Silver opened August at $18.06 and closed at its high of $19.44. Most of the month it remained in a trading range between $17.85 and $18.85.
Gold closed at $1250.80, very close to its high of $1251.82. From its low of $1183.79 near the open, it maintained a steady upward trend.
Platinum continued in the same trading range that it has been in since May, opening at $1578.00, hitting its low of $1495.50 during the last week of August, to close at $1530.50.
Palladium also stayed with the trading range established since May. It opened at $500.50 and closed at $508.00.
The August gold/silver ratio—the quantity of silver (in Troy ounces) required to obtain one ounce of gold—finished at 64.3 (versus 65.6 at the end of July, and 67.1 at the end of June. The narrowing of the spread indicates a higher silver value relative to gold.
| August Spot Price Summary (U.S. Dollars) | ||||
| Silver | Gold | Palladium | Platinum | |
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| High | $19.44 | $1251.82 | $519.00 | $1609.70 |
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| Low | $17.79 | $1176.27 | $461.75 | $1495.50 |
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| Open | $18.06 | $1183.79 | $500.50 | $1578.00 |
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| Close | $19.44 | $1250.80 | $508.00 | $1530.50 |
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New High for Gold, Two-Year Silver High
As Precious Metals Monthly went to press on September 15, 2010, gold had established a new all-time record, closing at $1,271.70 on the Comex in New York on September 14. Silver was also performing well, hitting its highest mark since March 17, 2008. Analysts attributed the spiking prices to further concern about the economy, especially as the dollar declined against a basket of currencies.
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CONTENTS
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Market Summary - August 2010 |
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Ross Hansen: There Might Be a Gold Trader Sitting Next to You! |
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Huge European Demand For Retail Physical Gold |
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Technical Trader Sees $29 Silver |
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Precious Metals Worldwide |
CORRECTION
Last month, our paragraph providing the credentials for the author of “Will Gold and the US Dollar Continue to Tango, or Will Splitsville Return?” was not included. For those interested in the article, Michael Trinkle has been interested in the stock market, investments, and spreading the word about currency trading for much of his life, and has most recently fulfilled this passion by working as a writer for ForexTraders.com, an educational/informative resource center for the currency exchange market.
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CHARTS
The following charts display the daily low and high spot price of each metal for the month of August, 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 August 2010.
There Might Be a Gold Trader Sitting Next to You!
by Ross Hansen
On a flight back from New York recently, the young banker seated next to me asked what I did for a living. When I told him I am the CEO of Northwest Territorial Mint, he replied: “I’m into gold, too. I trade in options and futures.” Immediately the fellow seated just in front of me turned around and said, “Me, too—I also trade in gold and silver options.” Not a day goes by without one of our customers telling me that he, too, has discovered the excitement of electronic trading. Even our delivery driver told me the other day that he had just gotten into the electronic gold options market!
Here is what has happened. Options and futures trading have evolved from the sophisticated and/or professional portfolio manager assisting a wealthy investor, to the average investor with a computer and a balance in his 401(k) who can become a futures or options trader. The most popular gold choice is in gold futures (COMEX), with an average daily volume of over 200,000 contracts, which equates to approximately 20 million ounces. Over 90% of these futures contracts are traded electronically.
Most of these on-line traders treat the volatility of the futures and options markets as though they were in a casino, and in the process gamble with the 401(k)s they are managing. If they lose on a trade—just spin the wheel on the next trade. However, sooner or later reality must set in. Since every trader (successful or unsuccessful) loses money at least 85% of the time, psychological buffers and trading skills must be perfected. “Knowing when, where, why and how much to trade distinguishes the professional, confident, successful trader from the 95% floundering novices, who will inevitably go broke” (Tom D’Angelo, webtrading.com, issue 29). Just like at the casino—the house always wins.
This phenomenon of paper trading has been increasing for several years.
Table I shows the 2005-2009 annual volume of gold futures and options. Although total volume for futures decreased slightly in 2009 from 2008…..
...Tables II and III show the dramatic upswing in both futures and options in 2010.
Is there a correlation between the “paper gold” trading volume bubble, and the actual spot price of physical gold? It is my belief that trading on futures and options volatility has significantly helped accelerate the price of gold. Recorded gold highs for the past several years are plotted on Table IV.
The recorded high in 2004 was $454.20 per troy ounce, and $1,212.50 in 2009, for an increase of 267% over the five-year period.
The ‘Casino Mentality’ is pervasive in the gold markets now. Buying ‘paper gold’ in futures and options is in vogue. The Dutch have taught us the best lesson about the dangers of such trading. Commit this word to memory: windhandel—meaning, literally, ‘trading in the wind’—that is, buying or selling in futures without actual possession of goods. Such trading resulted in the tulip mania of 1636-37 when one single tulip bulb ended up being sold for many thousands of dollars—the false market eventually collapsing to near nothing and leaving devastation everywhere (The Low Countries in Early Modern Times, Herbert Rowen).
