| 03/24/2023 10:15 AM Current Market Spot Prices: | Gold: $1,993.23/ozt | Silver: $23.25/ozt | Platinum: $990.94/ozt | Palladium: $1,440.02/ozt |
Friday, March 20, 2015
Is Now The Perfect Storm For Canadians to Sell Scrap Gold?
Winnipeg MB: www.kmggold.com
With the Canadian dollar at near record low values compared to the US greenback, and the price of gold driving upwards, could this be the perfect storm for Canadians to sell their scrap gold?
Whenever the Canadian dollar loses ground against the American dollar, Canadians should smile. Gold, silver and all other precious metals are bought and sold in US dollars, so when either the Canadian dollar slips or the U.S. dollar gains strength over the CAD, Canadians come out on top.
Right now the USD is about 1.27 times the CAD, and with gold seeing strength lately, Canadians get more bang for their buck selling gold.
Today, gold traded at around $1180USD/ozt, but with the CAD at 1.27, that saw gold traded in CAD very close to $1500CAD/ozt. Canadians haven't seen these types of prices for gold for at least a year.
Take advantage of the high gold prices and the low Canadian dollar now!
Its the the perfect storm for Canadians to sell their scrap gold, silver, platinum and palladium.
http://www.kmggold.com
With the Canadian dollar at near record low values compared to the US greenback, and the price of gold driving upwards, could this be the perfect storm for Canadians to sell their scrap gold?
Whenever the Canadian dollar loses ground against the American dollar, Canadians should smile. Gold, silver and all other precious metals are bought and sold in US dollars, so when either the Canadian dollar slips or the U.S. dollar gains strength over the CAD, Canadians come out on top.
Right now the USD is about 1.27 times the CAD, and with gold seeing strength lately, Canadians get more bang for their buck selling gold.
Today, gold traded at around $1180USD/ozt, but with the CAD at 1.27, that saw gold traded in CAD very close to $1500CAD/ozt. Canadians haven't seen these types of prices for gold for at least a year.
Take advantage of the high gold prices and the low Canadian dollar now!
Its the the perfect storm for Canadians to sell their scrap gold, silver, platinum and palladium.
http://www.kmggold.com
Monday, February 23, 2015
Silver Price Undervalued: Panties and Underwear Say So
Www.kmggold.com Current #silver prices confound me. They're too low...
The market price of #silver, #gold, and all precious metals, I thought, was always based on supply and demand. However, someone may have their thumb on the prices of #silver...
The levels of silver, a natural, consistent, and complete biocide, are rising in the oceans. Why? Because, for example, manufacturers of underwear put microscopic amounts or silver in the manufacture of panties, socks, and underwear etc. They contain microscopic amounts of silver, used as a biocide to kill the bacteria that cause unsavoury human odours.
That's right, there's silver in your drawers!
Numerous studies have shown that levels of silver in the Atlantic have increased ten fold higher than they used to be. Perhaps caused by the presence of silver used as a biocide, or odour killer in your socks, underwear and panties.
My confusion is based on the premise of supply and demand. If the supply of silver remains constant, and demand goes through the roof... Why is the price of silver still so low?
My underwear demands answers. Heck, my socks wanna know too! Why is the current market price of silver so low?
Silver discoveries have not glutted the market, but demand for odour eating socks and panties have!
Im still confused...
@KMGGold
KMG Gold Recycling
The market price of #silver, #gold, and all precious metals, I thought, was always based on supply and demand. However, someone may have their thumb on the prices of #silver...
The levels of silver, a natural, consistent, and complete biocide, are rising in the oceans. Why? Because, for example, manufacturers of underwear put microscopic amounts or silver in the manufacture of panties, socks, and underwear etc. They contain microscopic amounts of silver, used as a biocide to kill the bacteria that cause unsavoury human odours.
That's right, there's silver in your drawers!
Numerous studies have shown that levels of silver in the Atlantic have increased ten fold higher than they used to be. Perhaps caused by the presence of silver used as a biocide, or odour killer in your socks, underwear and panties.
My confusion is based on the premise of supply and demand. If the supply of silver remains constant, and demand goes through the roof... Why is the price of silver still so low?
My underwear demands answers. Heck, my socks wanna know too! Why is the current market price of silver so low?
Silver discoveries have not glutted the market, but demand for odour eating socks and panties have!
Im still confused...
@KMGGold
KMG Gold Recycling
Tuesday, January 31, 2012
Silver: Epic Reversal
Source: KMG Gold (1/30/12)
"If silver blasts through $40/oz, it's probably on its way to the all-time high. In that case, the next big move would be to the upside, with potential for $70/oz targets and triple-digit silver prices."
On Jan. 11, we expected the U.S. dollar to top as sentiment was uber-bullish, which would lead to a nice rally for gold, silver and (mining) stocks. That day, the USD index closed at 81.35, silver at $29.89, and gold at $1,641.
Today, the U.S. dollar stands at 78.90, silver at $33.89 and gold at $1,733.50, so we got what we expected.
On Jan. 9, we posted the following chart, which compares the current silver "bubble" to the Nasdaq Bubble a decade ago:
Now let's see where we are today.
Just like the Nasdaq, silver has set a lower/equal low, accompanied by a higher low of the MACD index, and has now rallied quite sharply:
Compare this to the Nasdaq:
An overlay of both charts shows us where we are today:
If we zoom in a bit:
If the pattern holds, we should be about halfway the "Bull trap," as many will view this as the Return to "normal."
If the pattern doesn't hold, and silver blasts through $40/oz, it's probably on it's way to the all-time high. In that case, the next big move would be to the upside, with potential targets of $70/oz and potentially triple digit silver prices.
As long as the pattern holds, I would be careful if silver hits $38/oz.
KMG Gold Recycling
Thursday, September 22, 2011
Silver Sales Rise 30%
The Royal Canadian Mint is on track to raise sales of its silver bullion coins by around 30 percent to 25 million ounces this year and to match last year's record gold sales of around 1 million ounces, an executive from the Mint said.
Speaking on the sidelines of the London Bullion Market Association annual conference, John Moore, executive director of bullion and refinery services at the Mint, told Reuters investors believed silver had more room to rise than gold.
"In terms of our sales this year, year to date we're tracking to the same volumes as we had last year in gold, which were record volumes for us. heading toward a million ounces," he said.
"In silver, we are 30 percent ahead of where we were last year," he said. "We finished last year with 18 million ounces of silver (sales). We are looking at increasing those sales by about 30 percent to the end of this year, to around 25 million ounces."
While silver sales have been strong, very few scrap coins are being returned to the market despite a rally in silver prices to record highs near $50 an ounce in late April.
The metal dropped sharply from that high, however, falling by around a third in just six sessions after its record high, unsettling some investors.
"Analysts are still calling for silver to follow gold and go back up to $50," Moore said. "If you believe gold is going to $2,000, you will probably believe that silver will follow it and go to $50."
Speaking on the sidelines of the London Bullion Market Association annual conference, John Moore, executive director of bullion and refinery services at the Mint, told Reuters investors believed silver had more room to rise than gold.
"In terms of our sales this year, year to date we're tracking to the same volumes as we had last year in gold, which were record volumes for us. heading toward a million ounces," he said.
"In silver, we are 30 percent ahead of where we were last year," he said. "We finished last year with 18 million ounces of silver (sales). We are looking at increasing those sales by about 30 percent to the end of this year, to around 25 million ounces."
While silver sales have been strong, very few scrap coins are being returned to the market despite a rally in silver prices to record highs near $50 an ounce in late April.
The metal dropped sharply from that high, however, falling by around a third in just six sessions after its record high, unsettling some investors.
"Analysts are still calling for silver to follow gold and go back up to $50," Moore said. "If you believe gold is going to $2,000, you will probably believe that silver will follow it and go to $50."
Thursday, September 08, 2011
Silver - The Perfect Alternative
The price of silver has been closely tracking that of gold during the precious metal’s bull run lately. Silver’s role as a precious metal has, at times has avoided any price negative news that has affected the other industrial commodities.
Silver benefits from gold’s rising prices largely because investors, whether in the paper or the physical markets, view it as an attractive leveraged play on gold. Silver offers exposure to the rising demand for safe haven assets at a cheaper price, sometimes earning it the title of “poor man’s gold.”
Of course, choosing silver as an alternative to gold has its risks, especially since the white metal isn’t entirely a precious metal. Silver’s price movements can be heavily impacted by favourable or unfavourable market sentiments regarding the health of the industrial sector, making the silver market highly volatile and prone to large swings in prices.
“Regardless of what happens, silver is still silver,” says Michael \Gupton of KMG Gold in Winnipeg. “It is considered both a precious metal with monetary overtones and also an industrial metal – two positive traits that affect its value.”
Worth the risk?
In spite of the risks, many people still find silver an attractive investment as it has the potential to bring far greater return on investment. The return on investment for silver can surpass gold as price movements over the last year have shown. From August 31, 2010, the price of silver year-over-year gained 115 percent compared to 47 percent for gold; meaning, that one hundred ounces of gold you bought last year for $124,770 made you $57,750 if you sold it one year later. However, you could have put that $124K all into silver and made nearly $143K for a total return of 147 percent more than your return on gold.
Over this next year, analysts expect gold prices to reach even higher and for silver to continue outperforming gold. “When we look at gold versus silver, we feel that silver prices could enjoy more of a gain over the next year or so." stated Gupton.
Silver benefits from gold’s rising prices largely because investors, whether in the paper or the physical markets, view it as an attractive leveraged play on gold. Silver offers exposure to the rising demand for safe haven assets at a cheaper price, sometimes earning it the title of “poor man’s gold.”
Of course, choosing silver as an alternative to gold has its risks, especially since the white metal isn’t entirely a precious metal. Silver’s price movements can be heavily impacted by favourable or unfavourable market sentiments regarding the health of the industrial sector, making the silver market highly volatile and prone to large swings in prices.
“Regardless of what happens, silver is still silver,” says Michael \Gupton of KMG Gold in Winnipeg. “It is considered both a precious metal with monetary overtones and also an industrial metal – two positive traits that affect its value.”
Worth the risk?
In spite of the risks, many people still find silver an attractive investment as it has the potential to bring far greater return on investment. The return on investment for silver can surpass gold as price movements over the last year have shown. From August 31, 2010, the price of silver year-over-year gained 115 percent compared to 47 percent for gold; meaning, that one hundred ounces of gold you bought last year for $124,770 made you $57,750 if you sold it one year later. However, you could have put that $124K all into silver and made nearly $143K for a total return of 147 percent more than your return on gold.
