Ferocious Buying Emerges on Price Weakness
Precious metals got pummeled last week. Silver closed down $2.43/oz at $29.80 – a 7.5% decline for the week. Gold fell $112/oz to close on Friday evening at $1,600/oz – a 6.5% decline. Platinum fell 6.6%, and palladium was off 9.2%. If there is any good news about these short-term moves, it is that gold and silver rallied strongly into Friday's close and have stayed in range this morning.
Sentiment seems to favor deleveraging in the metals futures markets. That is, investors are worried about austerity, debt defaults, and worsening economic fundamentals.
Last Wednesday, the Federal Open Market Committee gathered for its last meeting in 2011. Ben Bernanke's remarks afterwards were another disappointment for those hoping he would announce, or at least hint at, the next monetary stimulus program.
Instead, Bernanke suggested there are improving economic fundamentals and indicated there is no need for more easing at this time. Apparently there are still plenty of players in the markets who listen to what Bernanke has to say... because the dollar strengthened, and the metals were taken to the woodshed.
Hints of 2008-Style Deleveraging Pressure
While gold and silver are still likely to finish higher for the year, we see some of the same warning signs and the same selling pressures in futures markets as we saw in 2008. In 2008, central bankers, led by our own Federal Reserve, ultimately panicked and took extreme measures in response to the accelerating financial crisis. They provided trillions of dollars in backstops to shore up private banks and financial institutions. And these actions sparked a colossal rally in the metals markets that lasted for two years.
Today investors are once again worrying about the possibility of widespread bank defaults and potential chaos in the markets. Speculative money is coming out and fleeing to the liquidity of U.S. Dollar and Treasuries, as if they expect central bankers to respond differently this time around.
At Money Metals Exchange, we expect the same type of response that we saw in 2008. Why expect a different trick from a one-trick pony? Christine Lagarde, director of the International Monetary Fund, was in the press this week warning of a 1930's style depression if central bankers around the world don't get their act together and start the bail-outs. She is advocating the patented "panic and print" response – sounds familiar, right?
Problems Deepening in Europe
The markets are anticipating downgrades from Standard & Poor's on 17 European nations. S&P hinted it would take action if the European summit a week ago failed to produce significant results. The prospect of downgrades seems to be increasing deleveraging pressure and is weighing on commodities and metals futures prices.
Premiums & Buying Trends
Paper traders in the futures markets may have been selling, but investors in physical metals were buying – and buying BIG! Money Metals Exchange saw the busiest week since the late September price correction, which prompted record buying in the bullion markets. The big jump in activity included both large and small orders. Selling remained negligible.
Once again this week, Money Metals Exchange sold approximately equal quantities of gold and silver. This recent trend represents increased buying in gold. Earlier in the year, silver sales outpaced gold sales by a margin of 2 to 1.
Inventories of pre-1965 silver coinage, a favorite of value-seeking silver bullion investors, tightened dramatically this week. As a result, premiums on these 90% silver coins jumped significantly – at least relative to where they were recently. A number of wholesalers are completely sold out of half dollars. Buyers can still place orders and Money Metals Exchange has inventory in stock of virtually all items, but there could be modest lead times for delivery of some items.
Premiums on other popular bullion coins, bars, and rounds remained stable, and stock is available.
We Buy Back Too!
We want customers to know that Money Metals Exchange is here to buy back gold, silver, platinum, and palladium in the common bullion forms. We certainly don't advocate selling at this time, as we think the bull market in metals has years left to run. However, if you decide to sell for whatever reason, we can lock a price with you right over the phone, deliver a purchase order to confirm the transaction, and send your payment promptly – as soon as we receive the metal. You will find we are as easy to deal with when you sell as we are when you buy!
Call Money Metals Exchange to Buy or
Sell Precious Metals Coins, Bars, and Rounds. – 1-800-800-1865.