Friday, April 22, 2011 6:44:06 PM
Silver Still Soaring: The Short Covering Rally Continues
Ed Steer
April 21, 2011
(article below this; Silver Set to Soar as Paper Folds?)
Gold and Silver
The gold price didn't do much of anything yesterday and...looking at the Kitco chart below...it's obvious that the gold price hasn't done very much of anything during the last three trading days, despite the rather precipitous decline in the U.S. dollar during that time period.
The silver graph below just shows how much silver has become a different animal than gold. The dollar graduations on the Kitco graph below tells all. From silver's low on this chart, to its close on Thursday, silver has risen 8.4%...compared to gold's 1.3% over the same time period. This has nothing to do with the dollar. It's a short-covering rally, pure and simple...with Thursday's price action being more of the same. Volume, once again, was very heavy.
The dollar continued its decline on Thursday, reaching its nadir of 73.75 around 11:00 a.m. in London...which is 6:00 a.m. Eastern time. From there, the dollar recovered to 74.10 by the close of Thursday trading in New York. It's obvious from the precious metal charts, that the dollar was not a factor in yesterday's price action.
And not that I want to put too fine a point on this, but the gold price has barely reacted at all to the big decline in the U.S. dollar during the entire week just past
The gold stocks were rather jumpy in early trading yesterday...but then settled down somewhat, with the HUI finishing up an even 1% on the day. The silver stocks did somewhat better, but it was very uneven...and you'd never guess by looking at the action of either the gold or silver stocks, that we're at record highs in the gold price...along with a silver price that's screaming to the upside by at least a dollar a day.
As I said, the silver stocks did better, but prices were mixed. The top-callers are still yelling their lungs out...and most of the sheeple are doing their bidding by selling and waiting for the correction...which is the reason the silver stocks are not screaming to new highs. But if it does come...how deep will it be and how long it will last...will be the question of the day.
As Ted Butler has mentioned for weeks now, this silver rally is a short-covering rally. Open interest is actually declining because the bullion banks are covering their short positions...it's not caused by new speculative longs coming into the market and bidding the price up. The dynamics are totally different now.
Here's the 1-year silver chart. If you want to bet against this trend...please be my guest. Now that the silver price is doing what it's doing...volatility, both up and down, is the name of the game from this point onwards. As Richard Russell says, any dips should be bought.
The CME's Daily Delivery report showed that 1 gold, along with 18 silver contracts, were posted for delivery next Wednesday. The link to the action, such as it was, is here.
There was action in both GLD and SLV yesterday...as metal was withdrawn from both. GLD showed a small decline of 19,498 ounces...and a chunky 1,073,404 troy ounces of silver was taken out of SLV. Based on the recent price action, it's a pretty good bet that this silver was desperately needed elsewhere by an authorized participant, as SLV is owed many millions of ounces that just aren't available.
The U.S. Mint had a smallish sales report yesterday. They sold 9,000 ounces of gold eagles...along with 1,000 one-ounce 24K gold buffaloes. They didn't report any further silver eagles sales.
Over at the Comex-approved warehouses on Tuesday, they reported receiving a smallish 34,822 ounces of silver...but shipped 516,206 ounces out the door...for a net decline of 481,384 troy ounces. The link to the action is here.
My bullion dealer had another monster day at his store yesterday...and it was certainly one of his biggest sales days of 2011. He has almost more business than he can handle. Because silver bullion deliveries are now many months in the futures, customers are limited to 10 oz. of silver bullion per customer in over-the-counter sales. If they wish to purchase more, it's a 3-month minimum wait for most items. Physical supplies are tight...and getting tighter.
http://www.caseyresearch.com/gsd/edition/silver-still-soaring-short-covering-rally-continues
===========================================================
Silver Set to Soar as Paper Folds?
John Browne
Apr 21, 2011
As a result of active "demonetization" efforts by the IMF and its member central banks, gold and silver have experienced the type of volatility that has given conservative investors reasons not to perceive the metals as dependable cash alternatives. Instead gold and silver have become known as the asset class to hold as a hedge against inflation.
However, during the 1990's, when inflation was in general much higher than it has been since the turn of the millennium, gold and silver prices drifted lower and stagnated. However, since 2000, gold and silver have risen by over 400 and 700 percent respectively. Remarkably, this has occurred over a time frame during which, by most accounts, low inflation has prevailed. How can this be explained?
In 1944 when the U.S. dollar was considered 'as good as gold,' it was made the international reserve currency. This unique status is the reason that Fed Chairman Ben Bernanke was recently able to say that, "The U.S. Government has a technology, called the printing press that allows it to produce as many dollars at it wishes at essentially no cost."
Today, with the Federal Reserve treating the greenback as a never ending lottery ticket for deficit spending politicians, many investors feel the U.S. dollar is good for nothing. As a result there is an increasing international pressure to remove the U.S. dollar's reserve status. Given that there is no widely accepted alternative to the dollar (the euro has many problems of its own), this is creating fears of an international currency crisis, which has fueled interest in precious metals. So metal prices have risen even with low inflation expectations.
