Wednesday, December 7th, 2016 MST

The Mother of All Double Tops

May 2005

The October 2004 Monetary Digest predicted that the stock market rally was over. We based our position on two things. First was Richard Russell’s assertion that stock market’s primary trend is down, despite stocks having enjoyed strong upward movement from October 2002 through most of 2004. But, our primary reason for predicting a resumption of the bear market was the series of “lower highs” and “lower lows” from April through October of last year. This pattern caused us to believe that stocks were ready to resume their primary bear trend.

Instead, from the October lows, stocks headed higher, with a robust rally that took the Dow 1,000 points higher in only a month. From there, stocks went still higher, although with some periods, such as January, downward action was strong. In early March, the Dow traded above 11,000 intra-day but did not close above 11,000. Now, we again are prepared to warn of what could be the resumption of the bear market that began in 2000.

According to Dow Theory, as we understand Richard Russell’s explanations, a top occurs when either the Dow Industrials or the Dow Transportation Average makes a new all-time high, but the other index does not. That is what happened in 1999.

The Dow Industrials (often referred to as simply the Dow) closed at a new high in January 2000, but the Transportation Average did not. Actually, the Trannies had been in a steep decline for seven months when the Dow made its January 2000 new high. From there, stocks went lower for three years, wrecking havoc on stock portfolios and destroying the .com boom.

In early 2003, both indexes began to rise, and, as can be seen by looking at the 10-year charts on page 2, have turned in stellar performances over the last two years. But, does this mean a new primary bull market began in October 2002 when the Dow made a bottom? Probably not.

During the 2000-2002 period, when stocks were in decline, Richard Russell warned of a bear market rally that could “look better than the real thing.” After the rally began, Russell suggested that those subscribers who wanted to play the rally do so only on a limited basis. He maintained that we were looking at a bear market rally-not a new bull market-that the primary trend of the stock market remained down.

Russell is adamant that bull markets start only when stocks sell at great values, i.e., 6%-8% dividend returns, and when price/earnings ratios are at historical lows. According to Russell, “The Dow Theory has basically to do with buying great values and selling those values when they become overpriced. Value is the operative word in Dow Theory. All other Dow Theory considerations are secondary to the value thesis.”

Because stocks were not selling at “great values,” Russell did not call an end to the bear market and the launching of a new bull market in October 2002. In a recent posting on his website, Russell said, “All bear market bottoms are characterized by two phenomena. The first is extreme fear and accompanying disgust with the stock market. Expressions such as ‘I’ll never buy a stock again.’ or ‘This is the end of Wall Street as we know it.’ are heard. The second characteristic of a bear market bottom is that stocks sell at great values or ‘below known values.’ Dividend yields are high and attractive and volume tends to be low, maybe 10 to 20 percent of the volume that appeared at the bull market top.

“Nothing in October 2002 matched what one would expect at a bear market bottom. Conclusion-the bear market did not end in October 2002.”

Now, though, we’re at a unique juncture in the market, one that-despite all the optimism about stocks-may turn out to be the Mother of All Double Tops.

As noted above, according to Dow Theory, a top occurs when either the Dow Industrials or the Dow Transportation Average makes a new all-time high, but the other index does not. Now, notice in the 10-year graphs that the Transportation Average recently made an all-time high; however, the Dow is far from making a new high. Actually, the Trannies have been in steady decline since making the new high, and Russell says that stocks are sending off traditional signs of having made a top. If the Dow drops through its January lows, that will be a major negative for stocks.

Only time will tell if stocks have topped and if they have resumed their downward march. But, if they have, then we will have had a “Dow Theory double top.”

The first top ended the greatest bull market in history. The second top ended (If that’s the way it turns out.) a bear market rally so strong that many analysts identified it as a new bull market. Ominously, the two tops will have occurred five years apart, suggesting that the downside ride in stocks could last a long time, perhaps decades.

