Gold is slightly higher in the US dollar and other major
currencies. Spot silver has given up early gains but the futures
market has seen longer term contracts fall more in price so that
while spot is up $0.09 to $28.96/oz, the July 11 contract is only
trading up $0.01 to $29.00 and and the December 11 contract has
fallen by $0.084 to $29.01.
The dollar has fallen to 78.42 on the US Dollar Index and is
looking technically vulnerable of falling to long term support at
Gold is currently trading at $1,371.20/oz, €1,016.91/oz and
Gold to Silver Ratio - 50 Year (Quarterly)
It would be wrong to assume that gold's recent sell off is
over. Hedge funds and leveraged speculators on the COMEX tend to
be more technically driven - making "the trend their friend". As
the short term trend remains down they may continue to short the
market and force out any remaining weak longs.
As ever, the primary focus of investors and savers should be
the long term, and diversification is crucial (see
European sovereign debt issues may also be leading to a bid in
gold as Portuguese bond yields have risen to the risky 7% level
and Greek bond yields rose sharply to nearly 11.5% this morning
prior to a reversal.
The likelihood that sovereign debt risk will remain with us
for the foreseeable future will likely see investors, pension
funds and institutions remain risk averse. It will lead to
increased allocations to gold and lead to further diversification
into gold. Silver will also benefit from diversification as Jim
Rogers recently pointed out.
With inflation pressures threatening emerging markets and
taking hold in developed economies, as seen in the UK yesterday,
inflation hedging buying continues.
Silver is currently trading $29.09/oz, €21.57/oz and
US Mint Reports January Eagle Sales Reach 26 Year
The US Mint has reported that sales of American Eagle silver
bullion coins (1 oz) have reached 4,588,000 ("in ounces / number
of coins") which is a record since the US Mint commenced selling
the coins in 1986.
2011 American Eagle Bullion Sales Totals:
(in ounces / number of coins)
This shows that retail bullion demand remains very robust
despite the recent feeble economic recovery. It also shows that
silver buyers have not been deterred by the surging price of
silver. On the contrary, higher silver prices and increased
concerns about the US dollar, the euro and other fiat currencies
are leading a minority of 'hard money' advocates to increase
allocations to gold and silver.
Silver bulls are über bullish but they are a tiny minority of
the American and international retail investment and savings
marketplace. The average investor and saver in the US has no
allocation to gold, let alone to silver.
Therefore it would be wrong to assume that these record sales
are a negative contrarian signal and that silver has become a
bubble with the so called "dumb money" "piling" in.
Rather, a tiny segment of the US public, many of whom are
contrarian investors who are worried about the dollar and other
macroeconomic and geopolitical risks, are going overweight
However, the majority remain blissfully unaware of silver at
this time and the majority of the retail public could not tell
you the spot price of silver today or the gold to silver ratio
let alone how to invest in it.
Clarification: "Silver Bar Shortages to Lead to Price
Yesterday, we wrote how there were a myriad of different
indicators and much circumstantial evidence of increasing
tightness in the gold coin and silver marketplace (as seen in
Reuters reports of shortages of gold kilo bars; Sprott Asset
Management having difficulty securing 1000 oz bars in volume etc.
Some comments in our market update have been picked widely on
the internet including on FT Alphaville.
Gold in USD and CFTC Open Interest - Shows that
Speculators on COMEX are reducing positions
We reiterate that while shortages of bullion coins and bars
are not widespread at this time, it would be wise to keep an eye
Another indication of massive demand in the physical market
was seen in research done by German refinery group Heraeus' head
of sales Wolfgang Wrzesniok-Rossbach. In his Precious Metals
Weekly he contrasted this month's selling of the gold ETF
trust-fund by institutional investors, with the continuing demand
of private investors. Indeed "in the last two weeks [retail
investors] have bought large quantities of gold bars and coins;
so much so that despite higher production, some denominations
again already have delivery-time delays."
