Gold and silver. Discuss

[rnoldh]

Originally Posted by javyn

No idea!! It's getting ugly out there though

Could be a Bin Laden bounce for the dollar? Margin hikes from CME? Both?

Fundamentally nothing has changed, and there is so little silver out there that huge swings like this are probably going to be the norm.

If this is true, might as well learn Texas Hold Em.

The Bin Laden theory is BS, IMO. The CME changes would have had an effect, but I wonder if it should have been this large.

The way silver has been going crazy with the largest appreciation this past year of just about any commodity, I wonder if the big boys were into any manipulation.

Before you laugh, consider this. A few years ago Platinum, reached about $2,300/Oz ( which is crazy high )! It was way out of whack and an amazing appreciation. It hasn't been close in price since. Somebody made huge profits.

I know Plat. and silver are far different, but just sayin. See here about platinum manipulation.

BTW: At an even $33/Oz., I would buy silver.

 

[mikeman]

Originally Posted by rnoldh

If this is true, might as well learn Texas Hold Em.

The Bin Laden theory is BS, IMO. The CME changes would have had an effect, but I wonder if it should have been this large.

The way silver has been going crazy with the largest appreciation this past year of just about any commodity, I wonder if the big boys were into any manipulation.

Before you laugh, consider this. A few years ago Platinum, reached about $2,300/Oz ( which is crazy high )! It was way out of whack and an amazing appreciation. It hasn't been close in price since. Somebody made huge profits.

I know Plat. and silver are far different, but just sayin. See here about platinum manipulation.

I do think this is partly manipulation. I forget who brought it to the attention, but silver is traded 100 times what is actually held. Kind of creating a false market.

 

[asdf]

Originally Posted by rnoldh

Is a 30% silver drop ( $49.50/Oz to $34.60/Oz. ) a correction or a bloodbath? It makes no sense since the fundamentals point to a rising silver market or certainly a flat market with "slight corrections".
What exactly are the "fundamentals" of a lump of metal?

Originally Posted by mikeman

I think its all the big boys covering their shorts
Doesn't covering of shorts provide upward pressure, not downward?

 

[HelloIDistance]

Originally Posted by Monaco

The recent drop is a correction. Panic if you want but it just makes the market that much friendlier to the real players.

+10. Silver was way overbought. It was due for this. I don't think I have the balls to get in now though.

 

[rnoldh]

Originally Posted by asdf

What exactly are the "fundamentals" of a lump of metal?

Of the piece of metal there are none.

But in macroeconomics there are plenty. Historically gold and silver has been thought of as an inflation hedge. Everybody expects the coming inflation so the last few years gold and silver have been bought before their price rise and as they rise, in anticipation of the looming inflation.

Also, now more than ever there is a weak dollar. I think the dollar is at its lowest since 1971. Again, this almost always benefits gold and silver. It sure seems like it has till the last 3 years or so.

Finally, oil has the fear factor ( I am not calling this a macroeconomic fundamental )but most people accept it as a price factor.

Gold and silver ( mostly gold, but silver just as much recently has what I call the hype factor ). In the great run up of silver and gold in the last few years, it seemed you could not listen to a TV or radio show ( mostly conservative ) without hearing an ad for gold and now gold and silver. And that does not include the internet, forum and bulletin board hyping of gold and silver.

So, it would appear that economic fundamentals have been, and continue to be good for commodities in general ( against the dollar )and certainly for gold and silver.

Having said all that, I would not be amazed anymore if silver falls a bit more. Maybe some brilliant analysts are getting rich as I type, but I do not know the future.

 

[Crane's]

Originally Posted by javyn

No idea!! It's getting ugly out there though

Could be a Bin Laden bounce for the dollar? Margin hikes from CME? Both? Fundamentally nothing has changed, and there is so little silver out there that huge swings like this are probably going to be the norm.
Margin hikes are part of it and profit taking is the other.

Originally Posted by Monaco

The recent drop is a correction. Panic if you want but it just makes the market that much friendlier to the real players.
Yep. I have been selling on the highs and buying back in on the lows over the last ten days or so. I'm going to sit and see what happens for a bit.

Originally Posted by rnoldh

If this is true, might as well learn Texas Hold Em. The Bin Laden theory is BS, IMO. The CME changes would have had an effect, but I wonder if it should have been this large. The way silver has been going crazy with the largest appreciation this past year of just about any commodity, I wonder if the big boys were into any manipulation. Before you laugh, consider this. A few years ago Platinum, reached about $2,300/Oz ( which is crazy high )! It was way out of whack and an amazing appreciation. It hasn't been close in price since. Somebody made huge profits. I know Plat. and silver are far different, but just sayin. See here about platinum manipulation. BTW: At an even $33/Oz., I would buy silver.
Bet on it. I watched an analyst today who is saying everyone should sell and get into something else. Most of the trading today was institutional. Yeah the big boys road it up and are now taking in a nice profit. If they can start a panic sell with people like us the price will drop that much more. Sooner or later you can guess what will happen. In any case a run to nearly 50 an ounce by the beginning of May was something I didn't think would happen. By years end yeah but not this early. Oh and never forget. PMs are not a short term investment. You can make money on events like this no doubt but you gotta have some balls to play the game. That and it doesn't work well if you physically hold the metal. There is a reason and a purpose to have a PM pool account and last week was a good example of why I have one.