Another thing Russell is adamant about: The stock market is a leading indicator of economic activity. Some analysts say the stock market is the best indicator of future economic activity. If stocks decline, a recession is likely to follow.

During stock market declines and economic recessions, the nation’s mood turns pessimistic. An atmosphere of gloom covers the land, and people return to basic values. Gone are the beliefs in get rich quick schemes. Hard work and saving for the future become accepted guidelines.

And, no longer will Americans respond to DITECH.com ads that urge homeowners to “cash out their equity.” Instead, Americans will turn toward paying off mortgages. Also during such times, investors will rediscover the virtues of gold and silver.

At CMI, we believe that precious metals are in the early stages of a bull market, one that will run for many years, perhaps a decade or longer. Considering how the Federal Reserve and our federal government have abused the financial system, gold and silver are likely to become the foundations of all investment portfolios.

Actually, our financial system has been so abused that gold and silver may become the foundations of all investment portfolios for generations to come. If so, the prices of gold and silver will be bid higher and higher as investors dump paper dollars for hard money.

Too Much of a Good Thing?

The U.S. Mint’s American Eagles program, introduced in 1986, has been a tremendous success. The Silver Eagles, however, may have been too successful.

Through 2005, more than 127.5 million Silver Eagles were minted, and CMI fears that many of those Silver Eagles will come home to roost as the price of silver climbs higher. We do not fear that investor sales of Silver Eagles will suppress the price of silver, but that Silver Eagles will lose their high premiums.

The U.S. Mint marks up Silver Eagles more than $1.00 a coin. Add on the wholesalers’ and the retailers’ margins, plus the cost of delivery, and investors pay $1.75 or more premium on each coin for new Silver Eagles. Figure silver at $7.00, and that’s a 25% mark up, which is huge compared with other readily available and widely recognized silver bullion products.

For example, circulated pre-’65 U.S. 90% silver coins presently carry premiums of only $.25/oz, which is a 3.6% markup. Better-known 1-oz silver rounds, such as Engelhard Prospectors and Sunshine Minting Eagles, cost about $.75/oz over spot, for a markup less than 11%. Investors wanting even smaller markups can go with generic 1-oz silver rounds at $.45 over spot. (These markups are based on 1,000-oz quantities.)

It is true that in most markets, sellers recapture part of the premiums paid for their silver products. And, in most years, Silver Eagles have liquidated with premiums (We will note the exceptions later.) Further, sellers receive premiums for just about any form of silver when individual investor interest is high. Presently, common-date Silver Eagles liquidate at about $.90 over spot. A year ago, however, Silver Eagles liquidated at $1.20 to $1.30 over spot. Two reasons account for the premium decline.

Before-and during-the price run-up in April 2004, investors eagerly snapped up Silver Eagles. However, since silver’s 2004 run-up, with silver between $6.50 and $8.00, investors are seeking forms of silver with smaller premiums. Tack on $1.75 to $7.00, and you are paying $8.75 an ounce for your Silver Eagles. That is a big increase from the $6.50 or so many investors paid when silver was trading below $5.00.

Additionally, during silver’s price run-up in April last year, a large number of Silver Eagles were sold and wholesalers have lowered prices on backdated Silver Eagles to entice buyers to buy backdated coins instead of fresh ones from the U.S. Mint. That premium reduction is an indication of the risk that Silver Eagles investors face.

Most of the 127.5 million Silver Eagles were sold between $6.50 and $8.00 each, which means most Silver Eagles investors have been underwater since they bought. After being underwater for so long, investors tend to sell when they have the opportunity to break even.

As the price of silver moves higher, many Silver Eagles will come home to roost, putting downward pressure on premiums. Actually, we’re already seeing this, with Silver Eagles now liquidating at $.90 over versus the $1.20 of last year. But, there is more evidence that suggests Silver Eagles premiums will fall further as prices move higher.

