Gold and silver are tentatively lower this morning despite the
dollar and especially the yen being under pressure. The
possibility of Japan being downgraded has seen the yen join the
dollar under pressure and gold has risen to over 124,000 Japanese
yen per ounce, some 2% below the record nominal high just over
Gold in Yen - 1 Day (Tick)
Japan's public finances were already very poor prior to the
earthquake and nuclear catastrophe and are set to worsen
considerably, which should see the yen fall sharply versus
Sovereign debt risk remains elevated in the eurozone and the
cost of servicing peripheral nations' debt continues to rise. The
cost of insuring debt sold by Greece, Portugal and Ireland rose
to records this morning as have bond yields in Greece which have
leapt to new records - over 16% on the 10-year and 25% on the
2-year. Irish and Portuguese 10-year yields have risen to 10.63%
and 9.65% respectively.
Sovereign debt risk can now be seen in the eurozone but also in
Japan and the US, and as long as sovereign debt risk remains
elevated, precious metals will continue to be bought as hedges
and for safe haven purposes. This should lead to the continuation
of gold and silver's secular bull markets. Although, participants
should as ever realise that there will be corrections - some of
which can be sudden and sharp.
Evidence shows that speculation in gold and silver remains
muted as seen in the Commitment of Traders reports and the total
gold and silver ETF holdings - neither of which have shown huge
increases or signs of "irrational exuberance" or investors
Commitment of Traders (
) data is hardly indicative of an overly bullish sentiment
extreme that would normally precede a sharp sell off.
Total Gold ETF Holdings - 1 Year (Daily)
Total ETF gold holdings (see above) are near the levels seen last
June and below the levels seen in September, October, November
Total ETF silver holdings (see below) have risen in recent
days but are not far above the levels seen in December 2010 -
some 5 months ago.
Total Silver ETF Holdings - 1 Year (Daily)
Indeed, the ETF holdings appear to show that ETF precious metal
holders are "stickier hands" than had been expected as gold
holdings look to have consolidated above the 64 million ounce
Total ETF gold holdings at 66.55 million ounces are worth
nearly $100 billion at $1500/oz ($99,825,000,000). Total silver
holdings of 498.914 million ounces price at $45.50/oz are worth
only some $22.7 billion, suggesting that silver remains
under-owned when compared to gold and could see a sharp increase
in holdings in the coming months and years.
The $22.7 billion (total silver ETF holdings) is a small
number when compared to the huge sums of money at the disposal of
high net worths, hedge funds and sovereign wealth funds. The last
quarter saw Apple's iPhone revenue alone top $12 billion. This
puts the silver holdings figure in perspective.
One hedge fund alone, the Man Group, has assets of over $69
Some Clients Taking Profits and More Opting for Coins and Bars
Many of our clients have taken profits on certificates in recent
days. Most continue to be prudent and continue to maintain a core
holding (for portfolio diversification and financial insurance
purposes) but there are definitely concerns amongst some of a
Others have taken profits on certificates and bought gold and
silver coins and bars (in secure storage or delivered). Recently
orders for coins and bars have outweighed those for certificates
and there is definitely an increased preference for physical
coins and bars and for taking delivery.
Our ratio of sell orders to buy orders is the highest it has
ever been. Industry associates confirm that they have been seeing
an increase in selling on behalf of the public and that
speculative buying continues but is minimal.
The majority of the western public remain unaware of gold and
silver as investments and as stores of value. Most do not even
know how much an ounce of gold costs in local currency terms as
precious metals continue to be ignored by most of the non
financial press or media.
This is in stark contrast to the Middle East and Asia where
demand remains robust and may even be increasing due to inflation
Ignorance regarding gold and silver in much of the western
world is hardly indicative of a mania or speculative bubble.
Gold is trading at $1,508.25/oz, €1,028.10/oz and
Silver is trading at $45.44/oz, €30.97/oz and £27.44/oz.
Platinum Group Metals
Platinum is trading at $1,807.00/oz, palladium at $749/oz and
rhodium at $2,250/oz.