News and Views

December 19, 2011

SLV: Coming Up Short

In a commentary to his subscribers that is now publicly available, Ted Butler analyzes the short position in SLV, the largest silver ETF, and finds that from the start of this year, it “had grown dramatically, from around 13 million shares, to a peak of 37 million shares in the spring. Not only is the percentage of shorted shares of total outstanding shares higher in SLV than in any other hard-metal ETF, it is higher for a very unique reason – there is not enough physical silver available to allow for the normal issuance of shares as dictated by the prospectus. Aside from the harm short sellers are having on SLV shareholders, these short sellers are also manipulating the price of silver. If they had to go out and buy 25 or 37 million ounces of silver to issue shares as dictated by the prospectus, the price of silver wouldContinue Reading
December 18, 2011

‘Tis the (Physical) Season

As Coin News reports that “weakness in precious metals has been extremely bullish for physical gold and silver in terms of U.S. Mint bullion coins,” Paul Tracy chronicles the soaring demand for American Silver Eagles, and makes the case for “Why silver could take off from current levels.” And a MarketWatch article that deems silver “a bargain under $30,” while advising of its volatility, quotes a long-time investor named Colin Hayward as saying that “Buying silver under $30 today is like buying it at $5 ten years ago.” Hayward is also the president of Gearology, which specializes in gold and silver promotional items and gift ideas. About which, a Mason City Iowa man’s gift idea has become “The Tradition of the Kruggerand.” He buys one at the Salvation Army auction each year, just to put it back in the kettle.Continue Reading
December 16, 2011

Metals Market Faceoff

Weighing in on the “gold and silver price confrontation” between bulls and bears, Tocqueville Gold Fund manager John Hathaway argues that “This correction is well within the confines of what you can tolerate to say gold is still in a bull market.  Frankly, this is exactly what we need to set up a base for going to new highs.  I think we are going to be done with this by the end of the year.”  As for silver, he says that “we have to take our cue from gold… The things that are going to drive gold are going to drive silver, but as always, silver will get a bigger percentage move.” Hathaway also reminds investors, “Don’t lose sight of the long-term rationale for investing in precious metals and that is monetary debasement.  I see nothing to suggest anything has changed. Austerity is deflationary and it means people lose jobs,Continue Reading
December 15, 2011

Metals Sell-Off Tide Stems

As “Gold and silver calm down after selloff,” the collapse of negative gold lease rates is seen as one sign that the metals sell off may be ending.  And Ted Butler, in a note to subscribers, writes of seeing “scant signals from the real world of supply and demand to account for the decline in gold and silver prices. At the core, this is strictly another Comex-commercial rig job…. We have only gone down in price so that the commercials could buy. It’s not possible that the commercials can always be big buyers on such declines for any other plausible explanation. That the CFTC sits by, even though it has been armed with new anti-manipulative regulations is as shameful as it gets.” Related Links: Kitco:  Comex ends lower on follow-through pressure from Wednesday’s drubbing Dow Jones:  Comex gold down $9.70; silver up 34 cents Mineweb:  Battle lines drawn in goldContinue Reading
December 14, 2011

Is Gold as Low as It’ll Go?

With Comex gold closing below $1,600, its lowest level in five months, Jesse’s Café Américain looks at the role of gold lease rates in exacerbating “the ferocity of this sell off,” and with gold now “in a technically oversold condition, on a near-term basis,” Kitco‘s Jim Wyckoff is looking for it to bounce back soon.  He points out that the 14-period Relative Strength Index (RSI) on the above graph “is in a posture very similar to those RSI postures seen in July and September of this year,” after which “the gold futures market did proceed to post solid price rallies in the following weeks.”  And MarketWatch‘s Mark Hulbert writes that “contrarians detect a very strong wall of worry forming in the gold market, one which could very well be the springboard for bullion rallying into new all-time high territory.” Related Links: Reuters:  Gold dives 4 percent on fund liquidation, technicalsContinue Reading
The first quarter of 2012 “will probably see some strengthening in the metals, but not nearly the seasonality that we usually expect,” predicts silver analyst David Morgan, in an interview with Mineweb.  Citing the need for cash during a liquidity squeeze, he points out that “silver and gold are the ultimate cash but that’s only known by probably 1% of the world’s population.  The other 99% of the world’s population looks at pieces of paper with presidents’ pictures on them or if you’re outside of the US, different types of currencies that represent the ultimate liquidity.” He also notes that precious metals are “consolidating and we have these wide trading ranges and I’ve coined the term basically that these markets will scare you out or wear you out… scare you out are these big, huge drops that are very rapid – or wear you out where you get these longContinue Reading
December 12, 2011

