Paper "Asset" Owners Burned;
FREE Newsletter Released
Precious Metals Market Update
July 16, 2012 -- After last week's reports of slower than expected growth in China, speculation is growing that People's Bank of China will continue to drop interest rates, giving fuel to the precious metals markets.
gained $7/oz (+0.44%) for the week, closing at $1,590. Silver
rose almost 1% ($0.23/oz) to settle at $27.36. Platinum diverged from the other metals and fell for the week -- down $13/oz at $1,438. Platinum metal is now priced nearly 10% below gold -- a reflection of investors' gloomier outlook on manufacturing and preference for gold as a safe haven. Palladium outperformed the other metals slightly, rising $8 (+1.4%) to close at $589/oz.
Risks of Investing in the Paper Markets Exposed... Again
Regulators shuttered the futures brokerage PFGBest last week after discovering the firm's owner, Russell Wasendorf Sr., embezzled $220 million in customer segregated funds. Wasendorf botched his attempt to commit suicide but left the details of his fraud in a note.
The firm immediately filed for bankruptcy, parroting the behavior of MF Global
where "segregated funds," which are supposed to be sacrosanct, were stolen last Fall.
"Our advice is to stay away from proxies of any kind for precious metals and instead buy physical metal."
Clients involved with PFGBest were forced to rapidly liquidate 100% of open positions, and they have no idea when their funds may be released. Barring any action by the exchanges or by the regulatory agencies, they can expect the return of something less than half of any cash balances they may have held. Unlike cash balances held in banks or credit unions, the funds are not insured.
The debacle represents another massive blow to confidence in the futures exchanges. It underscores, once again, the vast difference between the physical market for precious metals and the associated paper market.
Futures contracts entail inherent risk based on the leverage employed -- a risk traders have long acknowledged. Now traders grapple with a different level of risk. Fraud appears more widespread than anyone would have acknowledged a year ago, and the bureaucrats in charge of preventing it have failed utterly.
So far, markets have not imposed a meaningful pricing penalty on futures trading in order to compensate for the counterparty risks involved. We expect this to occur over time. Our advice is to stay away from proxies of any kind for precious metals and instead buy physical metal which you hold yourself or store in a segregated account.
Hot off the Presses:
FREE Precious Metals Quarterly Newsletter
The Summer 2012 issue of Precious Metals Quarterly
, a free newsletter published by Independent Living Bullion
, is now available online
The new issue contains must-read information about the precious metals markets, including summertime buying opportunities and a primer on bullion versus mining stocks.
The newsletter also outlines a major buying opportunity in historic gold coins – now available through Independent Living Bullion
at only several percentage points above melt value. "Rare" coin dealers
who have been peddling these coins at 20% to 40% over the gold spot price are going to be steaming mad when they see this article!
You can access Precious Metals Quarterly right here
Discounted Fractional Gold Maples and Historic U.S. Coins
Independent Living Bullion
has a few fractional gold items left which can be obtained at steeply discounted prices. We sold through about half of our availability of lightly scuffed (and deeply discounted) ½-oz Gold Maple Leafs last week. These half-ounce coins can still be purchased for close to the same premium per ounce charged for the full-ounce Maple Leaf – making them a good bargain. We also still have some of the historic U.S. gold coins
(mostly the $10 and $20 denominations).
Please call 1-800-800-1865 for updated availability and pricing on these discounted products.
Premiums and Buying Trends
Sales volume has been moderate in recent days. Customer buying continues to dramatically outpace customer selling, as the overwhelming majority of our transactions involve customers who are taking advantage of low prices to add to their positions.
Premiums across the popular bullion forms are largely unchanged. Our inventory levels are high overall, with delivery delays only existing on exceedingly large orders for pre-1965 90% silver coins
Call Independent Living Bullion to Buy or Sell Precious Metals Coins, Bars, and Rounds – 1-800-800-1865.