A turbulent month for precious metals prices saw gold hit a record high on May 12, then tumble before closing up 3.3% for the month and 10% for the year so far. All metals tumbled from those highs, most noticeably palladium, which was off 28.5% from mid-month. Therefore, only gold managed to finish the month at a gain. That said, all metals recovered very well from their lows and ended the month on the upswing.
Gold/Silver Ratio
The May gold/silver ratio — the quantity of silver (in Troy ounces) required to obtain one ounce of gold — finished at 65.9 (versus 63.2 at the end of April). This reflected silver’s volatility. Silver’s low was nearly 14% off its high, while gold’s was just over 7% lower than its high. The result was that by month’s end, it took more silver to buy the same amount of gold as last month. This month more than negated silver’s gains relative to gold for the year – the silver/gold ratio began the year at 64.9.
| May Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $19.85 | $1250.79 | $556.50 | $1754.50 |
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| Low | $17.13 | $1159.54 | $398.00 | $1452.50 |
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| Open | $18.72 | $1181.90 | $551.50 | $1744.50 |
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| Close | $18.52 | $1220.60 | $467.00 | $1568.00 |
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CONTENTS
CORRECTION
In our article last issue, “IMF Gold Now On Open Market,” we misrepresented the quantities of International Monetary Fund gold sold last fall. Mauritius, Sri Lanka, and India purchased 212 metric tons of gold from the IMF – 200 metric (not million) tons by India, 10 metric tons by Sri Lanka, and 2 metric tons by Mauritius. We regret the error, and thank our many alert readers who caught our proofreading slip.
NORTHWEST TERRITORIAL MINT HAS MOVED
Northwest Territorial Mint’s bullion and retail store operations have moved.
As of April 26, find us at our new location at:
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Our business hours remain unchanged.
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Walk in customers are welcome at our new Federal Way location from 9:00 a.m. to 5:00 p.m. Monday through Friday.
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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FEEDBACK
Think we’re right? Think we’re wrong? Know something that we don’t? As always, your feedback is welcome. Send us an e-mail with your questions about investing in precious metals or request your very own Investor Guide, a free resource packet chock-full of useful information.
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CHARTS
The following charts display the daily low and high spot price of each metal for the month of May, 2010. 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 May 2010.
Are you an Investor, or a Hoarder?
by Ross Hansen
“Your silver or your children”?
Which would you sell first?
How you answer that question defines how you relate to hard currency investments.
An Investor is one who “commits money to investment products with the expectation of financial return.” (Investor Words). As an Investor you know why you have gold or silver in your portfolio. You know that you are primarily interested in wealth protection and profit potential. If you’re just buying, and buying because you have become emotionally attached, you have crossed over the line and have become a hoarder.
Hoarders get caught up with the emotional aspect of owning metal, including their fears and paranoias. Whereas an investor has an objective and will evaluate his assets and ‘cut loose’ to achieve a desired return, the hoarder would ‘sell his own children’ before parting with any of his prized accumulation. His ability to make effective decisions is stunted.
It is better to be an investor. Know why you have the precious metal in your portfolio to begin with. Have preset acceptable levels of performance that will be used for dis-investment. Know what profits you want to take. It is essential to develop an exit strategy that will account for changes in your life or investment profile.
What your objective is depends on your financial goals and your world view. Expect the dollar to collapse? Maybe you won’t take intermediate profits on your silver and gold. Need to pay for retirement? Then you need to decide when to stop buying and start selling. If you’re still holding on to non-performing assets, maybe you should divest yourself of those and take on some precious metals.
Is your wealth protection realistically positioned? Most investment professionals recommend that a well-balanced portfolio contain between 15-20 percent hard assets. Balance is essential. If you recently took a stock market hit, a real estate hit, and your 401k tanked—while bullion appreciated— it is probably time to rebalance. As an Investor, if the dollar did collapse, you would have preserved your real assets, and would benefit from wealth appreciation. If you are a hoarder, and things had really been bad, you’d be looking for a flea market to sell the couch. Along with the children.
The Investor faces challenges. He knows that he’ll never catch the bottom or the top, but one of the toughest challenges is knowing when to sell; it’s relatively easy to get in, but calling the exit is hard. A successful true Investor will have thought this through beforehand, and will be able to make the most appropriate, dispassionate decisions when the situation demands.
To assist in executing a balanced strategy, Northwest Territorial Mint has developed My Bullion Tracker to help you manage your precious metals portfolio, simply and easily on your computer. Knowing the value of what you own is the most important first step to being an investor and not a hoarder.