Over this next year, analysts expect gold prices to reach even higher and for silver to continue outperforming gold. “When we look at gold versus silver, we feel that silver prices could enjoy more of a gain over the next year or so." stated Gupton.
Friday, July 15, 2011
GOLD HITS FRESH RECORD HIGH OF $1595.10 IN EUROPEAN TRADE
KMG Gold. Gold prices rallied to a fresh all time high of $1595.10 this morning with
the market buoyed by fears about an escalation in the economic crisis on
both sides of the atlantic.
In the US the Fed Chairman's testimony before the House left the market
convinced that further stimulus measures would be required if growth slows
- and that seems likely. This expansionary policy heightened concerns
about a much weaker US dollar, a possible downgrading of US debt by the
ratings agency (Moody's placed the US economy on "review for a downgrade")
and it raised once again the spectre of inflation. Bernanke's assurance
that debt repayments would be prioritised from tax receipts left market
watchers wondering just how bad can this get. The Fed's view seems to be
that economic weakness is a temporary phenomenon driven by high oil and
food prices and that they expect these to ease in H2 2011 - the question
"why ?" remains to be adequately explained. With Democrats and Republicans
at loggerheads over the debt ceiling a political impasse to an economic
solution is in place and the unthinkable possibility of a US default has
now become a distinct possibility.
Meanwhile across the pond the crisis in the Eurozone continues with policy
makers seemingly trapped like rabbits in the headlights over the debt
crisis. Ireland and Greece both had the ratings downgraded by Fitch and
questions are being asked of Italy in terms of its ability to adequately
cover its debt obligations.
Gold has been a major beneficiary of the economic woes as have safe haven
currencies such as the Swiss Franc and Norwegian Krone and indeed other
hard assets. The relative strength indicator of gold is currently at 70
which suggests it is not presently overbought and there is scope for the
market to move higher. $1600 could prove a temporary psychological barrier
but the market has a head of steam behind it and we don't expect it to
struggle with that level. In January of this we forecast would see a high
of $1850 in 2011 - we hold to that opinion and it may be a little sooner
than we had originally anticipated.
It's down to who and what can you trust. The markets are primed for
capital flight and are seeking reliable destinations. Let's hope for some
cool and calm decisions - the markets are a little too hot at this time
and deeply uncomfortable.
Visit: www.kmggold.com
the market buoyed by fears about an escalation in the economic crisis on
both sides of the atlantic.
In the US the Fed Chairman's testimony before the House left the market
convinced that further stimulus measures would be required if growth slows
- and that seems likely. This expansionary policy heightened concerns
about a much weaker US dollar, a possible downgrading of US debt by the
ratings agency (Moody's placed the US economy on "review for a downgrade")
and it raised once again the spectre of inflation. Bernanke's assurance
that debt repayments would be prioritised from tax receipts left market
watchers wondering just how bad can this get. The Fed's view seems to be
that economic weakness is a temporary phenomenon driven by high oil and
food prices and that they expect these to ease in H2 2011 - the question
"why ?" remains to be adequately explained. With Democrats and Republicans
at loggerheads over the debt ceiling a political impasse to an economic
solution is in place and the unthinkable possibility of a US default has
now become a distinct possibility.
Meanwhile across the pond the crisis in the Eurozone continues with policy
makers seemingly trapped like rabbits in the headlights over the debt
crisis. Ireland and Greece both had the ratings downgraded by Fitch and
questions are being asked of Italy in terms of its ability to adequately
cover its debt obligations.
Gold has been a major beneficiary of the economic woes as have safe haven
currencies such as the Swiss Franc and Norwegian Krone and indeed other
hard assets. The relative strength indicator of gold is currently at 70
which suggests it is not presently overbought and there is scope for the
market to move higher. $1600 could prove a temporary psychological barrier
but the market has a head of steam behind it and we don't expect it to
struggle with that level. In January of this we forecast would see a high
of $1850 in 2011 - we hold to that opinion and it may be a little sooner
than we had originally anticipated.
It's down to who and what can you trust. The markets are primed for
capital flight and are seeking reliable destinations. Let's hope for some
cool and calm decisions - the markets are a little too hot at this time
and deeply uncomfortable.
Visit: www.kmggold.com
Wednesday, May 25, 2011
Gold gains; silver rallies more than 4%
Both metals settle at multiweek highs
SAN FRANCISCO (MarketWatch) — Gold futures traded higher on Wednesday, shaking off early weakness as the dollar came off its highs, and silver futures rallied more than 4%.
Gold for June delivery GCM11 -0.08% added $3.40, or 0.2%, to $1,526.70 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s best settlement since May 3.
August gold GCQ11 -0.09% , the contract with the most open interest but less volume, added $3.50 to settle at $1,527.80 an ounce.
Gold benefitted from ongoing concerns about Greece’s debt and its implications for the euro zone.
“Gold continues to have a safety bid,” said Frank Lesh, a broker and futures analyst with FuturePath Trading in Chicago.
Silver futures rallied 4.2%, with the July contract SIN11 +0.54% settling at $37.64 an ounce, the highest for the metal since May 10.
Silver was more of a speculator market, Lesh said. It was getting a push from smaller investors priced out of gold above $1,500 an ounce, particularly after its recent selloff, he added.
“Silver continues to function as the poor man’s gold,” Lesh said.
Investors on Wednesday grappled with news U.S. durable-good orders were sharply lower in April, rekindling worries of an economic slowdown and providing another leg of support for gold.
“We think that gold will remain well supported in the short term amid small-scale safe haven buying, and still in the absence of a substantial pick-up in physical demand,” analysts at VTB Capital in London said in a note to clients.
Gold rose $7.90 on Tuesday on worries surrounding Europe’s sovereign-debt situation. Read story on Tuesday's gold moves.
Meanwhile, the Bombay Bullion Association said it expects India’s gold imports to reach a record level of 1,000 metric tons this year if the monsoon season is good, analysts at Commerzbank wrote in a note to clients.
“Strong monsoon rainfall increases the income of the rural population, who are major buyers of gold jewelry in the world’s largest gold consumer country,” they said. Gold imports are likely to be 40-50 tons in May, but that’s 30% lower than the previous month, the analysts added.
The dollar index DXY +0.07% , which measures the greenback against a basket of six currencies, traded at 75.930 from 75.915 in late North American trading on Tuesday, as the euro pared losses against the U.S. currency. Read more on currencies
July copper HGN11 -0.06% rose 9 cents, or 2.3%, to $4.11 a pound, ending in the black for the second day.
Platinum and palladium also settled higher, with July platinum PLN11 +0.29% rising $17.30, or 1%, to $1,779.80 an ounce.
Palladium for June delivery PAM11 +0.18% rose $12.10, or 1.7%, to $747.35 an ounce.
SAN FRANCISCO (MarketWatch) — Gold futures traded higher on Wednesday, shaking off early weakness as the dollar came off its highs, and silver futures rallied more than 4%.
Gold for June delivery GCM11 -0.08% added $3.40, or 0.2%, to $1,526.70 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s best settlement since May 3.
August gold GCQ11 -0.09% , the contract with the most open interest but less volume, added $3.50 to settle at $1,527.80 an ounce.
Gold benefitted from ongoing concerns about Greece’s debt and its implications for the euro zone.
“Gold continues to have a safety bid,” said Frank Lesh, a broker and futures analyst with FuturePath Trading in Chicago.
Silver futures rallied 4.2%, with the July contract SIN11 +0.54% settling at $37.64 an ounce, the highest for the metal since May 10.
Silver was more of a speculator market, Lesh said. It was getting a push from smaller investors priced out of gold above $1,500 an ounce, particularly after its recent selloff, he added.
“Silver continues to function as the poor man’s gold,” Lesh said.
Investors on Wednesday grappled with news U.S. durable-good orders were sharply lower in April, rekindling worries of an economic slowdown and providing another leg of support for gold.
“We think that gold will remain well supported in the short term amid small-scale safe haven buying, and still in the absence of a substantial pick-up in physical demand,” analysts at VTB Capital in London said in a note to clients.
Gold rose $7.90 on Tuesday on worries surrounding Europe’s sovereign-debt situation. Read story on Tuesday's gold moves.
Meanwhile, the Bombay Bullion Association said it expects India’s gold imports to reach a record level of 1,000 metric tons this year if the monsoon season is good, analysts at Commerzbank wrote in a note to clients.
“Strong monsoon rainfall increases the income of the rural population, who are major buyers of gold jewelry in the world’s largest gold consumer country,” they said. Gold imports are likely to be 40-50 tons in May, but that’s 30% lower than the previous month, the analysts added.
The dollar index DXY +0.07% , which measures the greenback against a basket of six currencies, traded at 75.930 from 75.915 in late North American trading on Tuesday, as the euro pared losses against the U.S. currency. Read more on currencies
July copper HGN11 -0.06% rose 9 cents, or 2.3%, to $4.11 a pound, ending in the black for the second day.
Platinum and palladium also settled higher, with July platinum PLN11 +0.29% rising $17.30, or 1%, to $1,779.80 an ounce.
Palladium for June delivery PAM11 +0.18% rose $12.10, or 1.7%, to $747.35 an ounce.
Tuesday, May 10, 2011
Silver's drop doesn’t mean bull market over
PORT WASHINGTON, N.Y. (MarketWatch) — The massive decline in silver prices last week does not necessarily mean that the bull market in silver is over.
True, the recent run-up in prices was quite astounding. In just six months, silver prices doubled, almost hitting its all-time high set back in 1980.
Silver also outpaced other commodities — even gold. For years, it took about 63 ounces of silver to buy an ounce of gold. By last week, however, that ratio had been cut in half, to 32.
Bear in mind that, while there were two main reasons why silver shot up in 1980, there were several others this time.
Thirty-one years ago, the Hunt brothers tried to corner the market, which was rising anyway because of rampant inflation.
This time, there was no such squeeze, but rather, concerns over inflation, a rise in prices of other commodities (most notably oil), a fall in the dollar and widespread unrest in the Middle East and North Africa.
Good reasons for the rise notwithstanding, any item whose price soars the way silver did has to encounter headwinds sooner or later. Silver was no exception; its prices tumbled so fast that it lost a quarter of its value in a single week.
