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Data Wrap Up – August 2014

Metals Prices
ResourceLast1 Month Ago3 Months Ago1 Year Ago

Although gold prices remained flat amid rising geopolitical tensions and a strengthening US dollar, silver continued its decoupling from gold this month, falling 7.6% compared to a 0.8% decline for gold. Weakness in the silver market has been reflected in everything from silver coin demand to exchange-traded silver funds. Much of this downward pressure is stemming from the Federal Reserve winding down its quantitative easing program, along with improving labor market data.

However, on a historical basis, August is typically the weakest month for silver demand, mainly because of weak trading volume. So, even though this weakness doesn’t come as a major surprise, we’re going to continue monitoring developments in the silver market very closely.

Like gold, low-volatility platinum has stayed steadily in the $1,450 to $1,500 range in 2014, although prices did decline a slight 2.1% over the last month.

On the other hand, palladium has continued its meteoric rise. Although the metal is up a mere 1.0% over the last 30 days, it’s up 24.5% year-to-date and 17.2% over the last 12 months. That compares quite favorably to the 5.9% and 18.0% return for the S&P 500, respectively, over the same time period.

Additional demand for palladium in catalytic converters, as well as US and European Union sanctions on top supplier Russia, should continue to support favorable supply and demand dynamics throughout the remainder of 2014.

Although silver had a rough month, we’re confident that the metal will outperform over the long term. That said, this is as good a time as any to remind you of the importance of diversification when it comes to precious metals investing. Even though silver has lagged the broader market this year, an equally weighted portfolio made up of our four main metals would have returned 10.0% so far in 2014, easily beating the S&P 500 return over the same period. As with any asset class, spreading your eggs amongst multiple baskets is almost always the best plan of action.

We’ll continue to monitor developments in our precious metals holdings and will alert you if anything pressing comes to our attention.

The stock market is supposed to reflect—if only loosely—the health of the underlying economy. This hasn’t been the case lately. The S&P 500 keeps setting record highs, with minor hiccups in between, while the “actual” economy putters along.

The US economy has recouped a paltry 10 percent of real GDP over the last five years. This lackluster economic growth is widely blamed on poor consumer spending, for which you can thank persistently high unemployment and stagnant wage growth.

The current recovery was slow out of the gate, but it was dealt a major setback last quarter when GDP growth contracted by 2.1%. Many chalked this up as the result of an unusually harsh winter, though other factors are clearly at play.

The extended rally in US equities is painting a starkly different picture of the US economy than most leading indicators. There are plenty of signs that the current rally may be running out of juice, suggesting that it may be the perfect time to get defensive with your investments.

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