Market Summary —
September 2010

Silver reached a 30-year high on September 30.  Silver opened September at $19.43 and closed near its high at $21.87.  Silver’s climb was steady and continuous throughout the month from its low of $19.27.

On its way to an all-time high on September 29, Gold, too, advanced rapidly throughout the month, opening at $1250.53 and closing at $1310.44.  The high was $1317.15.

Platinum started a dramatic upswing during the second week, closing near its high of $1673.50, at $1670/oz.  The low was $1529.50.

Palladium hit a high mid-month, then corrected and subsequently rose to close about $40 higher at $1670/oz.   Palladium’s month-end high was $1673.

As this is written in the second week of October, it is necessary to make a notation to the heady climb of silver and gold prices.  Since July silver has risen by 33%, and the price of gold has gone up 10% in just the last 6 weeks.  They seem to reach new highs with each passing day.  In this context, September’s summary, yet only two weeks old, continues this upward thrust.

September gold/silver ratio—the quantity of silver (in Troy ounces) that one ounce of gold will purchase—finished at 59.92 (versus 64.3 at the end of August and 65.6 at the end of July).  This continued lowering of the ratio — which touched 70 in February of this year — reflects silver’s increasing value relative to gold.

September Spot Price Summary (U.S. Dollars)
	Silver	Gold	Palladium	Platinum
High	$22.11	$1317.15	$581.00	$1673.50
Low	$19.27	$1238.94	$506.50	$1529.50
Open	$19.43	$1250.53	$509.00	$1530.50
Close	$21.87	$1310.44	$573.50	$1670.00

CONTENTS

	Market Summary - September 2010
	Ross Hansen: When Investment Becomes Obsession
	Experts Believe Gold Price Rally To Continue
	Riding The Silver Rocket
	Gold And The International Currency "War"
	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 September, 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 September 2010.

When Investment Becomes Obsession

by Ross Hansen

An older couple told me in my office recently that they were going to spend cash they’d saved for a serious operation and purchase gold instead. 

Sometimes it seems that for our entire lives we have been told to ‘save for the future,’ to put something away ‘for a rainy day,’ to hold tight because ‘you never know what will happen.’  Some have carried this to an extreme.  Have we not all heard stories of the widow, starving in her unheated apartment, only to find that upon her death police discovered millions of dollars stuffed in a mattress?  Or, how about the eccentric old codger living in poverty, who leaves a huge fortune to his houseful of scrawny cats.  These folks have lost perspective—they have been successful graduates of “The Hoarders’ School of Investing.”

As I write this, silver and gold prices are setting records. Today I was reminded of the passage from Ecclesiastes—to every thing there is a season.

In my 30 years of buying and selling gold and silver, I have found that there is a time to buy, a time to sell, a time to accumulate, a time to divest.

Which brings me back to the couple in my office….

Gold is insurance to protect wealth.  Gold is a tool to enhance quality of life.  He who dies with the most gold does not win, if he exchanged ‘quality of life’ in order to get it. Over 40 years ago, Alan Greenspan, before becoming Chairman of the Federal Reserve Board, spoke the truth when he said that “there is no safe store of value” without gold, that it is a tool to protect wealth from erosion by government-caused inflation.  Today, as one looks at the debasement of the dollar relative to its ability to purchase gold, it is easy to progress from a balanced perspective of the true purpose of gold to one of a more extreme nature, even to what I call “the Bunker Mentality,” where we find somebody living in fear, sitting on his hoard of gold with a loaded shotgun, waiting for some unnamed, imaginary jack-booted government thug or hordes of desperate people who are coming to take his gold away.

Gold is an enhancement of life.  Its pursuit should not replace the quality of life.  Do not let gold become an obsession.

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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Experts Believe Gold Price Rally To Continue
by Northwest Territorial Mint Staff

As gold continues to reach new highs, Deutsche Bank AG, London, believes that “this rally has further to run,” and that “the drivers of this rally are fundamental rather than speculative.”   Deutsche Bank notes that the rally in gold prices has been underway since early in 2001, representing the most durable gold rally in history, and its  analysis indicates gold would need to surpass $1,455/oz. to be “considered extreme in real terms,” and would have to hit $2,000/oz. “to represent a bubble” (Global Market Research, 9.20.2010).

Meanwhile, amidst almost constant rumors of a possible gold bubble, analysts who believe the market is nowhere near a bubble area easy to find. Instead, they peg the culprit as the declining purchasing power of the dollar. In April of 2001 one US dollar could buy 125 mg of gold, while today it will buy only 24.3 mg. Paired with this is the fact that the money supply as measured by M3 was $6 trillion in 2001, while today it is approximately $14 trillion (see note below). If one were to graph those figures, each would be the reciprocal of the other.

NOTE:  Since 2006, M3 is no longer published or revealed to the public by The Fed.  However, there are still estimates produced by various private institutions.  M3 is the broadest money classification.  It includes, essentially, all of the money in all of its forms existing in the system.

“The US dollar is capitulating.”  Those were the words of David Frisby writing in MoneyWeek, the UK's best-selling financial magazine.  He explained that when evaluating currencies other than the dollar relative to gold, gold is still about 8% off its highs of June of this year relative to the euro, and it is also trading below its highs against the pound and the yen.  However, when considering the US dollar, it is a different story. “These new highs in gold and silver are as much a function of US dollar weakness as anything else,” Frisby said. When measured against a basket of other major currencies, the dollar had “fallen from 83 on the index…to 77.75” in only six trading days. “When will gold’s latest surge end? When the US dollar finds support,” he concluded.