What precipitated such a plunge? The same thing that has caused other regularly traded items’ prices to reverse course in the past: a hike in margin requirements.
As prices for commodities rise, it is not unusual for their exchanges to increase margin requirements — the amount of money traders have to put down as collateral.
The higher the price goes, the greater the margin, as officials try to dampen the rise. By the same token, when prices fall, the exchanges usually reduce such requirements.
In the case of silver, margin requirements were hiked not once but a total of five times before they stopped the rise in prices and turned it into a decline.
Since silver’s jump both reflected, and was accompanied by, prices rises in many other commodities, when silver fell, so did prices of most other items.
This widespread plunge in commodities prices led many traders to conclude that inflation was not a threat. They reasoned that the economy was growing too slowly for this to happen; they also believed that the Federal Reserve would not let inflation flare up.
Others interpreted this decline to mean that there was lots of speculation in the prices of silver and other commodities — especially oil. This provided another rationale for expecting prices to fall.
But as the great philosopher, Yogi Berra, used to say: “It ain’t over till it’s over.” In other words, the threat of inflation has by no means been vanquished, and geopolitical concerns remain.
On the inflation front, the Federal Reserve has pumped gobs of liquidity into the financial system, leading to a jump in the monetary base and the money supply. Consequently, the five-year Treasury-TIPS spread has shot up to its highest level in at least four years, reflecting growing concerns over inflation.
As Monday’s action shows, it is far from a foregone conclusion that silver prices can only go lower. They led a rebound in the precious-metals sector as traders once again focused on the reasons why they drove prices higher in the first place: inflation fears and political unrest.
True, the recent run-up in prices was quite astounding. In just six months, silver prices doubled, almost hitting its all-time high set back in 1980.
Silver also outpaced other commodities — even gold. For years, it took about 63 ounces of silver to buy an ounce of gold. By last week, however, that ratio had been cut in half, to 32.
Bear in mind that, while there were two main reasons why silver shot up in 1980, there were several others this time.
Thirty-one years ago, the Hunt brothers tried to corner the market, which was rising anyway because of rampant inflation.
This time, there was no such squeeze, but rather, concerns over inflation, a rise in prices of other commodities (most notably oil), a fall in the dollar and widespread unrest in the Middle East and North Africa.
Good reasons for the rise notwithstanding, any item whose price soars the way silver did has to encounter headwinds sooner or later. Silver was no exception; its prices tumbled so fast that it lost a quarter of its value in a single week.
What precipitated such a plunge? The same thing that has caused other regularly traded items’ prices to reverse course in the past: a hike in margin requirements.
As prices for commodities rise, it is not unusual for their exchanges to increase margin requirements — the amount of money traders have to put down as collateral.
The higher the price goes, the greater the margin, as officials try to dampen the rise. By the same token, when prices fall, the exchanges usually reduce such requirements.
In the case of silver, margin requirements were hiked not once but a total of five times before they stopped the rise in prices and turned it into a decline.
Since silver’s jump both reflected, and was accompanied by, prices rises in many other commodities, when silver fell, so did prices of most other items.
This widespread plunge in commodities prices led many traders to conclude that inflation was not a threat. They reasoned that the economy was growing too slowly for this to happen; they also believed that the Federal Reserve would not let inflation flare up.
Others interpreted this decline to mean that there was lots of speculation in the prices of silver and other commodities — especially oil. This provided another rationale for expecting prices to fall.
But as the great philosopher, Yogi Berra, used to say: “It ain’t over till it’s over.” In other words, the threat of inflation has by no means been vanquished, and geopolitical concerns remain.
On the inflation front, the Federal Reserve has pumped gobs of liquidity into the financial system, leading to a jump in the monetary base and the money supply. Consequently, the five-year Treasury-TIPS spread has shot up to its highest level in at least four years, reflecting growing concerns over inflation.
As Monday’s action shows, it is far from a foregone conclusion that silver prices can only go lower. They led a rebound in the precious-metals sector as traders once again focused on the reasons why they drove prices higher in the first place: inflation fears and political unrest.
Monday, May 09, 2011
Silver pullback is a buying opportunity
JUPITER, Fla. (MarketWatch) — How quickly the glorious springtime of silver turns into a winter of discontent. The selloff in silver saw the metal recently drop 20% from its highs, and we probably aren’t done yet.
But how low will silver SIN11 +6.92% go?
Here are some forces that I’m watching:
Bearish forces
•The Chicago Mercantile Exchange raised margin requirements on silver futures four times in two weeks. While margin requirements must go up when prices go up, four times in two weeks sure is grist for those who say the big banks are short silver and will do anything to derail silver’s bull run.
•Disappointment over silver’s failure to breach the psychologically important $50 level last week is also a factor. The hot money is moving on to other things for now. This leads to a correction, a normal and necessary part of any bull market.
•And then there’s simple profit taking — many people bought silver at much lower levels and so they’re locking in gains. Certainly big funds run by George Soros and others are doing just that. And you know what, I told my subscribers to do that, too, because there’s nothing wrong with taking profits. Silver, gold hit by report of Soros selling.
Bullish forces
Those short-term bearish forces, though, overlay these longer-term, bullish forces:
•Industrial demand for silver is enormous. Nearly 75% of the world’s silver supply is used to make everything from chemical reagents to jewelry to solar panels to plasma TVs. And with the global economy expected to grow by 4.5% this year, according to the International Monetary Fund’s latest figures, that industrial demand for silver is only going to increase.
•The decline in the U.S. dollar is threatening to turn into a collapse. The buck recently touched its lowest level against the euro since December 2009, and the U.S. Dollar Index DXY -0.23% was recently off 7.5% just in 2011. For a currency, that’s a huge move! Since silver — as well as gold and other commodities — are priced in dollars, they generally move opposite to the greenback. It’s what I call the “seesaw of pain” — somebody’s always getting hurt.
•Mine supply of silver is tight. While silver fabrication demand grew by 12.8% last year, silver mine production rose by only 2.5%, and mine supply accounts for 70% of all silver supply, according to GFMS. It’s hard for miners to crank up silver production because two-third of silver produced by mines is as a byproduct to other metals. Mine supply IS expected to rise this year, but it will be hard-pressed to keep up with the expected rise in demand.
The fundamental fact is that, despite the recent correction, both gold and silver are in big bull markets. Until that changes, pullbacks and corrections are buying opportunities.
‘China syndrome’
The big bullish story in silver is just one aspect of the demand shift we’re seeing to China and other emerging markets. China used to be a major seller of silver supply into the global market; now it’s an importer. And it’s importing more and more commodities of all types. China has a huge and growing middle class who want all the things that big, fat Americans want — more food, cars, clothes and jewelry, TVs and other electronics.
Click to Play Alternatives to gold and silverAs gold and silver tank, assets besides commodities can hedge against inflation, according to David Goerz of HighMark Capital Management, who recommends high-quality dividend-paying stocks as well as small caps.
And it’s not just China. According to Goldman Sachs, 70 million people worldwide are joining the world’s middle class each year. In 20 years the middle class will add another 2 billion people, most of them from emerging markets. Many of these nations have a cultural affinity for gold and silver.
So yes, we are seeing some air whoosh out of silver’s bubble. But I don’t think we’ve seen the real mania in silver yet. That doesn’t mean the metal can’t go lower. If the U.S. dollar rallies, that will likely trigger another leg down in silver. If the global economy slumps — and there’s the potential for that due to stubbornly high oil prices — that could knock silver lower as well.
If you want to short silver in the face of strong demand — like the 1.3 billion Chinese who seem ready to buy silver on the dips, or the billion people in India ready to do the same thing — good luck to you. I think you’ll need it.
As for me, I’m waiting for this silver correction to run its course, then I’ll buy again. A 50% retracement of gold’s recent bull run looks like a likely target, and a good place to re-enter the iShares Silver Trust SLV +7.25% , Silver Wheaton SLW +0.33% and other silver bellwethers.
Good luck and good trades.
But how low will silver SIN11 +6.92% go?
Here are some forces that I’m watching:
Bearish forces
•The Chicago Mercantile Exchange raised margin requirements on silver futures four times in two weeks. While margin requirements must go up when prices go up, four times in two weeks sure is grist for those who say the big banks are short silver and will do anything to derail silver’s bull run.
•Disappointment over silver’s failure to breach the psychologically important $50 level last week is also a factor. The hot money is moving on to other things for now. This leads to a correction, a normal and necessary part of any bull market.
•And then there’s simple profit taking — many people bought silver at much lower levels and so they’re locking in gains. Certainly big funds run by George Soros and others are doing just that. And you know what, I told my subscribers to do that, too, because there’s nothing wrong with taking profits. Silver, gold hit by report of Soros selling.
Bullish forces
Those short-term bearish forces, though, overlay these longer-term, bullish forces:
•Industrial demand for silver is enormous. Nearly 75% of the world’s silver supply is used to make everything from chemical reagents to jewelry to solar panels to plasma TVs. And with the global economy expected to grow by 4.5% this year, according to the International Monetary Fund’s latest figures, that industrial demand for silver is only going to increase.
•The decline in the U.S. dollar is threatening to turn into a collapse. The buck recently touched its lowest level against the euro since December 2009, and the U.S. Dollar Index DXY -0.23% was recently off 7.5% just in 2011. For a currency, that’s a huge move! Since silver — as well as gold and other commodities — are priced in dollars, they generally move opposite to the greenback. It’s what I call the “seesaw of pain” — somebody’s always getting hurt.
•Mine supply of silver is tight. While silver fabrication demand grew by 12.8% last year, silver mine production rose by only 2.5%, and mine supply accounts for 70% of all silver supply, according to GFMS. It’s hard for miners to crank up silver production because two-third of silver produced by mines is as a byproduct to other metals. Mine supply IS expected to rise this year, but it will be hard-pressed to keep up with the expected rise in demand.
The fundamental fact is that, despite the recent correction, both gold and silver are in big bull markets. Until that changes, pullbacks and corrections are buying opportunities.
‘China syndrome’
The big bullish story in silver is just one aspect of the demand shift we’re seeing to China and other emerging markets. China used to be a major seller of silver supply into the global market; now it’s an importer. And it’s importing more and more commodities of all types. China has a huge and growing middle class who want all the things that big, fat Americans want — more food, cars, clothes and jewelry, TVs and other electronics.
