Market Summary

December 2010

So far, precious metals have continued to be strong for the first half of December. While gold went over the $1400.oo per ounce mark for the second consecutive month, silver, platinum, and palladium traded near their opening levels for the month.

Gold traded in the $1390/oz to $1400.00/oz for the first two weeks of the month, reaching a peak on December 6th of $1422.40/oz. The rising price of gold continues to reflect the growing interest in precious metals during these uncertain economic times, as it is up over $300/oz from the same time a year ago.

Palladium continued its impressive run trading at over $700.00/oz every day of the month thus far compared to only three days over $700.00/oz for the entire month of November. Palladium traded as low as $731.50/oz and as high as $766.00/oz. Palladium is currently trading at a nine-year high.

Platinum has been relatively steady this month, opening at $1,698.20/oz and traded at $1,697.00/oz as of December 16th. Platinum reached a high of $1,732.50/oz but has been around the $1,700.00/oz range for most of the month.

Silver’s increasing value relative to gold continued during the first half of December.  The month started with a gold/silver Ratio of 48.7, and fell to 47.3 as of December 16th. Silver has finished over $28.00/oz every day this month, and hit a 30-year high of $30.09/oz on December 6th.

December 1 to December 16 2010 Spot Price Summary (U.S. Dollars)
	Silver	Gold	Palladium	Platinum
High	$30.09	$1422.40	$771.00	$1732.50
Low	$28.52	$1373.74	$737.25	$1685.50
Open	$28.56	$1391.55	$737.50	$1698.20
Close	$29.01	$1373.74	$745.75	$1698.50

Market Summary, November 2010

Silver continued its exciting push upward, opening at $25.00/oz. and closing November up $3.47 at $28.47.  A spike during the second week shot silver up to $29.30, feeding speculation that the metal would soon be trading over the $30.00 mark.  Silver’s low of $24.00 occurred right after the open. Silver spot prices blew past several 30-year highs during the month, culminating with a high on November 9. It retreated slightly (as did other precious metals) on European sovereign debt worries, but eventually finished the month on a strong note.

Gold’s price fluctuation profile was very similar to that of silver.  Testing the highs over $1400/oz., gold closed at $1394.19, having opened at $1364.75. Spot gold prices rose to an all-time high of $1,425.33 per ounce in response to the November 3 announcement by the Federal Reserve to inject an additional $600 billion in to the economy. Gold then pulled back from that high as the dollar gained strength versus the euro as a result of the sovereign debt crisis in Europe. Speculation of an interest rate hike in China caused gold to advance at a slower pace.

Palladium reached a high of $745.50 on November 9, continuing mostly in its month-long trading range.  It opened at $654.75, hit a low of $629.50, and closed at a respectful $709.00. Palladium has been moving in tandem with other precious metals. In addition, surging auto sales from China (which now accounts for 22 percent of the global auto market), coupled with supply questions arising out of Russia have been behind the increase in palladium prices.

After climbing to a high of $1811.50, platinum fell back to narrow trading range, closing at $1677.00.  It opened November at $1716; the low was $1631.50. Platinum traded at a high of $1811.50 on November 9, gaining in value along with other precious metals in response to the Fed’s announcement.

November ended with the Silver/Gold ratio under 50, at 48.9.  The ratio indicates the number of ounces of silver required to buy one ounce of gold.  The decreasing ratio over the past months indicates silver’s increasing value relative to gold.

Nov Spot Price Summary (U.S. Dollars)
	Silver	Gold	Palladium	Platinum
High	$29.30	$1425.33	$745.50	$1811.50
Low	$24.00	$1328.53	$629.50	$1631.50
Open	$25.00	$1364.75	$654.75	$1716.00
Close	$28.47	$1394.19	$709.00	$1677.00

CONTENTS

	Market Summary - November/December 2010
	Ross Hansen: Unique Times
	Silver Volume UP, UP, and UP—Gold Volume Continues Strong Too
	Gold, Silver, Platinum and Palladium are “Honest Money!”
	The Risk of Owning Gold
	Eternal Gold Redefines Itself Today

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CHARTS

The following charts display the daily low and high spot price of each metal for the month of November, 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 November 2010.

Unique Times

by Ross Hansen

The turbulence of recent events has led many people to say that we’re living in unique times. They cite unstable financial markets, high unemployment, threats of terrorism, and an out-of-control Congress spending wildly. All of these issues are causing stress and fear, inevitably leading people to the conclusion that these problems are unique, unparalleled, and perhaps impossible to handle.

So let’s ask the question: Are these times and their problems unique? Of course they are. Why? Because this time in history will never occur again. And these problems are unique because they’re happening to us and they’re happening now.

But let’s take a historical perspective. As Edmund Burke said, “Those who don't know history are destined to repeat it.”  (Then, more than a hundred years later, George Santayana essentially repeated it.) So let’s study some history to see what we can learn.