Or, if you are getting serious about establishing the correct ratio of precious metals in the portfolio, but want to make your investment in bite-size pieces, use our Monthly Accumulation Program. Buy at a convenient monthly level, take delivery when the goal is achieved. The best of both worlds.
To sum up……….”Your silver or your children?”…..the choice should be a no-brainer.
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.
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Inflationary Spirals Forming to Move Metals Higher
by Vincenzo Desroches
These recent turbulent weeks of trading have been a class in how co-dependent our various trading markets have become. Globalization has opened trade borders and broadened the number of participants in global trade. Currency and commodity markets have assimilated this growth, but the shockwave created by the sovereign debt crisis in Europe is a case in point. Vibrations hurtled across the globe at Internet speed defying any attempt at an early warning system. The seismic jerk sent worried traders rushing back to their trading desks and overturned many long-held beliefs in specific market correlations. Nowhere was this pattern of shifting tides more apparent than in the traditional relationships between our national currencies and precious metals.
Commentaries on gold and precious metals have almost exhausted every superlative in the dictionary during their impressive ramp up in value over the past decade. To the amazement of fundamentalists and technicians alike, investors continue to want in their portfolios the security of metals and the intrinsic value they represent. While headlines focus on Greece and euro to dollar charts, capital continues to flee to safe havens, primarily gold, silver, and other precious metals such as palladium and platinum. Metals, like stocks, retrenched a bit toward the end of May, with most analysts attributing these sell-offs to speculators exiting the market. Most investors in gold are long-term value investors, not speculators looking for a quick “day-trading” profit.
One long held belief taught in nearly every commodities classroom is that gold is inversely correlated to the US dollar. If the dollar weakens, gold appreciates. If the dollar strengthens, as it has over the past five months, then gold will surely depreciate. If this maxim is true, then how do you explain the picture below?
Source: marketoracle.co.uk
Obviously, someone forgot to send gold investors the e-mail that foreign exchange (forex) traders seem to have received back in February. A time-honored tradition suddenly broke down. Gold and the dollar strengthened at the same time. News broke about Europe’s sovereign debt issues in February.
And what of the other metals? Amazingly enough, silver, platinum, and palladium enjoyed the same correlation breakdown. They, too, appreciated right alongside the dollar, defying skeptics and critics of metal ownership.
Momentum indicators suggested that a market correction was in order, and values followed suit and have declined. The Euro continues to “bounce” off newly tested bottoms. Platinum and palladium backed off highs at the end of March, due to reduced industrial demand anticipated in Europe. These two metals are used mainly for auto-exhaust catalysts and jewelry. Unlike silver, which has many industrial uses, platinum and palladium react to demand swings in the market with more volatility. However, analysts were quick to add that fundamentals were improving. Market highs will surely be tested again in 2010.
The corrections in gold and silver prices have been more on the order of 5-7%, not the 10-20% as with other metals. Silver’s uses have been well documented and contribute to its overall market demand. However, the current market for gold and silver is also a reflection of expected future trends, particularly those related to inflation. Major market governments have been expanding their monetary supplies at record paces for the past decade, with some countries’ debt loads approaching 100% of GDP. Issuing more currency will only weaken the situation further. At some point, growth must be generated to pay down past mistakes. In the absence of growth, inflationary spirals are on the horizon. As most investors are aware, gold, silver, platinum, and palladium are excellent hedges against inflation.
Will the current “revisionist” trend become the new rule? At some point, when sanity returns to the market, the dollar will have to react to fundamentals. United States debt and deficit issues have not changed materially to warrant its current path. Recoveries take time, and pundits are already suggesting a “double-dip” recovery is in the offing. Expect gold to break its new correlation with the dollar, sooner rather than later.
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Vincenzo Desroches started a financial and forex journey as a young entrepreneur and through years of self-taught investment. However, his interest in economics has been a lifelong hobby, fulfilled through various books, magazines, and courses, adding to his knowledge of international economics on business trips around the world, including Europe, Asia, and Africa. Currently, he is writing a book about small business.
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Purchasing Power of Gold and Silver: 2010 and 1903
by John Q. Public
“John Q. Public” writes for www.Gold-Silver.US, a forum for the discussion of gold, silver and precious metals and tracking “the ongoing collapse of the financial system and all its implications.” The author has also used the nom de web, “Joe Sixpack.”
We often hear that we could never go back to a gold or bimetallic (gold and silver) standard, because there is not enough gold and silver in the world to do so. But is this actually the case? In the 19th century and much of the 20th century, the United States used a gold standard or a bimetallic (gold and silver) standard of some type. Even then, not every dollar in circulation was minted as a coin – in fact most were not.
An analysis of the purchasing power of gold and silver in 2010 and 1903 reveals that these precious metals could perform essentially the same function now as they did at the turn of the last century.
