News and Views

September 16, 2010

Bunker Mentality

For what he calls “a good take on the mainstream financial media’s thoughts about gold,” Tim Iacono recommends reading a Wall Street Journal blog post by Matt Phillips, which was “written after Goldman Sachs said more Fed money printing is on tap and the metal responded by surging to a new all-time high.” While Phillips admits, “We’ve been wrong so far. Gold is up 16% year to date, much better than the roughly flat S&P performance,” he goes on to caution that “we still think its dangerous to listen to the head-out-to-the-bunker-in-the-salt-flats-with-a-shotgun-a-year’s-supply-of-spam-and-sackful-of-gold-ingots crowd. Gold is working, because it’s working, and it’ll continue working until it doesn’t. Then look out.” “Based on commentary like this,” writes Iacono, “it would seem that we’ve still got at least a few years to go until gold prices get really crazy and writers like Phillips get even more frustrated. There is still a clearly dismissiveContinue Reading
As gold surges more than $24 to a new all-time high, and silver advances toward a new multi-decade high, Ted Butler proposes to the CFTC that “No single speculative trading entity could control on a net basis, long or short, a total derivatives position greater than one percent of the annual world production of any commodity.” He points out that “Since most commodities already fall well under the one percent of world production threshold, it is only necessary to bring the few commodities which have position or accountability levels greater than one percent into line.” Including of course, silver, with a current accountability level of “6000 contracts, or 30 million ounces. This is 4.3% of world annual silver mine production of roughly 700 million ounces, head and shoulders above any other commodity of finite supply. Based upon the one percent formula, the position limit in silver should be no greaterContinue Reading
“The weak dollar may be supporting the surprising strength in the precious metals market, especially among big foreign buyers, who are vacuuming up physical gold and silver right now,” suggests The Golden Truth, pointing to a post at Le Metropole Cafe, that “India is booming and the ‘wealth effect’ for the world’s largest gold buyer cannot be ignored,” which also references this Standard Bank of London report: “Demand for physical gold remains robust out of Asia and India ahead of Q4:10. Our Standard Bank Physical Gold Flow Index remains in positive territory indicating that buying in the physical market continues to outpace selling, even at this near-record high gold price.” This as a SilverSeek commentary accuses Western media of ignoring precious metals interest in Asia, specifically China, where “Chinese newspapers and financial media are reporting that buyers are primarily wealthier investors.  Prior to the gold and silver rush, buyers wereContinue Reading
September 13, 2010

All Swapped Out

As a primer is offered on “How silver is shorted by commercial traders,” looking at the latest COT report, Got Gold Report‘s Gene Arensberg analyzes the silver short position of those commercial traders, classified by the CFTC as Producer/Merchant, compared to the Swap Dealers, and finds that while the latter have a net short position of only 194 contracts, the former, at  61,604 net short contracts, have “essentially all of the commercial net short positioning on the COMEX for silver.” He goes on to ask:  “Can the Big Sellers of silver manhandle the silver market lower if the Swap Dealers are not on the sell side?  In a word, yes, it has definitely happened in the past.  But unless and until the Swap Dealers join in on the sell side of silver we think there is a higher likelihood of a material breakout for the second most popular precious metal.Continue Reading
September 11, 2010

They’re Baaaaack!

September’s Bank Participation Report, released Friday, showed that “3 or less” U.S. bullion banks increased their net short position in Comex silver by 5,367 contracts from the August report. “Without doubt, JPMorgan was the culprit,” writes Casey Research’s Ed Steer, extensively quoting Ted Butler’s response to his private clients: “Here’s why I think JPMorgan shorted more, putting its head back into the lion’s mouth, after closing out a bunch of silver short positions.  I don’t think they thought they had any other choice.  On August 24th, the price of silver was around $18 an ounce.  Over the next couple of days it jumped sharply to $19… and then continued to move up from there.  The technical funds were buying aggressively and the Commercials [as a group] sold to them.  Without JPMorgan’s additional 5,000 or 6,000 or more short contracts, the Commercials stood a good chance of being over run toContinue Reading
September 10, 2010

Gold: Midterms and Long Term

In an interview with The Gold Report, Brien Lundin, editor and publisher of the Gold Newsletter, and organizer of October’s New Orleans Investment Conference, speaks of a “trendless market” making for a “tough investing environment,” but, “the good news for gold investors is that no matter what happens, no matter which way the economy heads, there’s a very good argument for significantly higher gold prices.” He does however believe that “the upcoming midterm elections in the U.S. actually represent the greatest near-term risk to gold,” based on his prediction of “a dramatic backlash toward the conservative/Libertarian side of the political spectrum.”  But longer term he sees President Obama “married to a political and economic philosophy that will end up being very good for gold and probably very bad for the U.S. economy.” Related Links: Coin News:  Gold and silver prices settle lower Tim Iacono:  Silver continues to probe the $20Continue Reading
September 9, 2010

