Market Summary —
June 2010

The story of precious metals in June could be one of two tales….

First tale: it was a turbulent month.

Continuing from their rather turbulent performance of May, precious metals cast a near-identical look for June. All metals hit their lows during the first week, then climbed up to hit the monthly highs at the start of the third week. Silver experienced a $2.21 spread between high and low, representing about 12% amount when compared to the close. Gold experienced an exciting performance, having had a $68 spread—about 5.5% of the closing figure—and trading to an all-time high of $1266.49 at Northwest Territorial Mint on June 21 ($1,266.50 in New York and $1,265.30 in London). Palladium’s swing was $87, coming in at almost 20% of the closing figure. Platinum finished with a $119 swing, just under 8% of the close. Considerable volatility, one would say.

Second tale: we are in the summer doldrums.

Silver closed out the month down only 0.2% from the beginning of the month. Gold closed up only 1.6% for the month, despite hitting its all-time high in the third week. Platinum was down 3.6%, and palladium was down about 6%. Traditionally, between Memorial Day and Labor Day, precious metals are in the doldrums. June’s performance seemed to bear that out.

The June gold/silver ratio — the quantity of silver (in Troy ounces) required to obtain one ounce of gold — finished at 67.1 (versus 65.9 at the end of May, and 63.2 at the end of April) after charging up against 70 and then tumbling to 65. This reflected the volatility of both metals and confirmed gold’s growing strength versus silver.

June Spot Price Summary (U.S. Dollars)
	Silver	Gold	Palladium	Platinum
High	$19.47	$1266.49	$508.00	$1613.50
Low	$17.26	$1198.50	$421.50	$1494.00
Open	$18.53	$1221.01	$467.00	$1568.00
Close	$18.49	$1240.64	$439.00	$1511.50

Current Metals Pricing>>

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CONTENTS

	Market Summary - June 2010
	Ross Hansen: Are you Ready for a global currency?
	July: Buy or Sell?
	Can You Live on Gold and Silver?
	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, 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 June 2010.

Are You Ready For a Global Currency?

by Ross Hansen

Almost daily I am asked to comment about rumors of some new global currency. These rumors usually are centered around various shadow governments’ attempts to spring upon us a yet-secret currency designed to become the world’s new reserve standard, all for the purpose of consolidating the power of these nefarious, shady organizations.

So let’s talk about it for a bit….Perhaps the first question should be, “How would we arrive at a new world currency?”

Today there are 195 countries in the world, with most having their own currency. For the vast majority of these countries, however, their currency can only be used within their own country; it is not accepted elsewhere. Relative currency values are volatile and some have very little value when compared to others. A good example is the Iraqi dinar versus the US dollar: fewer than $100 US buys more than 100,000 Iraqi dinar. Similar weakness exists for scores of currencies which are in effect not liquid, unacceptable by international exchanges.

Even strong national currencies are no solution if the amount in circulation is very small: for example, the Norwegian krone, a strong and stable currency. With the Norwegian 2010 population estimated to be under five million (4,854,000), just how many krone are out there? Not enough to be a factor in regional or global currency. So we’re stuck with the US dollar as the world’s reserve currency—there is no other contender.

There have been attempts at regional currencies. The euro is the most successful to date. The amero was touted as the ‘natural’ solution for the three major North American countries; nothing happened. Over a year ago, the Chinese suggested a “super-sovereign reserve currency” run by the International Monetary Fund to be called the globo. Catastrophists have predicted the entire collapse of world currencies to be replaced by a gold-backed currency called hologram gold. A common universal world dollar currency to be printed and maintained by the World Bank has also been proposed—the univos. Watch the internet for rumor updates.

But in the midst of all of this background noise over new fiat world currencies, we have overlooked the true world currency that already exists! And it has been around for thousands of years!

It is called GOLD.

Although “when, where, or by whom Money was first coined is not agreed upon by writers,” at least we do know that in Rome it was first minted in 321 B.C. (History of Gold and Silver, vol. 1, p. 68). The first coins made purely from gold were minted in Lydia, a kingdom of Asia Minor, in 560 B.C.(The History of Gold, National Mining Association). Gold has survived empires, wars, famines, the rise and fall of literally dozens of civilizations. Yet, still, to this day many fail to comprehend the significance and real value of this ancient currency.

Gold’s value is recognized universally. Gold is freely traded world-wide on a daily basis. Everyone knows that gold is gold. Gold does not require an over-arching world government or world monetary management structure to issue it, or control its value, or to dole it out as needed. Former Federal Reserve Chairman Alan Greenspan states simply: “Gold still represents the ultimate form of payment in the world” (From Credit Crunch to Solvency Crunch).