In 1998, when Warren Buffett took delivery of his 129,700,000-oz silver purchase for Berkshire Hathaway, silver spiked to $7.50. Anyone who sold Silver Eagles into that run-up received spot or less. A large silver wholesaler (and supplier of silver to industrial users) accumulated nine million Silver Eagles on the Buffett run-up. He paid spot or less for the coins because of massive selling.

For Silver Eagles to maintain their premiums, there has to be heavy buying by large numbers of individual investors. If individual investors are not heavy buyers of Silver Eagles, then backdated Silver Eagles may overwhelm the market, resulting in a significant premium reduction on backdated Silver Eagles.

Any reduction in backdated Silver Eagle premiums will not mean that buyers of current year Silver Eagles will get lower prices because the U.S. Mint will not reduce its prices. If the Mint cannot get the prices it wants, it simply will not sell.

The Y2K liquidation of Gold Eagles in 2000 and 2001 may be a harbinger of things to come for Silver Eagles. The years 1998 and 1999 saw the best annual sales of 1-oz Gold Eagles, primarily because of Y2K buying. Although Y2K turned out to be a nonevent, there were widespread fears that the world’s computers would malfunction on January 1, 2000. One recommended action was to buy gold.

And buy gold the Y2K believers did, right at 1.5 million 1-oz Gold Eagles each year. However, when January rolled around and life went on as usual, the Y2K crowd began to sell. They had been committed to being prepared for “the end of life as we now know it,” as one Y2K prophet had put it.

Y2K buyers knew nothing of the dangers of paper money; they simply wanted to be prepared for “the end.” But, the end did not come, and the Y2K crowd sold throughout 2000 and into 2001, making backdated Gold Eagles cheaper than current year coins. For much of 2000 and part of 2001, backdated 1-oz Gold Eagles sold for premiums as low as $6.00.

As a result, the Mint sold only 94,000 1-oz Gold Eagles in 2000 and 222,029 in 2001, despite minting 433,319 2000-dated 1-oz Gold Eagles. It took the Mint three years to get rid of the overproduction. To do so, the Mint required its authorized dealers to take some 2000-dated coins with orders of 2001- and 2002-dated Gold Eagles.

Oddly, Y2K buying did not result in huge numbers of Silver Eagles being sold in 1998 and 1999. Sales in 1998 were below average (4.85 million) and 1999 sales were a little above average (7.4 million). Average annual Silver Eagle sales since 1986: 6.71 million.

However, in 2000, as news spread about silver’s production deficit, investor interest in silver and Silver Eagles grew. The five years 2000-2004 saw total sales of some 47 million Silver Eagles, for an average of 8.4 million, well above the average annual sales of 6.71 million over the life of the program. But, the silver market has seen big changes since 2000.

Today the price of silver is firmly entrenched at the $7.00 level, after having pushed above $8.00 in April of last year and having made another run at $8.00 in December. Less than two years ago, silver was trading below $5.00. Now, though, investors have come to accept silver at higher prices and seem poised to push the price permanently above $8.00 in the near future, perhaps this year.

If so, we can expect considerable selling from two contingents of silver investors. One group will be those who have seen their silver investments double over the last few years. That selling could be considerable as silver traded below $5.00 for three years, which means there are a lot of investors who will see their holdings double in price. Many investors simply sell anytime their investments have doubled in price, maybe not all but at least some. Many of these investors bought Silver Eagles.

The second group of sellers will be those who can now break even, or make a small profit, on their Silver Eagles. One hundred twenty-seven and a half-million Silver Eagles are a bunch of coins. With average annual sales now at about 8 million, selling of only 6% of backdated Silver Eagles would meet the total demand for Silver Eagles.

Of course, at the start of every new year, some Silver Eagle investors want current year coins. So, regardless of how many backdated Silver Eagles may come into the market, sales of new Silver Eagle would not shut down completely.

We have shared with our colleagues in the industry our theory that sales of Silver Eagles will depress premiums as silver rises above $8.00. Some agree, but some do not. Still others do not care.