Click to Play Alternatives to gold and silverAs gold and silver tank, assets besides commodities can hedge against inflation, according to David Goerz of HighMark Capital Management, who recommends high-quality dividend-paying stocks as well as small caps.
And it’s not just China. According to Goldman Sachs, 70 million people worldwide are joining the world’s middle class each year. In 20 years the middle class will add another 2 billion people, most of them from emerging markets. Many of these nations have a cultural affinity for gold and silver.
So yes, we are seeing some air whoosh out of silver’s bubble. But I don’t think we’ve seen the real mania in silver yet. That doesn’t mean the metal can’t go lower. If the U.S. dollar rallies, that will likely trigger another leg down in silver. If the global economy slumps — and there’s the potential for that due to stubbornly high oil prices — that could knock silver lower as well.
If you want to short silver in the face of strong demand — like the 1.3 billion Chinese who seem ready to buy silver on the dips, or the billion people in India ready to do the same thing — good luck to you. I think you’ll need it.
As for me, I’m waiting for this silver correction to run its course, then I’ll buy again. A 50% retracement of gold’s recent bull run looks like a likely target, and a good place to re-enter the iShares Silver Trust SLV +7.25% , Silver Wheaton SLW +0.33% and other silver bellwethers.
Good luck and good trades.
Tuesday, May 03, 2011
What Now for Silver?
The signals that indicate a correction...
KMG Gold Recycling
SO, US SPECIAL FORCES killed Osama bin Laden on Sunday. They may have also thrust a stake through the heart of the silver market, writes Eric Fry at The Daily Reckoning.
We will leave it to Wolf Blitzer and other world news commentators to articulate the geopolitical significance of bin Laden's rendezvous with 40 virgins. Our beat is financial...and in our little corner of the news world, the death of bin Laden seems like a perfect excuse for a long-overdue Dollar rally...and silver selloff.
The silver market has been hot...red hot...probably too hot. The Dollar, for its part, has been stone cold – sinking lower and lower with almost every trading day. Both assets are fully deserving of their respective price trends. The silver market, in other words, deserves to be soaring against the US Dollar. And over the next few years, I would not be surprised to see the silver price top $100...or even $200.
But over the next few weeks, the precious metals are likely to become a bit less precious for a while. Your editor does not raise this caution to suggest that silver be sold. Rather, he raises it to suggest that silver be bought...at lower prices.
To begin this brief analysis of the frothy silver market, please consider one essential fact: the following remarks are no better than guesses. Educated guesses, yes. But guesses all the same. To continue this analysis, please consider a few fascinating data points:
1) Silver has soared more than 50% so far this year, and 150% during the last 12 months.
2) The price chart of silver has developed a parabolic trajectory, typical of toppy markets.
3) Speculative trading activity is dominating many parts of the silver market. For example, recent trading volume in SLV, the $13 billion ETF that represents holdings in silver bullion, has been exceeding the trading volume in SPY, the massive $89 billion ETF that represents the S&P 500 Index. Prior to the recent silver frenzy, SLV would produce only about one quarter the daily trading volume of SPY. But now it is SLV's trading volume that routinely tops SPY's!
4) Various gauges of investor sentiment are flashing extreme bullish readings for silver. The Elliot Wave's Daily Sentiment Index shows that 95% of investors are bullish on silver. Likewise, the Market Vane's Bullish Consensus shows 93% of commodities traders are bullish on silver. When such an overwhelming majority of market participants hold such an overwhelmingly bullish opinion about a given asset, that asset tends to disappoint its fans...at least for a while.
Taken together, these various signs, indicators and portents say loud and clear that a major correction in the silver market is very likely, very soon. On the other hand, Ben Bernanke's reckless monetary policy – spearheaded by money-printing escapades that are so moronic only a PhD in economics could possibly devise them – say loud and clear that silver (and gold) are much better long-term bets than the US Dollar.
So why bother worrying about short-term risks in the silver market?
Good question. Maybe you shouldn't...unless you have an interest in converting these short-term risks into a long-term buying opportunity. The silver rally still "has legs," even if those legs might wobble occasionally.
Looking to Buy Silver...
KMG Gold Recycling
SO, US SPECIAL FORCES killed Osama bin Laden on Sunday. They may have also thrust a stake through the heart of the silver market, writes Eric Fry at The Daily Reckoning.
We will leave it to Wolf Blitzer and other world news commentators to articulate the geopolitical significance of bin Laden's rendezvous with 40 virgins. Our beat is financial...and in our little corner of the news world, the death of bin Laden seems like a perfect excuse for a long-overdue Dollar rally...and silver selloff.
The silver market has been hot...red hot...probably too hot. The Dollar, for its part, has been stone cold – sinking lower and lower with almost every trading day. Both assets are fully deserving of their respective price trends. The silver market, in other words, deserves to be soaring against the US Dollar. And over the next few years, I would not be surprised to see the silver price top $100...or even $200.
But over the next few weeks, the precious metals are likely to become a bit less precious for a while. Your editor does not raise this caution to suggest that silver be sold. Rather, he raises it to suggest that silver be bought...at lower prices.
To begin this brief analysis of the frothy silver market, please consider one essential fact: the following remarks are no better than guesses. Educated guesses, yes. But guesses all the same. To continue this analysis, please consider a few fascinating data points:
1) Silver has soared more than 50% so far this year, and 150% during the last 12 months.
2) The price chart of silver has developed a parabolic trajectory, typical of toppy markets.
3) Speculative trading activity is dominating many parts of the silver market. For example, recent trading volume in SLV, the $13 billion ETF that represents holdings in silver bullion, has been exceeding the trading volume in SPY, the massive $89 billion ETF that represents the S&P 500 Index. Prior to the recent silver frenzy, SLV would produce only about one quarter the daily trading volume of SPY. But now it is SLV's trading volume that routinely tops SPY's!
4) Various gauges of investor sentiment are flashing extreme bullish readings for silver. The Elliot Wave's Daily Sentiment Index shows that 95% of investors are bullish on silver. Likewise, the Market Vane's Bullish Consensus shows 93% of commodities traders are bullish on silver. When such an overwhelming majority of market participants hold such an overwhelmingly bullish opinion about a given asset, that asset tends to disappoint its fans...at least for a while.
Taken together, these various signs, indicators and portents say loud and clear that a major correction in the silver market is very likely, very soon. On the other hand, Ben Bernanke's reckless monetary policy – spearheaded by money-printing escapades that are so moronic only a PhD in economics could possibly devise them – say loud and clear that silver (and gold) are much better long-term bets than the US Dollar.
So why bother worrying about short-term risks in the silver market?
Good question. Maybe you shouldn't...unless you have an interest in converting these short-term risks into a long-term buying opportunity. The silver rally still "has legs," even if those legs might wobble occasionally.
Looking to Buy Silver...
Wednesday, April 27, 2011
Have Silver Prices Gone Parabolic - The Kinder Term for Bubble?
KMG Gold Recycling 11/04/27: ". . .1980 was 5 times faster."
This essay will attempt to address the question of whether or not silver prices are in a bubble, or possibly may be turning into a bubble; and if so, what trading strategies may be suited to the situation. This article will hopefully provide another string to the readers bow in attempting to identify bubbles and being able to protect one's portfolio and even potentially profit from them. For the record, we feel it is prudent to state our view upfront, we do not think silver is in a bubble at this point in time. However we think that it is likely that it will become a bubble in the future, but we cannot say when or at what price.
Asset price bubbles have occurred since the beginning of financial markets and will continue to do so as long as there remains a marketplace for assets to be traded. A key property of a bubble is that is it near impossible to identify with certainty before it pops, but once it does pop the bubble is apparently obvious to everyone. In our opinion, only those who risk capital and profit betting against a bubble can claim to have correctly identified one.
A casual glance at the chart could leave an impression that history is going to repeat itself and silver prices are about to crash. However in order to not only successfully identify bubbles but also profit from them, one will need to know the tipping point. This is the point at which the bubble is unsustainable and begins to breakdown.
There are many factors which contribute to the emergence of bubbles and one would need to look at a myriad of factors to determine when a bubble may pop. We will focus on just one in this article, momentum. In finance, momentum is the empirically observed tendency for rising asset prices to continue to rise. We are attempting to gauge when silver may run out of momentum and when this bull market will turn into a bubble and ultimately pop.
Whilst some may consider it crude to study momentum as opposed to fundamentals such as supply and demand, we feel that it is vitally important from both a psychological and technical standpoint. Psychologically if investors are used to silver prices increasing 30% per year and then silver prices only increase at a rate of say 15% for one year, psychologically this return looks poor on a relative basis, even though it is still positive and normally would leave many investors satisfied. Therefore there is a greater incentive to sell silver since it is not performing as well as it was in the past. Technically once a bubble is fully underway prices begin to rise in a parabolic or exponential fashion. If the price ceases to rise in an exponential fashion, selling will commence, even if the price is still rising, since investors will have extrapolated the exponential rise and so anything short of parabolic will not meet their expectations.
The most recent example of this was in the housing bubble. Prices didn't actually have to fall at all to trigger a crash, all they had to do was plateau or rise sluggishly and this would spark selling by people who had bet on prices continuing to rise. Without continually rising prices real estate investors could not refinance and borrow more against their properties to buy additional properties or other assets, so the buying stopped and the selling began. This was when the bubble popped; this was the tipping point before the actual crash that many investors strive to identify.
So how does this relate to silver? Although we believe that silver does indeed have strong fundamentals, we do think it is likely that the metal will become drastically overvalued in the future as a result of speculative buying by the masses. In an attempt to measure the momentum behind silver and when this momentum will run out, we have analyzed the rate of silver prices increases over the last 50 years or so, since 1968.
The chart below shows the rolling 100-day percentage change in the silver price. This is not a perfect measure of momentum, but it's a start.
As you can see, during the blowoff in 1980, silver prices were increasing at a rate of roughly 400% per 100 trading days. This compares with a current rate of increase of approximately 73% per 100 trading days. So if you think silver's current rally is going at a nose bleed pace, in the 1980 blowoff silver prices were increasing 5.47 times faster than they are at the moment.