Gold does not infringe on a nation’s sovereignty. Americans do not have to subject themselves to someone for the privilege of using it. The Founding Fathers recognized the value of gold and silver, and addressed it in the U.S. Constitution. Article I, Section 10 states: “No State shall…make anything but gold and silver Coin a Tender in Payment of Debts….” Oh, how far we have strayed!

Perhaps it is time to hearken back to our beginnings, to change the way we think of gold, not as a commodity, not as a shiny metal with which to adorn ourselves or hang all over our bodies, but as a currency. The Financial Times of London remembered in January of 2008,”…there was a time when gold was money.”

Don’t forget that it was J.P. Morgan who once testified before Congress: “Gold is money and nothing else.”

We don’t need a new global currency. GOLD ALREADY IS THE GLOBAL CURRENCY.

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.

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July: Buy or Sell?
by Northwest Territorial Mint Staff

One of the common beliefs in precious metals investing has been that summer is the time for prices to decline, only to rise again in the fall.

That was certainly the case last summer. The June average for gold last year was $947.94. Its July average was $936.67, a 1.19% drop.

Silver tumbled even more, by 8.53%, from a June 2009 average of $14.68 to its July average of $13.43.

It looked like the trend for the second half of the year – or at least the third quarter – would be one of declining values.

But, had you bought as the prices dropped from June to July, you would most likely have been pleased with your investment at the end of the year. The average gold price for December 2009 was $1,131.07 – not surprising given that gold spent much of the fall setting and surpassing all-time record highs. That was a 19 % gain. Silver was 20% higher for December than it was for June, platinum 18% -- and palladium a whopping 51% higher for December 2009 than June.

For gold and silver, that’s been the case in three of the past four years, which have been the hottest in the precious metals bull market. Only in 2008 was the December average lower than the June average. The final quarter of 2008 was filled with economic disaster and disquietude. Within a span of 19 days, Fannie Mae and Freddie Mac were taken over by the government, Lehman Brothers declared bankruptcy and disappeared, Merrill Lynch was peddled to Bank of America, AIG was given $85 billion by the federal government for being too big to fail, and Washington Mutual became the largest bank failure in history. Simultaneously, the price of commodities dropped as well, from oil and copper to gold and silver. Analysts have attributed this remarkable occurrence to hedge funds, which found themselves in need of selling their long positions in gold, especially, and pulling themselves out of short positions in the dollar – thereby creating a dollar rally.

So, as the summer progresses, let the reason that you invested in precious metals as part of your portfolio guide the purchase-and-sale decisions you must make. Are you preparing for difficult days ahead? Do you see the dollar to be stronger or weaker? Are your other assets likely to rebound? If so, you would anticipate second-half strength in precious metals, and an opportunity to leverage any dollars invested.

Average Price Change June, July, December 2006-2009

Source: Northwest Territorial Mint closing spot prices.

Average Prices June, July, December 2006-2009

Source: Northwest Territorial Mint closing spot prices.

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Can You Live on Gold and Silver?
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.”

What would gold and silver look like as your money?
Last month I showed, based upon production, that the purchasing power of silver and gold today is very similar to what it was 1903. Silver has 99% of its 1903 purchasing power, while gold has 88%.

I presented a couple of indices that will enable our examination this month to take the variable dollar out of the equation, and compare 2010 to 1903 based on purchasing power of the metals themselves. We can also correct the figures for the small difference between 1903 and 2010 silver and gold purchasing power.

Translating 1903 Income and Expense into Silver and Gold Money

We can calculate the cost of 1903 living in silver and gold by converting 1903 prices in dollars to silver and gold at the rate at the time.

My basis is the Department of Commerce’s Cost of Living and Retail Prices of Food 1903, which sampled 24,500 families living in industrial centers of 33 states in the US. Information on the cost of living, wages, status of the family and more was collected and reported. This work is the basis of a reasonable estimate of what one may expect it to cost to live in terms of silver and gold.

The average family annual income was $749.50. Renters were 81.08% of the population, while 18.97% owned their home (56.02% unencumbered, 43.98% encumbered). The average rent was $127.18 (4.55 persons, 4.98 rooms) per annum. For home purchasers, average principal was $109.54 and interest $49.51 per annum. For other costs, see the Table below.

You can correct to 2010 values using the relationship I explained last month. The average price of silver in 1903 was $0.54 per Troy oz. Gold was $18.95 per Troy oz. The gold/silver ratio was 35.1. The implied corrected gold/silver ratio (corrected for 2010 purchasing power) is 35.1*.88/.99 = 31:1, or 1 Troy oz. silver = about 1 gram gold; though the actual 2010 gold/silver ratio is more like 65:1. If both silver and gold become monetary again, one would expect the gold/silver ratio to adjust, though there is no guarantee it would revert back exactly to what it was in 1903.

