Gold & Silver Digest: 1/30/13
The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.
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1/30/13 5:57 PM EST US close metals price quotes from Finviz
NEW YORK, Jan 30 (Reuters) – Gold rose on Wednesday after data showed the U.S. economy unexpectedly contracted in the fourth quarter, and stayed higher as the Federal Reserve left in place its bond-buying stimulus plan.
The metal's inflation-hedge appeal received a boost after the Fed in its January policy statement repeated a pledge to keep buying securities until the outlook for employment "improves substantially."
The U.S. central bank also said that economic growth had stalled but indicated the pullback was likely temporary.
Platinum continues to trade at a slightly higher price than gold, but the threats to supply which recently pushed platinum prices above gold are now easing, while this week offers a number of opportunities for gold prices to surge higher.
Two weeks ago, platinum prices surged, rising above gold for the first time in 10 months, after the largest producer of the metal Anglo American Platinum sa AMS.JO -0.18%id it would halt operations at several mines in South Africa amid rising costs. Meanwhile, a gradual pick-up in economic data globally has kept the general outlook for platinum’s demand side more upbeat.
It's easy to get caught up in the frenzy of the gold market. When prices are skyrocketing to new highs, everyone is scrambling to buy. When prices are falling, it's as if they've run out of lifeboats on the Titanic. Like lemmings, many investors walk off their own personal fiscal cliff by buying high and selling low. To avoid flocking with the herd, it's key to remember that gold is not an investment at all. It is a rock-solid savings account that beats any fiat paper governments can dish out.
Last week, we went in-depth on why the US Federal Reserve will be printing much more fiat paper in the months and years to come and the effect this will have on the price of gold. The Fed's actions should be a red flag to anyone who is not currently holding a portion of their wealth in physical hard assets. In case you missed it, you can read it here.
The wealthy have for centuries stashed their gold in Swiss vaults. But Swiss bankers are now reluctant to accept the world's bullion in the same old way, as they seek to reduce the size of their balance sheets.
UBS and Credit Suisse, which dominate the powerful Zurich-based physical gold market, have raised the fees they charge for holding the precious metal, according to clients and people familiar with the banks.
Warnings about “hyperinflation” didn’t persuade South Dakota legislators to endorse the use of gold and silver coins on Wednesday.
Rep. Dan Kaiser, R-Aberdeen, had asked the Legislature to declare U.S.-minted gold and silver coins to be “legal tender” that could be used to pay state taxes at their market value.
“Within the borders of South Dakota, for our intra-state commerce, we are going to reserve the right for our citizens to use gold and silver as currency, especially in some case of emergency, if the U.S. dollar is no longer trustworthy as a source of currency,” Kaiser said.
While public officials may be ignoring the continued deterioration of our economy, job losses to the tune of hundreds of thousands of people weekly, and the unprecedented demand for government emergency support services like unemployment insurance and food assistance, Americans who sense uncertainty in the air are flocking to the safety of physical resources.
Our first point of interest is a recent report from the Federal Reserve that indicates some $114 billion dollars in cash was withdrawn from the nation’s largest banks  in the last thirty days. Those holding their money at bailed out financial institutions are understandably concerned because the government’s $250,000 deposit insurance guarantee program, originally implemented to restore confidence in the wake of the 2008 financial crisis, expired at the end of 2012 . That and the US fiscal situation has never been worse , with one Obama official recently having said the solution to the country’s woes is to simply kill the dollar .
William Kaye: Founder, Vice Chairman and Senior Managing Director of the Pacific Alliance Group of Companies – PACG was established in 1991 in Hong Kong. Mr. Kaye is the Managing Partner of the Greater Asian Hedge Fund, as well as its predecessor, the Asian Hedge Fund, LP (1992-98). Both funds have exhibited a consistent history of absolute and relative outperformance that has been recognized by independent rating organizations. Prior to founding PAG, Mr. Kaye was Manager of the Arbitrage Department (1984-1990) and a Member of the Board of Directors (1986-1990) of PaineWebber Incorporated in New York. Mr. Kaye joined Paine Webber (PW) in 1978, leaving the Mergers & Acquisitions Department of Goldman, Sachs & Co, and successfully built PW's Arbitrage Department into an industry leader.
In 1980, the price of one ounce of silver reached $ 50. Today, the purchasing power of the US dollar is substantially less than in 1980.
The price of one ounce of silver would have to rise to $ 150 to reflect the value of the US dollar thirty years ago, assuming an average annual inflation of 3.5%.
During the financial crisis of 2008, the silver price corrected 57% from the high of $ 20.79 down to $ 8.95. This correction was followed by a spectacular rise of more than 400% to $ 48.42. A correction was inevitable and a drop of 42% followed that phenomenal rise. So far, the silver price has recovered 14%. The present up-leg started in May of last year and should lead the silver price to a new all-time high.
On the heels of some wild trading in gold and silver, today acclaimed trader Dan Norcini told King World News that the silver market is now approaching key levels which will set off major short covering if breached. Norcini also provided two key charts. Here is what the acclaimed trader had to say: “If silver decisively breaks $32.50 we will see momentum-based buying come into the market. This is what is necessary to fuel a sharp uptrend in silver of the type of nature that we’ve seen in palladium and platinum. A break of $32.50 on silver would also signal a shift in sentiment regarding inflation.”
Dan Norcini continues:
“We will see the first round of short covering in silver when it breaks $32.50. There are a number of speculative shorts in that market. These shorts are weak hands and on a break of $32.50 they will capitulate. This short covering should move silver $2 higher very quickly.
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