 

[Rikkar501]

I've been looking into the Kitco silver pool but am kind of turned off by the $15 transaction fee for orders under $2500. Crane, I'm assuming you deal with more than the minimum? Are there any pool accounts that don't charge a fee, I don't have enough capital to invest over the minimum and $15 per would really eat away at profit margins.

 

[Levator Superioris]

Personally I think people still view gold and silver as a currency alternative. They are worried (probably rightly so) that the dollar declines. But lets be real, with 6+ billion people there isn't enough precious metals in the world to be a challenge to the fiat currencies.

Also compared the the Euro, Yen and Yuan, the dollar still looks alot better. CAD and AUD be damned because Canada and Auz are just too small. When the dollar does eventually decline the 'value' stored in different currencies is still going to migrate to the strongest currency and that will still be the dollar.

I have been into leveraged ETFs of late, ultashort gold in particular, didn't get in ultra short silver - d'oh! 40% returns in the last two days alone... sigh!

But it is worth noting that metals leveraged ETFs have experienced 10x avg trading volumes in the last few days in heavy bear direction; while many people argue that it's just a correction - I think it's mirroring an asset buble collapse aka housing market.

Leveraged ETFs are the only way everyday investors who can cough up 34k for a single short position can play in the precious metals market. And the crowd is heavily stampeding towards the door. Whether rightly or wrongly, I feel the panic of the herd will be quite significant. Albeit the weakness in my argument is that a hedge fund probably has zero interest in a illiquid house, but may play gold if they feel the market is correct.

 

[rnoldh]

L S, Good post. You obviously know PMs As you point out, the whole PM market is like a drop in the toilet compared to the daily world oil market, let alone compared to the world economy and currency market. But there will always be exceptions that prove a rule. While hardly a small time individual, the Texas University Fund bought a $1,000,000,000, Billion with a B! worth of physical bullion, which was about 5% of the Fund assets and took possession last year. Story here. Note that gold was $1142 approximately when the Fund bought. It has since been as high as 1,575, and today closed at $1,473 so it has been a good play for the Fund. You would think that the Texas fund managers would have seen more upside potential in silver, but I truly think that they held off because a $1,000,000,000 investment in silver bullion ( and taking possession ) instead of gold bullion, would have really got the market crazy. What do you think?

 

[asdf]

Originally Posted by rnoldh

Of the piece of metal there are none.

But in macroeconomics there are plenty. Historically gold and silver has been thought of as an inflation hedge. Everybody expects the coming inflation so the last few years gold and silver have been bought before their price rise and as they rise, in anticipation of the looming inflation.
Historically, equity has been a better inflation hedge than gold in that it actually has positive real return, compared to gold which has over the last century exhibited almost precisely zero real return (ie. it has paced inflation in the long run) but with wild/crazy volatility swings.

Also, i think a lot of "smart money" is more worried about deflation than inflation. Who knows.

 

[rnoldh]

Originally Posted by asdf

Who knows.

There is the answer. Who knows!

As I posted above, last year the advisers to the Texas Educational Fund spent 5% of the Fund assets on Bullion and took possession! So, it could not be clearer that this is a long term investment. It looks good now, but how will it turn out. Who knows.

Also, in your post, you use a 100 year window to make a valid historical point. For sovereign wealth funds and University Endowment Funds that is meaningful. But for individuals the windows are a lot smaller.

My gut feel is that for say a 10 year window PMs will outperform equities. But am I sure or do I know anything special. Who knows? I do and the answer is no!

 

[Crane's]

Originally Posted by Rikkar501

I've been looking into the Kitco silver pool but am kind of turned off by the $15 transaction fee for orders under $2500. Crane, I'm assuming you deal with more than the minimum? Are there any pool accounts that don't charge a fee, I don't have enough capital to invest over the minimum and $15 per would really eat away at profit margins.
Yes I make sure I move more than the minimum to avoid the fee. I'm not aware of any pool out there that does not have a transaction fee of one type or another. Right now I'm holding nothing in the pool account. I played both spikes in April and now I'm out and watching.

 

[mellow]

not sure if this is has already been posted, but you guys might enjoy this article: http://www.themorningsun.com/article...0010729492.txt a more in depth article here but you need a subscription: http://www.americanscientist.org/my_...42553569193245

 

[javyn]

Very cool article heh.

Back to 37, and I hear Hong Kong is opening a metals exchange...so I doubt Comex bumping margin requirements to crash the price of PMs is going to work very well in the future.

 

[rnoldh]

Silver has been hovering in the mid $30/Oz range for a few weeks now. See here.

Do those of you that are long on Silver still see $50/Oz Silver as a certainty this year? And what about $100/Oz. Silver. Is that even a probability this year?

There are only 6+ months left in 2011.

Mind you, I am still long on Silver in the "long run". But if the economy strengthens, and the gloom and doom scenarios lessen, then it might be a long slow climb for Silver. Remember, if Silver were to go up, let's say, 15% a year for the next 5 years, that would be excellent.

The Silver gains of the last year were unsustainable.