Many precious metals dealers waste no time trying to figure out what form of gold or silver will provide the greatest price appreciation for their clients. Most dealers simply sell buyers what they want. At CMI, if we think clients are headed in the wrong direction, we will take the time to discuss with them their objectives in an effort to put them in the investments that best fit their needs. That is one reason we have spent so much time studying the Silver Eagle situation.

When silver moves permanently above $8.00, we believe that sales of backdated Silver Eagles will depress the premiums of backdated Silver Eagles. Obviously, we have no way of knowing how much. Still, we think that complete disappearance of the Silver Eagle premium during Buffett’s silver purchase adds credence to our position.

Further, with premiums on backdated Silver Eagles down from what they were only a year ago, we think that the selling pressure is building. So, what can Silver Eagle owners expect?

We think it is likely that backdated Silver Eagles will trade at premiums about where Engelhard Prospectors and Sunshine Minting Eagles now trade, but maybe lower. One hundred twenty seven and a half-million Silver Eagles are a lot of coins. During times when the price of silver spikes, sellers of backdated Silver Eagles may get spot. During periods of quite to stable prices, Silver Eagles will likely liquidate above spot, but not at premiums comparable to today’s premiums.

Premiums on all silver coins and bars depend on the amount of individual investor activity and not by commodities exchange action. Exchange buying pushes prices higher but does not affect premiums. Individuals buying and selling determine premiums.

CMI is of the position that precious metals are in the early stages of a long bull market and that the public is nowhere near ready to join in the action. At a top in gold and silver, the public will be as enamored with gold and silver as it was with stocks in 2000 and as it is with real estate today. No market makes a top without exuberant public participation, and since the public is not in this market, we are nowhere near a top. But, when the public comes in, what will it buy?

It is true that Silver Eagles may be one of the forms of silver that the public gravitates toward. But, with 127.5 million Silver Eagles already out there, we doubt that Silver Eagles can hold the premiums they now carry.

Investors wanting simply to participate is this bull market should go with the forms of silver that have the lowest premiums, which are 100-oz bars, pre-’65 U.S. 90% silver coins, and 1-oz generic silver rounds (when available).

Still, there are no better-known 1-oz pieces of silver than Silver Eagles. Investors who want the wide-acceptance of Silver Eagles simply have to accept the fact that they may suffer premium declines.

Sealed Boxes of Silver Eagles

Despite our concerns about Silver Eagle premiums, presently there is a huge promotion of Silver Eagles sets (one of each year), and the promotion is causing sealed boxes of Silver Eagles to sell at big premiums. The promoters want sealed boxes because, supposedly, the Silver Eagles in sealed boxes are free from fingerprints and oils that come from handling.

Specific to the promotion is that the coins are in perfect condition and graded MS69 or MS70. So, if the coins have never been handled, as is the case with sealed boxes, the coins most likely will grade MS69 or MS70.

While this promotion is going on, the promoters need Silver Eagles of certain years. The demand-and the price paid-can change from day to day as coins are found and as the public responds to the promotion. So, if you are holding any sealed boxes of Silver Eagles and want to sell, give us a call.

At CMI, we like to see our clients take advantage of such promotions by trading their Silver Eagles for forms of silver that carry lower premiums. This enables Silver Eagle holders to increase the number of ounces of silver they own without additional cash outlays.

The thing to know about such promotions is that they will continue until interest wanes. When interest wanes, the promoters will move onto other promotions. When that happens, premiums on Silver Eagles usually fall like rocks. A 1999 promotion illustrates what can happen.

Silver Eagles dated 1999 were promoted as the “last Silver Eagles of the 20th century.” They were individually painted, put in holders, and sold at huge premiums. Despite the fact that year 2000 coins, not 1999 coins, were the last of the 20th century, the promotion was a huge success (successful for the promoters). While most Silver Eagles sold for the normal markups over spot during the promotion, 1999-dated Silver Eagles soared to double the price of silver, putting a 100% premium on them.

