8.5.11 WEEKLY RECAP

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Gold has moved opposite of the S&P 500 since February. The chart above gives a graphic example of the negative correlation between Gold and one of the other asset classes, stocks. Since February, economic stress in Europe and the U.S. has pulled the S&P 500 down while Gold moved higher.

After the Democrats and the Republicans came to an agreement and prevented a default on our nation’s debt, conventional wisdom says the market would boost as business and investor confidence increased. However, today’s reality is that the stocks ended low in the face of uncertainty over the debt deal. The terms include a $400 billion increase in the debt limit immediately, a $500 billion increase this fall, immediate spending cuts of $900 billion, and the creation of a Congressional commission to identify another $1.2 trillion in spending cuts.  Former Under Secretary of Commerce Robert Shapiro described these terms as “a mindless way to run a government.” J.J. Kinahan, managing director with TD Ameritrade, was quoted as saying, “Debt deal or no debt deal, we have some fundamental problems in the economy that we’re not dealing with.”

Monday’s extremely disappointing manufacturing report and last week’s revision of first-quarter growth estimates caused this change in focus. More bad news for the economy was released Tuesday; even though incomes rose in June, consumer spending fell (along with consumer prices). With most economists’ expectations of a credit rating downgrade from the top-notch AAA rating, stock futures were down and investors flocked to safe havens including Gold, which hit new record highs this week before falling victim to the massive selloff affecting all markets.

The stock markets are viewing a recession as likely as prices have continued to decline; stock prices hit their lowest points in almost two years. The concern has driven a number of investors to Treasuries, which is causing inflation concerns with the Swiss Franc and Japanese Yen. Mike Ryan, Chief Investment Strategist at UBS Wealth Management Americas, said Thursday, “The mood right now is gloomy…The burden of proof is for better data that show the economy is not falling into recession. Tomorrow’s payroll report is crucial. If we see another disappointment, the stock market will have significant downside from here.”

The highly anticipated payrolls report was released this morning; it indicated an increase of 117,000 jobs in July. The unemployment rate fell .1% down to 9.1%. These numbers were better than expected which finally brought some relief to Wall Street after two days of tension. Gold gave up early gains amid the news but one analyst says that South Korea’s recent purchase of Gold signals that it’s still not too late to buy Gold. An executive of one company stated that South Korea’s purchase is “significant, as it represents the first purchase of Gold by the East Asian country in over a decade. It would seem South Korea has joined the ranks of those countries that have lost faith in the U.S. dollar … it is no coincidence that many of these central banks are from emerging-market economies. Many of these countries have experienced the grim reality of enduring a currency crisis first-hand.”

WEEKLY SPOT PRICES

Gold:
Spot Gold prices opened this week at $1,628.00. The high was on Thursday, Aug. 4th at $1,684.90, while the low for the week occurred on Monday, Aug. 1st at $1,608.20. Gold ended the week up $22.30 at $1,650.30. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Silver:
Spot Silver prices opened this week at $39.95. Silver reached a high of $42.30 on Thursday, Aug. 4th, while this week’s low for Silver occurred on Friday, Aug. 5th at $37.56. Silver ended the week down $1.93 at $38.02. The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum:
Spot Platinum prices opened this week at $1,781.90 and ended the week down $66.90 at $1,715.00. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium:
Spot Palladium prices opened this week at $832.30 and ended the week down $90.30 at $742.00. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week.

 

Platinum American Eagle Coins

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Released in 1997, the Platinum American Eagle coin is the only investment-grade platinum coin from the U.S. Mint. Since its introduction, the Platinum Eagle has become one of the world’s most widely-traded platinum bullion coins because of the patriotic design and platinum value. The obverse design celebrates freedom and opportunity with a portrait of the Statue of Liberty.  The reverse design is unique in that it changes each year; strength and security are portrayed in the theme of the American eagle. 
  
APMEX features the Platinum American Eagle coins in 1 oz., 1/2 oz., 1/4 oz., and 1/10 oz. denominations as well as uncirculated, certified, and proof conditions. Offering a wide selection of platinum products, APMEX can help you establish a platinum portfolio. Eligible for placement in precious metals IRAs, Platinum American Eagles can act as building blocks for investment portfolios. Start building your Platinum investment today!

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Should the Governments Buy GOLD?

 

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The World Gold Council reports that the world’s central banks hold roughly 29,000 tons of Gold. Photo by Richard Perry/ New York Times.

 (Article reprinted from The New York Times,  Aug. 2, 2011.)

 

 Introduction

Private investors and central banks have scrambled in recent years to stock up on gold. This summer, they drove the price over $1,600 an ounce for the first time ever.

