Nothing new to speak of in the gold markets except that it’s moving higher. We still overall see some short term dollar weakness and gold is running up towards its $1,200 resistance. Silver just hit $15 and could go up to the $16 resistance. You’ll recall these resistance levels from last year.
Watch the dollar for clues at this point. A reversal will come even though many are thinking we have bottomed out. I am not in that camp.
For those who can’t wait to purchase metals and think we have bottomed, and most of you know I recommend dollar cost average into your allocation has been my call for years, I offer the following advice from my forthcoming book, Illusions of Wealth.
Gold and Silver Coins and Bars To Buy
There’s only one type of gold and silver to buy; the lowest cost to spot.
For silver it is the 1 ounce rounds, 1 ounce bars, 10 ounce bars, 100 ounce bars and for IRA purchases 1000 ounce bars.
For gold it is 1 ounce bars, 10 ounce bars, 2nd place would be the Canadian Maple Leaf and last place the American Eagle (these are the 2 most popular coins).
What are the most popular coins in the U.S.? The American Eagle Silver and Gold coins.
When supply becomes tight because of fast drops in prices, gold and silver do not act like a stock where no one wants them. They actually attract buyers and the premiums move higher. Every month the suppliers to gold dealers have to order from the various mints to satisfy what they believe will be demand. They pay the current price when they purchase from the mints. If the prices fall quickly, the supplier is not going to take a loss so they raise the premiums to dealers who then have to charge more to investors.
Because of this high demand, suppliers have also run out of silver from time to time and delay the delivery of the metals, sometimes for up to 3 months. The creators of the metal during these gold and silver rushes simply can’t produce the product fast enough. Remember, this is at a time when prices are falling. Demand will be 10 times this in the future when more and more discover that their purchasing power is being cut by owning a depreciating currency. For example; You have a stock worth $10. If you cashed that stock in you would get a $10 bill and would buy $10 worth of a product. If the value of the currency fell by 10%, you would still get $10 but it would only buy you what $9 could buy before the currency declined.
Gold and silver, over time, have held up quite well with their purchasing power. And as I said, there are times when currency is more valuable and times when gold and silver are. But as time marches on, there is nothing our government is doing to solve their spending habits and reduce debt. It just gets worse and worse. It is this perception people have of the government that could eventually pour over onto the dollar (as it does with any other currency where the Debt to GDP is out of control) and when citizens start to lose faith in currency, gold and silver are one of the few places to turn to.
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
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