Gold & Silver Digest: 1/30/13

Adam Taggart
By Adam Taggart on Wed, Jan 30, 2013 - 5:59pm

The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.

If you have articles to submit for the next digest, please email them to me by clicking here.

1/30/13 5:57 PM EST US close metals price quotes from Finviz

Reuters: Gold rises on surprise drop in US growth, Fed

NEW YORK, Jan 30 (Reuters) - Gold rose on Wednesday after data showed the U.S. economy unexpectedly contracted in the fourth quarter, and stayed higher as the Federal Reserve left in place its bond-buying stimulus plan.

The metal's inflation-hedge appeal received a boost after the Fed in its January policy statement repeated a pledge to keep buying securities until the outlook for employment "improves substantially."

The U.S. central bank also said that economic growth had stalled but indicated the pullback was likely temporary.

The Wall Street Journal: Platinum and Gold Near Parity In Anticipation of FOMC Statement

Platinum continues to trade at a slightly higher price than gold, but the threats to supply which recently pushed platinum prices above gold are now easing, while this week offers a number of opportunities for gold prices to surge higher.

Two weeks ago, platinum prices surged, rising above gold for the first time in 10 months, after the largest producer of the metal Anglo American Platinum sa AMS.JO -0.18%id it would halt operations at several mines in South Africa amid rising costs. Meanwhile, a gradual pick-up in economic data globally has kept the general outlook for platinum’s demand side more upbeat.

Hard Assests Alliance: Rock Beats Paper: Why the Volatility Can’t Beat a Solid Foundation

It's easy to get caught up in the frenzy of the gold market. When prices are skyrocketing to new highs, everyone is scrambling to buy. When prices are falling, it's as if they've run out of lifeboats on the Titanic. Like lemmings, many investors walk off their own personal fiscal cliff by buying high and selling low. To avoid flocking with the herd, it's key to remember that gold is not an investment at all. It is a rock-solid savings account that beats any fiat paper governments can dish out.

Last week, we went in-depth on why the US Federal Reserve will be printing much more fiat paper in the months and years to come and the effect this will have on the price of gold. The Fed's actions should be a red flag to anyone who is not currently holding a portion of their wealth in physical hard assets. In case you missed it, you can read it here.

CNBC: Swiss Banks Lose Old Taste for Gold

The wealthy have for centuries stashed their gold in Swiss vaults. But Swiss bankers are now reluctant to accept the world's bullion in the same old way, as they seek to reduce the size of their balance sheets.

UBS and Credit Suisse, which dominate the powerful Zurich-based physical gold market, have raised the fees they charge for holding the precious metal, according to clients and people familiar with the banks.

Argus Leader: S.D. legislators say no to making silver and gold coins 'legal tender'

Warnings about “hyperinflation” didn’t persuade South Dakota legislators to endorse the use of gold and silver coins on Wednesday.

Rep. Dan Kaiser, R-Aberdeen, had asked the Legislature to declare U.S.-minted gold and silver coins to be “legal tender” that could be used to pay state taxes at their market value.

“Within the borders of South Dakota, for our intra-state commerce, we are going to reserve the right for our citizens to use gold and silver as currency, especially in some case of emergency, if the U.S. dollar is no longer trustworthy as a source of currency,” Kaiser said.

SHTF Plan: Rush To Safety: Americans Buy Nearly Half a Billion Dollars Of Gold and Silver In January

While public officials may be ignoring the continued deterioration of our economy, job losses to the tune of hundreds of thousands of people weekly, and the unprecedented demand for government emergency support services like unemployment insurance and food assistance, Americans who sense uncertainty in the air are flocking to the safety of physical resources.

Our first point of interest is a recent report from the Federal Reserve that indicates some $114 billion dollars in cash was withdrawn from the nation’s largest banks [1] in the last thirty days. Those holding their money at bailed out financial institutions are understandably concerned because the government’s $250,000 deposit insurance guarantee program, originally implemented to restore confidence in the wake of the 2008 financial crisis, expired at the end of 2012 [2]. That and the US fiscal situation has never been worse [3], with one Obama official recently having said the solution to the country’s woes is to simply kill the dollar [4].

King World News: William Kaye Interview

William Kaye: Founder, Vice Chairman and Senior Managing Director of the Pacific Alliance Group of Companies - PACG was established in 1991 in Hong Kong. Mr. Kaye is the Managing Partner of the Greater Asian Hedge Fund, as well as its predecessor, the Asian Hedge Fund, LP (1992-98). Both funds have exhibited a consistent history of absolute and relative outperformance that has been recognized by independent rating organizations. Prior to founding PAG, Mr. Kaye was Manager of the Arbitrage Department (1984-1990) and a Member of the Board of Directors (1986-1990) of PaineWebber Incorporated in New York. Mr. Kaye joined Paine Webber (PW) in 1978, leaving the Mergers & Acquisitions Department of Goldman, Sachs & Co, and successfully built PW's Arbitrage Department into an industry leader.

Silver Seek: Silver: Buy, Hold Or Sell? Update #24

In 1980, the price of one ounce of silver reached $ 50. Today, the purchasing power of the US dollar is substantially less than in 1980.

