Platinum Gets White Hot; Also, Should Savers Cash Out Their IRAs?
The precious metals bulls and bears in the futures markets remain evenly matched, and we enter the new week with silver prices at the top of the range established over the past 3 weeks. Silver has solid weekly support at $30/oz, and just this morning, it found the momentum to break through $31. Gold has traded between $1,640 and $1,680.
Platinum, which has traded at a discount to gold for several months, is rapidly closing the gap. The discount had reached almost $200, but persistent labor disputes disrupting mine production in South Africa and improved outlooks for automobile manufacturing have brought platinum to within $15 of gold. Palladium is also outperforming. Both of these precious metals outperformed gold and silver in 2012 by between 3-5%.
Wall Street IRAs v. Self-Directed IRAs
Retirement planning is a complex task, but just about every financial advisor in the country would have you believe it's as simple as following their advice! They'll advise that if you dutifully buy the prescribed mix of stocks, bonds, and mutual funds, your account will grow tax-deferred at an average 8-10% per year, and you will retire comfortably.
Money Metals Specialists take several calls each week from investors faced with this herd mentality. Their financial advisors are still calling essentially the same plays, but almost nothing in the "conventional" playbook has worked in more than a decade. Investors who see the fallacy in this mainstream financial advice are opening self-directed IRAs where they can hold alternative assets, including physical bullion.
That's a good thing. Money Metals Exchange certainly advocates owning physical gold and silver. But for investors questioning the conventional wisdom surrounding IRAs, we recommend starting at the most basic. Start by asking a question that would certainly make any mainstream financial advisor blanche and stutter: Should I hang onto my retirement account at all?
For many, the answer will be yes. Liquidating some or all of an IRA means paying taxes on the amount at your marginal income tax rate, and those under 59-1/2 must also tack on a 10% penalty. They will decide these costs outweigh the risks of keeping assets in an IRA.
For others, the answer may be no because there are risks of leaving assets in an IRA account. We think investors are well served to consider the following:
- Taxes may be higher when the time comes to start taking distributions. Avoiding the tax associated with liquidating your IRA today, only to pay at a much higher rate later, is not a great trade. Americans just got slapped with tax increases, and additional increases may be on the way. As the recent debate surrounding the fiscal cliff highlights, politicians are incapable of making meaningful cuts in spending. They will choose instead to raise taxes if it becomes difficult to borrow or print the funds needed to keep the federal government growing.
- Retirement assets may be targeted by Washington politicians searching for creative ways to feed the voracious and untamable Federal beast. The risk of retirement assets being restricted or hijacked is bigger than most are willing to acknowledge. Various proposals for requiring that a portion of these accounts be invested in Treasuries are already circulating in Congress. Just last week, the Spanish government raided the pensions of retirees.
We know lots of you are wrestling with what to do when it comes to retirement planning. The important thing is to consider carefully, make your own decision, and then take action. But the bottom line is that persifying some portion of your assets into physical metal is even more critical than choosing whether or not to hold the metal inside of your IRA.
No Delivery Delays in 90% Silver Coins Despite Tight Market; Premiums Lower Than in Recent Weeks
Last week, we mentioned the significant tightness in the Pre-1965 90% U.S. silver coins, one of the most popular forms of silver bullion. Many of our competitors will not even accept an order for 90% silver right now.
However, due to Money Metals Exchange's deep supply lines, we were able to get our hands on some good supply this past week. So the premium on Money Metals' 90% silver dropped slightly after weeks of increases on this no-longer-minted product.
With the price of silver remaining depressed following last month's paper sell-off in the futures market, the sellers of 90% silver coins have all but disappeared, thus creating a significant supply-demand imbalance. It will probably take a big rally in the price of silver to draw out more sellers.
Otherwise, lead-times and higher premiums figure to be the new norm for these pre-1965 dimes, quarters, and half dollars. Once we sell through our current inventory, we will likely to have to raise premiums again.
Potential Market-Moving News This Week
The U.S. dollar got clobbered last week. Continued weakness there would bode well for precious metals.
Financial media will continue to focus on the debt ceiling debate as well as corporate earnings being reported from Q4 2012.
Here are some scheduled events that may impact the metals markets:
- Monday, Jan. 14th – Ben Bernanke Speaks. As always, pundits will parse his every word in an attempt to pine Fed policy going forward, and traders in the futures markets will react.
- Tuesday Jan. 15th – Producer Price Index. Recently, the government statistics on inflation, including the PPI, have been trending lower. Falling gasoline prices will play a role in this week's number.
- Friday Jan. 18th – Consumer Sentiment. Sentiment has been falling for most of the past year – despite the supposed economic recovery being touted by the government and the financial press.