Prices Fall below Mining Costs in Unusual Development

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.

Well, in the final few trading days of what's been a down year, precious metals are managing to move modestly upward. On Thursday, traders returned from their Christmas holiday in a buying mood. They pushed the Dow Jones Industrials to a fresh new record. And unlike so many times this year when metals prices suffered as stocks surged, gold and silver also posted gains on the day.

Gold advanced back above $1,200 per ounce. The yellow metal is up about 1% on the week and trades at $1,216 as of this Friday morning recording.

Silver's gains this week are besting gold's, something metals bugs like to see during rallies. The white metal is up better than 3% for the week and currently comes in at $20.10 an ounce. Market technicians will be eying a resistance level at $20.50. That's where an attempted rally was turned back earlier this month, and a couple of times this fall. If prices can punch through it, the near-term trend for silver will turn bullish.

Longer term, silver appears to have bottomed out in June and has formed a large base of support since then. Although we can't rule out another dip to slightly lower levels, any lower prices that do come are very unlikely to be sustained. That's because new mining supply won't be forthcoming when low silver prices make silver production uneconomical.

According to independent analyst Steve St. Angelo, the average break-even cost in the third quarter for the top 12 silver miners was $21.39 per ounce. In other words, silver now trades below the mining industry's average all-in costs of production.

We've reported in previous programs the same phenomenon in the gold market. And as John Rubino noted in a recent interview with Gordon T. Long, in the instances when spot metals prices dip below mining costs, major bottoms are put in.

Long:

Something is going to happen in 2014 in gold because the marginal cost reduction right now is between $1,250 and $1,300 and the cash marginal cost is $1,125 and we got gold trading at, let's say, $1,200. The miners can't stay on business.

Rubino:

Well, gold's price is falling below the cost of reduction twice in recent memories. Once in the late 90's and once in 2008 and in both cases that was the launch path for major bull market after that because you got the miners closing down the mines and scaling back the development of new mines and so at the margin, the supply starts to shrink and to the extent at that matter is in the gold market, that's not a huge factor but it's enough at the margin to at least create a bottom.

Mike Gleason:

Now represents a rare opportunity to buy gold and silver below their costs of production. To take fullest advantage of the discount, buy bullion in the forms that are available closest to melt value. These include our privately minted, low-premium rounds and bars. Another opportunity to buy gold and silver below their costs of production probably won't come around again for many years.

And as we get closer to 2014, now is an opportune time to get a jump-start on New Year's resolutions. If one of yours is to sock away more money to help secure your financial future, then Money Metals Exchange can help you meet your goals via our Monthly Accumulation Program. You choose the amount you want to save every month, and we send you that in form of gold or silver rounds or American Eagles. We can even enroll you in a convenient Auto Pay plan with a minimum investment of just $150 per month.

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Precious metals are still way below their highs from 2011, particularly silver! More customers than ever jumped on the opportunity presented in 2013 to add to their positions (or make their first purchases) before gold and silver resume their long march higher. And higher they will go.

We don't have a crystal ball, but we do certainly recheck our premises behind the case for diversifying into gold and silver. The case is stronger than ever. Our recent articles and podcasts lay it all out, and I hope you've been taking advantage of the high-quality content we produce each week to keep you informed.

As we close out 2013 we want to thank you for allowing us to play a small role in your life this year. We take the responsibility very seriously.

Well that will do it for this week, thanks for listening. Be sure to tune in to next week's Market Wrap podcast. We'll review the year that was in precious metals and look ahead to what might be in store in 2014 and beyond.

Until then, 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 accuracy and with top notch service. Have a great weekend, and here's wishing you a happy and prosperous New Year. We'll talk to you again in 2014.

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.