Thursday, May 03, 2007

Silver and stuff, Early May

Gold

Over the last few weeks I've mentioned Central Bank Gold sales as the reason for the downward pressure on metal prices, Gold directly and Silver by association. Apparently 89 tonnes of Gold has been sold into the markets in the last 7 weeks raising the weekly average sales from 7 tonnes to over 12 tonnes per week.

The Central Bank Gold Agreement (CBGA) allows a total limit of 500 tonnes to be sold by it's members this year and sales would need to continue at this volume to meet this years cap. This article at the Resource Investor fills out all the details and looks at the probable inability of Central Banks to keep up this pace and liquidate the full 500 tonnes allowed this year. Inability to keep up the pace of sales should lower the pressure and allow the continued appreciation of Gold

I'm quite surprised at Golds strength recently considering the impact that Gold sales of this size have made in previous years. This in mind, I'm also amazed Central Bankers have not got the message that they've lost control of the market. 2005 was an important year for Gold, for the first time ever, investors own the majority of Gold not Central Banks. In years of trying to manipulate the Gold market the banks sold their leverage, now it's no longer their game and yet they are still selling.

Silver

Silver is still echoing Golds weakness but it should be noted that silver stockpiles will likely be flat this year or continue to decline while Gold supplies continue to accumulate above ground. As it is, Gold production has not kept up with population increases, meaning less bullion per capita and increased rarity, even though it's supply is growing.

Silver supply is still in a deficit situation demanding Government sales to meet demand each year for well over a decade, silver is becoming rarer. When you consider population is growing, industrial uses are increasing and silver supplies are not meeting current demand, Silver will continue to become rarer for some time. If gold supplies are growing and silver supplies are shrinking would this not be a good time to invest new money in Silver or at least flip a modest portion of your Gold to Silver?

Canadian Dollar

David Dodge has stated he will not actively intervene against the strengthening dollar at least up to the 92.5 mark.

I assume with recent concerns over inflation risk the trend should be towards higher interest rates but higher rates would only push the dollar up. Lowering rates to weaken the dollar would only pump inflation so there would appear to be no safe decisions other than let the market decide and wait.

With 10.4 % monetary creation I personally believe tightening is the rational course, unfortunately with the current level of global liquidity it might make no real impact on our inflation. Inflation is not a local issue right now but one of global proportions as nearly every major economy is creating money in double digits. As long as this kind of monetary growth continues it is clear sailing for metals and a long term reduction of the buying power of paper currency.

Misc

I did a little research last week only to find Canada is still weighed over 50% in U.S. dollars reserves and we have a meagre 3 tonnes, or $76 million in Gold reserves. With no hard asset backing our country or currency and a heavy weighting to U.S. dollar reserves it's all the more important that you take care of your financial security.

You have to wonder why the average person fails to see the dangers signs. Just last week a free Readers Digest I was handed in the GO station had a chart showing international savings rates. It showed countries like France were still large net savers but it showed the U.S. and Australia with negatives savings and Canada way down at just over 1%, way down from our historical savings rates. We have fallen into the living beyond our means consumerism spiral that will lead many to crash and burn. The purchasing power of our money is being destroyed and we as a whole do nothing to protect ourselves and refuse to change our lifestyles to meet this new reality.

4 comments:

P said...

Are there any Canadian bullion dealers? I'd love to walk in & buy some. Is that possible?
It would save shipping & foreign exchange costs.
Please let me know how you purchase.

Lord of Wealth said...

I listed some dealers before but off the top of my head,

Border gold
http://www.bordergold.com/index.php?option=com_frontpage&Itemid=1
Physical Adress Surrey BC
(a friend has used them they allow walk in sales)

J&M
http://www.jandm.com/contacts.htm
Vancouver- walkin sales or delivery

Colonial Acres
Kitchener Ont
http://www.colonialacres.com/home.shtml
(I've used them) walkin or order on line.

Many currency exchange offices will carry bullion,
Bendix for one- higher prices.

Bank of Nova Scotia is my main vendor because I can get to the main branch at Scotia Tower in Toronto. If you order from a small branch you have to wait and pay for shipping by brinks to that branch. If your in toronto or at least close, I'd go straight here.

Locally - (I don't know where you are) call coin stores.

KITCO- web sales, Montreal
Good company.

There are likely others. Most walkin coins stores especially ones carrying collectables charge a higher premium than Scotia bank or Kitco would, but in most cases you would have to deal with delivery. The above are all Canadian so no exchange.

Hope this helps

P.s. If you are looking at coins such as soveriegns which are not pure bullion there could be GST and PST depending on Province. If you are buying Maples leafs there would be no GST, but some provinces do charge pst, Ontario being one. If you want leafs, order from BC and the savings in sales tax will more than cover delivery.

Pure bullion bars/waffer/bricks have not taxes in Canada and should have not taxes or duties delivered from the U.S.

Any other question, don't hesitate to ask, or let me know how it worked out.

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