For millennia, people have killed and died in pursuit of gold. In the recent downturn, so many investors have been eager to buy gold that it is sold in vending machines. Governments are as captivated by it as individuals are: for nearly a century, many nations’ central banks have stashed hoards of gold bullion in a vault at the New York Federal Reserve.

When asked recently why central banks hold gold rather than, for instance, diamonds, Ben Bernanke said “tradition.” Given the long history of humans considering gold valuable, does it make sense to continue this tradition, or should central banks focus on other assets with more intrinsic value?

Debater 1:   It Had to Be Gold

By Sanat K. Kumar, who spoke to “Planet Money” about gold in February,  is chairman of the Department of Chemical Engineering at Columbia University.

Anyone trying to think of some other element or compound to take the role of gold should consider why it has been used as a currency since time immemorial. If we are looking for something to be useful as currency, we need a commodity that meets a few requirements: First, its composition must be easy to define. It should also be relatively immutable, but not so inert that it cannot be purified into the form that is acceptable as an asset. It should be rare but not so rare that it is impossible to find. It is easy to see how ancient civilizations came to consider gold a magical, mythical material: it satisfied all these demands.

Gold is relatively unreactive, but it has a low enough melting point that it could be processed easily by past civilizations. In contrast, something like platinum, which is also relatively inert chemically, has a melting point of 3,000 degrees Celsius. This made platinum almost impossible to process until relatively recently. Similarly, gold is rare in the earth’s crust, but there is enough of it to go around.

Still, times have changed. Let us consider the issue today: Processing is no longer a problem. We can readily purify elements like platinum, rhodium and others, or we can synthesize any desired compound to practically any degree of purity. The issue of contamination is also no longer germane.

Thus the only modern requirements for an asset are rarity and immutability — and a suite of compounds and elements would qualify. So gold is no longer the one and only thing that could be used as an asset. Indeed, Ben Bernanke is correct — the argument for it is simply tradition. The value placed on gold comes from an emotional attachment handed down to us from our ancestors.

Debater 2:  A Proven Asset

By Ron Paul, a United States representative from Texas who is running for president for the third time, is the founder of Campaign for Liberty. He is the author of “The Revolution: A Manifesto” and “End the Fed.”

No asset has intrinsic value. An object is only valuable insofar as it is able to satisfy the wants and needs of individuals, and its value is determined by the subjective judgments of individuals. No other commodity has been as universally valued over time and across as many societies as gold.

Gold satisfies all the properties of money. It is durable, portable and easily divisible into bars and coins that share uniform properties. It is easily recognizable through visual, tactile, chemical and other means. Gold’s value and purchasing power are stable over time, as its supply grows slowly and it cannot be created ad infinitum as paper or digital currency can be.

Because of these properties, gold has always been considered an ideal store of value and medium of exchange, and central banks have always sought to hold it because it is the ultimate monetary backstop. When society and the monetary system break down, even if nothing else is accepted as a medium of exchange, gold still will be.

The Federal Reserve does not actually own gold; it only holds gold certificates as an asset. It is the Treasury Department that claims ownership of United States gold reserves. Historically, gold itself circulated as money, in the form of coins. Paper currency began to circulate for the sake of convenience, but these were only promissory notes that could be redeemed in “lawful money,” i.e. gold, on demand. Once the use of paper currency was established and most gold was held in bank vaults, the government seized the gold and left the people holding paper that could no longer be redeemed for gold. The paper currency was immediately devalued by 40 percent, reducing Americans’ purchasing power by an equal amount.

I would prefer to see the government not hold the gold it does. It should be returned to the people from whom it was taken. There is no need for the government to hoard gold or to keep gold in vaults as backing for currency; gold itself should be the currency that circulates.

 

Debater 3:  Gold Fever Is a Symptom of Inflation Fears

By Allan H. Meltzer, a visiting scholar at the American Enterprise Institute and the Allan H. Meltzer University Professor of Political Economy at the Tepper School of Business at Carnegie Mellon University, is the author of “History of the Federal Reserve, Volume I: 1913-1951″ and “Volume II: 1951-1986.”

Gold was money through most of our history, although after 1934 it was restricted to settlements between central banks. Its role in international payment settlements was further restricted in 1968, and it ended in 1971 when President Richard M. Nixon embargoed gold sales and floated the dollar exchange rate. After 1971, several central banks sold some of their gold stocks because the only revenue from holding gold is the speculative return if the gold price rises. After all, gold is no longer money, and holding it earns no interest.

Gold is a commodity with a unique history. It allows individuals to readily transport large monetary values, so it has long been favored by refugees. People who fear inflation or confiscation of wealth buy gold, expecting it will be stable or rise enough to protect the holder. That was true for European refugees in the 1930s, and French and Indian citizens have long been famous for holding gold.

