Precious Metals Quarterly
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Summer 2013 Precious Metals Quarterly An Insider Report for Clients of Independent Living Bullion Capitalize on Swings in the Gold:Silver Ratio BY SETH VAN BROCKLIN Contributing Editor, Independent Living s precious metals prices look to recover this summer from the damage done in the spring, the $GOLD:$SILVER CME/CME © StockCharts.com A 12-June-2013 Close 64.05 Volume 3 Chg +0.12 (-0.19%) $GOLD:$SILVER (Weekly) 85 groundwork may be laid for a new multi-year cyclical 80 leg higher. Investors can use this period to position 75 70 themselves to get the most bang for their depreciating 64.05 60 buck without assuming undue risk. 55 50 In an up-move for the metals as a group, silver can be 45 expected to outperform gold. Silver, owned in physical 40 form, can deliver outsized returns with less risk than 35 precious metals mining stocks or any of the various derivative and leveraged methods of ownership. 2005 2006 2007 2008 2009 2010 2011 2012 2013 Why favor silver over gold? Let’s look at the recent even suggested that for those inclined to trade, they had history of the gold:silver ratio. Gold traded as high as an opportunity to swap out of silver and into gold – 85 times the prices of silver in late 2008. From there, with the aim of being able to switch the gold back into silver staged a massive rally, outperforming gold, and silver when silver got relatively cheaper versus gold. narrowing the gold:silver ratio to 32:1 by late April 2011. Silver proceeded to do just that, causing the gold:silver At that time, we advocated sheltering wealth in gold ratio to rise. As it turned out, the ratio rose higher instead of silver on an intermediate-term basis. We and for longer than we expected. As of June 2013, gold traded as high as 64 times the price of silver – a doubling from the 2011 lows. Inside This Issue: Silver’s Upside Potential Holders of Physical Bullion Is Greater Than Gold’s Undeterred by Paper Takedowns .............. 3 In my judgment, silver now represents the better buy ILB’s Exclusive Interview of the two metals – both on an intermediate-term and with Silver Guru David Morgan ............... 4 long-term basis. That’s not to say that you shouldn’t own Great Questions from Our Customers .......... 6 any gold. The metal of kings has practical portability advantages as a more concentrated form of wealth than Spotlight on Platinum Group Metals ........... 7 silver. And a freak event could potentially take gold back JULY SPECIAL OFFER: Gold, Silver, up to the 85:1 ratio reached during the financial panic of and Platinum Coins at Bargain Prices .......... 8 late 2008. But realistically, the freak event in the precious Continued on next page www.IndependentLivingBullion.com metals probably occurred this past spring. Boost Your Returns by Buying The bottom line is this: Now could be the last great the Metal(s) that Offer the Best opportunity you’ll have to reallocate your precious Relative Value metals holdings more heavily toward silver before the white metal begins to gain ground on gold. Last year, when platinum was selling at a rare discount to gold, Precious Metals Quarterly alerted readers When it does, it could do so explosively. The to the opportunity to buy platinum at compelling mathematical reality is that based relative value. It now trades at on historical precedent, there exists just a small premium to gold. a lot more potential in percentage “Silver offers the most While we expect this premium terms for silver to outperform gold upside potential of any to expand, the case for favoring than for gold to outperform silver. of the precious metals.” platinum versus gold is somewhat We’ve made the case that silver will less compelling than it was. return to the classic ratio of 1/16th the price of gold We also suggested its sister metal palladium. It has (perhaps even to 1/10th) before the major bull market since outperformed all the other precious metals and is over. This is the ratio at which silver was priced to shows a modest gain for 2013. As with platinum, the gold in various societies going back centuries. It’s also case for favoring palladium – at least versus gold – still the ratio that was hit at the last major bull market peak exists, but it’s somewhat less compelling than it was. in January 1980. At 1/64th the price of gold currently, silver would have to increase in value 4 times relative However, the case for silver, after having been beaten to gold in order to get there. While gold would almost down mercilessly in the futures markets in the first half certainly rise during the same period, silver could of 2013, is now even more compelling than the cases for outperform gold by 300% or