Carving a Bottom: Silver Retests Key Low, Rebounds

But Fundamentals Will Ultimately Determine Fate of Precious Metals

Mike Gleason Mike Gleason
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April 25th, 2014 Comments

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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.

Mike Gleason:

Welcome to this week's Market Wrap Podcast, I'm Mike Gleason.

Well, precious metals prices are recovering this week after taunting investors with the threat of a breakdown. Silver in particular looked perilously close to breaking to new lows. In overseas trading before the U.S. market open on Thursday, silver prices nearly breached the $19 level. But by Thursday's close here in the states, silver managed to rally back up to $19.75 an ounce.

In fact, yesterday's spike down to the important $19 level -- followed by a strong rebound to a higher close for the day is considered a good sign for the bulls. Known as an outside reversal pattern, the spike down and close higher yesterday is evidence that the $19 level is as low as silver prices will go. Of course time will ultimately tell if that will in fact hold true. Bulls would still like to see silver at least get above the 50-day moving average at $20.50, and better yet $21 before starting to talk about an all clear signal.

As of this Friday morning, silver comes in at $19.78, good for a very slight weekly gain. Meanwhile, gold trades at $1,301 per ounce, up about 0.5% for the week. The platinum group metals are also showing some strength late this week. Platinum has poked above the break even point for the week now thanks to a small rally this morning and currently comes in at $1,422 an ounce, while the streaky PGM metal palladium moved back above the $800 level on Thursday and currently trades at $807 per ounce.

Will precious metals reassert themselves as a safe haven from rising geopolitical tensions in Russia and the Far East? Perhaps, but investors would be wise to take a step back and assess the bigger picture and the more long-running trends that will be driven by global supply and demand fundamentals.

In the precious metals markets, South Africa is key to understanding supply, especially for platinum and palladium, while Asia is a key driver of the demand outlook. Strikes at South African mines continue to crimp mining production. At current precious metals prices, mines cannot afford to pay the higher wages that workers are demanding. It seems that both sides of the wage dispute want and need higher prices for the product they mine, and that may be the only thing that ultimately allows for a resolution of the standoff.

Turning to the major drivers of future demand, China became the world's top consumer of gold last year and may continue to occupy that spot for the foreseeable future. Chinese gold jewelry fabrication demand surged to a record 872 tones in 2013. According to reports, China's annual demand for gold could climb 20 percent by 2017 as its growing middle class seeks status symbols in the form of gold jewelry. In many Asian cultures, gold and other tangible assets are also traditionally sought as sources of family wealth and long-term financial security.

Jewelry certainly is one way to hold precious metals. But if your objectives are primarily financial rather than aesthetic, rings and necklaces aren't the most efficient way to accumulate. Gold jewelry tends to be less pure than bullion coins, rounds, and bars. That might not be a huge problem if it was priced accordingly. But jewelry tends to sell at heavy mark ups compared to the actual metal value. The market is also less liquid, meaning if you need to sell your jewelry you'll have trouble determining what fair market value is and potentially even more trouble finding a jeweler or scrap gold dealer who is willing to pay it. Another downside to jewelry is that it's more likely to be lost or stolen to the extent that it is worn or carried outside of a secure safe.

Similar problems exist with diamonds, whose value depends on grade and other subjective factors. The diamond market is also being flooded with high-quality lab-grown diamonds. To the naked eye, they are indistinguishable from naturally formed diamonds.

So far, no man-made substitute for precious metals has been devised, despite centuries of efforts by alchemists and peddlers of fool's gold. Gold and silver exist in finite quantities in the earth, and will only become scarcer and more difficult to mine going forward as the easy-to-get metal has mostly been retrieved.

That's the big picture.

In the near term, markets can gyrate for any number of reasons that have little to do with fundamentals or for no discernible reason at all. As always, we urge investors in these markets to maintain a long-term perspective and not get shaken out or intimidated by near-term news stories or counter-trend price volatility.

If you do want to take advantage of today's oversold prices we want to remind you about a couple of exciting new items in the Money Metals product lineup.

First off the 50-gram gold Combi bar made by Valcambi offers bullion investors a unique combination of fractional gold at an uncharacteristically low premium. The Combi bar includes 50 breakable 1-gram sections contained in a single bar -- at a price of about 8.5% over the melt value. A single gram of gold is worth just over $40 at current gold prices, making the Combi bar the most economical way to obtain little pieces of gold, significantly less than buying 1-gram gold bars by themselves, or even 1/10-ounce gold coins – which are more than 3 times larger.

As an incentive to pick up this new gold product, we're offering the same low premium on Valcambi 50-gram Combi bars orders, regardless of whether you buy just one or a whole box of 25.

In terms of the poor man's gold the ultimate fractional pure silver bullion product is our new 1/10-ounce Walking Liberty silver round. A tenth of an ounce of silver is nearly 1/20th the value of a single gram of gold and hundreds of Money Metals customers have been snatching up these little beauties since we introduced them a little more than month ago. Packaged in tubes of 50, or five ounces, these tenth-ounce Walking Liberty silver rounds are stamped with their weight and purity and are available for as low as $2.43 each.

For more information, or to place an order for these or any other products we carry just visit our website at -- or give us a call and talk to one of the most knowledgeable precious metals specialists in the entire industry by calling 1-800-800-1865 during normal business hours. Our team is simply here to guide you and you will never experience pressure of any kind.

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.


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 or call 1-800-800-1865.

Mike Gleason

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.