The Michael Fuljenz Metals Market Report: April 2012, Week 1 Edition
The first quarter of 2012 is now complete. The headlines say that stocks rose faster last quarter than in any opening quarter since 1998, but silver and platinum rose even faster than stocks, as measured by the S&P 500 or the Dow! Although gold is lagging the other two precious metals so far in 2012, gold has recovered after every downdraft in the last few months by rallying after each attack by the gold bears. Gold is still on a positive path for its 12th straight year, delivering better gains than any asset class.
- Gold 52 weeks ago (April 1, 2011): $1418
- Gold's average price during 2012: $1690.57
- Gold's London Low for 2012: $1590 on January 3
- Gold's London High for 2012: $1788 on February 29
Last Week In Metals: Gold was flat, but silver rose $0.89 (+2.8%), platinum rose $23 (+1.4%) and stocks rose by less than 1%.
Where is Gold Going Next?
Gold was fairly flat last week on the London exchange. In America, the most-active June gold contract on the Comex (the New York Mercantile Exchange) settled at $1672 per ounce, up 0.42% on the week. Silver closed at $32.484 an ounce, up 0.66% on the week - a slow-rising week, but we'll take any rise!
The first trading day of April began on a positive note. Overnight, gold edged higher on the first day of April, reaching $1673 in Asia. In New York on Monday morning, gold rose $12 (+0.7%) to $1681 as of 10:30 am, Eastern time. Silver is up $0.72, or 2.2%, and platinum is up $14, or 0.9%. Even on a good day like this, gold is growing slower than the other precious metals and slower than most stocks for the year so far. Over the long-term, however, gold has still beaten stocks for the last 15 years and more.
Looking at the month of March, gold stayed in narrow $85 range ($1635 to $1720) over the last month. In April, a positive development would be a ratcheting up of that range, to perhaps $1650 to $1750. If gold prices can hold above $1650, we may be in for a base-building period leading to higher prices during the more bullish months of late summer and early fall. Physical demand has been down in Asia, in part because of a strike by Indian jewelers over the April tax increase. We have also seen some net sales in exchange-traded funds (ETFs) from short-term traders, but gold is still up, despite that news.
Where will gold go next? Here are two expert opinions: Charles Nedoss, senior market strategist at Olympus Futures, said that $1660 will be a key support this week. If gold stays above $1660, that trend may lure asset allocators into gold this quarter, since investors will see that gold is trying to put in a short-term floor. If $1660 doesn't hold, then investors might hold off, hoping to buy gold at a lower price later.
Arnett Waters, the principal of A.L. Waters Capital, says the gold market continues to be underpinned by the ultra-loose monetary policy and stimulus from central banks. Friday's news that more money was put into a euro-zone bailout fund is positive for gold, he said. "I'm glad that they increased the firewall. But they're on a path to printing money and will be indefinitely." Waters predicts gold will be "trapped" in a trading range of $1,650 to $1,800 this quarter, but then it could rise to $2,450 by the end of 2012.
Inflation = the Slow, Inexorable Erosion of the Dollar's Buying Power
The Federal Reserve took over control of the value of the dollar 99 years ago, in 1913. Since then, the value of the dollar has fallen by over 98%, in terms of gold. Gold has risen from $20.67 per ounce to over $1660. Since the 1960s price of $35, gold has risen almost 50-fold. President Johnson took silver out of our coins in 1965. Since then, the inflation monster has been loosed, pushing prices up each year.
Anybody over 60 remembers what it cost to buy daily necessities and a few luxuries in 1962. At the local diner, a McDonald's (or similar) hamburger cost just 19-cents. A movie cost anywhere from 25-cents to 75-cents, depending on your age and the time of day. College tuition at a good university cost about $16 per semester hour times 30 hours, or $960 per year. A doctor's office visit might cost $7 by check or $5 cash. A gallon of gas was usually under 30-cents, but it fell down to 18 or 19 cents during a "gas war."
