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.

The argument for Silver

I tripped over this article today and it’s certainly is as detailed, competant and literate as anything I could pump out(If not more so) and since I’ve touched many of these issues before I’m sure as hell not eager to write it up again, so I won’t, enjoy!

I like to find these kind of articles, first, it leaves me with the feeling I’m not alone and second, it give me time to finish what I’m writing from scratch.

It should be noted the article is from a U.K. site, so any bias against physical silver is not just about the weight and storage issues as stated but also that the U.K. applies a steep tax to physical silver sales. While they did not deride physical silver they also did not look at the danger of accepting paper silver the equivalent of the real thing. The kind of silver you choose can be as important as making the decision to invest in silver, be informed.

Silver Questions

I’m in a bit of a mood today totally unrelated to the drop off in metal prices. I’m wondering why are my hits are going up yet the comments are minimal.

That in mind I have some questions I would like answered.

Have you accepted the argument of metals as a sound investment or at least economic insurance?

Do you hold Gold or Silver or both?

If Silver, are you basing your investment on the belief in a probable eventual silver shortage or simply as real money and a hedge against the dollar?

What are your favourite products, why?

How are you dealing with storage?

How do your perceive the relative safety of paper silver/gold?

Do you dabble in metal equities or purely bullion?

What are your target prices, short and long term?

Off metals for a second, should we expect an inflationary or deflationary sprial to bring this mess to crisis?

I should really do this in a survey form but this will have to do. I hope to get some feedback about these issues, after all I know what I believe but I’d like to know what the bigger consensus is.

What if anything do you wish to see discussed on this site?

Thanks
Kubera Jones
Lord of Wealth

Silver and stuff april 23

So we got beat up a bit at the end of last week but we still managed make back the vast majority of on Friday so I’m not too concerned, There was news of more French Central Bank gold sales so fact that the big dip was only 1 day long shows that there is real strength and enough demand in the market to suck up excess supply nearly as fast as it be added to the market.

Gold is down just under 2 dollars again today yet silver is up .13 and just off last weeks highs. I’m convinced that metal strength is real and will remain strong but it appears that flooding of the market to suppress the price could continue this year so I won’t get too cocky and mortgage the house just yet. Last week we saw the Japanese come out in support of IMF gold sales to cover operating losses (and no doubt bolster the U.S. dollar). How much will gold the IMF sell is anyone’s guess. I still think the bigger question is the relevance of the organization!

On the other side I’ve seen predictions that gold sales will follow last years trend and continue to drop. There are two reason for this I suspect, 1 the banks are running out of bullion to sell, 2 self interest- since bullion selling seems to be having less and less effect on gold or the dollar so it’s in their best interest to hold and capitalize on gold’s appreciation.

The financial breakdown in Zimbabwe has reached a new stage with the closing down of all major gold mines in the country. The Government has not been paying the miners for the bullion since January creating cash crunches for most operations. It’s also been reported that the government has failed to fulfill their agreements to make 67% of payments in foreign currency. The lack of cash flow, the constant devaluation of the currency from the 1700% inflation rate and a fixed price for gold in Zimbabwean dollars left miners finding it hard to produce gold at a profit. The final straw however was the lack of foreign currency which left the miners unable to purchase cyanide for leaching gold ore. While Zimbabwe is only a small piece of the supply picture no drop in supply can be ignored.

If I had any cash available I would still be comfortable buying at this point. Of coursem, what do I know;)

Silver and stuff

Recent Silver news has Toronto brokers GMP (Griffiths McBurney Securities) predicting an average silver price of 14.25 with peaks of $20 for 2007. That is certainly news to warm the heart. Studies show that both jewellery and industrial use of silver is growing faster than new mine supplies, all of which looks good for continued strength of silver this year. Silver looked flat and steady for most of last week but Friday’s jump over the important 14 dollar mark is significant, give it a few days and if it holds or continues up I think we are on the annual spring run which I predict will take us to near $17 U.S.

It’s my belief that India will stop or greatly lower government silver sales this year. With the natural yearly deficit and no Indian sales to fill the gap supplies could shrink by 100 million ounces this year, or 80% of the NYMEX holdings. No one knows or is saying how much silver India has but they have to see eventually that they are giving it away at today’s prices. It only makes sense that at some point they will see the coming shortage and hoard the remaining silver to exploit the price at a later date. Then again who says governments make the correct decisions, and who says they are not selling it to friends so they can exploit it personally rather than have the Government profit?

What is knowable is that India is in the position the U.S. was in for decades as the supplier of silver to make up for supply deficit. The U.S. with billions of ounces of silver eventually ran out so will India! The year India gets smart or runs out will be the beginning of the parabolic rise for silver prices. I only hope I can increase my position before that moment.

In the Gold world at least 29 tonnes of bullion has been released for sale in the last couple of weeks and the markets did not even flinch. Last year this kind of selling would have caused a severe price hit but this year nothing there was nothing but salivation as someone gobbled it all up. Aggressive central bank gold selling is not going to have the desired effect in dropping the price by flooding the market, 1 they don’t have enough left to do the job , 2 other central banks are the ones buying it up. If it was only funds and retail buyers the prices might have tanked but big money is in the buying mood and a meagre 29 tonnes is not enough to satiate them.

There is danger however that the IMF will open the vault and start selling its gold to cover operating expenses. The IMF should be put down like the sick animal it is, it has very few clients beyond Turkey and the bureaucracy continues to grow and suck up profits. This gold was deposited by the U.S. as collateral to open the IMF, this is loaned gold and I don’t see how the IMF thinks it can sell someone else’s property to cover their debts. If I was the U.S. I would be demanding the IMF close and return my gold. Or perhaps they intend to turn a blind eye to the bullion sales in order to temporarily support the strength of the dollar. It seems they are so intent on continuing the charade of U.S. economic strength they will sell their future in the form of gold reserves to fool the public until the next election. As long as the sales are not huge volumes I think they will have a minimum impact, but if they manage to coordinate with central banks to make a splash, who knows?

The U.S. dollar was getting killed on tough protectionist talk last week. When you add in the debt, war, trade imbalance and the over creation of money factors, the U.S. dollar looks like it has no where to go but down, which is good for those of us holding metals. This however will not be good for export economies like Canada, Yes they will continue to buy our oil and steel etc but our meagre manufactured goods sector will be hard pressed to maintain business as the Can dollar appreciates against the Greenback. The impending recession will also hurt Canada unless we start making more effort to market ourselves and our goods in Asia.

I’ve noticed a spike in hits to my site and to the feed services. I hope all my readers are getting something out of my ranting and I would appreciate comments and discussion on these or any related topics. I’m also willing to post full articles for anyone not inclined to build their own blog.

With the renewed level of hits I will try to write more, I blog politically as well as on Silver and since the Canadian scene for the last couple of weeks has been rather interesting I’ve been torn between reading metals and economic material and posting political. I can’t seem to post on all topics and research all topics within the time I have.

I’ve added some auction links which seem a little erratic. They are supposed to show silver bullion auctions but occasionally show other things, fortunately no sex toys yet! Do people think they are distracting or acceptable?

I’m just adding this at the last moment before I post. Gold went on a run last night in overseas trading (up 7ish) and seems to be holding early, silver moved little but is also holding.

Good news, I sold my second car (an attempt at frugalizing and being Greener) so now I can go shopping today, mmmm, coin store, the bullion counter, or Ebay? Decisions, decisions!