Market Summary —
April 2011

Volatility Rules
The month of April produced higher returns for all four precious metals, with silver finishing with a double-digit gain, while gold, platinum and palladium all achieved single digit increases.

Both gold and silver continued to benefit from concern over inflation, a possible worsening of Greece’s economic woes, and continuing worry over US debt levels.

Gold opened the month of April at $1,436.59 per ounce, finishing at $1,564.88 per ounce, up 8.9%. For the month, Gold reached a high of $1,570.43 per ounce, and a low of $1,415.82 per ounce.

Silver prices continued to soar in April, opening at $37.78 per ounce, and closing at $48.04 per ounce, a gain of 27%. Silver hit yet another 31-year high of $49.90 per ounce, and a low of $37.11 per ounce.  For the year, silver prices have increased by 55.5% -- and that was before the blast that followed in early May.

Platinum began the month of April trading at $1,777.50 per ounce. It finished the month up 5.8% at $1,880.50 per ounce. Platinum reached a high of $1,883.50 in the month of April, and at a low of $1,759.00 per ounce.

Palladium began the month of April trading at $769.00 per ounce. It closed the month at $796.00 per ounce, a 3.5% increase. Palladium reached a high of $807.25 per ounce for the month of April, and hit a low of $729.00 per ounce.

As Precious Metals Monthly went to press on May 13, 2011, gold was down 4.3% from its April high, closing at $1,502.35 on the Comex in New York on May 12. Silver’s meteoric rise had been halted by a series of five margin requirement increases by the CME that began in late April and continued through the second week of May. It retreated from a 31-year record of $49.90 to a $35.50 close on May 12.

The April gold/silver ratio — the quantity of silver (in Troy ounces) that one ounce of gold will purchase — continued to decline, finishing at 32.57 for the month of April (versus 38.03 at the end of March, 41.56 at the end of February and 47.39 at the end of January). The plummeting gold/silver ratio continues to illustrate the increasing value of silver relative to gold. Just over two years ago, the gold/silver ratio was above 83, with gold selling at $804.60 and silver at $9.64.

April Spot Price Summary (U.S. Dollars)
	Silver	Gold	Palladium	Platinum
High	$49.90	$1570.43	$807.25	$1883.50
Low	$37.11	$1415.82	$729.00	$1759.00
Open	$37.78	$1436.59	$769.00	$1777.50
Close	$48.04	$1564.88	$796.00	$1880.00

CONTENTS

	Market Summary — April 2011
	Ross Hansen: Setting the Record Straight on Silver
	The Importance of Diversification
	The Western Silver Saga
	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 April, 2011. 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 April 2011.

Setting the Record Straight on Silver

by Ross Hansen

Silver’s volatility has brought lot of new opportunists to the precious metals market. These new faces have jumped from one vogue investment to the next, and are now selling gold and silver with the same vigor as they’ve shown in the past when they pushed penny stocks, tech stocks, and mortgages.

Often, they spew a wide assortment of conspiracy theories and wacky, wildly exaggerated statements to get you to buy precious metals.

As a 30-year precious metals professional, I like my clients to be armed with facts. So permit me to debunk one of the main arguments these hucksters make – namely, that mine production is plummeting and we’re running out of silver.

Our friends at GFMS, the world’s premier precious metals consultancy, publish independent reports about silver and gold every year. They have allowed me to use the data below from the World Silver Survey 2011, which GFMS prepared for the Silver Institute. Examine and see mine production has been increasing for the past five years (as it has for many prior to that).

World Silver Supply & Demand (tons)

Copyright © 2011 GFMS/The Silver Institute.
Used with permission. Obtain the World Silver Survey at http://shop.gfms.co.uk/acatalog/Silver.html

Check with any of the other leading mining companies and you see the same story again and again. They are all providing increased supplies and have more new product coming online.

Silver Growth for Selected Silver Miners
2010 vs. 2009 (Moz.)

Source: Annual reports and press releases.

