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In the precious metals markets this week . . .

GOLD:
Monex spot gold prices opened the week at $1,196 . . . traded as high as $1,247 on Wednesday and Friday and as low as $1,194 on Monday . . . and the Monex AM settlement price on Friday was $1,229, up $33 for the week. Gold support is now anticipated at $1,217, then $1,210, and then $1,192 . . . with resistance anticipated at $1,250, then $1,275, and then $1,300.

SILVER:
Monex spot silver prices opened the week at $18.53 . . . traded as high as $19.83 on Thursday and as low as $18.45 on Monday . . . and the Monex AM settlement price on Friday was $19.19, up $.66 for the week. Silver support is now anticipated at $18.92, then $18.69, and then $18.40 . . . and resistance anticipated at $19.42, then $19.90, and then $20.52.

PLATINUM:
Monex spot platinum prices opened the week at $1,695 . . . traded as high as $1,751 on Wednesday and as low as $1,687 on Tuesday . . . and the Monex AM settlement price on Friday was $1,716, up $21 for the week. Platinum support is now anticipated at $1,705, then $1,685, and then $1,645 . . . and resistance anticipated at $1,755, then $1,790, and then $1,810.

PALLADIUM:
Monex spot palladium prices opened the week at $528 . . . traded as high as $549 on Wednesday and Thursday and as low as $515 on Tuesday . . . and the Monex AM settlement price on Friday was $527, down $1 for the week. Palladium support is now anticipated at $505, then $492, and then $465 . . . and resistance anticipated at $555, then $579, and then $605.

The European Union and the International Monetary Fund’s $1 trillion loan package and sovereign debt purchase program (essentially the European version of TARP) may have temporarily eased concerns over the European credit crisis and stabilized markets across the globe, but incurring more debt to repay debt is a temporary fix and will likely lead to a new set of problems down the road. One of the main concerns is that the quantitative easing and debt monetization planned could mean added massive inflationary pressures to the global economy that has already seen a record jump in money from past efforts to combat the financial crisis and recession.

But while the proverbial piper has to be paid later, expectations for potentially rampant inflation is tailwind for an asset that we have long recommended. That of course, is gold. The record price for gold (set, by the way, only last December) was broken yesterday, but the yellow metal set another new high today and should repeat the feat more times this year as the $1,300 mark could easily be eclipsed with all the tailwinds for the metal.

While equity markets teeter-tottered over recent weeks, first sliding and then staging a massive one-day rally on Monday fueled by euphoria over the European bailout, gold has been a consistent performer, highlighting its defensive properties in addition to its strong fundamentals during inflation. In the last two and a half weeks, not even including today’s action, gold prices have climbed 6.5 percent, compared to a 5 percent drop in the S&P 500 index over the same period.

Gold’s recent strength, of course, is just part of the overall long-term bullish trend we have anticipated. The only scenario in which gold underperforms is during periods of strong growth and low inflation such as we experienced in the 90’s, a not-very-likely scenario to repeat in today’s world. Although gold prices have gained good ground in recent trading, gold has by no means reached its ceiling. Expect some temporary corrections along the way, but the trend is clearly up and you definitely want to have a mix of gold and gold miner stocks. Please see our various portfolios for recommendations.

There also has been ongoing consolidation in the sector, which points towards the value that larger miners see in their smaller peers. Newcrest (NCMGY) reached a cash-and-stock agreement to buy Lihir Gold (LIHR) for A$9.5 billion in early May. Under the terms of the deal, Lihir shareholders will receive Newcrest shares plus cash considerations. Besides becoming the fourth largest gold miner in the world (and the largest in the Asia Pacific) in terms of reserves by way of the merger, the acquisition also makes sense for Newcrest because it diversifies Newcrest’s portfolio with more foreign assets not subject to the new proposed 40 percent tax on miners’ profits—Lihir’s main mine is located in Papua New Guinea. Lihir shareholders get the benefit of a premium for their shares (which had already rallied sharply on a previous offer), as well as shares in the new company. We view the merger as a positive for Newcrest, while it also underscores the value of gold reserves in general.

Until next week,

Stephen Leeb, Ph.D.
Editor
The Complete Investor

Silver Price Jumps to 2010 Peak

Silver has taken off since last Thursday as growing concerns over Euro Zone debt pushed risk adverse investors away from paper currencies and into the precious metals. This flight to safety and the global surge in economic activity have sent silver to a recent peak of $18.89 an ounce, touched yesterday. The precious metal’s previous high was reached last December.

Concerns that Europe’s strides to keep Greek debt in check would fall flat permeated the global markets. The resulting dive by stock indices and high market volatility drove investors to safe-haven investments, including silver.

Silver has enough momentum to resist downside from the latest announcement that Mexico would ramp up silver production. With the market focused on the long-term outlook, recent trends in physical supply have had limited influence on current day prices.

