2 Debates; Still No Mention of 800 lb. Gorilla

Announcer:

Welcome to Money Metals Exchange's weekly market wrap podcast. Helping precious metals investors during these treacherous times. Now, here's this week's market wrap with commentary and analysis from the fastest growing precious metals dealer in America, Money Metals Exchange.

Mike Gleason:

Welcome back, everyone. I'm Mike Gleason. In case you missed the Vice Presidential debate on Thursday night, it didn't reveal much we didn't already know. Congressman Paul Ryan, at one point, said, "A debt crisis is coming. We can't keep spending and borrowing like this." When asked earlier in the debate for specifics on what he and Mitt Romney would cut to make the budget numbers work, Ryan declined to offer any.

Of course, neither Joe Biden nor Barack Obama have any credible solutions to the nation's fiscal mess either. No, we don't need to look far for evidence that the debt crisis is beyond a point where the current political system can fix it.

Meanwhile, I found it quite fascinating that the term "Federal Reserve" wasn't uttered even once during the debate. The Fed stood as the unacknowledged 800-pound gorilla in the room because, after all, the Fed is Washington's solution, if you can call it that, to the debt crisis. Neither campaign wants to admit it but that's the reality.

Look, regardless of who wins in November, the Fed will continue pumping tens of billions of dollars every month into the Treasury Department and into mortgage-backed securities. The nation's central bank aims to keep government's borrowing costs low. That way, the political class can forestall making tough budget decisions. The Fed also wants to produce a higher rate of inflation so that the real value of government debt obligations diminishes.

Yes, all roads lead to inflation and a decline in the value of the dollar. That's why real money, gold and silver, should continue to shine regardless of who wins the upcoming election.

Turning to the market action, precious metals' prices continue to consolidate after their late summer surge. Gold is coming in at just under $1,770 on Friday morning as this podcast is being recorded. It looks to end the week with a small loss, as does silver. The white metal is struggling to regain footing at just under $34 an ounce after being unable to clear and hold the key $35 overhead resistance level last week. It's likely we'll see more consolidation before the next upleg and it would be a welcome development for those looking to acquire more metal at low cost.

One of the reasons we feel that prices could chop sideways, or even move down in the near term, comes from the most recent commitment of Traders Report – for silver specifically. It shows commercial traders piling on their biggest net short position of the year. An extreme reading of this sort usually implies a corrective move that allows the big institutions to unload some of their short positions.

Now, a few internet commentators are sending out alerts warning of an imminent price plunge in silver. However, our analysts here at Money Metals Exchange remain convinced that the intermediate term trend turned up in August and we expect to see seasonal strength continue at least until the first quarter of 2013. Any correction that may play out over the next few days will probably disappoint those ultra bears in the end.

Looking ahead to next month, there's good news for precious metals bulls. November is typically the strongest month of the year for the metals. Only time will tell.

We'll be taking some time during our weekly podcast to address issues on the minds of precious metals investors. Today we'd like to talk about precious metals backed IRA's. These retirement accounts, often referred to as self-directed IRA's, have really gained in popularity over the last couple of years. Despite a jump in interest, most people still aren't aware that they can hold physical gold and silver in a tax advantage retirement account. The vast majority of folks remain invested in the traditional lineup of stocks, bonds and mutual funds – all paper assets that have dramatically underperformed metals over the past ten years.

So why are most people still unaware that it's possible to hold bullion in their IRA? Well, to answer that and to provide a little more detail on how precious metals IRAs work, I'll bring in Clint Siegner, Co-Director here at Money Metals Exchange. Clint, let's start with a simple question. Why do you think most investors have never heard of this option?

Clint Siegner:

Their financial advisor isn't going to bring it up. That's for starters. Those guys get paid handsomely for selling financial securities: stocks, bonds, mutual funds. They haven't yet figured out how to earn a commission selling gold and silver. Until they do that, I wouldn't expect them to be promoting it. We get a couple of calls a week from customers who just finished a meeting with their financial advisor and he was poo-pooing people that would actually buy gold and silver coins. Those people must be crazy. If he's progressive, maybe recommending they buy a few shares of a gold and silver ETF.