In 1903, there was no Federal Reserve System. The US was on a gold standard, but both gold and silver circulated as money.
Silver was permitted to float relative to gold (no 16:1 or other fixed monetary ratio).
There was no income tax in 1903, so more of money earned went to the worker.
The population of the USA was around 80.8 million (US Population Statistics, Bob McCaughey). Today it is around 307 million (US Census Bureau estimate, May 2010).
Comparison of silver and gold purchasing power: 2010 and 1903
To compare the purchasing power of silver and gold today vs. 1903, please note the following data:
US population 1903 = 80.8 million
World population 1903 = 1.6 billion (www.Geography.about.com)
US population 2010 = 307 million World population 2010 = 6.9 billion (www.Geography.about.com)
The current US population is 3.8 times what it was in 1903, and the current world population is 4.3 times what it was in 1903. Since these population growth ratios are so similar, an average of the two is used for this analysis. This average ratio is 4.05.
The silver and gold market is worldwide, and there is potential for silver and gold to be used as money in many places in the world. Finally, the US has always purchased (and sold) some silver and gold in foreign markets.
As for the metals themselves, according to the USGS, the world production of silver in 2008 (nearest year available) was 4.08 times what it was in 1903; for gold, 4.6 times what it was in 1903.
Defining purchasing power of a commodity as being proportional to the population (i.e., more population is more demand), and inversely proportional to the production rate (i.e., less commodity is less supply and thus higher purchasing power) we can use these ratios to compare the purchasing power of silver and gold today (2010) vs. 1903.
2010 Purchasing Power of Silver in 1903 Scenario = Population Ratio/Silver Production Ratio = 4.05/4.08 = 0.99 or 99%. This means that 1 Troy oz. of silver in 2010 should purchase 99% of what it did on 1903. Conversely wages in 2010 should be 101% of what they were ion 1903 on a silver basis.
2010 Purchasing Power of Gold in 1903 Scenario = Population Ratio/Gold Production Ratio = 4.05/4.6 = 0.88 or 88%. This means that 1 Troy oz. of gold in 2010 should purchase 88% of what it did on 1903. Conversely wages in 2010 should be 114% of what they were in 1903 on a gold basis.
What is this analysis reveals is that, over more than a century, there has not been a huge change in the purchasing power of gold and silver. The amount of production of gold and silver per capita is actually a little higher in 2010 than it was in 1903! This means that if there was enough gold and silver to be used in 1903 to the extent it was and in the manner it was (i.e., fractional reserve basis), the same could be true today!
Disclaimer: This is a hypothetical analysis, and cannot be verified. Please do your own due diligence. The study is intended as a basis of discussion and a possible guideline for those already purchasing or considering purchasing silver and /or gold.
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Precious Metals Worldwide
News & Trends from Around the Globe
Electron Beams Boost Antimicrobial Silver
Blasting a silver nitrate solution with an electron beam can generate nanoparticles that are more effective at killing a wide variety of bacteria, says Rani Pattabi his his colleagues at Mangalore University in the International Journal of Nanoparticles. As conventional antibacterial substances lose their ability to fight mutated micro-organisms, techniques such as this one can produce a new assortment of agents effective in killing deadly bacteria such as MRSA (multiple-resistant Staphylococcus aureus, or methicillin), Escherichia coli (E. coli O157), and Pseudomonas aeruginosa. The article describes this method as straightforward and non-toxic.
Palladium Fuel Cells May Be Closer
According to the Journal of the American Chemical Society, scientists at Brown University and the Oak Ridge National Laboratory created a nanoparticle with a palladium core and an iron/platinum shell that generated 12 times more current than commercially available pure-platinum catalysts at the same catalyst weight. The output remained consistent 10 times longer than commercially available platinum models. The scientists reporting their results said these results might help bring fuel cells closer to reality.
Organic Form of Palladium Created
Using palladium, researchers at the University of Amsterdam have creaeted a new type of material called chiral palladium, according to results published in Nature Chemistry. Chiral molecules are either asymmetrical or exhibit traits of “handedness,” such as the left and right hand of a human, which are mirror images, but cannot be superimposed on the other. They are also organic; metals are not chiral. This new class of substance is called a metallo-organic. To make the chiral palladium, an organic template was imprinted onto palladium, then removed. The molecular structure of the remaining palladium then was shown to have been altered through the photo-electric effect. Striking the “left-handed” side of the chiral palladium with a photon ejected an electron from a different portion of its structure than when striking the “right-handed” side. In all other respects, the palladium remains the same, and the researchers even pressed a coin to prove that it retained its malleability, conductivity, and catalytic activity.
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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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