement level (38.2 percent) corresponds to the high from this past spring at about $1,000. Thus, even though a pullback of $200 back to $1,000 per ounce would probably feel dramatic, it would be mathematically typical. (Retracements of 38.2 percent are common, with most Elliott Wave theoreticians considering them mild corrections within an ongoing trend.)
The chart in silver, which has not risen to all-time highs, is considerably more precarious than in gold. The Moving Average Convergence/Divergence (MACD) in October and December, shown in the chart below, reflects the fact the white metal has not been getting as significant a lift from the forces that have buoyed gold over the past few months. But silver is unlikely to be overlooked during a parabolic superspike in the yellow.
The RSI appears set to retest previous resistance. The 50-day moving average currently coincides with the intermediate-term trendline, suggesting a potential entry point if silver loses the 5-day moving average. The more recent trendline is a possible lower entry point, if necessary.
The two obvious upside numbers to watch in silver are, first $20, and then the all-time high a bit north of that. But the more long-term chart below shows the look of an ascending bearish wedge in silver that could trigger selling if the immediate overhead resistance is not overcome.
Silver appears to be in a bearish ascending wedge, but can invalidate this pattern by rising above immediate overhead resistance at the upper trendline. Falling below the lower trendline would suggest further weakness, possibly down to the 50-week moving average.
Precious Metals Worldwide
News & Trends from Around the Globe
Investment Demand for Physical Gold Rises 11% World Gold Council Reports
Demand for gold in the form of bars and coins in the retail investment category rose 11% in the third quarter of 2009, versus Q2 '09, according to the World Council’s Q3’09 Gold Demand Trends Report.
Total identifiable gold demand for the third quarter 2009 reached 800.3 metric tons, up 15% from the second quarter, as gold’s long-term store of value and wealth preservation qualities continued to attract investors and consumers. Average gold prices for the quarter were 10% higher than in Q3’08 at $960/oz. Identifiable investment demand overall, which includes gold ETFs and bars and coins, was 227 metric tons, a slight increase on Q2 levels, but down 46% from the extreme highs of Q3’08.
Sri Lanka Buys 10 Metric Tons of IMF Gold
The International Monetary Fund sold 10 metric tons of gold to Sri Lanka's central bank for $375 million, according to Yahoo! News.
Sri Lanka's purchase followed India's major acquisition of 200 metric tons of gold from the IMF earlier in the month. The IMF, the world's third-largest official holder of the precious metal, is seeking to reduce its dependence on lending revenue and bolster its finances amid the global economic crisis.
The IMF executive board approved in September the sale of 403.3 metric tons of gold. The fund, which currently holds roughly 3,000 metric tons of gold, is the third largest official holder of the precious metal after the United States and Germany.
Silver May Hit $25 in 2010 CPM Group Predicts
Industrial and investment demand for silver may see the white metal rally into the $25/ounce range in 2010 according to analysts for the CPM Group – a commodities research, consulting, and investment banking organization, reported Mineweb. Commodity Analyst Chintan Parikh predicts that prices may spike as high as $25, surging past its most recent high of $20.79, set in the spring of 2008. Parikh says higher prices are being driven by the fact that traditional industrial end users of silver have begun to replenish severely depleted inventories. He also pointed to silver's appeal as a safe haven for investors in times of economic upheaval.
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