From a variety of sources, here are some typical prices from 1962 and their equivalent price in 2012:
| COST OF LIVING INCREASE | 1962 | 2012 | CHANGE |
|---|---|---|---|
| AVERAGE WAGE | $4,291 | $31,000 | +622% |
| NEW CAR | $3,125 | $22,500 | +620% |
| IVY LEAGUE TUITION (YEAR) | $1,250 | $42,000 | +3,260% |
| DOCTOR'S OFFICE VISIT | $5.00 | $60.00 | +1,100% |
| WOMAN'S HAIRCUT | $3.00 | $40.00 | +1,233% |
| POUND OF BACON | $0.79 | $4.77 | +503% |
| HOT DOG, FENWAY PARK | $0.35 | $7.00 | +1,900% |
| MOVIE TICKET | $.75 | $7.00 | +833% |
| GALLON OF GAS | $0.30 | $4.00 | +1,233% |
| FAST FOOD HAMBURGER | $0.19 | $1.00 | +426% |
| CUP OF COFFEE | $0.15 | $2.00 | +1,233% |
| DAILY NEWSPAPER | $0.10 | $1.00 | +900% |
| HERSHEY'S CHOCOLATE BAR | $0.05 | $1.00 | +1,900% |
| FIRST CLASS POSTAGE STAMP | $0.04 | $0.45 | +1,025% |
| OUNCE OF GOLD | $35.00 | $1,680 | +4,700% |
| OUNCE OF SILVER | $1.29 | $32.50 | +2,419% |
As you can see, gold and silver have risen far faster than most consumer items since 1962, so the metals have more than held their value. The values of gold and silver have risen faster than inflation since 1962.
American Coins Were Launched 220 Years Ago Today
On April 2, 1792, Congress passed the Coinage Act, which launched the U.S. Mint, using Thomas Jefferson's new decimal-based currency system, based on gold and silver weights. The Coinage Act authorized building the first Mint in America's capital, Philadelphia. President Washington soon named a top astronomer and mathematician, David Rittenhouse, as the Mint's first Director. Happy birthday, U.S. Coins.
Four Critical Do's and Don'ts when Selling Your Coins or Bullion
DO - Get an offer from the dealer who sold you your coins. Major dealers typically pay more for coins they sold than anyone else, and they pay in a reasonable amount of time.
DO NOT be misled by high pressure salesmen to sell your coins before getting a second offer.
DO - Expect to receive near melt value - or even a little higher - from major reputable dealers, when selling bullion coins or bars.
DO NOT pay someone 20% or more to buy your common American Eagles, Maple Leafs or bars, even if they come directly to your house. Unfortunately, I've seen numerous customers allow their bullion sales terms to be "combined" with their rare coins in terms of sales mark-up.
DO - Sell to dealers who have a positive literary reputation to uphold. Preferably, sell to a dealer who has won awards from the Numismatic Literary Guild or their regional press club.
DO NOT sell to someone who wants to scare you into selling your coins. I like the commercial that says "show me the Carfax." I say "show me the coin plaques." The next time some dealer shows you advertisements or charts on why you need to sell your collection, politely ask him to show you the proof that his writings have won any national awards.
DO - Verify the expertise and credentials of anyone to whom you sell your coins. Verify their memberships in organizations, like BBB, NGC and ICTA. Ask if they are a contributor to leading price guides like the Redbook. If a dealer represents himself to be a pricing expert, he should also be a respected contributor to at least one leading price guide.
DO NOT Take a dealer's word for all of his membership claims. Some dealers use logos when they are not members, so check at the sources: Check with BBB or NGC.
Low Mintage American Eagles
The American Eagle is moving into its second quarter century. American Eagles are allowed to be included in an IRA account because Congress made clear that American Eagles could be put into the retirement plan, contrary to the general rule. To the person who is looking for growth potential in rare coins, certain low-mintage Eagles could align well with your rare coin investment desires. Low-mintage Eagles are probably the ones with the best opportunity to acquire collectible value beyond their bullion content. There are no guarantees, of course, but you can be sure that collectors in the future will probably be bidding up the prices of rarer coins as compared to the more commons ones.
Metals Market Report Archive >
Important Disclosure Notification: All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Publisher's knowledge at this time. They are not guaranteed in any way by anybody and are subject to change over time. The Publisher disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein. Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability. All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions. Arbitration: This company strives to handle customer complaint issues directly with customer in an expeditious manner. In the event an amicable resolution cannot be reached, you agree to accept binding arbitration. Any dispute, controversy, claim or disagreement arising out of or relating to transactions between you and this company shall be resolved by binding arbitration pursuant to the Federal Arbitration Act and conducted in Beaumont, Jefferson County, Texas. It is understood that the parties waive any right to a jury trial. Judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. Reproduction or quotation of this newsletter is prohibited without written permission of the Publisher.
