Metals Market Report Archive

The Mike Fuljenz Metals Market Report

The Michael Fuljenz Metals Market Report: December 2012, Week 3 Edition

Gold fell below $1700 on Thursday, after the Federal Reserve announced an expansion of their current monetary policies into 2013. There was widespread misunderstanding of the Fed's intentions as traders sold their Gold ETFs. Gold rallied to $1697 on Friday and near $1700 on Monday's opening, but the metals are clearly suspended in "limbo" as the year's end approaches. Barring any sudden and sharp move down in the next 10 trading days, gold will close 2012 with its 12th straight rising year, with silver and platinum exceeding gold's gains, growing at double digits, with prospects for more gains in 2013.

Global Monetary Easing Should Push Gold Further Up in 2013

Last Wednesday, the Federal Reserve promised to continue QE-3 (up to $40 billion per month of bond buying) at least until the unemployment rate reaches 6.5%. They also added $45 billion in monthly bond-buying under "Operation Twist" (an attempt to lower long-term rates by using short-term Treasury notes to buy long-term bonds). Normally, this amount of added liquidity would elevate gold's price, but many investors interpreted this new 6.5% jobless limit as potentially less inflationary than the Fed's previous policy, so gold investors on Wall Street unloaded their gold ETFs Thursday morning. However, they may be taking the Fed's words too literally. The Fed will likely keep changing the goal posts as time goes on.

The Fed has already promised to keep their near-zero interest rate policy (N-ZIRP) through at least mid-2015, further adding to the luster of gold, since gold does not have to compete against high returns for cash. In recent months, the Fed's long-term "easy money" regimen has been spreading around the world. The European Central Bank (ECB) is now headed by a more inflationary Italian, Mario Draghi, who is actively imitating the Fed by buying up euro-bonds. And now, the new head of the Bank of England, Mark Carney, has said that he favors large and open-ended "quantitative easing." Japan is also following suit, so the world's four most powerful central banks are all aligned behind more monetary inflation.

U.S. Investors are Buying More Gold Coins after the November Election

The re-election of Barack Obama as President has led to some surprisingly strong sales in both guns and gold. Gun sales soared last month, as orders overwhelmed inventories, and we saw a similar trend in our business - a surge in demand for numismatic and gold bullion coins to our mostly-conservative collectors and investors. Supplies of quality rare gold coins on the market have been significantly reduced, many prices increased and major dealers reported more million dollar sales days to me in November then in any other month this year.

Nationally, sales of U.S. American Eagle gold bullion coins soared in November. During the first 10 months of 2012, Eagle sales averaged just 54,000 ounces of gold per month, but in November of 2012, Americans bought 131,000 ounces of Gold Eagles, more than double the previous monthly average.

The Dollar Is Falling Again, But So Is Every Other Major Currency

Due to the Fed's new monetary easing plans, the dollar declined further last week. Despite Europe's woes, their euro is beating the pants off the dollar again, rising above $1.30 last week and to almost $1.32 early this week. This does not mean the euro is "strong" but that it is slightly less weak than the dollar.

As 2012 nears its conclusion, the dollar is ending a roller-coaster currency year by dipping slightly below break-even against most currencies. Through December 14, the dollar is down 1.5% to the euro, 2.1% to the Swiss franc, 3.4% to the Canadian and Australian dollars, 3.9% to the British pound and 4.6% to the Russian Ruble. By contrast, the dollar has advanced to the Brazilian real, Japanese yen and Indian rupee.

What this means is that GOLD has beaten all of the major currencies in which it is traded around the world. There is a "race to the bottom" among the varieties of paper money around the world in 2012.

Gold's 2012 Gains in 12 Currencies (Through December 14, 2012)

Brazilian real +20.5%
Japanese yen +17.1%
South African rand +14.9%
Indian rupee +10.7%
U.S. dollar + 7.8%
Chinese yuan + 6.5%
The Euro + 6.2%
Swiss franc + 5.6%
Canadian dollar + 4.2%
Australian dollar + 4.2%
British pound + 3.6%
Russian ruble + 2.9%

While the world's currencies keep over-printing their paper, gold's annual winning streak continues.

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