So far it appears that the rate of increase in silver prices at present is still below the relative rate of increase in 1980, therefore implying there is further upside. However this analysis doesn't take into account that the Bunker-Hunt brothers were attempting to corner the market for physical silver in the late '70s, a buying force which is not present today. Therefore one should err on the side of caution when using this barometer for trading purposes as it may not reach 1980 levels. But at present the barometer isn't even close, so we do not think silver is in bubble at the moment. KMG Gold Recycling
The chart below best shows how silver is far from in a bubble yet. We have smoothed the 100 day percentage change and overlaid the nominal silver price.
As shown by the blue line still being relatively low in contrast with 1980, there is still a great deal of upside potential for not only the silver price itself, but the rate at which silver prices are increasing. When both the blue and red lines are parabolic, then a bubble argument can be made.
As always the most important part of any discussion of the financial markets is how one should deploy capital. Whilst a silver bubble is not yet upon us, we are going to suggest some trading strategies that could offer attractive risk-reward dynamics should a bubble scenario unfold.
Many people would be inclined to take a short position if they believed silver was drastically overvalued and in a bubble. However in our opinion this is not a particularly attractive trade. Whilst of course the investor will make money if silver prices fall, the investor is also open to unlimited liability on the upside and should silver prices continue to rise substantial losses could be incurred. Taking an outright short position via futures or short selling silver stocks implies that one believes that one's timing is spot on. In reality nobody can ever have perfect timing so it makes sense to allow for some error in your judgement when placing the trade.
This is important when placing any trade but particularly crucial where bubbles are concerned since the market is moving in extreme ways. In the 1980 blowoff, silver was increasing at a rate of over 100% per 30 days, anyone who was short would've got wiped out just for being 30 days too early.
However by utilizing options the trader can take a position that will benefit from an imploding silver bubble but offers much better risk-reward dynamics than being outright short. There are two basic trades that we think would be attractive under such a scenario.
The first is allocating small amounts of capital to near term 'out of the money' puts. By purchasing puts that are say three months or less from expiration and at least 25% out of the money the investor is effectively buying insurance against a crash in silver prices. If silver prices plummet then the value of the puts will explode, but if prices keep soaring the downside is strictly limited to the premium paid for the put. If this trade is placed prematurely, it can be placed again in another few months, and again and again so long as the trader holds the view that silver prices are going to crash. If the view is correct then the eventual payoff will more than cover the cost of being too early in buying the initial puts.
The second trade is a longer term trade that involves selling at the money call vertical spreads which are more than a year from expiration. This expresses the view that prices are not sustainable in the longer term and therefore by the time the call options expire they will likely be worthless due the fall in silver prices. Additionally, if prices were spiking higher it is likely that call options would be being bought heavily by speculators, thereby inflating their premiums. By selling these call spreads one would benefit from a fall in silver prices and a reduction in call buying/increase in call selling by speculators over a longer term time period, without taking on unlimited risk.
We do not think either of these trades are attractive at present, we are merely pointing out that they may be in the future if a bubble scenario does unfold. For now we think it is a case of not pulling on Superman's cape so to speak and letting silver run. If silver's rise is going to be even half as fast as that of 1980 then it could still rise twice as fast as it is at present before blowing off. KMG Gold Recycling
This essay will attempt to address the question of whether or not silver prices are in a bubble, or possibly may be turning into a bubble; and if so, what trading strategies may be suited to the situation. This article will hopefully provide another string to the readers bow in attempting to identify bubbles and being able to protect one's portfolio and even potentially profit from them. For the record, we feel it is prudent to state our view upfront, we do not think silver is in a bubble at this point in time. However we think that it is likely that it will become a bubble in the future, but we cannot say when or at what price.
Asset price bubbles have occurred since the beginning of financial markets and will continue to do so as long as there remains a marketplace for assets to be traded. A key property of a bubble is that is it near impossible to identify with certainty before it pops, but once it does pop the bubble is apparently obvious to everyone. In our opinion, only those who risk capital and profit betting against a bubble can claim to have correctly identified one.
A casual glance at the chart could leave an impression that history is going to repeat itself and silver prices are about to crash. However in order to not only successfully identify bubbles but also profit from them, one will need to know the tipping point. This is the point at which the bubble is unsustainable and begins to breakdown.
There are many factors which contribute to the emergence of bubbles and one would need to look at a myriad of factors to determine when a bubble may pop. We will focus on just one in this article, momentum. In finance, momentum is the empirically observed tendency for rising asset prices to continue to rise. We are attempting to gauge when silver may run out of momentum and when this bull market will turn into a bubble and ultimately pop.
Whilst some may consider it crude to study momentum as opposed to fundamentals such as supply and demand, we feel that it is vitally important from both a psychological and technical standpoint. Psychologically if investors are used to silver prices increasing 30% per year and then silver prices only increase at a rate of say 15% for one year, psychologically this return looks poor on a relative basis, even though it is still positive and normally would leave many investors satisfied. Therefore there is a greater incentive to sell silver since it is not performing as well as it was in the past. Technically once a bubble is fully underway prices begin to rise in a parabolic or exponential fashion. If the price ceases to rise in an exponential fashion, selling will commence, even if the price is still rising, since investors will have extrapolated the exponential rise and so anything short of parabolic will not meet their expectations.
The most recent example of this was in the housing bubble. Prices didn't actually have to fall at all to trigger a crash, all they had to do was plateau or rise sluggishly and this would spark selling by people who had bet on prices continuing to rise. Without continually rising prices real estate investors could not refinance and borrow more against their properties to buy additional properties or other assets, so the buying stopped and the selling began. This was when the bubble popped; this was the tipping point before the actual crash that many investors strive to identify.
So how does this relate to silver? Although we believe that silver does indeed have strong fundamentals, we do think it is likely that the metal will become drastically overvalued in the future as a result of speculative buying by the masses. In an attempt to measure the momentum behind silver and when this momentum will run out, we have analyzed the rate of silver prices increases over the last 50 years or so, since 1968.
The chart below shows the rolling 100-day percentage change in the silver price. This is not a perfect measure of momentum, but it's a start.
As you can see, during the blowoff in 1980, silver prices were increasing at a rate of roughly 400% per 100 trading days. This compares with a current rate of increase of approximately 73% per 100 trading days. So if you think silver's current rally is going at a nose bleed pace, in the 1980 blowoff silver prices were increasing 5.47 times faster than they are at the moment.
So far it appears that the rate of increase in silver prices at present is still below the relative rate of increase in 1980, therefore implying there is further upside. However this analysis doesn't take into account that the Bunker-Hunt brothers were attempting to corner the market for physical silver in the late '70s, a buying force which is not present today. Therefore one should err on the side of caution when using this barometer for trading purposes as it may not reach 1980 levels. But at present the barometer isn't even close, so we do not think silver is in bubble at the moment. KMG Gold Recycling
The chart below best shows how silver is far from in a bubble yet. We have smoothed the 100 day percentage change and overlaid the nominal silver price.
As shown by the blue line still being relatively low in contrast with 1980, there is still a great deal of upside potential for not only the silver price itself, but the rate at which silver prices are increasing. When both the blue and red lines are parabolic, then a bubble argument can be made.
As always the most important part of any discussion of the financial markets is how one should deploy capital. Whilst a silver bubble is not yet upon us, we are going to suggest some trading strategies that could offer attractive risk-reward dynamics should a bubble scenario unfold.
Many people would be inclined to take a short position if they believed silver was drastically overvalued and in a bubble. However in our opinion this is not a particularly attractive trade. Whilst of course the investor will make money if silver prices fall, the investor is also open to unlimited liability on the upside and should silver prices continue to rise substantial losses could be incurred. Taking an outright short position via futures or short selling silver stocks implies that one believes that one's timing is spot on. In reality nobody can ever have perfect timing so it makes sense to allow for some error in your judgement when placing the trade.
This is important when placing any trade but particularly crucial where bubbles are concerned since the market is moving in extreme ways. In the 1980 blowoff, silver was increasing at a rate of over 100% per 30 days, anyone who was short would've got wiped out just for being 30 days too early.
However by utilizing options the trader can take a position that will benefit from an imploding silver bubble but offers much better risk-reward dynamics than being outright short. There are two basic trades that we think would be attractive under such a scenario.
The first is allocating small amounts of capital to near term 'out of the money' puts. By purchasing puts that are say three months or less from expiration and at least 25% out of the money the investor is effectively buying insurance against a crash in silver prices. If silver prices plummet then the value of the puts will explode, but if prices keep soaring the downside is strictly limited to the premium paid for the put. If this trade is placed prematurely, it can be placed again in another few months, and again and again so long as the trader holds the view that silver prices are going to crash. If the view is correct then the eventual payoff will more than cover the cost of being too early in buying the initial puts.
The second trade is a longer term trade that involves selling at the money call vertical spreads which are more than a year from expiration. This expresses the view that prices are not sustainable in the longer term and therefore by the time the call options expire they will likely be worthless due the fall in silver prices. Additionally, if prices were spiking higher it is likely that call options would be being bought heavily by speculators, thereby inflating their premiums. By selling these call spreads one would benefit from a fall in silver prices and a reduction in call buying/increase in call selling by speculators over a longer term time period, without taking on unlimited risk.
We do not think either of these trades are attractive at present, we are merely pointing out that they may be in the future if a bubble scenario does unfold. For now we think it is a case of not pulling on Superman's cape so to speak and letting silver run. If silver's rise is going to be even half as fast as that of 1980 then it could still rise twice as fast as it is at present before blowing off. KMG Gold Recycling
Tuesday, April 26, 2011
Gold & Silver Investment Merely "Routine Speculation" at Record-High Prices as US & Irish Debt Quality Openly Challenged
The Gold Price recovered an overnight dip below $1500 per ounce in London on Tuesday, trading less than 1% shy of yesterday's new all-time high at $1518 as European stock markets rose together with major government bonds and energy prices. Live gold, silver, platinum, and palladium prices available at KMG Gold Recycling
After Monday's "explosive" Asian trade and near-$4 price range per ounce, "Silver showed further weakness" according to one Hong Kong dealer, "stretching [his] expectation about how volatile it could be."
At today's London Fix – set at $45.48 per ounce – the price of Silver Investment bullion had only been higher on four days in history, three of them amid the Hunt Brothers' Corner of Jan. 1980, and the other being Thursday last week.
"Despite silver setting new nominal record highs in the past week, the Comex net long position [in silver futures contracts] is far from record levels," says the latest Precious Metals Weekly for ABN Amro from the VM Group in London, "implying that [London-centered] physical trade is driving the price."