Using these data we can create the Table below showing monthly income and expenditure in silver and gold for the average 4.88-person family. The Table also shows corrected figures taking into account the 2010 purchasing power of silver and gold (but not the actual gold/silver ratio for 2010).

Average Family (~5 members) Income and Expenditures, Silver and Gold, 1903 Basis (plus purchasing power 2010 corrected)

* Choose "rent" or "principal and interest" depending on the situation. Obviously if you purchase a home, you would need to make a little more than the average income, while if you rent, you could make a little less.

** Fuel and electricity may not be realistic today; our lifestyle is much different than in 1903. Data from http://www.visualeconomics.com/how-the-average-us-consumer-spends-their-paycheck/ indicate that the average American family spends $2,384 (125.5 Troy oz. of silver, or 61.8 grams of gold) on gasoline and $3,477 (183 Troy oz. of silver or 90.1 grams of gold) on public utilities including electricity.

*** Do not expect all the expenses to add to the average expense. The data are not normalized, and each average for each category stands on its own. In this study no attempt was made to normalize the data for each category to the average family. The average family does not purchase the average of all the categories. If they did, then the expenses would be a little different than the reported average expense, as follows: $734.05 renter’s average expense, $765.92 homeowner’s average expense. The average expenditure was reported by the families independently of the average expenditure of each category.

Conclusions

A typical family requires around 113 grams of gold or 113 Troy oz. silver per month to live (1903 basis). This is based on actual purchasing power considerations for silver and gold. In today's dollar with gold at approximately $1,200/Troy oz. ($38.58/gram) and silver at $19/Troy oz., this is equivalent to $4,360 in gold terms, or $2,147 in silver terms. The costs could increase by up to an additional 25 Troy oz. of silver (or 25 grams of gold) per month, based on current energy expenses as explained in the Table footnotes.

The discrepancy in gold vs. silver basis is because the 65:1 gold/silver ratio of today is twice what the 31:1 of 1903. For both to serve the same role in daily commerce, either gold needs to decrease to $590/Troy oz., or silver needs to increase to $39/Troy oz. or both need to move together (e.g., gold to $1,000, silver to $32.26) to meet the 1903 ratio. If silver becomes monetary again (along with gold) the added monetary demand in addition to industrial demand should lead to a silver price increase.

If you believe that silver and gold will become monetary again, holding some mixture of the two would probably be the safest strategy. However, while silver could revert to a more traditional ratio with gold and increase in value, gold still has the unmatched benefit of being an easy-to-move way of concentrating your wealth – try running from danger with 100 lbs. of silver.

From the analysis, silver appears to be the most cost-effective purchase if you presume that the relationship between it and gold will move towards the 1903 mean. With the gold/silver ratio currently so high, and the purchasing power of monetized gold and silver indicating the need for a lower gold/silver ratio, silver potentially gets you twice as much bang for the current buck. Of course this analysis is approximate, and many factors may force the ratio to stay the same or even get larger.

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

World Gold Production Update

The hierarchy of global gold producers continues to change, led by the decline in South Africa’s production and the continued rise in China’s gold output. South Africa lost its No. 1 ranking in 2007. For the third straight year, China is the world’s largest producer of gold.

In 2009 there were 1,505 tons of gold produced by the top eight countries. Rankings are as follows:

• China produced 300 tons, an increase of 62% since 2001.

• Australia is the second largest gold producer with 220 tons.

• South Africa follows with about 210 tons, only half of its production in 2001.

• The United States had almost identical output of South Africa, 210 tons.

Filling out the eight major producers: Russia produced 185 tons, Peru 180 tons, Indonesia 100 tons, and Canada 100. Canada’s gold production has fallen 30% since 2001, despite listing one-half of the mines in the world.

Total world gold production is 9.6% below its peak of 2001.

Source: USGS.

Starr’s Golden Drum on Display at New York’s Met

A gold-plated snare drum presented to Ringo Starr of the Beatles will be on display from July 7 through December at New York City’s Metropolitan Museum of Art. The drum was a gift from the Ludwig Drum Company to Starr for popularizing its drums during the musical act’s most popular days.

Vietnam’s Gold Exports Rise

Vietnam exported an estimated 36 metric tons of gold in the first half of 2010, according to its General Statistics Office. By contrast, only seven to eight metric tons of gold had been imported, according to Vietnam Gold Traders' Association deputy chair Huynh Trung Khanh, as quoted in a story disseminated by Adfero Limited and available through the World Gold Council. At that rate, Vietnam’s exports would make it the twelfth leading gold producer. At the same time demand for gold is growing in Vietnam said Do Xuan Quynh, manager at Bao Tin Minh Chau Jewelry Company, in a June 16 Financial Times article. Bao Tin Minh Chau recently became the fourth company in Vietnam authorized to produce gold bars by the State Bank of Vietnam.

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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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