The Michael Fuljenz Metals Market Report: April 2012, Week 2 Edition

Gold rose early last week, with London price fixings above $1675 on both Monday and Tuesday, but the Federal Reserve's minutes from their March 13 Federal Open Market Committee (FOMC) meeting were released later on Tuesday, sending stocks and metals down on the "news" (almost a month old!) that the Fed was not necessarily planning any new "quantitative easing" schemes, as of March 13! Gold dropped to $1621 the next day. Then, traders were not able to bid gold back up on Good Friday, when a weak jobs report sent bond yields down. However, this "bad news" should give gold a boost in the coming week.

• Gold 52 weeks ago (April 8, 2011): $1469.50
• Gold's average price during 2012: $1688.27
• 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 fell $31 (-1.9%), silver fell $1.16 (-3.5%), platinum fell $48 (-2.9%) and the Dow fell by 1.15%.

Gold Rises on Weak Job News - Even Though that Makes no Logical Sense!

Gold started recovering Monday morning in Asian trading based on the weak jobs report released Friday, when most gold markets were closed in America. The relatively low number (120,000) of new job gains in March revived expectations that the Fed might have to reconsider their decision not to launch "QE-3" (quantitative easing, phase 3). Spot gold rose over $10 to $1,642 in Asia and $1643.50 on the leading U.S. futures contract.

As for Friday's jobs report, don't believe everything you hear from the government or the financial press about how weak the U.S. economy seems. Bear in mind that the first monthly jobs number is usually revised higher in subsequent months, simply because it is impossible to count all the new jobs in a full month after just a few days following the end of that month. Also, notice that the privately-produced ADP jobs report for March revealed 209,000 new payroll jobs. The people at ADP produce paycheck software for many U.S. companies, so they know the full truth faster than government bean counters usually do.

The main point is that job growth is good for gold! The rise of gold depends partly on a growing base of affluent people who work for a living, save and store part of their wealth in gold. Therefore, it is good news when more Americans work and save! Only myopic traders think slow job growth is good for gold.

Americans Have Plenty of Disposable Income to Buy More Gold!

Speaking of misleading government statistics, here's another counter-intuitive lesson on weighing the daily financial news: Take note of what consumers actually do - their buying patterns - not what they say they will do, or what the financial pundits theorize about what they do. Last Tuesday, March cars sales were released, with astonishing gains by Chrysler and Volkswagen, with 34% sales gains, followed by GM and Nissan at 12% and Toyota at 11%. We also saw impressive 7% to 8% "same-store" sales gains in March for four leading retail chains announced last week: Target, The Gap, Macy's and The Limited.

How can Americans be doing so badly when store sales and car sales are doing so well? Manufacturing jobs and production are rising to meet this new demand. The March U.S. manufacturing index rose to 53.4, up from 52.4 in February (any number over 50 signals expansion), as 15 of 18 surveyed industries improved their manufacturing output. This simply doesn't happen in the middle of a "jobless" recession.

Here's a little-known secret about government statistics, as trumpeted by the financial press: The first press release is usually only half-baked, partial information. Wait 4-6 months to get the final number.

Here's a dramatic example: On February 29, 2012 - five months after the third quarter of 2011 ended, final revisions revealed that U.S. wages and salaries rose by $107.2 billion that quarter, over four times above the initial $24.8 billion. In fact, wages and salaries grew by a combined $197.3 billion in the third and fourth quarters, the biggest six-month gain since 2007. Seeing this revised data, the chief economist for Deutsche Bank concluded that "Consumers have a lot more firepower than we first thought."

Bottom Line: If Americans can buy so many more high-ticket cars and durable goods in department stores, these same Americans can also now afford to buy more gold and silver investments and collectible coins.

Good News: India's New Gold Import Tax May Be Repealed in May!

The 20-day strike by India's gold dealers may have yielded some dividends. Activism sometimes pays. India's Finance Minister Pranab Mukherjee has finally promised to consider ending India's new gold tax, which was implemented just one week ago, on April 1. The Indian gold market was basically closed for the last 20 days, so there should be a rush in demand as soon as the tax increase is cut sharply or even eliminated. (All this news came after the gold market closed in the West for Good Friday observance.)

The weekend edition of The Wall Street Journal reported that gold imports into India "have all but ground to a halt." Bachhraj Bamalwa, head of the All India Gems and Jewellery Trade Federation, said that he is "more than satisfied after meeting the Finance Minister," who told dealers that he would "fully satisfy" their demands for tax rollbacks. Bamalwa added, "We and all our associated members have decided to call off the strike until May 11 and expect some favorable announcement by the finance minister in Parliament by then." Gold sales may not take off until the tax repeal goes into effect, but this news should end the closure of jewelry stores across India, allowing them to sell the supplies they already have on hand.

Mr. Bamalwa said the strike cost India's gold industry nearly $4 billion in lost revenues, and it ended just in time for one of the biggest gold-buying seasons of the year, the Akshaya Tritiya festival, falling on April 24 this year. It is considered a lucky day to start a business or buy property, gold or other valuables.

Analysts Speak Out for Gold

As gold shuffles around for firm footing to launch another likely major rally, some big voices in the analyst world have been singing gold's praises. Don Coxe says this is the best chance of a lifetime to buy gold; Dennis Gartman quickly returned to gold after a brief defection; Marc Faber revealed he owns the biggest gold position of his life.

Don Coxe, strategy advisor for the BMO Financial Group, said, "In our view, we have entered the most favorable era for gold prices in our lifetime." Coxe cited government deficits that are running "beyond the forecasts of all but the hardiest goldbugs five years ago; central banks are printing money and creating liquidity beyond the forecasts of all but the most paranoid goldbugs a year ago." This leaves savers with two choices: hold their wealth in paper that is being steadily and systematically debased in value, or invest in an asset that can rise dramatically in paper money terms.

Newmont CEO: Buy Gold Before $2,000

Newmont Mining CEO Richard O'Brien told CNBC viewers to buy gold before it reaches $2,000 and inflation "comes roaring back." O'Brien sees flat production and escalating costs as being inhibitors to gold supply, adding to upward price pressures on gold. O'Brien didn't predict a timetable for $2,000 gold but said, "If you think about the next year, the next three years, the next five years we're in an upwardly sloping gold price environment." He said currencies are "going to continue to be cheap, and when inflation comes, it's going to come roaring back and gold will look like an asset class that people should own. Buying it now is the best time to buy it."

Sign of the Times? Ruger Runs Out of Guns

Whether or not it's a comment on the state of social order, the intriguing reality is that the fourth largest gun maker has run out of guns! Sturm, Ruger & Co. announced that after receiving orders in the first quarter of this year for over one million units (guns, in other words), it is being forced to suspend accepting any new orders. CEO Michael Fifer said: "Year-to-date, the independent wholesale distributors placed orders with the Company for more than one million Ruger firearms. Despite the Company's continuing successful efforts to increase production rates, the incoming order rate exceeds our capacity to rapidly fulfill these orders. Consequently, the Company has temporarily suspended the acceptance of new orders. The Company expects to resume the normal acceptance of orders by the end of May 2012."

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.

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