Throughout the ages, every generation has faced its trials and tribulations. Whether a thousand years ago, a hundred years ago, or a decade ago, mankind has had to contend with plague, invasion, shifting political borders, war, financial upheaval, and yes, even climate change. As Plato wrote, “The only constant is change.” Each change is one-of-a-kind, but yet, it’s similar. When the Carthaginian general Hannibal marched his elephants across the Alps to attack Rome in 218 BC, his beasts were indeed new and frightening to the Romans – his ancient version of “shock and awe.” And yet, Hannibal was neither the first nor the last military man to use a never-before-seen weapon or tactic to make war on his enemies. In Desert Storm, imagine the surprise of the Iraqis when vital communications were knocked out by stealth fighters – the US Air Force’s equivalent of Hannibal’s elephants.

So, how does this relate to bullion investing?

When the only constant is change, you must change your investment strategy to meet each day’s new reality. When the facts change, you need to change.

And that strategy works well for 80% of your portfolio. For the 20% of your portfolio that we recommend you keep in hard assets, these facts haven’t changed. Because, even in this ever-changing world, there has always been one constant: Precious metals. Gold and silver as a medium of exchange.

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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Silver Volume UP, UP, and UP—Gold Volume Continues Strong Too

by Northwest Territorial Mint Staff

Not only is the price of silver continuing its meteoric rise, but so is its trading volume, as a look at some of this year’s recent New York COMEX numbers can attest.  COMEX silver volume figures from November, 2009, to those of November, 2010, have increased by 96.9%.  Silver volume in November, 2009, was 1,159,284 ounces, increasing to 2,282,155 for November, 2010.  Accentuating the silver metal’s recent push upward, the one-month volume increase from October, 2010, to November, 2010 was a rather astounding 73.7% (Chicago Board of Trade, CMEG Exchange Volume Report, 11.2010).

Philip Klapwijk, Executive Chairman of Gold Fields Mineral Services (GFMS), recently said that he expects a continued wave of domestic demand for silver.  GFMS, which is headquartered in London, bills itself as “the world's foremost precious metals consultancy, specializing in research into the global gold, silver, platinum and palladium markets.”  Klapwijk states:

“If we look at calendar 2010 there has been a significant lift in investment in silver…and it’s probable that next year we will see a higher figure and a larger scale of investment from both institutional and private investment sources.”

While noting that the production of silver has grown dramatically during the last ten years, he said that the “extra silver is being absorbed without a problem,” and that a substantial decrease in silver prices because of changing circumstances is “highly improbable…next year.”  At the recent Silver Institute dinner in New York, he had predicted that silver could trade higher than $30/oz next year (Mineweb, 11.23.2010).

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Gold, Silver, Platinum and Palladium are “Honest Money!”
by David H. Smith

For 6,000 years, across historic time-frames, geographic locales and cultures, gold, silver, and to a lesser extent, copper, have been considered “money”.  Today the United States, as well as many European nations, have run up debts which may never be repaid – at least in money which has the  equivalent of today’s purchasing power, as opposed to some “nominal” inflated value in the future that will buy much less.

Ironically, all levels of society – individuals, local, state, and regional governing bodies, as well as the Federal government itself – have run up debts which only, through a lot of frugality, “sharing of pain” and even some luck, have  much chance of ever being paid back.  

In the current environment of uncertainty, individuals, investment groups and even central banks are once again turning to the “metal of kings” to help keep their financial vessels afloat. Not just gold, but silver, and to some extent, platinum and palladium are stepping into this role as well.

Unlike paper currency, these precious metals cannot be produced in unlimited quantities. Thus over time, they tend to hold their relationship to other media of exchange. They are quite simply, recognized around the world, as storehouses of value.

We’ve all heard about the German hyperinflation of the 1920’s which took the German Mark from 4:1 in relation to the U.S. Dollar, to literally infinity within just a few years, and destroyed the savings and ethics of a nation in the process. But have there been more recent examples of currency devaluations from which we can draw lessons?

Consider the following:

• In 1980, the Zimbabwean dollar (Z$) was actually worth more than a US dollar, coming in at $1.47 U.S. By 2006, the Z$ was worth just one millionth of one British Pound!  Over the next few years, the new currency, exchanged at a rate of 1,000 old bills for one new one, proceeded to decline, due to full-time printing press action, to 100 trillion Zimbabwean dollars for one USD.  Many people have actually paid several dollars apiece for these worthless bits of paper on eBay, and hold them today as collectors’ items!

• December 2009, North Korea: currency devalued 99% overnight

• January 2010, Venezuela: currency devalued 50% overnight.

• 2009 - 2010:  Vietnam devalued its currency, the dong, 3 times.

Would having ownership of even a few ounces of gold and silver, held as “insurance” have made a difference to people under these circumstances? In this situation, making a profit would have been a secondary consideration to simply being able to put food on the table and keep a roof over one’s head. 

Given the speed at which US dollars and Eurodollars are being printed and circulated these days, a person has to wonder just what their fate, at some point in the future is going to be.  It would not take a hyperinflationary scenario or even a formal devaluation like the ones noted above, to decrease the purchasing power of hapless paper money holders in a meaningful way.

