There is still a bright future for silver and gold

Overall, May has been a poor month for Gold starting about 680, peaking at about 688.80 and falling to 652.50. There certainly have been some good dips for buyers and with the added strength of the loonie in recent weeks now certainly looks like a great time for Canadians to add a bar, coin or nugget to their stash. For Americans however, they’d better RUSH to get into the market before the dollar totally dissolves.

Silver was similarly brutal this month but with yesterdays and today’s move back up towards 13.44 it’s nearly recovered it’s entire months loses in 2 days, I hope it holds. The gold silver ratio is almost back to 49, a signal that silver will continue to out perform gold?

Recent reports on the silver industry have disputed the arguments that silver stocks are declining. My take on this issue is; if 77 million ounces of government sales are required for supply to meet demand, then the shortage is still growing. These governments’ vaults are not endless and will be drawn down to nothing eventually, likely sooner than later.

Silver investment demand is raging (64.5 million oz) and if the market thinks greedy little investors like me are going to part with our hoards before we see multiples of 10 they’ve got another thing coming. They assume that invested silver will be available to the market when they need it, yes it is available, but certainly not at today’s prices. As prices rise more investors will see the trend and will jump in making it harder for silver users to shake loose supplies. Once that silver vault in India runs dry or the demand for the superconducting cables from AMSC takes off prices will run and run hard. Supply is tight and a relatively small investment fund of 500 million could suck up 27% of NYMEX’s 130 million oz supply at today’s prices. If each Canadian tried to buy 4 ounces or $60 worth they would run out. Less than ½ of all Americans could buy 1 ounce before they ran out. Now imagine the world population…… WAITING……..STILL WAITING…… ah, now you get it, there is almost none left. In pure, deliverable form there is less silver in the market place than gold. Today's price does not reflect this and I'm not selling until it does.

So why haven’t you bought any yet? Yes I mean you, and you too Lois.

There has been a lot of waffling by metal commentators in the last 2 weeks, I guess they are taking heat from their subscribers and are trying not to over inflate expectations of an immediate rally but I don’t see anything to worry about long term, which is the only thing I’m concerned about.

I see Spain verging on bankruptcy as bullish for metals and dangerous for the Euro

I see the U.S. Democrats bending over backwards to let Bush continue his war and his spending, as adding more market risk, more debt, more chance of a U.S. fiscal crisis, and in the end more need for a metals hedge.

I see reports of 6.7% food inflation in the U.S., U.K. 6%, and China 7%, Government claims of 2-3% core inflation are garbage.

This week Kuwait unpegged its currency from the U.S. dollar and has moved to a basket of currencies. If the other oil states go this route it will signify a vote of no confidence in the greenback and greater weakness will follow.

Iran’s move to no longer accept the dollar for oil is gaining momentum as current figures has non dollar transactions near 70%.

All these things paint a picture of fiscal mismanagement, political risk, and inflation. Sounds like trouble to me.

When troubles hit you want to be debt free, have real money, and even better your own productive land, if you have all 3 you’re laughing.

The Pain in Spain is an anti Fiat Refrain

I've mentioned before about the high level of gold selling over the last few months and now the who and the why of this selling has finally come to light. On first look it appeared to just the run of the mill gold liquidation used by many central banks to weaken gold and in turn strengthen the U.S. dollar. The U.K. Telegraph however reports that 80 tonnes of the recent selling can be attributed to Spain, further they claim that it’s not dollar motivated but pure survival as Spain struggles with a burgeoning account deficit that as recently hit 9.5% of GDP

Spain in order to cover its expenses has been selling off its gold. These sales have resulted in Spain’s foreign currency reserves falling from 41.5 Euros to a meagre 13.2 Billion since 2002. This amount is only 12 days of imports and the continued shrinkage of these reserves could jeopardize Spanish Economic stability.

Portugal and Greece are reported to have similar reserve shrinkage problems and should they run out of cash the other EU Central Banks are obligated to act as a “lender of last resort”. Should any one of these countries falter it will spread the pain over the entire Euro Zone.