Friday and Monday's Bank Holidays in the US and UK meant "markets had a chance to go wild on thin volumes," says one London dealer, but after surging to new record highs gold settled last night at $1510 per ounce – the first drop in 8 trading days, as Russell Browne at Scotia Mocatta notes.
Silver Prices saw a "long legged Doji" chart pattern, Browne adds, "warning of a possible reversal" by touching new highs intra-day but falling back to end the session unchanged.
"There is some good, old-fashioned...[and] routine speculation...in the few commodities that can be stored, like gold," writes Jeremy Grantham, co-founder and chief investment strategist of the $107 billion GMO asset manager, in his latest letter to clients.
"[But] I believe this is a small part of the total pressure on [raw material] prices, and the same goes for low interest rates. [Instead] we have gone through a profound paradigm shift in almost all commodities, caused by a permanent shift in the underlying fundamentals" as limited supply meets vastly increased demand from Asia's fast-emerging economies.
"Statistically," says Grantham, "most commodities are now so far away from their former downward trend that it makes it very probable that the old trend [of steadily falling input prices] has changed.
"[This is ] perhaps the most important economic event since the Industrial Revolution."
Monday saw shares in Barrick – the world's largest listed Gold Mining stock – lose 5% after it successfully bid 14 times last year's earnings at take-over target Equinox, a copper miner.
Asian investors also sold Chinese loser Minmetals, however, driving it 12% lower in Hong Kong, after it said "the price offered by Barrick is above our most optimistic assessment of value... [and] would, in our view, be value destructive for [our] shareholders."
Over in Venezuela, meantime, 20 armed robbers broke into, seized control of, but failed to steal any gold from the El Callao facilities of Russian Gold Mining firm Rusoro.
"They did get into the storage area but they were unable to open the armored security safes" before fleeing the scene, Rusoro's local security chief told Globovision TV.
In the credit markets, a new report from Deutsche Bank ranks the US government as the world's fourth riskiest sovereign borrower, behind Greece, Ireland and Portugal, and just ahead of Italy.
Here in London on Tuesday, UBS's City office asked the decisions committee of the International Swaps & Derivatives Association to say whether the Irish government's new Credit Institutions Act signals a "restructuring credit event" for Anglo Irish Bank.
The Act orders AIB to buy back certain "subordinated liabilities" from bondholders, potentially triggering bets against the bank's debt known as credit default swaps.
Yields offered to new buyers of Irish, Greek and Portuguese debt all rose to new post-Euro records on Tuesday morning, as prices continued to fall.
Live gold, silver, platinum, and palladium prices available at KMG Gold Recycling
After Monday's "explosive" Asian trade and near-$4 price range per ounce, "Silver showed further weakness" according to one Hong Kong dealer, "stretching [his] expectation about how volatile it could be."
At today's London Fix – set at $45.48 per ounce – the price of Silver Investment bullion had only been higher on four days in history, three of them amid the Hunt Brothers' Corner of Jan. 1980, and the other being Thursday last week.
"Despite silver setting new nominal record highs in the past week, the Comex net long position [in silver futures contracts] is far from record levels," says the latest Precious Metals Weekly for ABN Amro from the VM Group in London, "implying that [London-centered] physical trade is driving the price."
Friday and Monday's Bank Holidays in the US and UK meant "markets had a chance to go wild on thin volumes," says one London dealer, but after surging to new record highs gold settled last night at $1510 per ounce – the first drop in 8 trading days, as Russell Browne at Scotia Mocatta notes.
Silver Prices saw a "long legged Doji" chart pattern, Browne adds, "warning of a possible reversal" by touching new highs intra-day but falling back to end the session unchanged.
"There is some good, old-fashioned...[and] routine speculation...in the few commodities that can be stored, like gold," writes Jeremy Grantham, co-founder and chief investment strategist of the $107 billion GMO asset manager, in his latest letter to clients.
"[But] I believe this is a small part of the total pressure on [raw material] prices, and the same goes for low interest rates. [Instead] we have gone through a profound paradigm shift in almost all commodities, caused by a permanent shift in the underlying fundamentals" as limited supply meets vastly increased demand from Asia's fast-emerging economies.
"Statistically," says Grantham, "most commodities are now so far away from their former downward trend that it makes it very probable that the old trend [of steadily falling input prices] has changed.
"[This is ] perhaps the most important economic event since the Industrial Revolution."
Monday saw shares in Barrick – the world's largest listed Gold Mining stock – lose 5% after it successfully bid 14 times last year's earnings at take-over target Equinox, a copper miner.
Asian investors also sold Chinese loser Minmetals, however, driving it 12% lower in Hong Kong, after it said "the price offered by Barrick is above our most optimistic assessment of value... [and] would, in our view, be value destructive for [our] shareholders."
Over in Venezuela, meantime, 20 armed robbers broke into, seized control of, but failed to steal any gold from the El Callao facilities of Russian Gold Mining firm Rusoro.
"They did get into the storage area but they were unable to open the armored security safes" before fleeing the scene, Rusoro's local security chief told Globovision TV.
In the credit markets, a new report from Deutsche Bank ranks the US government as the world's fourth riskiest sovereign borrower, behind Greece, Ireland and Portugal, and just ahead of Italy.
Here in London on Tuesday, UBS's City office asked the decisions committee of the International Swaps & Derivatives Association to say whether the Irish government's new Credit Institutions Act signals a "restructuring credit event" for Anglo Irish Bank.
The Act orders AIB to buy back certain "subordinated liabilities" from bondholders, potentially triggering bets against the bank's debt known as credit default swaps.
Yields offered to new buyers of Irish, Greek and Portuguese debt all rose to new post-Euro records on Tuesday morning, as prices continued to fall.
Live gold, silver, platinum, and palladium prices available at KMG Gold Recycling
Tuesday, April 19, 2011
$5000 Gold and $300 Silver Are Credible Numbers
Q: What do CNBC, George Soros, Warren Buffet and every other mainstream investment commentator on the price of gold have in common for the last ten years?
A: They are all wrong. All the time, every year, ten out of ten years in a row.
If you continue to pay attention to such disinformation, you will lose money. Definitely. No question. Guaranteed. Each and every year, their vapid comments on the future gold price prove to be complete bollocks, yet year after year, and day after day, millions of readers watchers and listeners tune in for another dose of horribly incorrect information.
These days, the number of perpetually inaccurate predictions forecasting an end to the gold boom are thoroughly drowned out by the now multitudinous voices screaming from the rooftops for gold to go much higher. About 90 percent of that is the herd mentality at work. Early predictions for $1,000 gold, which seemed extreme and outlandish just two years ago, turned out to be very conservative. So its easy now to lay claim to being “the one who predicted the gold bull market”. Bandwagon riders aside, there are compelling reasons to support a much higher gold price, and more importantly, a narrowing of the ratio between the gold price and the silver price. One year ago, the silver to gold ratio was 63 ounces of silver for every ounce of gold. Today that ratio is 35:1. Its fallen by nearly half in one year.
In terms of pure performance, whereas gold has delivered a solid gain of 26.51% in the course of the last year, silver has outshone gold spectacularly, turning in a gain of 123.55%, making it the commodity trade of the year by far. The effect of that performance is to dramatically alter the perception of investors in terms of its desirability as a precious metal. Its long been a psychological barrier to silver’s progress, in my opinion, that a precious metal could be had so cheap.
But as the prices of both monetary metals grows, and their price differentials narrow, investors want an idea of where the future is heading in terms of these prices. Can they continue to grow so dramatically in price, or is there a point at which their price appreciation curve will level out and become more incremental? Or, is there a point at this the upward price curves will plunge steeply downward? And at what point, if every, will the price curves of silver and gold converge? What exactly is the appropriate ratio of gold versus silver? Do we buy bullion, coins, ETF’s, Gold Funds, Senior Miners or Junior Explorers? Which is safest? Which is riskiest? First lets consider the ratio question. If the ratio suggested in the title were to become reality, that would mean a ratio of only ten ounces of silver to buy one ounce of gold.
If the ratio curve were to continue climbing in favour silver at the present rate, it would approach 10:1 within another year. But if the ratio were to reflect numbers pegged to certain fundamental realities, then perhaps we could deduce a more rational price differential with better certainty. According to John Stephenson’s Little Book of Commodity Investing, there is 16 times more silver in the earth’s crust than gold. So on that basis alone, the correct price ratio is arguably 16:1. Silver bulls like to point out that silver is unique among monetary metals because of its wide ranging industrial applications, as well as in photography and jewelry.
As the silver price continues to consolidate its price differential with gold, it is likely that process modification and substitution will occur wherever possible in the manufacturing supply chain to replace silver, which will dampen industrial demand. Thanks to silver’s unique chemical attributes, however, that effect will be muted. 2009 statistics from the Silver Institute show that global supply of silver was more or less equal to the global demand for silver from all classes including manufacturing and bullion minting. Government stocks of silver are estimated to have fallen by 13.7 million ounces over the course of 2009, to reach their lowest levels in more than a decade. Russia again accounted for the bulk of government sales, with China and India essentially absent from the market in 2009.
Regarding China, Gold Fields Mineral Services states that after years of heavy sales, its silver stocks have been reduced significantly. If the silver ratio is heading to 16:1, that implies a near term price range of $90 – $100 per ounce. If gold goes to $5,000 an ounce, and the silver/gold price ratio remains 16:1, there’s silver at $312.50 per ounce. And what, pray tell, is coming down the pike to support a gold price of $5,000? First and foremost, the United States dollar.
The whole global financial system is trapped in a situation whereby we have no choice but to permit the United States to continue counterfeiting money. There is no single political force or voice or even prospect with the knowledge and the power to put a stop to the insanity into which we continue to spiral on a daily basis. That means, despite the unanimous chorus from the financial media mainstream, which anesthetizes the human race in an effort to thwart violent protest by design, the fabrication of electronic dollars will continue apace. For years. In terms of strict nominal value, that implies a proportional increase in the prices of, well, everything. Inflation is the direct outcome of monetary expansion in the absence of economic growth. Therefore, gold and silver will be direct beneficiaries of such policy.