more. platinum and palladium. Silver offers the most upside potential of any of the precious metals. Stock Up on Silver and Gold Automatically! Independent Living Bullion’s monthly silver and gold bullion accumulation program is extremely popular with customers. The minimum purchase is only $150! A program description and enrollment form is posted at www.IndependentLivingBullion.com. Monthly accumulation is a savvy, no-hassle way to protect and save your money. We can even set up bank debiting, so you never need to write a check! Whether or not you sign up for the monthly plan, you may make individual silver and gold purchases whenever you wish. Our premiums above the spot market price are minimal! Call 1-800-800-1865 or visit American Eagles www.IndependentLivingBullion.com today. and Rounds Offered! Precious Metals Quarterly Stefan Gleason, President published by Independent Living Bullion Co-Directors: PO Box 2599 • Eagle, ID 83616 Clint Siegner – [email protected] Mike Gleason – [email protected] Office: 1-800-800-1865 Secure Fax: 1-866-861-5174 Monthly Program – [email protected] 7:00 a.m. - 5:30 p.m. Mountain Time, Monday through Friday www.IndependentLivingBullion.com Copyright 2013 by Independent Living Bullion Precious Metals Quarterly 2 www.IndependentLivingBullion.com Holders of Physical Bullion Undeterred by Paper Takedowns BY CLINT SIEGNER CO-Director, ILB April’s carnage in the gold and silver futures markets gold and silver prices do not capped almost 2 years of underperformance. Those caught reflect well on the dollar. placing leveraged bets on higher gold and silver prices in While most Fed governors the futures market have recently been shrieking in agony – may privately prefer a weaker assuming margin calls didn’t already put them out of their dollar, they certainly do not misery. want precious metals prices to rise too far, too fast. The retail market for physical gold and silver bullion is a vastly different situation – for a variety of reasons. For Paul Craig Roberts, who Former Treasury official starters, virtually no one is selling. Bullion investors get served as an assistant Treasury Paul Craig Roberts argues to make their own choices about when to sell, without Secretary under President the Fed engineered the the added pressure of 10-to-1 leverage and brokers Ronald Reagan, analyzed the recent gold/silver takedown. demanding they put up more money. takedown in gold and silver prices in April. He made the following observations On the other hand, no one who incorrectly timed a and concludes the Fed was most likely behind the cash purchase of bullion rounds, coins, or bars has action: ever been forced to sell because of a margin call. 1) The estimated number of futures contracts Furthermore, the members of the general sold on Friday, April 12th, represented public who are buying physical gold and somewhere between 124 and 400 tons of silver tend to have a long-term outlook gold – a mind-boggling quantity. based on fundamentals such as negative real interest rates and ongoing money 2) Based on position limits, this would creation. Since the fundamentals require 14 traders with zero prior open inter- haven’t changed a whit, these folks often est each deciding to sell a staggering 40,000 view big price drops as an opportunity. They buy contracts… all at the same time. more while it is cheaper. In April and May, amidst the 3) No traders with legitimate long positions to panic and pain in the paper markets, Independent unload would dump such quantities all at once. Living Bullion had record numbers of customers The intent was clearly to knee-cap prices. calling and calmly placing orders to buy. If traders had been buying – not selling – there would Bullion investors also understand that putting money in now be an investigation à la the Hunt Brothers back in the futures markets is akin to gambling in a casino run 1980. But as far as we know, the Commodities Futures by the Mob. These markets are neither fair nor free. Trading Commission is not asking questions about these On one hand, large commercial banks throw their recent events. Instead, financial media pundits simply weight around – triggering short-term price moves warn people off investments in gold and silver – crowing and then trading them for profit. about volatility and the supposed end of the bull market. And on the other, is the Federal Reserve trying to As noted above, buyers of physical bullion aren’t engineer a “Goldilocks” rate of inflation – one that is persuaded. From individuals right on up to foreign not too hot and not too cold. Gold and silver’s sharp central banks, investors continue buying and voting rise in both price and prominence over the past decade “no-confidence” in the dollar.