Perhaps it will never happen, but we don’t need a tulip bulb bubble in the gold market. Don’t gamble with your investments. Resist the urge to paper trade in futures and options. Holding physical gold is the ultimate ‘safe haven.’
Tell that to the next gold trader who sits down next to you!
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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Huge European Demand For Retail Physical Gold
by Northwest Territorial Mint Staff
The World Gold Council (WGC) reported recently that during the last two years there has been an “extraordinary increase” in the retail demand for physical gold products in Europe. European demand in 2009 represented 40% of global demand in this segment, and carried over to this year. In the second quarter of 2010 Europe was still “the source of 35% of the world’s demand for small gold bars and coins,” the industry association reported. Two years previously demand had been only a “relatively insignificant” 7%.
Historically, Germany and Switzerland account for the lion’s share of the retail market (79% in 2009), primarily because gathered data represents the location of the transaction rather than the location of the investor—Switzerland and Germany are frequently visited destinations.
The World Gold Council attributed the strong European demand to several key factors: uncertainty over public debt; regional economic conditions; gold’s strong price performance; and to “an increasing awareness of gold’s role in portfolio management” and its relative ease of access.
The report concluded that the recent growth may be part of a sustained trend, since “historically gold has a capacity to provide investors with both confidence and a sure and steady means of enhancing the consistency of their returns.”
(Source: World Gold Council, Gold Demand Trends, August 2010)
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Technical Trader Sees $29 Silver
by David Bannister
Since December of 2009, silver has been in a consolidating position, with highs hitting around $19.00, as shown in the accompanying Elliott Wave technical chart. (The Elliott Wave Theory is an analysis technique published by Ralph Elliott, which posits that markets follow a pattern of five waves up and three waves down—or sometimes, five up and three down in a bull market, and three up and five down in a bear market).
Click on chart for larger image.
After careful analysis of this chart, David A. Bannister, silver strategist, said on the last day of August that there are three developments forming that will push silver to new highs. These factors are the recent increases in silver stock prices, the continuing worldwide uncertainty concerning fiat currency and debt problems, plus the fact that the average person just cannot go out and afford to buy gold. “You will see a strong populace movement into buying silver and silver coins,” Bannister said. “A move over $19.50 could start a multi-month run targeting $26-$29 per ounce for starters before a broad pullback,” he continued. “Silver needs to bust through $19.50 per ounce to confirm, but I suspect we will see this fairly soon.”(David Bannister, Market Trend Forecast, August 31, 2010)
David Morgan, Editor of The Morgan Report, is even more bullish on silver. He cites an approaching monetary crisis that will precipitate hyperinflation in the United States. Combined with other factors, he answers his own question: “How high can silver go? Seven to eight times higher.”
...
(Source: David Bannister, Market Trend Forecast, 31 August, 2010; Silver-Investor.com)
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Precious Metals Worldwide
News & Trends from Around the Globe
Australian Gold Production Up 11 Percent
Australian gold production for the 12 months ended June 30, 2010 rose 11 percent over production for the previous 12 months. Australia is the world’s second-largest producer of gold, after China. Production rose to 245 metric tons for the 12 months measured from 222 metric tons in the equivalent year-ago period.
Second Quarter 2010 gold output rose by 11 percent the first quarter of 2010, and was up 20 percent versus the second quarter of 2009 (Reuters, Sydney, 29 August, 2010).
During the same 12-month time period, world gold mine production increased by 5 percent. The bulk of that was attributed to Australian production, which was augmented by a major new mine completing its first year of production (World Gold Council, August, 2010).
Gold Continues As Safe Haven
A Wall Street Journal review of Europe’s ‘stress tests’ administered to 91 of Europe’s largest banks found some banks “understated some lenders’ holdings of potentially risky government debt.” As part of the tests, Europe’s largest banks were required to reveal how much government debt from European countries they held on their balance sheets (The Wall Street Journal, Business, 9/ 7, 2010).
Safe-haven buying support rose due to continued worry about the European Union’s financial system. This information comes at the same time officials meet in Basel, Switzerland, “to hash out new global capital requirements for the industry in face of the financial crisis.” The weak global economy is “buoying the price (of gold) to historic levels due to (its) safe-haven appeal.” December gold is testing the $1260 level (FXStreet, 7 September 2010).
Total Gold Tonnage Ever Mined
How much gold has been mined during the known history of the world? Up to the end of 2009 the answer is: approximately 165,000 metric tons. Sixty-five percent of that amount—or about 107,250 metric tons—has been mined since 1950 (World Gold Council, FAQ37). Official world government gold holdings, updated as of June, 2010, is 30,462.8 metric tons.
This figure, while as accurate as is possible, does not list all gold holders: countries which have not reported their gold holdings to the International Monetary Fund (IMF) in the last six months are not included, while other countries are known to hold gold but do not report their holdings publicly (International Monetary Fund, International Financial Statistics (IFS), updated June 2010 edition).
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Mike Lane PoliticalCartoons.com
Contents © 2010 Northwest Territorial Mint.
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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