In order to paper over the effects of the financial collapse, central banks around the world are printing as fast as their presses can manage. But unlike prior periods of monetary inflation (like the 1970's), some major powers (China) are withdrawing liquidity. In addition, emerging market manufacturers are holding down prices even as currencies lose value. This may explain the strong performance of metals despite seemingly manageable inflation. But if higher prices emerge into the light of day (as they already have in commodities), currency uncertainty combined with high inflation should intensify the market for precious metals. The question then becomes how to play the market.
Gold has always been the reserve asset of choice for central banks and major private investors. But now, as smaller investors become aware that paper dollars are under threat, many are looking towards silver. Taken in aggregate, these smaller investors have enormous buying power. Through ETF's and mining stocks they are not bound by government restrictions on holding precious metals in retirement funds. In contrast to gold, central banks do not hold much silver. They are therefore less able to push down the price of silver by dumping inventory when rising metal prices undermine currency confidence.
Indeed, so far this year, silver is up nearly 50% while gold is up only about 6%. Given these figures, investors may be forgiven if they feel that the big move in silver may be over. Technical analysis may provide comfort.
According to the U.S. geological survey silver is about 17.5 times more abundant than gold in the earth's crust. This ratio has long been appreciated by civilizations throughout history. Thus, in 1792 the newly formed U.S. Congress passed the First Coinage Act, which legally set the valuation ratio of gold/silver at 15 (it was raised to 16 in 1834). In the early 1990's, with silver out of favor with investors, the ratio approached 100. At the beginning of this century gold stood at some $250 an ounce and silver at $4, putting the ratio at about 62. Today, with gold at around $1,500 an ounce and silver at $45, the ratio has closed to around 33. But this is still far higher than the ratio seen in the late 1980's (silver's last mega spike), and if far higher than the natural proportions of gold and silver would suggest.
The demand for physical silver also remains strong, which supports the market for spot silver. Smaller investors may find gold too expensive at $1,461 an ounce, but may be nevertheless prepared to buy several ounces of silver for much less. Potentially, this 'poor man's gold' market may help drive silver prices far faster than gold.
http://www.safehaven.com/article/20714/silver-set-to-soar-as-paper-folds?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+safehaven%2Fall-articles+%28Safehaven+-+Most+Recent+Articles%29&utm_content=My+Yahoo
Ed Steer
April 21, 2011
(article below this; Silver Set to Soar as Paper Folds?)
Gold and Silver
The gold price didn't do much of anything yesterday and...looking at the Kitco chart below...it's obvious that the gold price hasn't done very much of anything during the last three trading days, despite the rather precipitous decline in the U.S. dollar during that time period.
The silver graph below just shows how much silver has become a different animal than gold. The dollar graduations on the Kitco graph below tells all. From silver's low on this chart, to its close on Thursday, silver has risen 8.4%...compared to gold's 1.3% over the same time period. This has nothing to do with the dollar. It's a short-covering rally, pure and simple...with Thursday's price action being more of the same. Volume, once again, was very heavy.
The dollar continued its decline on Thursday, reaching its nadir of 73.75 around 11:00 a.m. in London...which is 6:00 a.m. Eastern time. From there, the dollar recovered to 74.10 by the close of Thursday trading in New York. It's obvious from the precious metal charts, that the dollar was not a factor in yesterday's price action.
And not that I want to put too fine a point on this, but the gold price has barely reacted at all to the big decline in the U.S. dollar during the entire week just past
The gold stocks were rather jumpy in early trading yesterday...but then settled down somewhat, with the HUI finishing up an even 1% on the day. The silver stocks did somewhat better, but it was very uneven...and you'd never guess by looking at the action of either the gold or silver stocks, that we're at record highs in the gold price...along with a silver price that's screaming to the upside by at least a dollar a day.
As I said, the silver stocks did better, but prices were mixed. The top-callers are still yelling their lungs out...and most of the sheeple are doing their bidding by selling and waiting for the correction...which is the reason the silver stocks are not screaming to new highs. But if it does come...how deep will it be and how long it will last...will be the question of the day.
As Ted Butler has mentioned for weeks now, this silver rally is a short-covering rally. Open interest is actually declining because the bullion banks are covering their short positions...it's not caused by new speculative longs coming into the market and bidding the price up. The dynamics are totally different now.
Here's the 1-year silver chart. If you want to bet against this trend...please be my guest. Now that the silver price is doing what it's doing...volatility, both up and down, is the name of the game from this point onwards. As Richard Russell says, any dips should be bought.
The CME's Daily Delivery report showed that 1 gold, along with 18 silver contracts, were posted for delivery next Wednesday. The link to the action, such as it was, is here.
