This page is to provide helpful information to those individuals interested in collecting gold and silver coins or investing in bullion.

Copper: The New Silver?

By Doug West, Ph.D.

www.canddcoins.com

June 2011

Most of us haven’t considered copper in the same class as gold, silver, platinum, and palladium – this may be changing. Up until recently .999 fine copper was not readily available for those who would like to collect or hoard copper metal. Now there are dozens of designs and vendors of copper all over the internet. Copper may very well be the “new kid on the block” in the metals investment neighborhood.

Copper has been in wide spread use for thousands of years and is an abundant element with only a small fraction of the reserves economically viable for recovery. Copper is a ductile metal with very high thermal and electrical conductivity, which makes it very useful. The modern uses are so numerous it would be impossible to list. It is easy to say that it affects nearly every part of our lives from our homes to our cars. As the world becomes more industrialized, it is assumed that everyone will want a cell phone, car, and electricity in their homes. This all takes copper and the demand is speculated only to grow in the next few decades. Figure 1 is a graph of the price of copper over the last five years. As you can see, the trend is up.

Figure 1 – Spot Price of Copper for the last five years

Copper trades a little differently from the precious metals like gold and silver. Copper is typically traded by the Avoirdupois (AVDP) ounce rather than the Troy ounce. The Avoirdupois (AVDP) ounce is a little lighter (28.35 grams) than the Troy ounce (31.10 grams). There are 16 AVDP ounces to a pound. The AVDP system is much more common in our day to day world than the Troy weight system. Items at the grocery store are in the AVDP system. Copper also trades by the Kilo, which is 1000 grams or 2.20 AVDP pounds. Figure 2 shows some examples of copper as it is currently traded. In the figure there is a Kilo bar, two ½ Pound bars, and two AVDP ounce rounds. Some of the copper round designs are very intricate and attractive.

Figure 2 – Copper Bars and Rounds Commonly Available

One of the first things that struck me as I started to investigate the pricing of .999 fine copper bars and rounds was how large the premium was compared to the futures price you see in the newspaper and on www.kitcometals.com. Typically on eBay and on websites you will pay $10 to $15 each for one pound AVDP bars and $2 to $5 each for 1 ounce ADVP copper rounds. Copper is at $4.40 per pound on the futures exchange this equates to $0.28 per AVDP ounce. I haven’t found a definite answer as to the reason for the large premium, but here are a couple of my speculations: 1. the futures contract is for 25,000 pounds and delivery is in New York City. This is a very large quantity and transportation and fabrication charges become significant factors. By the way, less than one percent of the futures contracts for copper actually take delivery. 2. Fabrication charges – the cost of striking a 1 ounce copper round with an attractive design has to be close to $1 each. Once you take into account cost of material, the minting process, and transportation costs, this probably puts a $1 as the minimum cost of production for a one ounce round. If is very possible costs of production may come down as copper rounds and bars move into the mainstream and the production quantities increase.

In addition to copper in .999 fine bars and rounds, quantities of copper pennies are starting to trade as copper bullion. Each penny before 1981 is 95% copper and contains 2.95 grams of pure copper. In 1982 the mint switched to a copper plated penny with a zinc core. 1982 is a confusing year for the penny since both the 95% copper pennies and the copper plated pennies have that date. Currently, on eBay the pre-1982 copper pennies are being sold for around 2 cents each which equates to $2.22 per pound. Copper pennies are a definitely a less expensive form of copper to hold than the .999 fine bars and rounds. However, it is currently illegal to melt pennies. The pre-1982 pennies are already being hoarded, just as the wheat back cents were in the 1960’s.

In conclusion, I would have to say that copper may just well be the new silver, that is the metal that can be purchased in abundance at a relatively small price. Keep an eye on this commodity as it may just break into the mainstream of metals investment in the near future.

Monthly Price Patterns for the Price of Silver
May 2011
By Doug West, Ph.D.
www.canddcoins.com

The monthly price movement of silver is not a completely random event. Some months have a much higher probability the price will increase when compared to other months. It is also true that in some monthly the price of silver is much more likely to decrease than increase. To those involved in buying and selling silver this information could be very helpful. The purpose of this short analysis is to understand the average price movement of silver.