There are many reasons to own silver, such as the inflation of the currency due to quantitative easing; unsustainable government debt (grown from $5.6 trillion to $14.3 trillion in just ten years); and increasing industrial applications. But an allegedly dwindling silver supply is not.

While we’re discussing growth, I wanted to share our growth with you. Northwest Territorial Mint just completed the acquisition of Graco Awards of Tomball, TX, a prime contractor of military medals and service ribbons. These are the awards presented to the men and women of America’s military, including the Medal of Honor, the Silver Star, and the Purple Heart. Our latest acquisition has taken up lots of my time and has delayed the writing of this article. Thank you for your patience.

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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The Importance of Diversification
by Joe Bilsborough, Director at Northwest Territorial Mint

Investors frequently ask, “How much precious metal should I buy or sell?” or “What percentage of my investments should be in precious metals?”  Understanding the importance of diversification is crucial in answering these and similar questions. Diversification, although it does not guarantee against loss, is certainly a proven method of reducing investment risk and an important component of reaching long-term financial goals. 

One form of diversification that we will discuss briefly, and have illustrated on the Northwest Territorial Mint website is asset allocation. This is one of the most important decisions that investors make.  Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, cash, real estate, precious metals, etc. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk. The goal with diversification through asset allocation is to avoid putting all of your eggs in one basket -- and getting hurt if that basket’s value drops. Diversifying into several asset classes can help smooth out peaks and valleys in performance, taking unnecessary risks, and increasing the chance of being at the right place at the right time.

The goal is not to pick the next hot asset class but instead to choose the appropriate mix that will help you reach your goals. For an illustration of how different asset classes have performed over time, Northwest Territorial Mint has created a Periodic Table of Returns, showing returns since 1996 for real estate, large-capitalization stocks, small-capitalization stocks, international stocks, bonds, and U.S. Treasuries. At 12.83% over these 15 years, precious metals were a close second to real estate, but you’ll see that every asset class was a top two performer at least once over that period.

You can view the table for yourself at: http://bullion.nwtmint.com/precious-metals-investment.php.

...

Joe Bilsborough, AAMS, is Director of Northwest Territorial Mint’s Institutional Division and has worked in the Financial Services industry for more than 20 years as a Financial Advisor, Principal, and Head of Distribution.

Northwest Territorial Mint does not advise on any personal income tax requirements or issues. Material discussed in this article is meant to provide general information only and does not represent personal tax advice, either express or implied.

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The Western Silver Saga
by Northwest Territorial Mint Staff

As we trace the price of precious metals minute-to-minute, we sometimes forget that these metals are an essential part of history. Here we discuss silver’s central role in American politics in the late 19th and early 20th centuries.

For all its current luster, silver has had a very political, and occasionally troubled, past in the US.

The key date is 1873. With silver out of favor worldwide and prices dropping, the government passed a law effectively eliminating silver coinage. Officially known as the Coinage Act of 1873, you may have heard it referred to as the “Crime of 1873.” This law effectively did away with the country’s bimetallic standard and put it on an unofficial gold standard.

The Coinage Act resulted in a reduced money supply and higher interest rates. This hurt those who typically had debt, such as farmers who borrowed to survive until their next crop could be sold. The law was already highly unpopular with silver mine owners; the two groups joined together in what became known as the Free Silver Movement.
           
The nomenclature derived from previous coinage acts dating back to 1792, which permitted anyone to bring silver to the US Mint and receive a silver dollar for a specified amount of the metal without paying minting expenses.

New mines, most notably the Comstock Lode in Nevada, had increased supply, leading to lower silver prices. So mine owners turned to the government, wanting it to buy their mine output in order to increase demand and prices.

Passed by Congress over the veto of President Rutherford B. Hayes, the Bland-Allison Act of 1878 required the government to purchase two to four million troy ounces of silver per month from US mines at market rates to mint into silver dollars. Hayes and later presidents managed to weaken the Bland-Allison Act by purchasing only the minimum amount of silver.