There was action in both GLD and SLV yesterday...as metal was withdrawn from both. GLD showed a small decline of 19,498 ounces...and a chunky 1,073,404 troy ounces of silver was taken out of SLV. Based on the recent price action, it's a pretty good bet that this silver was desperately needed elsewhere by an authorized participant, as SLV is owed many millions of ounces that just aren't available.
The U.S. Mint had a smallish sales report yesterday. They sold 9,000 ounces of gold eagles...along with 1,000 one-ounce 24K gold buffaloes. They didn't report any further silver eagles sales.
Over at the Comex-approved warehouses on Tuesday, they reported receiving a smallish 34,822 ounces of silver...but shipped 516,206 ounces out the door...for a net decline of 481,384 troy ounces. The link to the action is here.
My bullion dealer had another monster day at his store yesterday...and it was certainly one of his biggest sales days of 2011. He has almost more business than he can handle. Because silver bullion deliveries are now many months in the futures, customers are limited to 10 oz. of silver bullion per customer in over-the-counter sales. If they wish to purchase more, it's a 3-month minimum wait for most items. Physical supplies are tight...and getting tighter.
http://www.caseyresearch.com/gsd/edition/silver-still-soaring-short-covering-rally-continues
===========================================================
Silver Set to Soar as Paper Folds?
John Browne
Apr 21, 2011
As a result of active "demonetization" efforts by the IMF and its member central banks, gold and silver have experienced the type of volatility that has given conservative investors reasons not to perceive the metals as dependable cash alternatives. Instead gold and silver have become known as the asset class to hold as a hedge against inflation.
However, during the 1990's, when inflation was in general much higher than it has been since the turn of the millennium, gold and silver prices drifted lower and stagnated. However, since 2000, gold and silver have risen by over 400 and 700 percent respectively. Remarkably, this has occurred over a time frame during which, by most accounts, low inflation has prevailed. How can this be explained?
In 1944 when the U.S. dollar was considered 'as good as gold,' it was made the international reserve currency. This unique status is the reason that Fed Chairman Ben Bernanke was recently able to say that, "The U.S. Government has a technology, called the printing press that allows it to produce as many dollars at it wishes at essentially no cost."
Today, with the Federal Reserve treating the greenback as a never ending lottery ticket for deficit spending politicians, many investors feel the U.S. dollar is good for nothing. As a result there is an increasing international pressure to remove the U.S. dollar's reserve status. Given that there is no widely accepted alternative to the dollar (the euro has many problems of its own), this is creating fears of an international currency crisis, which has fueled interest in precious metals. So metal prices have risen even with low inflation expectations.
In order to paper over the effects of the financial collapse, central banks around the world are printing as fast as their presses can manage. But unlike prior periods of monetary inflation (like the 1970's), some major powers (China) are withdrawing liquidity. In addition, emerging market manufacturers are holding down prices even as currencies lose value. This may explain the strong performance of metals despite seemingly manageable inflation. But if higher prices emerge into the light of day (as they already have in commodities), currency uncertainty combined with high inflation should intensify the market for precious metals. The question then becomes how to play the market.
Gold has always been the reserve asset of choice for central banks and major private investors. But now, as smaller investors become aware that paper dollars are under threat, many are looking towards silver. Taken in aggregate, these smaller investors have enormous buying power. Through ETF's and mining stocks they are not bound by government restrictions on holding precious metals in retirement funds. In contrast to gold, central banks do not hold much silver. They are therefore less able to push down the price of silver by dumping inventory when rising metal prices undermine currency confidence.
Indeed, so far this year, silver is up nearly 50% while gold is up only about 6%. Given these figures, investors may be forgiven if they feel that the big move in silver may be over. Technical analysis may provide comfort.
According to the U.S. geological survey silver is about 17.5 times more abundant than gold in the earth's crust. This ratio has long been appreciated by civilizations throughout history. Thus, in 1792 the newly formed U.S. Congress passed the First Coinage Act, which legally set the valuation ratio of gold/silver at 15 (it was raised to 16 in 1834). In the early 1990's, with silver out of favor with investors, the ratio approached 100. At the beginning of this century gold stood at some $250 an ounce and silver at $4, putting the ratio at about 62. Today, with gold at around $1,500 an ounce and silver at $45, the ratio has closed to around 33. But this is still far higher than the ratio seen in the late 1980's (silver's last mega spike), and if far higher than the natural proportions of gold and silver would suggest.
The demand for physical silver also remains strong, which supports the market for spot silver. Smaller investors may find gold too expensive at $1,461 an ounce, but may be nevertheless prepared to buy several ounces of silver for much less. Potentially, this 'poor man's gold' market may help drive silver prices far faster than gold.
http://www.safehaven.com/article/20714/silver-set-to-soar-as-paper-folds?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+safehaven%2Fall-articles+%28Safehaven+-+Most+Recent+Articles%29&utm_content=My+Yahoo
invest at your own risk, based on your own due diligence, at your own risk tolerance
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