Promoters gladly paid $10 a coin, while silver was below $5.00, because they were selling the painted version for several times $10. However, when interest in the promotion died, premiums on 1999 Silver Eagles collapsed. Today, 1999-dated Silver Eagles are “run of the mill” coins, carrying premiums only slightly higher than 1987 coins, which carry the smallest premiums of any year. The U.S. Mint enjoyed its best year with 1987 Silver Eagles, turning out 11.4 million. When this promotion ends-and it will-premiums on sealed boxes of Silver Eagles will most likely fall.

Years carrying the highest premiums are 1986, 1990, 1992, 1994, 1995, 1996, and 1997. Still, if you have sealed boxes for any other year and want to talk about selling or trading, give us a call. Premiums on 1996 coins, which were the lowest mintage (3.6 million), carry the highest premiums.

Certified Mint is now CMI Gold & Silver Inc.

In our 32 years in the precious metals bullion business, we have seen nothing impact the industry as has the Internet. Before the Internet, investors wanting information on gold or silver trudged to their local libraries and spent hours hoping to learn something about the metals. Today, investors wanting the latest data on precious metals need only to sit in front of their computers and within seconds they can choose from hundreds of sites that offer hours of reading.

Also prior to the Internet, dealers wanting to get the attention of potential clients relied almost exclusively on newspaper and magazine ads, although a few dealers used TV ads. (Invariably, dealers that used expensive TV ads could afford to do so only because they sold high-margin precious metals investments or numismatic coins, not bullion coins that offer investors the most metal for the money.) And, nearly all dealers published newsletters to keep their names before investors. Today, most dealers use the Internet exclusively.

Because of Internet impact and because the name CMI Gold & Silver Inc. more accurately reflects what we do, we made the change. The name Certified Mint was chosen by its founder in 1973. In 1976, Bill Haynes bought CMI. In Certified Mint’s early years, the name reflected what we did.

We minted CMI-hallmarked silver bars and rounds for sale to investors, and we minted custom silver rounds. However, as interest in silver and gold grew in the mid-1970s, precious metals giants Engelhard and Johnson Matthey began producing silver bars that quickly became investor favorites.

Consequently, CMI became a retail precious metals dealer, with an emphasis on educating its clients of the need to own physical gold and silver during inflationary periods. And, we have definitely been in an inflationary period since CMI’s inception.

When President Richard Nixon closed the gold window in 1971, the M3 money supply stood at a “mere” $750 billion. Today, M3 is somewhere north of $9,448 billion, a 12.6 fold increase. In the 34 years prior to Nixon closing the gold window, the money supply increased less than twofold.

Longtime clients will also notice that our several old websites now point toward our new site www.cmi-gold-silver.com. The new site is more to-the-point and covers products that make up 95% of the physicals precious metals markets.

We believe that the name change and the new website will help prepare us for the precious metals bull market that lies ahead. More additions to the website will be made as time permits. Generally, plans are to add statistics and information that will help investors make informed decisions when investing in precious metals.

Further, we have added a page titled Doing Business with CMI to our new website. Although some longtime CMI clients may feel no need to review the page, we encourage them to do so. We have made changes in the way we do business, changes that help speed up deliveries.

Investors new to CMI and the metals markets definitely should read Doing Business with CMI on our new website, which also can be found at www.cmigs.com. The page answers fundamental questions about doing business with CMI.

Also, checks for purchases can now be made payable Cmigs, eliminating the need to put gold & silver on the payee line for those investors who want as much anonymity as possible. Checks can still be made payable to CMI. We also have new bank wire instructions for those investors who send funds electronically.

Meanwhile, as we have done for 32 years, we stand ready to take phone calls from investors-and potential investors-who feel they need to talk with someone before making their precious metals investment decisions. We take calls 7:00 a.m. to 5:00 p.m., MST. Call us at 800-528-1380.