Both collectors and silver investors know the result as Morgan Dollars (for its engraver, George Morgan), and millions were minted from 1878 to 1904 and again in1921. However, silver dollars were not very popular and large stocks of the coins remained in vaults, uncirculated.

Still not satisfied with the government’s silver orders, the mine owners lobbied harder, and the Sherman Silver Purchase Act passed in 1890. The Treasury had to buy 4.5 million ounces of silver per month (virtually the Western mines’ entire output) and issue notes redeemable in either gold or silver.

Most of these notes were redeemed in gold, depleting the Treasury’s gold reserves. The 1893-97 depression (“The Panic of 1893”) was thought by President Grover Cleveland to be a consequence and led Congress to repeal the Silver Purchase Act. Divided by the actions of their president, Free Silver Democrats brought the issue to the forefront during the 1896 election. Their candidate, William Jennings Bryan, gave an impassioned speech at the Democratic National Convention. In his “Cross of Gold” speech, Bryan argued for bimetallism and denounced the gold standard. Bryan won the nomination, but lost the election.

Despite multiple attempts to ensure that silver remained a monetary force, the Free Silver movement ultimately failed and the gold standard won out, as it had elsewhere in the world.

The government bought and minted great gobs of silver into coins once more with the passage of the Pittman Act of 1918. Written to enable the US to sell silver to Britain to aid World War I efforts, it again required the government to buy US-mined silver to strike new coins. The US Mint melted more than 272 million Morgan Dollars to sell to Britain, but was required to mint “Peace Dollars” from 1921 until 1928. (The 1934-35 mintages weren’t so required.)

Even the gold standard didn’t last, falling out of fashion with most of the world even before Franklin D. Roosevelt’s New Deal Congress passed the US Gold Reserve Act in 1934 ending the gold standard here.

Today the debate has renewed, with a return to a gold or bimetallic standard deriving new energy as US government debt piles up and the Fed monetizes it. Fears of US default and hyperinflation have brought not just investors, but ordinary Americans to again consider silver (and gold) as a way to preserve wealth. Only time will tell whether the circle completes.

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Precious Metals Worldwide
News & Trends from Around the Globe

CME Increases Margin Requirements
CME Clearing raised margin requirements for silver futures contracts on the COMEX exchange five times between April 26 and May 9, increasing the amount of cash needed to purchase these contracts by 84%. These actions were credited with causing selloffs by traders unable to meet the new requirements that led to a 27% drop in contract values during the first week of margin increases. This plunge in silver prices was reported to be the largest weekly plunge since 1975.

1099 Repeal Signed Into Law
The controversial Form 1099 tax-reporting requirement that was slipped into President Obama’s 2,400-page healthcare legislation has been repealed.
Enacted as part of the Patient Protection and Affordable Care Act, the Form 1099 tax reporting requirement would have forced all businesses, including precious metals dealers, to issue a Form 1099 for all business transactions of $600 or greater in total.

The law would have required precious metals dealers to collect personal data on any individual who sold as little as a single ounce of gold and report that information to the IRS. The amount of paperwork created by this legislation would have been crippling, with estimates that hundreds of millions -- if not billions -- of additional 1099 reports would have needed to be filed with the IRS each year.

As a result of the repeal, precious metals transactions will remain private.

University of Texas Takes
Physical Possession of Gold
The University of Texas Management Company, one of the largest college endowments in the country, has taken possession of $1 billion worth of gold bullion. This represents 5% of the school’s $20 billion investment portfolio. Their chief investment officer, Bruce Zimmerman, said that the endowment had started buying gold in September 2009 at $950 an ounce and its average price was around $1,150 an ounce. The gold is being stored at an undisclosed underground HSBC facility in New York City.

Typical institutional investments in gold generally average about 1% of assets; analysts have speculated that this investment may cause other endowments to increase the percentage of assets they invest in gold. They noted that the fact that the school took physical possession of the gold indicates a long-term commitment to the asset.

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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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