For the July contract, the metal is getting critical support at $18.595, a level analysts say could drop to the $18.50 level if the Greenback holds its strength and the US equity market turns negative. In the near-term, the largest risk the silver market faces is a mass liquidation. In order for this to happen, the US equity market would have to be on the brink of collapse, and the Euro Zone crisis would have to worsen. Last night when fears over the Euro Zone hit the markets, a significant decline in stocks of 1.2 million ounces happened overnight. Upon market opening, silver still held support at $18.55 an ounce.

The opposite, optimistic outlook is just as likely to hit the silver market. Many analysts claim that a corresponding flight away from debt laden paper currencies could provide tremendous upside to the silver market.

Company News

Goldcorp (NYSE:GG; TSX: G) will sell its Escobal silver project to Tahoe Resources, a new private company lead by former Goldcorp CEO Kevin McArthur. The sale is for $505 million; in addition, Goldcorp will receive shares equal to 40 percent of Tahoe, which is planning an initial public offering in Canada, and the balance in cash of at least $230-million, depending on the results of the offering. The deal should close by June 8, the firm said.

Tahoe said separately that it has filed a preliminary prospectus for the IPO, and will use the proceeds to cover the cash portion of the Escobal acquisition, and for engineering studies and continuing exploration of the Escobal project. The Escobal deposit in Guatemala was discovered by Goldcorp in 2007 and the company has since outlined an indicated resource of 130.1-million ounces, plus 187.5-million ounces in inferred resources. In addition to silver, the deposit also contains some gold, lead and zinc. The sale has been approved by Goldcorp’s board, but remains conditional on Tahoe completing its IPO.

Silver America (OTCBB: SILA) has acquired the Keeno Strike Property silver and gold project in Clark County, Nevada. The project’s exploratory work program will test ~1.1 million ounces of gold and ~69.0 million ounces of silver unavailable to the industry at the time these properties were initially developed. If the above estimates are proven and added to the additional mineral deposits of lead, zinc, and copper, the property could contain an estimated equivalent gross in situ value in excess of $3 billion. The Keeno Strike Property is located roughly 30 miles southwest of Las Vegas in the Goodsprings/Yellow Pine Mining District, which, in addition to containing deposits of copper, cobalt, nickel, zinc and lead, has produced significant quantities of gold and silver.

Due to a delay in the auditing process, US Silver Corporation’s (CVE:USSIF) year end 2009 statements will not be released for another week. The 2009 results were due for release by the close of business on April 30, 2010. Both the Company and the auditors are working diligently to complete the audit process. The Company is not aware of any financial or operational events of a material nature other than those previously disclosed. US Silver Corp owns and operates the Galena Mine in the historic Silver Valley of North Idaho. The Galena Mine and Mill, along with the Coeur Mine and Mill and the Caladay Project were acquired from Coeur d’Alene Mines Corp (NYSE:CDE) on June 1,2006.
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Gold Heats up as Athens Burns

John Browne
Posted May 6, 2010

In the decades that preceded Greece's adoption of the euro in 2001 the country papered over its chronic inefficiency and lack of competitiveness with its northern neighbors through regular devaluations of its currency, the drachma. But as a prerequisite to join the Euro Zone, the dominant powers of the Continent, most notably Germany, required financial housecleaning and promises of fiscal discipline. When these goals were apparently met, the Greeks came aboard.

With the benefit of hindsight it is now widely understood that Greece, in common with some other 'Club Med' countries, 'distorted' its financials (largely through accounting gimmickry dreamed up on Wall Street) in order to qualify for entry. No doubt the influx of more than 100 million citizens from these countries swelled the economic heft of the Euro Zone. But these benefits came with a price.

At its core, the euro is a Germanic currency. Similarly the European Central Bank (ECB) has an institutionally Teutonic preference for sound money. Once within the euro, countries such as Greece, Spain, Portugal and Italy, were bestowed a monetary respectability that was previously unavailable to them. But they were no longer able to print their own money, and were therefore unable to camouflage their economic deficiencies with currency devaluation.

In the first decade of the 21st Century, the euro gathered strength as the economic power of the union increased and investors grew nervous about the fate of the dollar. As the relative value of the euro rose, the uncompetitive economies in the euro zone were conferred a wealth that their economies could not justify or maintain. In order to keep the wheel spinning these governments incurred ever greater amounts of debt. But, by issuing bonds denominated in the highly regarded euro, rather than their former currencies, borrowing costs for these nations came down. It was good fortune...while it lasted.

However, when the world's recession began, countries with the heaviest relative debt loads experienced the unforgiving brutality of reverse leverage. Now that payback time has arrived, not just individuals and corporations, but nations are threatened with default.

Originally, the Greek rescue package was billed at $12 billion, then at $30 billion, with Germany providing the lion's share. Today, The Wall Street Journal reports that the rescue package for Greece will total some $133.14 billion over three years. According to IMF estimates, in 2009 the Greek economy accounts for just 2 percent of the European Union's. If the larger economies of Spain, Portugal and Italy need financial bailouts, the sums involved may amount to trillions of dollars.