As noted, we take calls 7:00 a.m. to 5:00 p.m. Mountain Standard Time. Arizona does not go on Daylight Savings; this means that during the summer we are effectively on Pacific Time, putting us three hours different from our East Coast clients, two hours different from clients living in the Central time zone, and one hour off Mountain Daylight time. Confusing, but that’s the way it is in Arizona, which rarely marches lock step with the rest of the nation.

24-hour Precious Metals Prices

Instantaneous access to investment data is one of the Internet’s great features. For most Internet savvy precious metals investors, Kitco.com has become the primary source of precious metals spot prices. The “24-hour prices” shown on CMI’s website are pulled from Kitco, as are the prices that appear on most websites.

Our “closing spot prices,” which also are posted daily on our website, may or may not agree with Kitco prices, because Kitco’s prices are not always accurate. Still, they are usually accurate and are an excellent way for investors to follow precious metals prices. Another source is www.thebulliondesk.com, which posts prices from England. Kitco is the website of a Canadian refinery.

Although Kitco boasts “24-hour prices,” the precious metals exchanges, from which Kitco derives prices, do not trade 24 hours a day. More accurately, Kitco provides “nearly 24-hour” precious metals prices. Despite this small misconception, Kitco’s “24-hour prices” provide an invaluable service to the precious metals industry.

Kitco pulls prices from the COMEX and the ACCESS, both of which are divisions of the New York Mercantile Exchange, the world’s largest physical commodity futures exchange. The COMEX, which is the “open out-cry” exchange, is the better known of the two. This is commonly called “the New York market.” It’s the one so often pictured on TV with the traders shouting, waving their arms, and making gestures with their hands. The ACCESS exchange is Internet based, and for many readers, this will be the first time they ever heard of the ACCESS exchange.

Most people think that gold trading for the week begins in the U.S. at 8:20 a.m. Eastern Time on Monday, when the COMEX opens. But, that is not the case. For the week, gold and silver begin trading Sunday evening at 7:00 p.m. ET on the ACCESS. Trading continues until 8:00 a.m. Monday. From 8:00 a.m. to 8:20 a.m., when the COMEX opens, no exchange on which gold trades is open in the U.S.

Gold trades on the COMEX until 1:30 p.m. ET, and at 2:00 p.m. the ACCESS reopens and stays open until 8:00 a.m. the next day. So, from 1:30 p.m. to 2:00 p.m. ET, neither the ACCESS nor the COMEX is open, so Kitco’s prices are static for thirty minutes.

As can be seen, there are fifty minutes during the day that gold does not trade in the U.S. For silver, it’s sixty minutes. Silver trades on the ACCESS the same time that gold trades, but on the COMEX, silver trading starts at 8:25 a.m. ET and closes at 1:25 p.m. ET.

In summary, open out-cry COMEX trading for gold is conducted Mondays through Fridays 8:20 a.m. to 1:30 p.m. ET. Silver is traded 8:25 a.m. to 1:25 p.m. ET Mondays through Fridays. On Sundays, the ACCESS opens at 7:00 p.m. ET and trades to 8:00 a.m. ET Monday morning. Mondays through Thursdays, the ACCESS opens at 2:00 p.m. and trades until 8:00 a.m. the next day. On Fridays, the ACCESS is open 2:00 p.m. to 4:30 p.m. ET.

For the normal five-day workweek, the exchanges, from which Kitco pulls its “24-hour” quotes, trade gold 23 hours ten minutes a day and silver 23 hours. Despite the slight misnomer, Kitco’s “24-hour prices” truly are an invaluable service to precious metals investors, a service that increases investor interest in precious metals.

During the time there is no trading in New York, the metals are trading in London, and the Chicago Board of Trade also has an electronic market for gold and silver. However, the system that posts Kitco’s “24-hour prices” does not pull from either the London market or the CBOT exchange. (The CBOT effort has been generally a disappointment, and the trading there is unimportant.)

Therefore, twice a day, Kitco’s prices and graphs are static: between 8:00 a.m. and 8:20 a.m. ET and between 1:30 p.m. and 2:00 p.m. ET for gold. For silver, the static times are 8:00 a.m. to 8:25 a.m. ET and between 1:25 p.m. and 2:00 p.m. ET.

