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Gold and Silver Price Weakness -- Are the Fundamentals Intact?

Screaming buying opportunity presented as precious metals markets consolidate

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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 to this week's market wrap podcast, I'm Mike Gleason.

Today I'd like to talk about precious metals from a global perspective. Because as investors, we can no longer afford to be U.S.-centric in our analysis.

The United States no longer holds the title of the world's leading manufacturer of goods. That distinction belongs to China, which will also soon overtake the U.S. as the world's largest economy.

The Chinese yuan may even some day serve as the world's reserve currency. In the meantime, the U.S. is well on its way to losing that status as the world increasingly puts its trust in alternatives such as gold.

Central banks around the world are net buyers of gold. In fact, the World Gold Council just announced that central banks last year bought more gold than any year since the mid 1960s! These foreign central banks are slowly but steadily gaining independence from the U.S. dollar. China's appetite for precious metals will only continue to grow along with its economy.

China is growing at five times the rate of the U.S. China needs to grow its gold reserves as well. China's gold holdings currently come in at a fraction of what the U.S. officially reports. That means there's a lot more upside to gold demand out of China in the years ahead.

For now, an even bigger purchaser of gold is Russia. Vladimir Putin's government is quietly turning some of its vast petroleum resources into gold. The Russian Central Bank has acquired 570 metric tons of the yellow metal over the last decade, making it the world's biggest gold buyer over that period.

It's no secret that Putin seeks to raise Russia's geopolitical profile in relation to the United States. He knows that gold commands universal respect, irrespective of culture or ideology. By contrast, the U.S. dollar – and all fiat currencies – rest on the ability of the issuer to persuade everyone else that the arbitrary units of account have value. In other words, it's a confidence game. The world is slowly expressing a vote of "no confidence" in the dollar regime. At some point, oil exporters could sidestep the dollar completely and insist on gold or some other currency or basket of currencies as payment.

Gold itself represents an important form of international diversification, since its supply-and-demand fundamentals are globally driven, its value is determined on international markets, and it is recognized throughout the world as a liquid monetary asset. Given the global currency crisis unfolding in slow motion, gold has the potential to continue rising in value for years to come.

For the moment, however, the gold market is showing some weakness. Prices retreated this week, with gold breaking below $1,650 per ounce to turn negative for the year. Silver is showing similar weakness and is now testing support at the $30 level. Both metals are down another 1-plus percent today as the weakness continues. Gold currently sits at $1,610 an ounce while silver trades at an even $30.00 as of this recording on Friday morning.

For the year it's been a different story for platinum and palladium however. Both have made strong advances year to date, despite being down today. Palladium rests near multi-month highs at $760 an ounce. Platinum has been hovering around the $1,700 level but fell below this morning. The white metal began the year at $1,550 and selling at a discount to gold. It now trades at a premium, coming in at $1,680 at the moment.

The outperformance of the platinum group metals is a bullish sign. As discussed in last week's fantastic interview with David Smith of the Morgan Report on Money, Metals and Mining, these more economically sensitive metals tend to lead other precious metals. For now, it's a buyer's market in gold and silver.

We hope you are able to take advantage of these relatively low prices while they last. At this time, Money Metals Exchange has plenty of availability in low-premium bullion products, including rounds, bars, and Eagles.

Premiums on "junk" silver remain somewhat elevated however, as holders of 90% silver coins are simply unwilling to bring supply to the market at these prices. They're betting prices are heading higher. And in the long run, with the depreciation of the dollar all but guaranteed, metals prices have nowhere to go but up.

Well, that will do it for this week's market wrap podcast, thanks for listening.

This has been Mike Gleason with Money Metals Exchange reminding you that we remain fully committed to getting you the most value for your depreciating dollar... with speed, with privacy, and with top notch service. Have a great President's Day 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.

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