Daily Bullion Market Update 6/27/11
By Barry Stuppler – MintStateGold.com
Gold was down $38.20 last week, closing at $1,500.90 per ounce. Gold dropped $52.50 on Thursday and Friday after Fed Chairman Ben Bernanke gave no hint of the next round of quantitative easing at his news conference, and the release of 60 Million Barrels of Oil from the International Energy Agency. The U.S. will release 30 Million barrels from our Strategic Petroleum Reserves over the next 30 days.
Why did gold drop $52.50 on those announcements? Well, the U.S. Dollar rallied sharply and crude oil dropped dramatically, which drove precious metal prices down to support levels. $1,500 is a major support level and Gold has managed to stay above that level for the past 25 trading days (May 20th). Gold traded down to $1,493 last night in Asia before sizeable buying came in to drive it over the $1,500 level again. If gold does break the important $1,500 level this coming week, I believe it will be short lived.as the Euro and U.S. Debt problems, along with the geopolitical crisis in the Middle East and an attractive price for Gold/Silver, will encourage worldwide investors (particularly in China and India) to become aggressive buyers of gold and silver.
Gold imports from India and China, the two largest consumers of precious metals, are estimated to jump by 64% and 28% respectively. However, buyers in both countries are price sensitive and should the price of gold drop below $1,500 per ounce, imports would increase by an additional 10-15%. Recent increasing inflation in China and India is causing the public to own gold and silver to preserve the family’s wealth.
Silver closed at $34.63 last Friday, down $1.10 per ounce for the week. The high/low range for the week was $36.77 to $34.14 per ounce. Silver has managed to stay between $34.14 to $38.88 since May 19th, the last 26 trading days. Primary demand is coming from Asia, with China and India the aggressive buyers at the low end of the trading range and continuing to purchase as the market moves higher. Silver is still taking direction from Gold and is influenced by the U.S. dollar and Crude oil prices. I still believe that the risk/reward issue for Silver looks excellent.
If Silver trades down to $33 per ounce or lower, I believe it would be an opportunity of a lifetime. I feel we will see Silver make another attempt at breaking through $40 an ounce by the end of the summer months. More international inflationary news, and the lifting of the U.S. debt ceiling, will add stimulus to Silver, breaking it out of its current trading range.
PLATINUM & PALLADIUM
Platinum dropped an amazing $156 this past two weeks, from $1,833 to $1,677 per ounce, a correction of 8.5%. Estimates of a lower consumption in 2011, due to lower automobile sales of Japanese cars, is effecting the market price.
Palladium dropped $86 this past two weeks, from $816 to $730 per ounce, a substantial correction of 10.5%, while the Platinum Guild predicts higher demand for Palladium for catalytic convertors from Asian automobile makers.
RARE COINS REPORT
In next week’s Weekly Market Report, I’ll provide the July 1st update on investment quality rare gold and silver U.S coins. (Current CoinStats reports are available now)
This Week’s recommended commitment and diversification:
Precious Metals commitment: Minimum of 35% of investible capital (Increased due to last week’s correction)
Diversification: Gold 60%, Silver 30%, and Palladium 10%
Diversification includes long term numismatic investment and short term bullion products.
THE BEST GOLD AND SILVER INVESTMENTS, PART III:
Two weeks ago I recommended selling selected Gold and Silver mining stocks, funds, and Indexes, and replacing them with physical metal. The selected mining stocks I’m referring to are the ones with operations in third world countries like Peru, Chile, Bolivia and Indonesia. There is a serious risk of nationalization, union strikes, heavy government taxation, labor unrest, and environmental hold ups and costs. Last week I provided my 9 reasons why GLD (SPDR Gold Trust, the popular Gold ETF) is not the best way to invest in gold or silver.
What are the best gold/silver investment products?
PRECIOUS METAL BULLION
The following are the most popular precious metal bullion investments within the U.S. The popularity is due to the very low premiums over the spot metal price and the tightest spreads between the bid/ask price. Plus, they are all acceptable for IRA pension accounts.
1) U.S. Gold and Silver 1oz Eagles
2) Canadian Gold and Silver 1oz Maple Leafs
3) U.S. Gold 1oz .999 Buffalo
4) First Quality .999 Silver 1oz Trade Units (Rounds)
5) Canadian Platinum and Palladium 1oz .999 Maple Leafs
Silver Bars and Junk 90% bags of Pre-1965 U.S. Coins are acceptable in IRAs, however I don’t recommend them for two reasons:
- Bars have assay and authenticity problems
- 90% Junk Silver coin bags develop a larger discount to spot silver as the price of silver increases.
GOLD AND SILVER BULLION PLUS
The following are the most popular gold and silver bullion plus investment items. These actively traded items offer confidentiality and privacy that is not offered by bullion gold/silver items. These items cannot be placed in an IRA account, but are excellent for personal ownership.
1) Swiss & French 20 Franc Pre-1933 Brilliant Uncirculated (BU) (1/5 ounce Gold)
2) British Pre-1933 King Edward & George Gold BU Sovereigns (1/4 ounce Gold)
3) U.S. Certified $20 Gold Saint Gaudens dated prior to 1933
4) U.S. Certified $20 Gold Liberties, dated prior to 1908
5) U.S. Morgan & Peace Dollar, Brilliant Uncirculated 20 pc. Rolls date prior to 1925
All the above items are very popular with investors and collectors. These brilliant uncirculated coins have a very low premium over their precious metal content. Because of their popularity, they also have very tight buy/sell spreads. Since the five items listed above are not considered modern issue bullion coins they are not eligible for IRA accounts. However, these bullion plus coins are affordable and offer safety, confidentiality, and privacy.