The method of analysis used the average monthly London SPOT silver prices from 1984 to 2010. An “up month” is defined as a month where the average price is greater than the average price for the previous month. A “down month” is just the opposite, that is, the price is lower in the current month than it was the previous month. In an “up month” the price goes up and in a “down month” the average price goes down. Figure 1 illustrates this monthly price movement pattern.  In the month of January in Figure 1, the hatched bar goes to 17. What this means is that for 17 years of the 27 studied the average monthly price of silver increased from the previous December to January.  Also in January of Figure 1, the solid bar goes to 10. This indicates that in 10 of the 27 months studied, the average price of silver was less in January than it was in the previous December. What this figure tells us is that in January and February you are most likely to see the price of silver move up. June and July are typically down months for price movement, and to a lesser extent, so are the last four months of the year.

Figure 1 – Monthly price change in SPOT silver from 1984 to 2010. The solid bars represent months with a downward price movement. The hatched bars represent months with an upward price movement.

Figure 2 shows the number of months were the yearly average high and low occurred. Since this analysis used the monthly averages you can not assume that the yearly daily high occurred in the same month as the yearly high monthly average. The same thing goes for the monthly and daily low. What we can see from this graph (solid bars) is that the yearly low is most likely to occur in December. The graph also indicates that February is the probable month with the yearly average high. Another point obvious from the graph is that no monthly average high or low occurred during the month of August. The summer months are normally less volatile months for the price of silver.

Figure 2 – Months that contain the yearly high or low. The solid bars indicate months where the yearly low (monthly average) occurred. The hatched bars represent months where the yearly high (monthly average) occurred.

In conclusion, the first quarter of the year is typically bullish (the price goes up) for the price of silver with a correction in mid-summer. The low point of the year for the price of silver most often occurs in December. Since each year is different, this analysis is only helpful in a general sense.

Gold – How High Will It Go?
October 15, 2010
By Dr. Doug West, Ph.D.

Anyone who follows gold knows that the price is at an all time high. Given this, the obvious question is “how high will it go”? No one has an exact answer to this question, however, by looking at historical trends and making some assumptions a reasonable estimate can be made. To try to answer this question I have used the relationship between the US Dollar index ($USD) and the price of gold ($GOLD). The US Dollar index and the price of gold have an inverse relationship, that is, when the value of the Dollar Index drops the value of gold generally increases. Looking a chart of the US Dollar Index and the price of gold over a 10 year period this inverse relationship is very obvious, however, it isn’t written in stone.

To start the analysis we need to first make an attempt at predicting the course of the US Dollar Index over the next few months. Based on the US government’s strong desire to print money the long term trend is probably down. The continued decline in the value of the dollar is an assumption for this prediction. As with any assumption, it could be total wrong. Looking at the $USD graph in Figure 1 a pattern of movement for the Index is apparent. The sold line in the upper part of Figure 1 is an extension of the US Dollar Index over the next five months. If the pattern continues, the Index will make a Bear market rally in the near term peaking some time in November. After that the Index will continue its slide down to the approximately the 72 level. This is a level of resistance for the US Dollar Index. This should occur approximately in February 2011. Now that the course of the Dollar Index has been plotted, the effect on the price of gold can now be extrapolated. Based on the inverse relationship between the Dollar Index and Gold, we would expect a near term correction in the price of gold hitting a short term bottom in November. The price range for this bottom should be in the $1250 to $1300 range. At this point the price will increase reaching a high point some time in February of $1450 to $1500.

Predicted Price of Silver for March 2010

By Doug West, Ph.D.

For anyone that buys and sells silver on a regular basis it is very useful to have an idea of the approximate range of the price of silver for a given month. One way to get this information is by looking at several years of past price history and use this information to determine the price of silver for the current year (see Monthly Price Patterns for the Price of Silver). In this analysis, 26 years of price history for SPOT silver was reviewed to determine an approximate range for the price of silver in March 2010.