Following World War I, Germany was crippled by the payment of the massive war reparations which forced it to print many millions of deutsche marks. The result was the notorious 'Weimar Inflation,' which at its height pushed the price of a single loaf of bread to 1 Trillion deutsche marks. In the end, many Germans fired their heating boilers with paper currency, which was cheaper than coal or wood. Gold however, held its value. As a result, its local purchasing power rose dramatically. It was said that at one point a single one-ounce gold coin could buy an entire city block of Frankfurt.

While the current round of printing by the Federal Reserve and other major central banks does not yet match the relative speed and intensity undertaken in Weimar Germany, there are many indications that we are headed in that direction. The world is now awash with excess paper currency which threatens heightened inflation on a global scale. But inflation is not the only problem. Financial collapse once thought impossible now is looming.

If the number of countries needing bailouts continues to grow, the amount of new paper money that will likely be issued will skyrocket from today's levels. Debt ratios of the UK and the US are among the worst in the developed world. Should they require financial rescue, the bill may very well reach tens of trillions of dollars. If that happens investors will likely demand gold with extreme urgency.

Athens and the seats of power of other profligate governments appear ready to crumble under the heat of the political austerity brought on by the threat of financial collapse. As a result, gold seems to be heating up.

A Time for Gold

The frightening financial gyrations unleashed by the unrest in Greece, and compounded by the mysterious kinks of electronic stock markets, have quickly reintroduced naked fear into the hearts of investors. Not surprisingly, while these concerns throw into question the safety of just about every asset class, gold and silver are beckoning once again as a means to help protect purchasing power.

We are now in the early stages of what I believe will be a global sovereign debt crisis. With Greece, Portugal and Spain, we are seeing the results in what might be considered the “subprime” nations struggling with overly burdensome debt payments. However, just like in the mortgage crisis, many “prime” nations, like the United States and Great Britain suffer from the same disease. It is just that for these countries it will take a bit longer before the symptoms materialize.

The bottom line is that many nations, including the United States, have simply borrowed more than their citizens can realistically repay. For many such countries, default may be the only way out. The only question is how to do it. Will governments simply refuse to pay, or will they pretend to pay by printing money? I believe either option would be very bullish for gold and silver. If nations default, gold and silver prices should rise, if they inflate, they should soar.

Today the collective governments of the European Union, who had been following a more responsible policy than the United States, decided to capitulate. With their massive $900 billion dollar bailout package to any euro zone country that needs help financing their debt, the Europeans have decided to follow the path blazoned by the Federal Reserve. All debt problems, on both sides of the Atlantic, will now be monetized with a printing press.

While gold sold off on the bailout news, there is no question in my mind that the development is extremely bullish for gold. Germany has caved and the inflationists have prevailed. The moral hazard of the bailout will mean bigger deficits in more euro zone countries. Eventually even Germany itself will succumb and join the party. To defend the euro and sterilize their bond purchases the ECB will have to sell dollars. But to whom? The U.S. is certainly not buying.

If Europe, like America, becomes a net foreign borrower, the industrialized West must expect emerging markets to pick up the tab for both America and Europe! After all not every nation can ride the debt wagon; someone has to pull the cart. This will mean that China in particular will have to buy even more foreign exchange to prevent a collapse of both the euro and the dollar. This may push them to the breaking point much sooner than many like to think.

Last Thursday as the Dow Jones plunged 1,000 points, gold surged $35 to just under $1,200 per ounce. Yes, gold and silver may already be “hot”, but I believe there are still great quantities of kindling now lying around which could fuel a continuing fire.

I do not think you should wait for the sovereign default disease to spread. I do not think that it is too late to buy physical gold and silver. Once more people comprehend the magnitude of the problem, I believe prices may go higher than they are today.

It Is Good To Own Gold

07.05.2010 | Author: Kathryn Smith | Posted in Investing

Gold is the asset that one must go for in these times. Despite the ongoing Greek financial crisis and the rise of the dollar, gold is doing really well on the market.

Because of the credit downgraded of Spain and Portugal, the yellow metal has managed to gain even more ground. The precious metal is known to be a hedge against inflation because the price of gold rises as inflation rises. The precious metal has created so much excitement around it that people are now trying to come up with the money to invest in it.

Very many banks have began to buy gold, following the example of India who has bought last year 200 tons of the International Monetary Fund’s glittering metal. China is another example where gold is bought massively. The Chinese Government has advised the citizens to start investing in the precious metal. Economists believed that China will buy the rest of the International Monetary Fund’s gold but the country did nothing. The reality is that China was in fact buying its own gold using its own currency. It is well known that the country has set its goal in surpassing American in the gold reserves sector.

The world’s largest gold consumer, India, has also begun to seriously invest in the glittering metal. The Indian Central Bank representatives declared that they are searching to diversify their assets and this is the only reason why they are buying gold.

If the Central Banks are investing so much in the precious metal, than so should we. If you cannot afford to buy gold bars and coins just yet, then you should take into consideration investing in gold by the gram. It is not expensive and it is a good way to protect your savings.