At the same time, sovereign and large capital pool (LCP) investors in U.S. debt are seeking to exit their holdings of U.S. dollars, The world’s largest bond fund, PIMCO, and its acerbic chief Bill Gross, are now shorting the U.S. dollar. China has stated repeatedly that it will reduce its holdings of U.S. debt. This is sending a signal to the rest of the sovereign wealth and LCPs that the U.S. dollar should be abandoned. That means, when the convulsions that seize the global financial system, such as that of 2008, manifest themselves, investors will flee less and less to the U.S. dollar, and more and more to other currencies – especially gold and silver. So not only does the price of gold appreciate in strictly nominal terms, but demand for it is growing even as it grows exponentially in price.
That’s why, given this illogical yet nevertheless existing stupidity, the more expensive gold and silver get, the greater will be their demand as a replacement for U.S. dollar denominated safe haven asset classes. The third major factor that is going to drive gold to $5,000 and silver through $300 is related to the first two. Governments, always reactive and never proactive, will eventually start to ratify gold and silver as official currency alternatives as a result of public pressure. The decision by the people of Utah to do just that was big news recently, even though technically and legally, it always was legal tender in that state. It is this final legitimizing step by regional governments that will open the eyes of the otherwise hypnotized American public.
For now, the move is painted as fringe by the idiotic mainstream, who are unwitting pawns for the financial services industry – U.S. Federal Reserve – U.S. Treasury trio of economic under-miners. But contrary to global public perception, this has been a recurring theme in the United States economy, pretty much from day 1. The Daily Astorian, a newspaper of the day in Astoria, Oregon, on May 9th, 1876 published a story the following of which is an excerpt: The people of this country are tolerably familiar with depreciated money.
The great mass of them have had nothing else for the last fourteen years. We are accustomed to depreciated Greenbacks, National Bank Notes, Nickels and Silver, and there are those living who can recall the time when Gold was worth less than Silver. The biggest perpetrators of what we, the people, must soon designate as criminals, else suffer the continuing consequences of no jobs and no future, are the United States Federal Reserve, the United States Treasury, The Commodities and Futures Trading Commission, and the Securities Exchange Commission. “Oh but wait,” say some. “The United States Federal Reserve is not a government body….its private.” And? The Federal Reserve is nothing more and nothing less than the off-balance sheet entity of the U.S. Treasury that permits the illegal fabrication of dollars out of thin air without prosecution.
Of course this off-balance sheet entity is not an official government body. It was designed that way, exactly as Enron set up LJM L.P., to hide losses and perform sundry distasteful and illegal acts in an effort to support its parent entity. When an entity is formed specifically to operate outside of the publicly elected offices of government, but is given dominion over the most important property of the voting public – its money – and when that entity acts in direct opposition to the interests of the public to whom it owes a fiduciary duty, then its status as government or private really becomes irrelevant. All that matters in terms of its identity is its treasonous and fraudulent activity.
The management of Enron went to jail for their larcenous culture of hiding from shareholders the true extent of their losses, and the illegal nature of their everyday operations. With a bit of luck and perseverance, the same fate will yet befall Bernanke, Paulson, Summers, Rubin, Geithner, Gensler, Shapiro and the rest of the Ivy league thieves. In the meantime, the best defense against their intentional destruction of the United States currency is selling dollars to buy gold for capital preservation and silver for low-risk capital appreciation.
The day will come when, instead of teaching that these leaders were nobly trying to ease the pain of financial forces beyond their control, today’s politicians will instead be accurately portrayed as naïve, negligent, and just plain stupid populists whose ignorance of real economic matters was exactly the ingredient necessary to permit the psychopathic and misanthropic banking community to form the financial policies of their governments. Unfortunately, the only ones likely to be alive by the time that happens are now in diapers.
A: They are all wrong. All the time, every year, ten out of ten years in a row.
If you continue to pay attention to such disinformation, you will lose money. Definitely. No question. Guaranteed. Each and every year, their vapid comments on the future gold price prove to be complete bollocks, yet year after year, and day after day, millions of readers watchers and listeners tune in for another dose of horribly incorrect information.
These days, the number of perpetually inaccurate predictions forecasting an end to the gold boom are thoroughly drowned out by the now multitudinous voices screaming from the rooftops for gold to go much higher. About 90 percent of that is the herd mentality at work. Early predictions for $1,000 gold, which seemed extreme and outlandish just two years ago, turned out to be very conservative. So its easy now to lay claim to being “the one who predicted the gold bull market”. Bandwagon riders aside, there are compelling reasons to support a much higher gold price, and more importantly, a narrowing of the ratio between the gold price and the silver price. One year ago, the silver to gold ratio was 63 ounces of silver for every ounce of gold. Today that ratio is 35:1. Its fallen by nearly half in one year.
In terms of pure performance, whereas gold has delivered a solid gain of 26.51% in the course of the last year, silver has outshone gold spectacularly, turning in a gain of 123.55%, making it the commodity trade of the year by far. The effect of that performance is to dramatically alter the perception of investors in terms of its desirability as a precious metal. Its long been a psychological barrier to silver’s progress, in my opinion, that a precious metal could be had so cheap.
But as the prices of both monetary metals grows, and their price differentials narrow, investors want an idea of where the future is heading in terms of these prices. Can they continue to grow so dramatically in price, or is there a point at which their price appreciation curve will level out and become more incremental? Or, is there a point at this the upward price curves will plunge steeply downward? And at what point, if every, will the price curves of silver and gold converge? What exactly is the appropriate ratio of gold versus silver? Do we buy bullion, coins, ETF’s, Gold Funds, Senior Miners or Junior Explorers? Which is safest? Which is riskiest? First lets consider the ratio question. If the ratio suggested in the title were to become reality, that would mean a ratio of only ten ounces of silver to buy one ounce of gold.
If the ratio curve were to continue climbing in favour silver at the present rate, it would approach 10:1 within another year. But if the ratio were to reflect numbers pegged to certain fundamental realities, then perhaps we could deduce a more rational price differential with better certainty. According to John Stephenson’s Little Book of Commodity Investing, there is 16 times more silver in the earth’s crust than gold. So on that basis alone, the correct price ratio is arguably 16:1. Silver bulls like to point out that silver is unique among monetary metals because of its wide ranging industrial applications, as well as in photography and jewelry.
As the silver price continues to consolidate its price differential with gold, it is likely that process modification and substitution will occur wherever possible in the manufacturing supply chain to replace silver, which will dampen industrial demand. Thanks to silver’s unique chemical attributes, however, that effect will be muted. 2009 statistics from the Silver Institute show that global supply of silver was more or less equal to the global demand for silver from all classes including manufacturing and bullion minting. Government stocks of silver are estimated to have fallen by 13.7 million ounces over the course of 2009, to reach their lowest levels in more than a decade. Russia again accounted for the bulk of government sales, with China and India essentially absent from the market in 2009.
Regarding China, Gold Fields Mineral Services states that after years of heavy sales, its silver stocks have been reduced significantly. If the silver ratio is heading to 16:1, that implies a near term price range of $90 – $100 per ounce. If gold goes to $5,000 an ounce, and the silver/gold price ratio remains 16:1, there’s silver at $312.50 per ounce. And what, pray tell, is coming down the pike to support a gold price of $5,000? First and foremost, the United States dollar.
The whole global financial system is trapped in a situation whereby we have no choice but to permit the United States to continue counterfeiting money. There is no single political force or voice or even prospect with the knowledge and the power to put a stop to the insanity into which we continue to spiral on a daily basis. That means, despite the unanimous chorus from the financial media mainstream, which anesthetizes the human race in an effort to thwart violent protest by design, the fabrication of electronic dollars will continue apace. For years. In terms of strict nominal value, that implies a proportional increase in the prices of, well, everything. Inflation is the direct outcome of monetary expansion in the absence of economic growth. Therefore, gold and silver will be direct beneficiaries of such policy.
At the same time, sovereign and large capital pool (LCP) investors in U.S. debt are seeking to exit their holdings of U.S. dollars, The world’s largest bond fund, PIMCO, and its acerbic chief Bill Gross, are now shorting the U.S. dollar. China has stated repeatedly that it will reduce its holdings of U.S. debt. This is sending a signal to the rest of the sovereign wealth and LCPs that the U.S. dollar should be abandoned. That means, when the convulsions that seize the global financial system, such as that of 2008, manifest themselves, investors will flee less and less to the U.S. dollar, and more and more to other currencies – especially gold and silver. So not only does the price of gold appreciate in strictly nominal terms, but demand for it is growing even as it grows exponentially in price.
That’s why, given this illogical yet nevertheless existing stupidity, the more expensive gold and silver get, the greater will be their demand as a replacement for U.S. dollar denominated safe haven asset classes. The third major factor that is going to drive gold to $5,000 and silver through $300 is related to the first two. Governments, always reactive and never proactive, will eventually start to ratify gold and silver as official currency alternatives as a result of public pressure. The decision by the people of Utah to do just that was big news recently, even though technically and legally, it always was legal tender in that state. It is this final legitimizing step by regional governments that will open the eyes of the otherwise hypnotized American public.
For now, the move is painted as fringe by the idiotic mainstream, who are unwitting pawns for the financial services industry – U.S. Federal Reserve – U.S. Treasury trio of economic under-miners. But contrary to global public perception, this has been a recurring theme in the United States economy, pretty much from day 1. The Daily Astorian, a newspaper of the day in Astoria, Oregon, on May 9th, 1876 published a story the following of which is an excerpt: The people of this country are tolerably familiar with depreciated money.
The great mass of them have had nothing else for the last fourteen years. We are accustomed to depreciated Greenbacks, National Bank Notes, Nickels and Silver, and there are those living who can recall the time when Gold was worth less than Silver. The biggest perpetrators of what we, the people, must soon designate as criminals, else suffer the continuing consequences of no jobs and no future, are the United States Federal Reserve, the United States Treasury, The Commodities and Futures Trading Commission, and the Securities Exchange Commission. “Oh but wait,” say some. “The United States Federal Reserve is not a government body….its private.” And? The Federal Reserve is nothing more and nothing less than the off-balance sheet entity of the U.S. Treasury that permits the illegal fabrication of dollars out of thin air without prosecution.
Of course this off-balance sheet entity is not an official government body. It was designed that way, exactly as Enron set up LJM L.P., to hide losses and perform sundry distasteful and illegal acts in an effort to support its parent entity. When an entity is formed specifically to operate outside of the publicly elected offices of government, but is given dominion over the most important property of the voting public – its money – and when that entity acts in direct opposition to the interests of the public to whom it owes a fiduciary duty, then its status as government or private really becomes irrelevant. All that matters in terms of its identity is its treasonous and fraudulent activity.
