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.
Welcome to this week's market wrap podcast, I'm Mike Gleason.
Well, the big news in the financial markets this week was the surge of the Dow Jones Industrial Average to new all-time record highs. CNBC brought out the party hats and staged a special celebration of the milestone, complete with a spate of predictably bullish commentaries.
Lost in all the exuberance was the fact that the Dow's new highs aren't real. In inflation-adjusted terms, the stock market trails well below both its 2000 and 2007 former highs.
I'm sure I don't need to tell you how much cheaper everything from health insurance to gasoline to gold bullion was back in the year 2000. The stock market is just another asset class that has gotten more expensive in nominal terms thanks to the enormous expansion of the currency supply.
Even though the Dow sits at new nominal highs, the index remains mired in a long-term bear market when measured against gold. The ratio of the Dow Jones to the price of an ounce of gold peaked at 44 to 1 in 1999 with gold scraping the bottom of the barrel at $255 an ounce.
The ratio has since fallen markedly, to as low as 6 to 1 when gold hit $1,900 an ounce in mid 2011. The Dow to gold ratio currently comes in at 9 to 1. That means the Dow is still down nearly 80% from its real high as measured in real money, that being gold – not phony paper dollars.
Could the Dow drop another 80% versus gold? An 80% drop in the current 9 to1 Dow-gold ratio would bring the ratio down to 1.8 to 1. And that isn't a far-fetched number or one without precedent. Back in January 1980, the Dow to gold ratio crashed down to 1 to 1 as gold spiked to $850 per ounce.
We don't know whether the ratio will get that low at gold's ultimate high for this secular bull market. But all signs suggest that we haven't yet seen a secular high for gold. The metal has been consolidating for the past 18 months and appears to be at or near a turning point. As I noted in last week's podcast, a number of indicators are flashing signals that typically appear at major bottoms.
The gold market is extremely oversold at a time when the stock market may be reaching critically overbought levels. The stock market has gotten extremely over-hyped in the financial media, that's for sure! This is a time for prudent investors to ignore the hype and avoid being over-exposed to stocks. This is a time for prudent investors to get themselves well diversified in precious metals and aggressive investors to consider increasing their allocations. At some point – and quite likely very soon – the Dow to gold ratio will reverse to the downside.
In the meantime, gold and silver continue to base out, giving investors the opportunity to position themselves ahead of the big rally that could be coming. Both precious metals are up slightly for the week, with gold trading at $1,583 and silver at $29.25 per ounce as of this recording on Friday morning. A big reversal from the early morning correction on Friday is underway as we speak and the metals have bounced hard off lows seen earlier in the trading day.
We continue to see scarcity and elevated premiums for pre-1965 90% silver coins, though not for most bullion products. We saw similar developments on a more extreme scale in late 2008, when the spot silver price got too low for holders of coins to accept. Only when silver prices rose significantly did the premiums dissipate. The 90% silver coin market again seems to be saying that silver prices are unrealistically low at these levels.
As for the platinum group metals, platinum trades near $1,600 an ounce, holding to a slight premium over gold. Its sister metal palladium continues to outperform in 2013. Trading at $775 per ounce currently, palladium is up close to 7% for the week and up nearly 10% for the year. Both gold and silver are still in negative territory for 2013.
Well, before we sign off today, we do have a quick product note. We came across a few more of the lightly scuffed 1 /4 ounce Gold Maple Leafs earlier this week. It's been a few months since we've had any of these and they always go quickly when we bring them into inventory. These coins do have some slight contact marks, but value investors looking for pure gold fractionals at premiums barely above that of a one ounce product may want to pick some up. We have just a very small batch this time around, but we want to pass this great discount on to you. Premiums above gold spot are only 5 to 6%, which is a fantastic price compared to their U.S. Mint counterparts, the 1/4 ounce Gold American Eagle.
We don't figure to have these for very long at all – so don't hesitate to pick up the phone and grab some if you are interested, before they run out. Just call us at 1-800-800-1865.
Well, that will wrap it up for this week's market wrap podcast. 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. Thanks for listening and have a great weekend everybody.
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.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.