Today, uncertainty about the future financing of large U.S. budget deficits and inflationary Federal Reserve policy are increasing the demand for gold. People in China and other nations with inflationary policies are also stocking up on it. Saudi Arabian sheiks protect part of their wealth by holding gold.

The modern frenzy for gold is a symptom of a fundamental concern: inflation. The world would benefit from an agreement by major central banks in Europe, Japan and the United States to maintain zero inflation. China could join after it removed its exchange controls. That agreement would allow other countries to fix their exchange rates and “import” low inflation. The world would have both more stable prices and more stable exchange rates.

The unrestrained U.S. monetary policy since we abandoned gold has not provided stability.

(End of reprint)

Follow the example of the central banks around the world; add Gold to your investment portfolio. APMEX is one of the most trusted and largest dealers of Gold and precious metals. APMEX maintains one of the world’s largest selections of precious metal products, including the popular Gold American Eagle Coins and the Gold Canadian Maple Leaf Coins.   

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7.29.11 WEEKLY RECAP

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The eyes of the world are on Washington while Gold spot prices are at record-highs.  Investors all over the globe have a stake in the outcome of the debt ceiling negotiations.  With each passing hour, the nation moves closer to a crisis and anxiety builds.  Markets reflected that anxiety this week. Precious metal prices are up due to safe-haven buying strategies and stocks are down sharply.  In fact, the Dow Jones Industrial Average is set for its largest weekly decline in over a year, while Gold pushed to record high spot prices three times this week.

In Hong Kong earlier this week, Secretary of State Hillary Clinton spoke to Chinese investors. She spoke reassuringly that “political wrangling” is a part of democratic problem-solving. She explained that the U.S. is working towards resolving the disagreements and improving the country’s long-term fiscal outlook. She also framed the debt debate as a sort of bump in the road.

The partisan tactics being employed by U.S. political party leaders became clear on Wednesday when both President Obama and House Speaker John Boehner made televised addresses.  President Obama clearly showed that the two sides are no closer to an agreement that would allow the U.S. to raise the debt ceiling in order to avoid what most analysts describe as a devastating default. “For the first time in history, our country’s triple-A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet,” he said in remarks late Monday. Obama was quite critical of the Republicans’ unwillingness to compromise but he made it clear that he expects a compromise package on his desk this week.  

In his rebuttal, House Speaker John Boehner pointed the criticism back towards the President and the Democratic Party. He categorized the Democratic plan as “full of gimmicks.” There is still the expectation that an agreement will be reached, albeit a short-term one. Their concern is that the credit rating agencies may still downgrade the U.S. credit rating if they see no significant steps taken to reduce long-term debt.

Another concern is the Commerce Department data that reports any economic growth we were experiencing had actually started to wane late last year, not this year as a number of economists’ data implied. Previous reports had the economic growth at 1.9% during the second quarter, but in actuality it only grew 1.3%. According to Ryan Sweet, a senior economist at Moody’s Analytics, “The economy essentially came to a grinding halt in the first half of this year…We did get side-swiped by some temporary factors which are fading, but it raises some concerns about the sustainability of the recovery.”

WEEKLY SPOT PRICES

Gold:
Spot Gold prices opened this week at $1,600.60. The all-time record high was on Friday, July, 29th at $1,637.50, while the low for the week occurred on Monday, July 25th at $1,600.60. Gold ended the week up $27.40 at $1,628.00. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Silver:
Spot Silver prices opened this week at $40.16. Silver reached a high of $41.47 on Wednesday, July 27th, while this week’s low for Silver occurred on Friday, July 29th at $39.30. Silver ended the week down $0.21 at $39.95. The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum:
Spot Platinum prices opened this week at $1,799.00 and ended the week down $17.10 at $1,781.90. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium:
Spot Palladium prices opened this week at $807.90 and ended the week up $15.40 at $832.30. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

 

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In 2007, the U.S. Mint released the first four coins in a series of Gold First Spouse Coins. These coins are the government’s first  1/2  oz. 24-karat gold coins. They are also the first commemorative 1/2 oz. Gold coins. With a face value of $10, these .9999 fine Gold coins are minted and released annually in the order the First Ladies served in the White House. The First Spouse Coins are minted in Proof and Uncirculated condition. Each First Spouse Gold Coin will coincide with the release of the four annually circulating Presidential $1 Coins.

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A Special Message from Michael Haynes, CEO of APMEX.

 

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 >>>WATCH THE VIDEO <<<

With the looming debt ceiling crisis, Michael Haynes, CEO of APMEX, offers his unique perspective about the global and U.S. economies in these uncertain times and highlights the importance of diversifying your investments. As CEO of one of the world’s largest and most trusted online precious metals dealers, his insight comes from more than 30 years in the precious metals industry.

Keep up with APMEX news throughout your week with subscriptions to the

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