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  • Gold: $1,168.90 -10.95 |
  • Silver: $16.71  -0.14 |
  • Platinum: $934.00  0.30 |
  • Palladium: $735.75  -11.30 |
  • Rhodium: $780.00  0.00 |
Weekly Market Wrap

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Gold/Silver Rally as Interest Rates Rise

Federal Reserve in Serious Trouble as Economy Stagnates

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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.

"Taper" talk was back on the table this week. On Wednesday, minutes from the Federal Open Market Committee's most recent meeting hit the newswires. And a predictable outpouring of linguistic speculation and feigned drama followed.

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The main problem facing Federal Reserve policymakers at the moment is rising long-term interest rates. The Fed does not directly control Treasury bond yields or mortgage rates, but it does exert influence over them through its bond-buying program dubbed "Quantitative Easing." The Fed's attempts to gently alert the markets that it intends to start the process of winding down QE have caused rates to soar in recent months – as investors have dumped bonds.

So far, interest rates have headed ever-so-slightly toward more normal levels. But if the rout in the bond market continues, it could cause serious problems for America's fragile economy. The U.S. bond market is worth about $32 trillion – yes, that's trillion with a "t" – so even relatively small percentage declines in value can lead to enormous losses in wealth. Moreover, the fledgling housing recovery will be threatened if mortgage rates continue to rise.

It's doubtful that the Fed would want to risk finding out what the breaking point for the economy is. After re-inflating asset markets with free money for several years, an even bigger crash than we saw in 2008 could result if the Fed were to exit the markets now.

Even if we don't see another crash, the stock market will struggle if rates keep rising. Many sectors are interest-rate sensitive, and investors tend to demand higher dividend yields and earnings yields out of equities as a whole in such an environment.

Some analysts say rising interest rates are bad for precious metals, but that's not necessarily the case. Precious metals are the least correlated asset class to bond and equity markets. When paper assets sell off, hard assets often serve as a safe haven.

This is what happened in the late 1970s. Rising interest rates. Weak economy. Lousy stock market. It all set the stage for a mania phase in gold and silver, which peaked in January 1980.

As for the action in the metals this week, the Fed didn't end up moving the markets a whole lot. Precious metals entered Friday trading little changed on the week. Silver prices consolidated around the $23 level after last week when the metal put in its biggest weekly rally in percentage terms since 2008. As regular listeners to this program will recall, I had been saying for weeks that a strong weekly close above $20 could spark a major short covering rally. That's exactly what happened.

Turning to gold, the metal of kings currently trades at $1,374 an ounce after breaking above the $1,350 resistance area last week. We will be keeping our eye on the $1,400 level. If gold can clear that and get a 14 handle on the price chart, it should be able to start pushing through zones of price congestion established in the spring.

Meanwhile, platinum is outperforming gold slightly this week. Though prices only advanced about 1%, it was enough for platinum to break out to a fresh five-month high. Prices currently come in at about $1,545 per ounce as platinum heads for its seventh consecutive weekly gain, an advance that is quite unusual during what is normally a quiet summer period in the metals.

Now that we have signs of technical breakouts on the charts for all the precious metals, investors may not be able to count on any deep price corrections to give them cheaper entry points. Some commentators were eyeing $1,100 or even as low as $1,000 levels on gold for a final bottom. Those levels may never be hit.

Frankly, trying to pick the absolute bottom is a poor strategy – particularly for investors who are underexposed to precious metals.

Customers who are enrolled in our Monthly Gold & Silver Savings Plan automatically added to their positions throughout the spring and summer doldrums. Money Metals Exchange's Monthly Plan takes all the hassle and stress out of the decision of when to buy and puts you on a steady course of accumulating more ounces, which in the end is the name of the game.

Before we close we have another exciting product special to mention. We just re-stocked up on the very popular pre-1933 historic U.S. Gold coins – available at prices close to their melt value. And this time, we have a good assortment of the different types.

We currently have the $5 and $10 Liberty and Indian coins, as well as the $20 Liberty and $20 St. Gaudens coins. And as we've mentioned before you will never hear us offering these coins unless we can get them at bullion prices, and you can grab these "jewelry grade" coins for only 7 to 8% over the gold melt value. That's less than a lot of modern day fractionals – such as Gold American Eagle bullion coins.

These historic U.S. coins are likely to go quickly, so give one of our specialists a call at 1-800-800-1865 to inquire about pricing and availability before we run out. Supplies are quite limited. And remember you can find all kinds of great content on the metals markets, access up to the minute pricing, sign up for our Monthly Gold & Silver Program, or place online orders 24 hours a day, 7 days a week by visiting www.MoneyMetals.com.

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 depreciating dollar... with speed, with accuracy and with top notch service. Have a great 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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