In 15 of the last 26 years, the average price of silver has been higher in March than the previous February. This indicates a slight bias toward increasing prices in March. To possibly increase the accuracy of the estimate, we consider only the 12 years where the price of silver on the first trading day of March ($16.50 in March 2010) was higher than the average price in the previous month ($15.87 in February 2010) in the analysis data set. The following projections were based on data from only those 12 years where the price for the first trading day of March was higher than the average price in February.

The results for March 2010: The expected high for the month should be between $17.64 and $18.30. The expected low for the month should be between $14.68 and $15.34. The average price for the month is expected to be approximately $16.49.

Like all predictions into the future, they should be taken with a bit of skepticism. The silver market can be very volatile and can change rapidly based on world events. In general, the price of silver is closely tied to the price of gold. Where gold goes, silver will likely follow.

Disclaimer: this article is intended solely for information purposes. The opinions are those of the author only. Please conduct additional research and consult your financial advisor before making any investment or trading decisions. No responsibility can be accepted for losses that my result of trading on the basis of this analysis.

Predicted Price of Gold for August 2009

By Doug West, Ph.D.
www.investmentmetalsandcoins.com

For anyone that buys and sells gold on a regular basis it is very useful to have an idea of the approximate range of the price of gold for a given month. One way to get this information is by looking at several years of past price history and use this information to determine the price of gold for the current year. In this analysis, 25 years of price history for SPOT gold was reviewed to determine an approximate range for the price of gold in August 2009.

Trend Indicator – To help us get a better estimate of the price of gold in August we use a price trend indicator. To determine the trend for the gold price use the closing price of London SPOT gold the last trading day in July and compare it to the average price in July. If the closing price for the last trading day in July is higher than the average in July then it is an “up” open for August. A “down” open for August is when the closing price on the last trading day in July is below the average in July. In July 2009, London gold closed the month at $939.00 per ounce and the average price for July was $934.23. Based on this definition for “up” and “down”, August 2009 gold opens (or July 2009 gold closes) the month in the “up” condition. In 11 of the 25 years studied gold opens the month of August in the “up” condition. For these 11 years, gold finished the month up 7 times. So the “up” indicator for the open of the month appears to be correlated to an “up” finish for the month. An “up” finish for the month is defined as the average price for August being greater than the average price for July.

Monthly Average - Looking back over the last 25 years we see that the month of August doesn’t exhibit a clear price movement trend. In 14 of the last 25 years, the average price of gold in August was lower than the average price of gold in July. We can refine our estimate of the average price change by taking into account the up indicator previously discussed. Looking only at the 11 years where August opened with an up trend gives us a two percent increase in the average price of gold when compared to July. July’s average price was $934.23. A two percent increase in this gives a projected average price for gold in August of $952.91.

Monthly High and Low – using the last 25 years of price data filtered with the “up” open indicator gives an estimate of the monthly range for gold. In a typical month, the monthly high price is four percent greater than the last trading day of July. To get an upper bound you need to add in three standard deviations to the mean change which gives $1089.24. On average, the monthly low is down two percent from the last trading day of July. Using the two percent price decrease and three standard deviations puts the lower bound  price at $835.71 per once. What all this tells us is that during the month of August 2009, the price of gold should range between $1089.24 and $835.71.

Putting it all together – During the last 25 years, the month of August has not exhibited a clear seasonal trend. To get a more useful prediction a price trend indicator was used to filter out the months that opened with the gold price down when compared to the monthly average.  Using this information we can say that in August 2009, the expected range of gold prices will be from a potential high of $1089.24 to a potential low of $835.71. The average price for the month is expected to be approximately $952.91. Based on the up trend indicator, we would expect the average price of gold to be higher than in July.  If August 2009 turns out to be typical, then this range in price should be reasonably accurate. However, all it takes is a world crisis, a stock market boom or bust, or some other big event to see a big spike up or down in the price of gold. Good luck with your gold investments and hopefully this analysis will help.

Disclaimer: this article is intended solely for information purposes. The opinions are those of the author only. Please conduct additional research and consult you financial advisor before making any investment or trading decisions. No responsibility can be accepted for losses that my result of trading on the basis of this analysis.