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AGE Gold Commentary is our regular report analyzing trends in precious metals and rare coins. We monitor domestic and international markets and extrapolate from our 30 years in metals to place current events into a hard asset perspective. View archives.

4/1/2004: Gold dips on China comments -- Opportunity knocks!


Greeting from American Gold Exchange. In this issue of Gold Market Commentary:

Gold taps 15-year high, breakout possible!
Japan ends currency intervention
Silver hits 17-year high, palladium over $300
Platinum falls, palladium droops
U.S. gold coins selling fast!

Gold taps 15-year high, breakout possible!

After climbing steadily for the past ten days, gold reached a 15-year high of nearly $432 in New York trading today, establishing strong evidence that a major breakout is possible. Profit-taking late in the day pushed the closing price down to $426.70, just under the previous New York closing high of $426.80, which occurred on January 9. A New York close above this previous high will be highly significant, implying that the next leg of gold’s bull market has begun in earnest.

In our Gold Market Update of January 1, we went on record with our expectation that gold will trade between $480 and $550 per ounce in the next 12 to 24 months. That’s the big picture and we stick to our prediction. In the short term, gold may be ready to move higher now, perhaps substantially higher. While this upsurge is by no means a certainty, it seems more likely with each trading day.

When we last updated you on March 1, gold was trading at $396.50, rising from a short-term bottom at $390. The dollar was rebounding against the euro and the yen, after setting recent lows versus both currencies, largely on the back of expected currency intervention by the ECB and actual currency intervention by the Bank of Japan. (See Gold Market Commentary, March 1: “Currency intervention pressures gold” ).

Since that update, several important events have helped gold to move higher again. To begin with, the Washington Agreement, which limits gold sales by the central banks of the Group of Ten top industrialized nations, was renewed on March 8. Gold sales by these nations had been the main source of liquidity for the short-selling and producer-hedging that pushed gold prices to 20-year lows in 1999, before the first 5-year agreement was announced. Renewal of the Washington Agreement was widely anticipated, but it was not expected to happen so soon before the first agreement expires in September. Its early renewal signals a strong affirmation that most of the major central banks are committed to gold lending constraint, and that gold will remain an important element of global monetary reserves. This is bullish news for gold.

Japan ends currency intervention

More importantly, Japan ended its currency intervention in support of the dollar against the yen on March 31. During March, the Japanese government spent a total of Y4,700 billion to support the yen at Y105 against the dollar. Japan’s fiscal year ended yesterday, and within an hour a wave of dollar-selling by U.S. hedge funds and an absence yen-buying by Japanese corporates sent the dollar below the Y104 mark for the first time since April 2000. (See Economy Watch, March 31: “Dollar plunges to four-year low against yen.” ) Japan has been intervening in the currency market, buying dollars or selling yen, in order to make their year-end books look better. Yes, like Enron and World Com, governments do it, too! With the ending of their fiscal year, the immediate need to intervene has passed. Without this prop to hold it up, the dollar is falling once again and gold is rising. Most interesting, however, is the fact that the gold price seems to be separating itself from a direct correlation with the euro. After months of moving in lockstep with the euro against the dollar, gold is now gaining despite the fact that the dollar/euro relationship has remained relatively static for the last two weeks. This is a very significant change because it implies that gold is now being driven more by its own fundamentals, including its role as inflation hedge and safe haven, than its role as an inverse-proxy to the dollar. Liberated from these currency chains, gold could now be ready to move substantially higher. It’s time to pay close attention to the gold market. A breakout looks imminent!

Silver hits 17-year high, palladium over $300

Silver has been skyrocketing and is now trading over $8.00. Amazingly, the silver chart is beginning to look like a vertical line. While this type of movement is certainly bullish, it is difficult to sustain. At some point – perhaps at $8 or $9 per ounce or higher – silver may fall hard. So if you’re speculating, be very careful: set trailing stops to protect yourself. Otherwise, continue to buy on any weakness, which we have not seen for several weeks now. Platinum holds in steady trading at just over $900. Palladium is now over $300, up 50% since we made our palladium buy recommendation on January 1.

U.S. gold coins selling fast!

No matter how fast we buy classic U.S. gold coins for inventory these days, we sell them even faster. And our colleagues around the nation report the same. Phase 2 of the bull market in classic U.S. coins, which we first reported you on August 2, 2003 (See ANA show report: Bull market raging in rare coins ), is now firmly in full swing. Prices are moving higher, but not all issues are moving at the same rate, so there are some bargains still to be had. Please call Matt Warden or Tom Simonian, toll-free, at 1-800-613-9323 for a consultation for our current recommendations.

Our email alerts are being read by other dealers, who copy us. So we are not going to publish our recommendations for the time being, while quality coins remains so difficult to find. Please call and we’ll be happy discuss them with you. Our regular customers know what we like and are very satisfied with our recommendations, our expertise, the quality of our coins, and, especially, our prices. Thanks for your support! It means an awful lot to us.

That’s it for now. We’ll have an expanded update later in the month focusing on major trends in the world economic picture – trends that the major media and most financial experts seem to be overlooking. We continue to look forward and we see big changes on the horizon that are likely to have a major impact on the gold market.

As always, thanks for your time!


Dana Samuelson, Owner and President
Dr. Bill Musgrave, Vice President


Metal Ask      Change
Gold $1,804.65           $-2.78
Silver $19.06           $-0.08
Platinum $855.87           $-5.52
Palladium $2,048.91           $0.88
In US Dollars