Similarly in silver bullion products, Heraeus reports "massive
demand for bars and coins."
Today, the physical gold and silver markets remain tiny in
terms of value when compared to equity, bond, deposit and
currency markets and even a small shift in capital into physical
will likely lead to production and capacity issues and
As our friend Bron Suchecki of the Perth Mint noted overnight
on FT Alphaville "Observations about retail coins and bars being
short usually reflects the minting/refining industry's limited
production capacity (result of no capex after years of no
interest in precious metals) relative to short term surges in
An important question is whether the surge in retail demand is
short term in nature or are we in the early stages of gold and
silver bullion again becoming mainstream assets which are owned
by the majority of retail investors and savers and not just the
fringe of libertarians and hard money advocates in the US.
We believe the latter is quite possible given the likelihood
of a US and global sovereign debt crisis and of global currency
debasement in the coming years. Not to mention, the real risk of
a global Depression.
Future Silver Prices
Yesterday we wrote how there is a possibility that silver could
reach its nominal high of $50 per ounce and in the longer term
the inflation adjusted high of $130 per ounce was quite
We pointed out that these figures were conservative compared
to some silver bulls who are über bullish and say silver prices
could rise to over 30 times to over $1,000 per ounce. While we
are bullish and believe that silver remains a good investment and
important financial insurance we do not share their über
bullishness. Silver prices would very likely only rise to these
levels in the event of hyperinflation.
Hyperinflation remains unlikely although the pathological
fiscal and monetary policies of the US and other central banks
does not inspire confidence in this regard.
Such wildly bullish predictions for silver remain verboten on
Wall Street and in the City of London. In marked contrast to how
predictions of 'Dow 40,000' were lapped up and propagated to the
As ever, when assessing a marketplace it is important to look
at all sides - the über bullish and the über bearish. The über
bears are not just bearish on the silver market some of their
statements show that they are simply anti gold and anti silver no
matter what the outlook for the market.
Many are positively delusional and despite massively strong
fundamentals continue to trot out the usual nonsense about
bullion. The usual simplistic clichés are - gold and silver have
no yield; gold is a bubble (no mention of silver in this regard
and they conveniently ignore it remains some 33% below its
nominal high in 1980); gold and silver are barbaric relics.
Berkshire Hathaway's Charlie Munger took it one level further
recently by getting personal and pejorative basically saying that
you are a jerk if you own gold.
As ever getting a plurality of opinion is good and one should
seek out the opinions of all market participants - the uber
bullish and the uber bearish; the pro gold and silver and the
anti gold and silver.
Ultimately, what happens to the dollar, euro, pound price of
gold and silver is irrelevant. Precious metals are not get rich
quick schemes and not about making money rather owning physical
ounces of gold and silver is about preserving and protecting
wealth over the long term. This is why we are always reluctant to
get into the price prediction game (even though much of the
financial media demand it).
Charlie Munger and the gold bashers in the Financial Time's
Lex Coumn need to again realize the importance of real
PLATINUM GROUP METALS
Platinum is currently trading at $1,834.50, palladium at $817/oz
and rhodium at $2,375/oz.
Given the variety of macroeconomic and monetary risks
in the world today, owning a genuinely diversified portfolio
passively which includes international equities, international
bonds (short dated; high credit) gold, silver and some cash has
never been more important.
Undiversified savings and investment portfolios,
leverage, attempting to time markets, unsafe counterparties and
speculation should as ever be avoided.
Yesterday we wrote how "Zero Hedge reported that Bullion Vault,
the digital gold provider, had run out physical silver
inventories in Germany (and possibly elsewhere) and was advising
clients to buy silver from other sources." We were contacted by
our friends in Bullion Vault and are happy to clarify that:
BullionVault stores and trades physical silver in London,
not Germany. Owing to tight supply in the Good Delivery
market, it was unable last weekend to offer silver off its
own book, but customers continued trading with each other
online. BullionVault did not at any time advise its users to
seek alternatives sources (BullionVault).
