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Gold/Silver Poised for Short Squeeze as Dow Falls
Platinum Miners on Strike, Fueling Supply Concerns
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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, gold and silver got a boost from some bad news on Thursday. Disappointing earnings reports coupled with weak economic data releases in the U.S. and China prompted investors to rotate out of stocks and into safe havens.
Gold prices gained $26 on Thursday – a 2.1% move – to close at a six-week high of $1,264 per ounce. Silver also gained on the day, but not enough to erase losses suffered earlier in the week.
Silver prices continue to get whipsawed around the $20 level. Whenever prices poke above $20 per ounce, sellers have stepped in to push them back down. That, in turn, attracts buyers who pounce on the opportunity to buy silver at spot prices below $20.
So essentially, the silver market remains in a stalemate between the bulls and bears. But we continue to see signs of pressure building for a big upside move in both silver and gold once prices break through technical resistance levels.
For now, the market is giving investors a great opportunity to accumulate ounces on the cheap. This is especially the case with silver, which has been beaten down the most over the past couple years and remains the most depressed of any precious metal. As of this Friday morning recording, silver trades at $20.20. Meanwhile, gold is adding modestly to its gains from yesterday and comes in at $1,269 an ounce, up about 1% on the week. There are strong indications that a close above $1,270 could fuel a short covering rally that takes gold over $1,400.
The other big news this week was platinum.
Another labor union strike in South Africa this week is threatening production at the world's largest platinum mines. An estimated 70,000 workers have walked off the job, demanding higher wages. The strike will cost the world's three biggest platinum producers millions of dollars per day in lost revenue. And if it persists, it could result in supply shortages of platinum and palladium. More than two-thirds of all platinum production comes from South Africa.
So far, platinum and palladium prices haven't been heavily impacted by the work stoppage. But even if it's quickly resolved through some sort of compromise on the wage increases the strikers are demanding, the future is one of rising labor and rising all-in production costs. This trend will tend to put upward pressure on platinum group metals prices going forward.
Platinum currently goes for $1,436 an ounce, actually down close to 2% on the week. Palladium trades at $745 and is off about 1% week over week.
Many precious metals analysts expect platinum and palladium to outperform gold this year. That could well be the case, especially if automotive demand for platinum and palladium picks up.
But gold continues to serve as the primary outlet for investors who seek shelter from financial assets as perceptions of risk increase. Many investors were disappointed and confused that gold prices didn't rise along with stocks in 2013, despite all the crazy monetary stimulus we've seen from the Federal Reserve. But gold is valuable to investors who seek diversification precisely because it doesn't march in lockstep with stocks and bonds. Gold's potential to move in the opposite direction of stocks was demonstrated yesterday, when it rose strongly as the Dow lost 176 points.
The gold price would be much higher than what it's now quoted at if spot prices more accurately reflected investment demand. The reason they don't is because physical demand gets diverted into derivative instruments and unbacked IOUs on an enormous scale.
If a small minority of the people who THINK they own gold tried to take possession of it in physical form, all hell would break loose. Most of the gold that gets traded and gets counted on the books of hedge funds, commercial banks, and central banks as assets doesn't actually exist free and clear in inventories. For example, the German government is trying to get back the gold it supposedly has on deposit in the United States, but it is having difficulty doing so.
Former U.S. Assistant Treasury Secretary Paul Craig Roberts weighed in on the issue this week in an interview with Greg Hunter.
Paul Craig Roberts:
Paul Craig Roberts: In fact in Germany asked for this delivery, I think last year. The Fed said, "no, but we will give you over the next 7 years, we'll give you 300 ton of your gold. So, we'll give you back 20 percent of what you trusted us to keep for you over the next 7 years." But they're not even able to do that. We see the same thing. The stocks of gold at the Bank of England seem to be disappearing. The stocks of many of the gold trusts such as GLD are being looted by the bullion banks who buy up shares, convert them into gold. All this gold is disappearing into Asian markets in order to meet the purchases of China and India and other countries. The entire West is being drained of gold.
In closing, I strongly urge all precious metals investors and anyone thinking about investing in precious metals to insist on obtaining product in physical form. If you're wary of holding too much valuable metal in your home or a bank safe-deposit box, consider a secure storage facility where your holdings won't be co-mingled or pooled with those of others.
A friendly Money Metals Exchange specialist can point you to some well-vetted bullion storage providers, including ones that are approved for precious metals IRAs. Just call us during normal business hours at 1-800-800-1865.
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 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 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.