Chinaustralia

As Mineweb reports on the massive mineral resources that go into “Building a modern China,” where “The 15.7 billion square meters of urban floor space built in China during 2009 could cover Jamaica,” a Business Week cover story looks at how China is mining Australia to meet its resource needs. The article notes that despite Australia being the world’s 18th largest economy, its dollar is the fifth-most-traded currency, as “speculators, unable to bet on a yuan pegged to the U.S. dollar, use the currencies of China’s main trading partners instead.” This as Bloomberg reports that “China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar’s role in global trade.” And, Jim Rickards declares that “Treasury debt has become the new opium; the cheap, easy-to-produce, commoditized stuff that we ship to China to bulkContinue Reading
“There is evidence that the supply of physical silver is getting tight and it could  be the beginning of a major upward move in the price,” writes Paul Mylchreest in the latest issue of his Thunder Road Report, pointing out that “Importantly the silver price has started to trade differently in the last couple of weeks – as everybody who stands shoulder-to-shoulder with GATA and Ted Butler in the precious metals market has noticed. Time after time after time in recent years, the silver price has been blatantly taken down in the days preceding option expiry to the benefit of the big shorts. This time was different,” a situation that he describes in detail, referencing this chart posted on The Golden Truth. And, heeding Butler’s call to switch, he writes of selling gold shares to buy physical silver, adding that “Buying some silver is an opportunity to send a powerfulContinue Reading
September 7, 2010

Is Gold Overbought?

Not according to U.S. Global Investors’ Frank Holmes:  “Looking at our oscillators, gold appears to be far from overbought.  The chart shows the 60-day oscillator for gold (yellow) and the U.S. dollar (green) for the past 10 years as of August 31. One standard deviation represents a 7.3 percent move in gold prices. Despite its recent run, gold was down 0.38 standard deviations as of the end of the month. More importantly, we’re not seeing the huge price spikes that are typical when investments get overheated.” And in an analysis headlined “Gold entering a virtuous circle,” Matterhorn Asset Management’s Egon von Greyerz, expects “gold to start a substantial rise now which will continue for 5-10 months before any major correction. Gold’s technical picture is extremely strong with a continuous rising pattern of higher highs and higher lows with the steepness of the curve increasing.” Related Links: Zero Hedge:  Jim RickardsContinue Reading
Silver is deemed strong, following a week in which it settled at its highest price since March 2008, and which also ended with gold posting its fifth consecutive weekly gain. But analyzing the latest COT report, — visual – numerical — Casey Research’s Ed Steer sees it as being “ugly in both metals,” with “absolutely no sign that any bullion bank was covering short positions in either metal during the prior week.”  He does however paraphrase Ted Butler’s analysis, that, “a lot of this deterioration had to do with the Raptors [the ‘9 or more’ Commercial traders] selling long positions and taking profits.  This has the same affect as increasing the net short position… as selling a long position has the same net impact in the COT as going short a contract.” More on the COT report and the future prospects for both gold and silver in the second-half ofContinue Reading
September 3, 2010

Waiting for Gold’s Big Wave

In an interview with The Gold Report, Casey Research’s Louis James, who recently wrote about a family member’s gold awakening, touts the virtues of physical gold and silver, including the American Buffalo gold coin, and discusses some unorthodox storage strategies. He also contends that  “In spite of the news that gold has made, it’s not seen as an important instrument of investment by most people. If you’re a gold bug or you’re somebody who is already interested in the sector, you see advertisements on the Super Bowl and say, ‘Oh, wow, this is really catching on! This is going to be like the ’70s and the wave is coming.’ … I believe there will be a wave. But I am not sure we’re even in the beginning stages of that crest yet.” Related Links: FX Street:  Safe-haven buying buoys gold ahead of U.S. job numbers MarketWatch:  Silver closes at itsContinue Reading
With Tuesday’s action in silver prompting speculation that JPMorgan covered more short positions, a Got Gold Report analysis of last week’s COT report, finds that “the more mercenary of the COMEX commercial traders, the traders the CFTC classes as Swap Dealers, had actually turned slightly net long silver with silver in the $18.30s. From August 17 to August 24 the SDs covered or offset 3,329 short positions turning from 2,134 contracts net short to 1,195 contracts net long.  Of course since then silver has rallied more than a buck, and both the swap dealers and the producer/merchants had ample ammunition to fire from their pre-Labor Day holiday bunkers.” The analysis also cautions that “It will take buying pressure and lots of it for silver to well and truly challenge the long-time resistance,” but we “believe that silver is gaining popularity once again and is overdue for a new definition moveContinue Reading