Moses Kim suggests that his analysis of gold cycles indicates that “there is likely to be a push higher into the end of the year.  $1600 is a very reasonable target that doesn’t necessarily indicate there is some kind of mania in gold.” The fact that central banks are now net buyers of gold suggests to him that a “paradigm shift” is developing that changes the way gold is looked at.  “Central banks don’t buy tons of physical gold to flip it months later,” he says.  He sees this shift as a force that will send gold to new heights.  He observes that the naysayers have been publicly fighting the gold bull market for years, and “while the circus concerning a non-existent gold bubble goes on, I can assure you that the smart money is buying” (Comments, 10.4.2010).

The historical analysis of why the Central banks being net buyers of gold would have such an effect is addressed by a recent article in Money. Greg Peel points out that this situation is unique, not having existed since 1988. Between then and now, and prior to the euro introduction, the Washington Agreement on Gold—commonly called the Washington Agreement—was  concluded to prevent nations from selling huge amounts of gold which would drive down the value of the common currency.  Peel explains: “That limit was a collective 400 metric tons of gold sales per year for five years.  In 2004 the Agreement was rolled for another five years with a limit of 500 metric tons, and it was rolled again in 2009 with the 400 metric ton limit reimposed.”

However, by 2009 the picture had changed:  Eurozone countries emerged in financial crises.  “The result,” he says, “is very little gold was sold in 2009…and with this gold year almost at an end…global central banks will have net bought around 15 metric tons.”  He concludes:

Now is not a good time to throw away the only asset that might have true value.  So it is of little surprise that the world’s central banks have now swung from being net sellers to net buyers. Which is clearly another reason why gold is currently at an all-time high.” (Central Banks Net Gold Buyers, Greg Peel, Money 9.16)

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Riding The Silver Rocket
by Northwest Territorial Mint Staff

Silver analysts are as bullish as those looking at gold. Only a few short weeks ago that analysts were wondering when silver was going to break $20 an ounce, Many believe that the current upward price movement was long overdue, and driven by investors who believe silver is massively undervalued.

Adding his opinion that the silver bull market would continue, Lawrence Williams, London commodities author, noted the possibility that a slow industrial recovery to damaged markets could jeopardize silver’s continued rise, but that nonetheless, silver would probably be buoyed upward by gold.  His considered conclusion:  “this bull market in precious metals…could last for perhaps 20 years, which means it may have another 10 years to go yet before the bubble bursts” (Mineweb, 10.6).

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Gold And The International Currency "War"
by Northwest Territorial Mint Staff

We are in the midst of an international currency “war,” and the combatants are some of the world’s biggest economies.  So submits Chris Hunter in a special Investor Edition of International Living Investor (10.7.2010).

Countries that have devalued their own currencies downward in order to protect their export industries include China, Japan, Switzerland, Brazil, Mexico, Peru, Columbia, South Korea, Taiwan, South Africa, Russia, and Poland.  Not to forget that one of the most aggressive players in this currency “war” is the Federal Reserve of the United States of America.  The lower the value of a currency relative to another, the lower the cost of exports will be to that country. Mr. Hunter notes that The Fed under Ben Bernanke has been successful at pushing the dollar lower relative to other nations’ currencies.  “The dollar has lost over 12% since June,” he said.  A currency’s value is kept lower by manipulation of interest rates, or by “quantitative easing,” which is the euphemism for the printing of new paper money.

This concerted action by many nations has not gone unnoticed.  International Monetary Fund (IMF) Director Dominique Strauss-Kahn said during the first week in October that countries risk undermining the global economic recovery if they use their currencies to boost domestic growth (Reuters, 10.6). 

Looking at the dollar’s lower value, Mr. Hunter asks “Why should you care?”  The answers are simple:  if your savings are denominated in dollars, you just had the equivalent of a 12% tax handed to you;   if your earnings are dollar-denominated, you just had the equivalent of a 12% tax handed to you there, too. He concluded:

I know you’ve heard it before, but holding a significant portion of your savings in gold is the single best way to protect against a dying dollar.  Gold is honest money.  That means the world’s smart money is buying tons of the yellow metal right now in anticipation of a lower dollar down the line.

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Precious Metals Worldwide
News & Trends from Around the Globe

Silver’s Best Streak Since the 1970s
Silver’s value relative to gold continues to increase.  Even though gold has gained 21% this year, silver has done even better, gaining more than 30%, and reaching a 30-year high above $24 an ounce.  Although gold gets more headlines, the performance of silver has been more dramatic, having risen for seven straight quarters, its best streak since 1974.  Indicative of silver’s increasing strength versus gold, the gold/silver ratio at the end of July was 65.6, and at the end of September, 59.92.  In other words, one ounce of gold would buy 5.68 fewer Troy ounces of silver at September’s end than it would at July’s end.

Latest Use of Silver: Water Purification
Plain cotton cloth coated in silver nanowires and carbon nanotubes with a 20-volt electrical field has been shown to effectively kill bacteria, possibly leading to a low-cost water purification system that might save lives in the third world. The electrified silver kills bacteria, meaning the filter needn’t trap the micro-organisms. That lets water flow smoothly and effectively. The filter, developed at Stanford University by researchers Yi Cui and Sarah Heilshorn, killed 98 percent of Escherichia coli (E. Coli) bacteria within seconds. Though 100% effectiveness is the goal, it’s a promising possibility to effectively fight cholera, typhoid, and hepatitis. And the technique is inexpensive, too – according to Cui, the cotton they purchased came from Wal-mart.

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