What does this matter to silver and gold?

1. We know that the Euro is not necessarily a risk free alternative to the U.S. dollar
2. We see the real instability of the Euro which is a further indictment of Fiat currencies in general
3. More people will get scared as the 18 month window for Spain’s shrinking reserves approaches, some of these scared people will invest in metals, earning early investors a healthy profit.
4. We learn it was not a deliberate attack on the gold price, not that it’s relevant. Still it got sold softening the price so now we should take advantage of their misfortune.

Prices look soft; paper looks suspect, do your self a favour and go buy some silver.

Update

I tripped onto another reference to this story
http://news.goldseek.com/GoldForecaster/1179936000.php

It's is believed that a Spanish housing boom that has tripled prices in recent years is about to pop after anti speculation laws were passed. If spain should have a housing slump like the U.S. is suffering now it will certainly be a likely trigger for finacial crisis.

Hell even Mogambo commented on this today, Ha I beat him to it, so I get to say "We're freaking doomed!"

Gold Catalyst equals more demand

I've poached this from the Telegraph in the U.k. rather than link to it because often newspapers hide articles behind a subscriber wall after being online for a couple of days.




Gold glows on back of clean-air movement
By Ambrose Evans-Pritchard

Gold is coming of age as an industrial metal in a host of uses from car catalysts to air conditioning and health care, adding 451 tonnes to global demand last year - roughly offsetting sales by central banks.

The World Gold Council is counting on a future surge in demand for use in diesel catalysts following the invention of a new technology by the US firm Nanostellar that is more efficient and cheaper than platinum.

Gold costs $663 an ounce, while platinum has soared to $1,320 as car companies scramble to meet stricter clean-air rules.


James Burton, the WGC's chief executive, said the design could cut noxious emissions by 40pc more than existing platinum catalysts. "With the diesel automobile market continuing to grow strongly across the globe, this is very exciting," he said.

For now, however, investment demand remains the key hope for gold bugs waiting to see the metal break out of its lacklustre trading range.

Rob McEwen, chief executive of US Gold Corp, predicted that gold would soon smash through its 25-year peak of $730 in May 2006. "I expect it to test $850 by the end of 2008, and by the end of 2010, north of $2,000, possibly $5,000," he said, insisting that dollar troubles would eventually prompt a flight to the safety of bullion.

Yesterday, however, the dollar was in fighting form after robust housing data in the US, sending gold tumbling $12 an ounce to $661. The shares of Peter Hambro Mining sank 11.2pc in London on fears of a fresh dispute with the Russian government over stated reserves.

The WGC said consumer demand in India and China was the key impetus for growth of the gold market in the first quarter of 2007. India's thriving middle class drove up sales by 50pc year-on-year, snapping up jewellery in advance of the Akshaya Thritiya festival.

In China, the Year of the Golden Pig has boosted Chinese demand by 31pc, with affluent city buyers opting for 24-carat bars of pure gold.

The red-hot flow of funds into Exchange Traded Funds has slowed to 36 tonnes, suggesting that western investors are becoming sated with holdings after accumulating nearly 700 tonnes in ETFs since 2003.

One of the properties of gold is that it can serve as a catalyst at low temperatures. Japanese toilets now use gold filters to break down smelly nitrogen compounds, purifying the air. Gold particles can clear smoke in air conditioning systems in buildings, or in gas mask respirators to prevent CO2 poisoning down mine shafts or in airplanes.

The pharmaceutical company CytImmune has developed a new cancer treatment using gold nanoparticles to target tumours, a treatment that appears to reduce toxic side effects.

This be will be very bullish for gold if it can begin replacing Platinum as a catalyst (not so good for Platinum however) and it will also be a great improvement for diesel engines that constantly have to fight their dirty image.

All the other precious metals have had the advantage of strong industrial usage creating a base demand. These new catalysts and medical uses will finally create a strong non jewellery base demand onto which investment demand can be added. The only problem I see however is this company is banking on gold remaining stable. Should gold take off like many people believe, these Catalysts may become prohibitively expensive.

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.