Because Kitco’s prices are pulled from exchanges, Kitco’s prices are not actually “spot prices.” “Spot prices” call for settlement within two working days of the transaction date, which is also called the “value date,” the date the transaction was entered into and prices agreed upon. However, exchange prices (futures prices) greatly influence spot prices because dealers hedge positions in the futures markets. Further, and probably more important, dealers deliver against and take deliveries of futures contracts.

Gold and silver investors need to be aware that the pricing of gold and silver sales and purchases are done based on the spot market, which trades even when the futures markets are closed. So, when a dealer tells you spot is something different that what Kitco is posting, you now know why.

Future Issues of Monetary Digest

We are planning to change the way we will mail some issues of Monetary Digest. When we have brochures or other material, as with this issue, we will mail in an envelope.

However, when we mail without additional materials, your copy will come folded and tabbed, with your name and address printed on the newsletter. This change will permit a more timely and prompt delivery of issues that have no accompanying material. With this new method, readers will receive their issues within days of our submitting to the printer.

We hope this alert keeps readers from discarding as junk mail future issues of Monetary Digest.

Recommendations

Precious metals buyers who are in the market for investment purposes should go with as much silver as possible because historically silver has always outperformed gold in precious metals bull markets. This bull market, we expect silver to show a still bigger percentage gain than gold because of the growing industrial demand for silver.

Silver

Presently, circulated 90% silver coins carry premiums of about $0.25/oz. Circulated 90% coins often pick up high premiums in precious metals bull markets and during periods of heavy buying, even without a bull market. In 1999, during the Y2K buying frenzy, circulated bags sold at 50% premiums over the value of their silver content.

For investors wanting a pure silver play and wanting silver in a convenient form, 100-oz bars are recommended. As this is written, 100-oz silver bars are selling for $.45/oz over spot. In a market in which the public is buying heavily, 100-oz bars sell for $.60/oz premiums.

Investors wanting pure silver and “survival coins” should go with 1-oz silver rounds. Engelhard Prospectors and Sunshine Minting Eagles are selling at $.75 over spot. Generic 1-oz silver rounds are selling at $.45 over.

Gold

Investors who want “cheap gold” should go with Krugerrands, which are selling at $10-$12 below Gold Eagles. Some buyers avoid Rands because sales (liquidations) of 25 or more generate the filing of 1099Bs. So, investors wanting “cheap gold” without the reporting requirements should go with Mexican 50 Pesos or Austrian 100 Coronas. Mex 50s and Austrian 100s usually sell-when available-at about the same premiums as Rands. For more information on Mexican 50 Pesos and Austrian 100 Coronas, visit www.cmigs.com.

Investors, who are inclined to buy Gold Eagles should consider 1-oz Gold Snakes, which are minted by Australia’s renowned Perth Mint. Gold Snakes sell at the same price as Gold Eagles, but Gold Eagles are unlimited production coins, while production of 1-oz Gold Snakes will be limited to 30,000 coins. As are Gold Eagles, Gold Snakes are legal tender coins.

Gold Snakes are part of a 12-coin series based on the Chinese Lunar Calendar. Two coins from the Series, the 2000 Dragon and the 2002 Horse, have already reached the production cap of 30,000 and are selling at premiums in the secondary market. More information on the Snakes and the Lunar Series can be found on our website www.cmigs.com.

Platinum

CMI continues to believe that platinum is too high compared with gold and silver and should be avoided at this time.

Palladium

Many investors remember that only a few years ago palladium traded above $1,000, making palladium today look really cheap. Maybe palladium is cheap here, and if clients want to buy we will not try to talk them out of it.

However, investors need keep in mind that a little more than a year ago palladium traded at $175. This metal can be more volatile than silver, and buyers should expect a roller coaster ride. One-ounce bars are the best forms for most investors.