Banking On (Eventual) Easing

Analyzing a number of “Global factors hitting gold and silver,” a Wall St. Cheat Sheet article notes that “While central banks around the world are itching to provide even more monetary easing,  they do not have the political environment to do so.  However, history has shown us that central banks see monetary easing as a viable solution to economic problems.  When recently asked if he is buying commodities, Jim Rogers explained, ‘Well, not at the moment, but I’m seriously considering it given what’s happening in the world.  The central banks are going to loosen up even more on money.  That’s not good for the world, not good at all, but that’s all they know how to do.  So, I’m contemplating, being forced to buy more real assets.'” Related Links: MarketWatch:  Gold ends at seven-week low on Euro woes Reuters:  Gold drops 3 percent on technical sell-off, euro fears; silver fallsContinue Reading
“If silver during the Euro crisis has the same initial reaction as it did in 2008, with a sharp decline, we believe that due to the nature of the crisis, 2012 being a currency crisis vs. 2008 being a liquidity crunch, the demand for physical silver would be overwhelming on a global scale, according to, which presents the argument in a new video titled, “If silver goes down all hell will break loose in the physical market.” It predicts that the “ultimate low for silver is $22.50, this being roughly the same percentage pull back from the 2011 high that we saw in the 2008 crash. Only this time, we believe it would be a flash crash, short lived, sending silver north of $50 in the matter of weeks. If a fiat currency crisis starts, Europe, Asia, and even Americans will start to purchase precious metals in order toContinue Reading
Predicting that “silver could rise from $33 to $50 an ounce next year,” a Money Morning article argues that the price will be driven up by a continuation of 2011’s increased investment demand:  “We are rewriting the rules by turning silver into an investor’s metal. Instead of the price being a measure of its value in manufacturing, the silver price is becoming a measure of how big a mess the global financial system becomes.” More conservatively, HSBC sees an average price of $34 an ounce in 2012, with the company’s head of precious metals research, James Steel, saying that “Silver prices will reflect the interplay of many factors. The single biggest bullish factor, in our view, will be renewed investment demand.” More on Steel’s outlook for 2012 in an interview with The Street. Related Links: Reuters:  Gold rises; posts weekly loss on uncertain Europe Dow Jones:  Comex gold edges higherContinue Reading
December 8, 2011

Paper Monster

“I would recommend owning plenty of gold and, depending on your available resources, select real estate and collectible art, which works well for wealth preservation, and having an adequate pool of cash, which would only be used to acquire additional ‘real assets’  in the event of another crisis.”  That’s the conclusion of a Vancouver Sun op-ed warning that “the money needed to bail out Europe and to fund America’s spiralling debt and future unfunded obligations is in the tens of trillions. IT DOES NOT EXIST. It has to be created by printing money in massive quantities, and despite all the rhetoric you will hear against such policies, in the end it’s the path of least resistance. Printing money is an invisible tax on savings, much easier to initiate, than, say, raising taxes or cutting back on services and entitlements.” Related Links: Reuters/Bloomberg:  Gold falls 2 percent as ECB disappoints, eyesContinue Reading
December 7, 2011

Buying Time

As it’s reported that “Germany pours cold water on EU summit hopes,” Tocqueville Gold Fund manager John Hathaway suggests that European leaders have just “six months before people start to get very restive with their medicine of tightening government spending, cutting back on entitlements and all that kind of thing.  I think if you want to have a bet that they don’t have as much time as they need, you should have some gold.” And he predicts that “at the end of the day we are not going to see any solution other than more central bank money printing.” As for silver, Hathaway likens it to “a small cap stock,” pointing out that “there is not a lot of capacity in silver to absorb a fresh flow of new money coming in.  So I think you could get a big, violent move upwards, especially if gold goes to new highs.”Continue Reading
Echoing other recent analyses about the latest COT report for silver, Got Gold Report‘s Gene Arensberg sees the data as being more bullish than bearish.  Referencing the above graph for net short positioning by large Commercial traders (LCNS), he points out “how low the blue line is and how rare it is for that line to be this low… We think that the very low level of commercial net short positioning presently ‘says’ that the largest, best funded and presumably the best informed commercial traders on the COMEX are not positioning as though they believe silver has very much downside left in it.” Also, identifying what he describes as a possible “giant technical ‘flag’ or perhaps a ‘pennant’ formation” in the silver chart, Arensberg concludes that “in the back of our mind is the notion that if what we are actually witnessing is a giant flag or pennant formation, andContinue Reading