It brings to mind the comment made in the once-popular Dirty Harry movies by the irrepressible Inspector “Dirty” Harry Callahan, when he spoke to criminals and superiors alike. He’d look them in the eye with gritty determination and say “Do you feel lucky today?”

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The Risk of Owning Gold
by Northwest Territorial Mint Staff

The World Gold Council recently published an article specifically analyzing gold and its relationship to the three main types of risk. The Investment Research article identifies these areas as credit risk, liquidity risk and market risk.

Gold is unique in that its risk is non-existent or low in two of these three categories.  Gold does not carry a credit risk - the risk that a debtor will not repay.  “Gold is no one’s liability” and its value “cannot be affected by the economic policies of a country”, as can happen with a currency, they conclude.

Liquidity risk also favors gold. “Liquidity risk is very low,” they point out, citing the 24-hour trading of gold around the world, and the wide range of buyers and investment channels available.  The gold market is both deep and liquid, “as demonstrated by the fact that gold can be traded at narrower spreads and more rapidly than many competing diversifiers or mainstream investments.”

“Gold is of course subject to market risk,” the report says, an observation easily verified by a look into the past.  During a historically recent time-frame, from the early 1980s to around 2000, gold experienced a series of sharp and sustained declines. This price weakness was magnified by central bank selling policies prior to the Central Bank Gold Agreement in 1999. 

Another negative was the large amount of gold hedging (where gold production is “forward sold” for a specific price) by some of the world’s largest mining companies. These factors, coupled with a tail-off in investor demand served to keep the price of gold under pressure for a number of years. Interestingly, in 2009, Central bank bullion buying turned positive for the first year since the end of the great gold bull market in 1980, a trend which at present is continuing.

However, even though gold is exposed to market risk, that effect is minimized by the fact that gold is not volatile, is virtually indestructible, and “nearly all of the gold which has ever been mined still exists.”  The conclusion of the article is that gold has excellent investment value as a global currency and commodity.  (World Gold Council)

Regardless of the risk factors associated with gold, every transaction has a common component:  the investor.  “The gold price is not about gold, but what the investor believes it to be and the value he assigns to it.  More than that, it is about the gold investor and what drives him.”

These are the ruminations of Julian Phillips, a long-time gold and silver analyst.  He speaks to an interesting dilemma: Surely gold makes pretty jewelry; surely it is a great conductor; surely it does not tarnish. Even when it is purchased, it is usually locked away and never even seen by the purchaser.  So, he asks, “If gold is not used or admired, why was so much of it bought so as to make the gold price multiply more than four times over (the first decade of) this century?”

So much was purchased, he suggests, because of what investors expect of gold, especially in a crisis when nothing else can be relied upon or trusted.  Some investors buy gold looking to profit from the purchase; some purchase gold from self-generated profits and merely expect it to hold its value. The last major investor category is the government, which intends for gold to carry it through the tough times, even when its own currency won’t do the job.

Regardless, for several thousand years, gold has been and continues to be considered as money when nothing else will do.  Phillips points out the primary beliefs and expectations that drive investors to purchase gold: “It retains value (even) when enemies exchange it. It is an international asset…there are no unfulfilled obligations attached to it…it is free of government…nothing else fits that bill, nor will it.”

In this light, Julian’s conclusion is that “the pressure we see ahead for the world will ensure that more and more people will come to consider gold as real money.” (Julian Phillips, Gold Forecaster, 11.27.2010)

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Eternal Gold Redefines Itself Today
by Northwest Territorial Mint Staff

Forgotten in the drama of gold’s present popularity as a “fly-to” vehicle for investors who fear the vagaries of fiat money in today’s ‘challenged’ debt and monetary climate, is the long-standing role that gold has played in the field of medicine.

The World Gold Council (WGC) in a recent technology report notes that the earliest recorded medical use of gold was by the Chinese in 2500 BC. Ayurevidic use of the yellow metal on the Indian subcontinent, for example, dates back thousands of years. Numerous ancient cultures have used gold for the treatment of small pox, skin ulcers and measles.

Not to be outdone, modern medicine is investigating gold’s potential benefit for the treatment of rheumatoid arthritis, cancer and sensitive implants.  “Gold offers a high degree of resistance to bacteria, making it the material of choice for implants at risk of infection,” the WGC report notes.  It is “considered a highly valuable metal in microsurgery of the ear.”  

Additionally, tiny portions of gold about the size of a grain of rice are now being inserted into the prostate, along with the use of ultrasound, in the treatment of prostate cancer.

Compounding the effect of the potential uses of gold for biomedical applications, the report predicts that continued development of the consumer electronics market will lead to “substantial growth in semiconductor chip sales over the next five years,” which will likely create more gold demand. The report maintains that “Over the longer term, we expect innovation from new technologies to develop into significant new markets” for gold. 

“Recent years have seen an explosion of interest in the use of gold for a host of science and technology applications, mainly as a result of the emergence of nanotechnology.”  For example, WGC notes that gold offers functional benefits for such burgeoning industries as those which use touch-sensitive screens.  (World Gold Council, gold.org/, 2010)

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