Mike Gleason:

Which are just paper proxies, of course, not the real thing. You don't have the ability to take physical possession of that metal.

Clint Siegner:

You'd think it'd be a little awkward for those guys after ten years in a bull market for metals. They're still having to denigrate them. They're, of course, married to the financial securities and it makes you feel a little bit bad.

Mike Gleason:

I suspect if they could figure out a way to get paid for selling bullion they probably would throw in the towel and start recommending it to everyone but that's not the world we live in yet.

Now let's talk a little bit about how precious metals IRAs work. What can you tell people there?

Clint Siegner:

The first thing people will likely have to do is set up a brand new account with a new firm. Firms that have most of the IRAs now are just not going to have an option for a self-directed account for the reasons we just discussed. They'll locate a firm that specializes in self-directed IRAs – and we have a few recommendations of companies on our website. In return for making that leap, they're going to get a lot more flexibility on the assets that they can actually own. They can own physical metal, of course. They can own real estate and a whole range of other tangible assets.

Mike Gleason:

You could even own a business. I know somebody who's actually done that through a self-directed IRA.

Clint Siegner:

Yep. You can own a business. You can even own livestock. If you want to have a couple of goats in your retirement account, you ought to be able to.

Mike Gleason:

Absolutely. A lot of people do have a significant portion of their net worth tied up in their retirement accounts and have been, obviously, under-served by the lack of flexibility and lack of investment options and, obviously, that's what they get with these self-directed IRAs. Kind of hit on that and talk about some of the advantages that you get, above and beyond what you've already mentioned, and also some disadvantages, too.

Clint Siegner:

I'll give the bad news first in terms of the disadvantages. These accounts are just like any other IRA. That means that the details are going to be reported to our friends in government. Lots of people are drawn to precious metal because there are some privacy advantages. Unfortunately, you give those up when you do it inside an IRA.

Mike Gleason:

I think you're giving up maybe a lot more by just sticking with the main cart of investment options in these types of financial accounts so, obviously, there are some disadvantages to the alternative, of course.

Clint Siegner:

Certainly, that's true.

Mike Gleason:

One objection I've heard, I guess, for somebody I spoke to once before, is that they feel like, "Well, I'm not going to have a chance to actually own the physical metal, so what's the point?" But you can actually distribute metal to yourself through these accounts. You don't actually have to just take dollars. You could actually take physical metal when it comes time to take a distribution.

Clint Siegner:

That's right. Although you can't actually hold the metal inside the IRA account today, you can certainly get the metal as a distribution. That can be a real advantage. If you're not wanting to take depreciating dollars, you can just have them ship the metal instead.

Mike Gleason:

Certainly. One thing that we should make a point of here is that if you are, say, 59-and-a-half, which is the age that you do not have to pay an early withdrawal penalty inside a retirement account, if you want to put some of your retirement money to work in precious metals or some other asset class, one thing you may want to consider doing is just liquidating it, paying the tax and then owning that asset outright outside of a retirement account. For everybody, that's maybe not an option if they can't take the tax hit. You're going to have to pay a pretty sizeable tax to do something like that.

Well, that will wrap it up for this week's podcast. Thanks for listening. This has been Mike Gleason with Money Metals Exchange reminding you that we are fully committed to getting you the most metal for your depreciating dollar with speed, with privacy and with top-notch service. Have a good weekend, everybody.

Announcer:

Thank you for joining us for this edition of the Money Metals Exchange Weekly Market Wrap. Be sure to come back next week, and don't forget to subscribe to our weekly podcast through iTunes. For answers to all of your questions, or to discretely and securely buy or sell gold or silver coins, bars, and rounds, call 1-800-800-1865. Our knowledgeable and no-pressure specialists are standing by between 7:00 a.m. and 5:30 p.m. mountain time, Monday through Friday. Visit us at www.MoneyMetals.com or call 1-800-800-1865.