(Financial Times) Brace for a 'perfect storm' in
Asset managers and central banks are just beginning to
readmit gold back into the select group of prudent asset
classes. That this is occurring at a time when what might be
seen as the world's safest financial asset classes may also be
its scarcest suggests interesting times ahead for those who own
The Thomson Reuters/Jefferies CRB Index of 19 commodities
rose 0.6 percent to 335.72 as of 8:15a.m. in New York, after
touching 335.99, the highest since Oct. 2, 2008. Cotton, cocoa,
wheat and silver led the gains
* 2011 likely to be another record year for commodities
* Another $60 billion could be allocated this year - Barcap
* Funds opt for active rather than passive strategies
Commodity investments could near half a trillion dollars by
the end of 2011 as the return of $100 oil and a broad-based
rally heighten interest in the asset class to levels not seen
But the wave of money now hitting commodities is more
sophisticated and discerning than its predecessor three years
ago. Investors are increasingly looking for active management
rather than 'buy-and-hold' plays, which left many counting
their losses after the financial crisis hit.
Barclays Capital data and estimates suggest that, if prices
remain as they are, total fund investments in commodities at
the end of 2011 are likely to be around $420 billion. With any
price appreciation, the total would be higher.
Gold gained for a third day as concern over the pace of the
U.S. recovery cut the value of the dollar, boosting the metal's
appeal as an alternative investment. Platinum jumped to the
highest price since 2008 Bullion for immediate-delivery
advanced 0.5 percent to $1,375.18 an ounce at 4:33 p.m. in
Seoul, while February - delivery gold gained 0.5 percent to
$1,374.80 in New York.
Immediate-delivery platinum climbed as much as 1.1 percent
to $1,847.20 an ounce, the highest level since July 2008. "
There's growth, but it doesn't really seem to be exceptional
at the moment," Ben Westmore, an analyst at National Australia
Bank Ltd. in Melbourne, said today by phone, referring to the
U.S. economy. "It's basically a currency effect."
The dollar fell to a five-week low against the euro on
speculation that slow recoveries in housing and labor
marketswill deter the Federal Reserve from raising interest
rates. The Dollar Index, which measures the currency's strength
against six major counterparts, fell for a second
U.S. housing starts fell 0.9 percent to a 550,000 annual
rate last month, according to a Bloomberg survey before a
Commerce Department report today. The number of people
continuing to receive jobless benefits increased to 3.99
million in the week ended Jan. 8, from 3.88 million the
previous week, another survey showed before tomorrow's
Spot gold jumped 30 percent last year, reaching a record
$1,431.25 in December. Prices have declined 3.2 percent this
month, stoking demand from individual investors for bars and
U.S. Mint coins.
Australia's Perth Mint reported stronger demand as prices
fell below $1,400 an ounce, Barclays Capital analyst Suki
Cooper said in an e-mail yesterday. Bar premiums reached
two-year highs before the Chinese New Year, Cooper said, citing
the mint, which produces about 6 percent of the world's
) -- Wheat and corn prices rose Tuesday as bad weather renewed
concerns about global supplies
Devastating floods in Australia have raised questions about
how much damage occurred to the wheat crop, which was being
harvested when the waters hit. The Australian crop had been
expected to fill global needs but now inventories are starting
to look tighter, Telvent DTN analyst Darin Newsom said.
There also are concerns that the U.S. winter wheat crop
could be affected by dry weather in the Great Plains
Argentina, a big exporter of corn, has endured a dry spell
in the region that grows that crop. There was rain last weekend
but some analysts believe it wasn't enough to avert crop
damage. Analysts say that could exacerbate a global shortage of
Iran successfully test-fired a surface-to-air missile near
its Khandab nuclear site, the official Islamic Republic News
Agency reported today. The test was intended to ensure that
Iran can protect the nation's "sensitive" sites, IRNA said.