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Platinum Outshines; Canada Follows U.S. & Caps Silver Sales

Platinum outshines gold and silver

The platinum group metals continue to outshine gold and silver in the early goings of 2013. Platinum (up almost 10% year to date) is knocking on the door of a breakout at the $1,700 level, while palladium (up more than 5% for the year) now trades at 16-month highs.

As for gold and silver prices, they gave up some of their recent momentum last week. Gold relinquished all of the gain from the prior week and silver gave back about half. They continue to trade range-bound.

For the moment, the stock market is the darling of traders. The S&P 500 made a new 5-year high. With the exception of crude oil, commodities and the precious metals played second fiddle. Investors are not currently focused on uncontrolled spending, exponential debt growth, competitive currency devaluation, and negative real interest rates.

Royal Canadian Mint Responds to Demand Spike

The Silver Maple Leafs, minted by the Royal Canadian Mint, have been a big beneficiary of dramatically higher premiums and limited availability in Silver American Eagles. For investors seeking legal-tender government-minted bullion coins, the Maple Leaf was the obvious choice once the Eagle got scarce. But mints, especially government-run mints, cannot flip a switch and triple production overnight. Officials with the Royal Canadian Mint responded to the demand spike last week by announcing they will also limit what they send to dealers, based on their purchase history.

Royal Canadian Mint limits its distribution of silver maple leaf coins

"Due to very high demand for Silver Maple Leaf bullion coins, the Royal Canadian Mint is carefully managing supply to ensure all our bullion distributors are served and we continue to take orders," said Alex Reeves, the senior manager for communications at the Royal Canadian Mint.

Demand for physical bullion remains brisk at Money Metals Exchange and other national dealers. If the U.S. Mint resumes taking orders for silver Eagles this week as expected, some of the pressure behind rising premiums will diminish. However, the Mint expects to limit its distribution – just as the Royal Canadian Mint has done. If allocations don't meet demand, we look for premiums to continue rising, accompanied by longer lead times for delivery – particularly because tightness in available inventory of 90% silver coins also shows no signs of abating.

Potential Market-Moving News This Week

The consensus is that Congress will once again grant itself an increase in federal borrowing capacity, with the assurance to voters – trust them this time – that they will balance the budget later. What could go wrong?!

Anyway, the passage of the "No Budget/No Pay" bill in the House – in which Republicans purport to play hardball by withholding Congressional paychecks until the Democrat-controlled Senate produces a budget – dominated financial media and boosted the stock market last week. Events in Washington DC are likely to remain front and center this week.

Here are some other scheduled events that may impact precious metals:

  • Tuesday, Jan. 29th – Consumer Confidence. The December report was ugly, with consumers' expectations for the economy falling 15 points.
  • Thursday Jan. 31st – Gross Domestic Product. Recent estimates of GDP show slow growth. Of course, the government's own heavily managed CPI inflation statistics have been used to paint a brighter growth picture. When adjusted using the same CPI calculation employed by the Bureau of Labor Statistics in the 1970s, as reported by ShadowStats.com, the GDP picture is downright ugly.
  • Thursday Jan. 31st – Jobless Claims. Estimates regarding the number of jobs created put the rate very close to what is needed to offset population growth. In other words, we are treading water. The percentage of people not employed, but not counted by bureaucrats as "unemployed" remains very near the levels seen at the height of the financial crisis. The problem is especially acute among young people.

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