The management of Enron went to jail for their larcenous culture of hiding from shareholders the true extent of their losses, and the illegal nature of their everyday operations. With a bit of luck and perseverance, the same fate will yet befall Bernanke, Paulson, Summers, Rubin, Geithner, Gensler, Shapiro and the rest of the Ivy league thieves. In the meantime, the best defense against their intentional destruction of the United States currency is selling dollars to buy gold for capital preservation and silver for low-risk capital appreciation.
The day will come when, instead of teaching that these leaders were nobly trying to ease the pain of financial forces beyond their control, today’s politicians will instead be accurately portrayed as naïve, negligent, and just plain stupid populists whose ignorance of real economic matters was exactly the ingredient necessary to permit the psychopathic and misanthropic banking community to form the financial policies of their governments. Unfortunately, the only ones likely to be alive by the time that happens are now in diapers.
Monday, March 28, 2011
Gold, Silver Prices Volatile on Profit Taking
Gold and silver prices were volatile as investors weighed recent highs in the precious metals and looked to lock in profits ahead of the second quarter.
Gold for April delivery was losing $3 to $1,423.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,430 and as low as $1,410.10 while the spot gold price was dropping more than $8, according to Kitco's gold index.
Silver prices were adding $0.13 to $37.18 an ounce. Both metals, however, have bounced back from session lows as buyers stepped in to buy the metals at lower prices.
Explanations for today's selloff have run the gamut. Headline news like hawkish comments from Federal Reserve members to worries that there will be no third round of quantitative easing to improving economic growth in the U.S. were the favorites. But most traders weren't surprised by the move down.
"I've been calling for this $1,400 support and $1,450 congestion area," says George Gero, senior vice president at RBC Capital Markets. Gold has tried five times now to break, conquer and hold record highs. Prices inch higher each time but haven't been able to sustain those levels. Gold now has to overcome an intraday high of $1,448.60 an ounce.
"I see. . .that silver has been outperforming gold," argues Gero, "and I think silver is outperforming gold because it is a bridge between investment demand and industrial demand." Gero also says that gold is less speculative and that silver is where investors and traders are trying to hedge their currency positions.
Year-to-date, silver has rallied 20% while gold is relatively flat despite hitting new records.
Gold for April delivery was losing $3 to $1,423.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,430 and as low as $1,410.10 while the spot gold price was dropping more than $8, according to Kitco's gold index.
Silver prices were adding $0.13 to $37.18 an ounce. Both metals, however, have bounced back from session lows as buyers stepped in to buy the metals at lower prices.
Explanations for today's selloff have run the gamut. Headline news like hawkish comments from Federal Reserve members to worries that there will be no third round of quantitative easing to improving economic growth in the U.S. were the favorites. But most traders weren't surprised by the move down.
"I've been calling for this $1,400 support and $1,450 congestion area," says George Gero, senior vice president at RBC Capital Markets. Gold has tried five times now to break, conquer and hold record highs. Prices inch higher each time but haven't been able to sustain those levels. Gold now has to overcome an intraday high of $1,448.60 an ounce.
"I see. . .that silver has been outperforming gold," argues Gero, "and I think silver is outperforming gold because it is a bridge between investment demand and industrial demand." Gero also says that gold is less speculative and that silver is where investors and traders are trying to hedge their currency positions.
Year-to-date, silver has rallied 20% while gold is relatively flat despite hitting new records.
Friday, February 04, 2011
Is it Time to Sell Gold and Silver ?
In the last days we have seen the gold price hit $1,324 and yesterday spring to $1,355, (KMG Gold London Fix Prices), leaving it in a neutral zone technically speaking. More than 10% of the gold ETF, SPDR in the States has been sold as well as around 10% of the ishares Silver Trust. Investors need to know, “is this the time they should be selling their gold and silver investments?” Traders will look solely at the short-term charts, medium-term investors at the medium –term fundamentals and long-term investors before this checked to see if this was a sufficient correction to disinvest and when will be the right time to re-enter the market. With so much emotion creeping into these decisions, investors need to sweep that away and coldly assess the individual investment situation within their own investment criteria. We will stand back further and look only at, “Is it time to sell Gold & Silver” and leave you to make up your own minds.
Technical picture
In the dollar the gold price has moved into ‘neutral’ territory having halted the downward movement as it hit support between $1,324 and $1,330 after which it bounced to $1,355. The Fix in London was at $1,347.50 up almost $20 from yesterday afternoon’s Fix of $1,328.
Many of you will feel that the dollar gold price is what defines gold’s movements, but we would caution investors who think this way. Gold has fallen back from its recent peak of $1,425 to $1,324. Take a look at the euro price of gold. It has pulled back from its peak of €1,065 and fell back to €962, almost the same amount of fall. And yet we have seen the euro jumping back from its recent low of $1.32 to stand over $1.38 a 4% move. This complicates matters because if you see the relationship of gold reflecting the strength or weakness of the dollar, you would have been wrong-footed. After all, a 4% move in the $ gold price is $65 move from the recent peak.
Recently, the euro weakened, because of the sovereign debt crisis, more rapidly than the dollar fell. Now the euro is recovering because the EU leaders are supposed to come out with a plan that will remove the fear of a euro collapse, in March. With politics playing games with the raising of the borrowing limits of the U.S. fear is growing that confidence in the dollar is going to press it lower against the euro. So you, the investor, have to decide which is the currency that most accurately reflects the demand and supply factors dictating the gold price or which is the one through which to invest to maximize profits? We have our own opinion for sure.
The Fundamental picture
- The gold market has changed its shape since the last century, when it was at the mercy of the developed world’s central banks. Since the beginning of this century, the world’s central banks have completed the gold sales they had planned to make and halted this policy and that of accelerating the production of gold.
- We have seen the jewelry market recover recently in the developed world.
- We are seeing the rise of persistent Asian demand.
- Investment demand in the developed world looks undecided as to whether to invest more or to divest believing gold has had its day. On the other side of investment demand for gold, there is a school that is selling from the gold ETF’ and buying physical gold, to hold overseas.
- We are seeing producers just manage to replace the ounces they have mined with new discoveries, but at such a slow pace that, at best, we expect little to no growth in newly mined supplies, despite the rising gold price.
- In the silver market there is a far greater scope for newly mined supplies, except for those that come as a by-product of base metal production.
- There is also a far greater scope to reclaim silver. However, most new uses of silver do consume the silver used and are not reclaimable.
- Investment demand for silver tends to be more institutional despite silver being the ‘poor man’s’ gold.
- Asian demand for silver is growing as it is the next best investment to gold, so they believe.
However, the silver price moves with the gold price, with more extreme swings either way.
It’s a matter of Perspective
This makes it even more complicated for the investor, for Asian investors buy silver and gold for very different reasons than investors watching the level of interest rates in the U.S.A. The difficult task ahead of investors is to give the correct weighting to the different parts of global gold and silver markets: -
- How far will the east dominate gold & silver prices?
- To what extent will the developed world’s events dictate the direction of the precious metal prices?
- Will an economic recovery in the West lead to more or less demand for the precious metals?
- What are the different characteristics of global investors when it comes to buying and selling?
- What is the future of currencies and their values against gold?
- What effect will the shift in power from West to East have on the precious metals going forward?
Technical picture
In the dollar the gold price has moved into ‘neutral’ territory having halted the downward movement as it hit support between $1,324 and $1,330 after which it bounced to $1,355. The Fix in London was at $1,347.50 up almost $20 from yesterday afternoon’s Fix of $1,328.
Many of you will feel that the dollar gold price is what defines gold’s movements, but we would caution investors who think this way. Gold has fallen back from its recent peak of $1,425 to $1,324. Take a look at the euro price of gold. It has pulled back from its peak of €1,065 and fell back to €962, almost the same amount of fall. And yet we have seen the euro jumping back from its recent low of $1.32 to stand over $1.38 a 4% move. This complicates matters because if you see the relationship of gold reflecting the strength or weakness of the dollar, you would have been wrong-footed. After all, a 4% move in the $ gold price is $65 move from the recent peak.
Recently, the euro weakened, because of the sovereign debt crisis, more rapidly than the dollar fell. Now the euro is recovering because the EU leaders are supposed to come out with a plan that will remove the fear of a euro collapse, in March. With politics playing games with the raising of the borrowing limits of the U.S. fear is growing that confidence in the dollar is going to press it lower against the euro. So you, the investor, have to decide which is the currency that most accurately reflects the demand and supply factors dictating the gold price or which is the one through which to invest to maximize profits? We have our own opinion for sure.
The Fundamental picture
- The gold market has changed its shape since the last century, when it was at the mercy of the developed world’s central banks. Since the beginning of this century, the world’s central banks have completed the gold sales they had planned to make and halted this policy and that of accelerating the production of gold.
- We have seen the jewelry market recover recently in the developed world.
- We are seeing the rise of persistent Asian demand.
- Investment demand in the developed world looks undecided as to whether to invest more or to divest believing gold has had its day. On the other side of investment demand for gold, there is a school that is selling from the gold ETF’ and buying physical gold, to hold overseas.
- We are seeing producers just manage to replace the ounces they have mined with new discoveries, but at such a slow pace that, at best, we expect little to no growth in newly mined supplies, despite the rising gold price.
- In the silver market there is a far greater scope for newly mined supplies, except for those that come as a by-product of base metal production.
- There is also a far greater scope to reclaim silver. However, most new uses of silver do consume the silver used and are not reclaimable.
- Investment demand for silver tends to be more institutional despite silver being the ‘poor man’s’ gold.
- Asian demand for silver is growing as it is the next best investment to gold, so they believe.
However, the silver price moves with the gold price, with more extreme swings either way.
It’s a matter of Perspective
This makes it even more complicated for the investor, for Asian investors buy silver and gold for very different reasons than investors watching the level of interest rates in the U.S.A. The difficult task ahead of investors is to give the correct weighting to the different parts of global gold and silver markets: -
- How far will the east dominate gold & silver prices?
- To what extent will the developed world’s events dictate the direction of the precious metal prices?
- Will an economic recovery in the West lead to more or less demand for the precious metals?
- What are the different characteristics of global investors when it comes to buying and selling?
- What is the future of currencies and their values against gold?
- What effect will the shift in power from West to East have on the precious metals going forward?
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