The price of one ounce of silver would have to rise to $ 150 to reflect the value of the US dollar thirty years ago, assuming an average annual inflation of 3.5%.

During the financial crisis of 2008, the silver price corrected 57% from the high of $ 20.79 down to $ 8.95. This correction was followed by a spectacular rise of more than 400% to $ 48.42. A correction was inevitable and a drop of 42% followed that phenomenal rise. So far, the silver price has recovered 14%. The present up-leg started in May of last year and should lead the silver price to a new all-time high.

King World News: Norcini - Silver Now Very Close To A Major Short Squeeze

On the heels of some wild trading in gold and silver, today acclaimed trader Dan Norcini told King World News that the silver market is now approaching key levels which will set off major short covering if breached.  Norcini also provided two key charts.  Here is what the acclaimed trader had to say:  “If silver decisively breaks $32.50 we will see momentum-based buying come into the market.  This is what is necessary to fuel a sharp uptrend in silver of the type of nature that we’ve seen in palladium and platinum.  A break of $32.50 on silver would also signal a shift in sentiment regarding inflation.”

Dan Norcini continues:

“We will see the first round of short covering in silver when it breaks $32.50.  There are a number of speculative shorts in that market.  These shorts are weak hands and on a break of $32.50 they will capitulate.  This short covering should move silver $2 higher very quickly.

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18 Comments

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3125
kwn says silver short squeeze????

Boy, that's a shocker. They've only been pounding that message for the 4-5 years I've been paying attention. I'll believe it when I see it.

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Yes, right

The thing about KWN is that they are strongly biased toward metals moving upward in the immediate or short term.  Although I definitely want to hear what the KWN commentators have to say, I generally take with a proverbial grain of salt - in regard to immediate moves.  I trade mining stocks daily and definitely would not do what I do based exclusively on KWN.  I'd have been broke long ago.

 But with that said,I do believe that the mid term to long term picture of major market moves upward is lundoubtably correct with one caveat:  I think it possible that in a highly deflationary (delegeraving) environment PM prices could go down, even way down, before liquidity (ie some increased form of money printing) catches up with the downward market pressures. However,  I also think that scenerio is less likely than a pure inflationariy situation, perhaps rapidly escalating, without a downturn.  But the bottom line is that no one can predict the timing of  these larger moves, no matter what they say on KWN. 

But you know, one of these days, PMs will take another big move up and then the latest commentator, like say, Turk, will be lauded for his prediction of last week.  Hey, even a blind squirrel somethimes finds an acorn. (ha)

But, but, what has been fairly reliable for a while now is that PMs have been trading in a fairly predictable range.  Also, the stocks seem to have lost considerable correlation with the spot Metal price, and also, the (inverse) correlation with the DXY (dollar index).  Nevertheless, it has been possible to trade on the margins within a farily predicatable range (not for those with a queezy stomach - sometimes me). 

Anyway, yeh, don't get caught up in any short term predications from KWN. It's fun to listen to, but very very dangerous when acted upon.

jcat3022's picture
jcat3022
Status: Bronze Member (Offline)
Joined: May 9 2012
Posts: 78
I listen to just about every

I listen to just about every podcast KWN puts out, and Iike Rob said, would recommend taking most of it with a grain of salt.  I do find the analysis beneficial and worthy of the 15 minute listen.  Bill Fleckenstein's is one of the better ones on there.  Would really like for Chris to do a podcast with him in the not so distant future.

I agree with Rob re: defaltion/inflation argument, could go either way really.  But I'm not seeing big players sit on the sidelines if gold goes down to $1200 and ounce.  People would IMO flock to it as an undervalued safe haven.

Rob, since you trade mining stocks everyday, what do you see with them short term and long term (say 18 months out).  I know it's really tough to predict, because they essentially follow the price of the metal.  I own shares of a dozen or so miners and would rather accumulate than trade at this point.  Any chance you seen some of them going up 50-100%?

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
well

Well, one thing I've learned the hard way is to never give investing advice to anyone. So, I'm not advising here - be clear about that.

 But, right now one that I do like is SAND - it has been moving up and looks to have a lot of room on the upside in the next year.   For me, the swings of Silver Wheaton (SLW) have become something of a staple though - it's core portfolio for sure.

But generally speaking beware of the typcially high BETA of mining stocks my friend.  For a 12 to 18 month hold, timing is very very important.  Right now, at this moment, the XAU is down - MIGHT be a pretty good entry point.  For a medium term play, I'd cost average over 2 or 3 months, carefully  buying on the dips.  Patience.

Other Jr.s or exploration companies:  AAU  looks very interesting if you are up for some risk (serious risk).

For my mom's long term stock folder I stick to the majors, expecially Newmont, which is paying a 3%+ div and has promised to increase it if spot goes up.  Also Freeport Mc.  I also bought Sprott Resource Lending (mining company capital funder) which pays around 4% div.

BUT BUT BUT, don't believe ANYTHING I say - go do your homework.  It is our existential condition to make our own dicisions, good and miserable picks, and mistakes.  No one can save you from that reality.

I'll just add that oil and oil related stocks may have some real winners.  Some are overvalued at this point - no doubt - but the general (midguided) elation over the economy AND the possibility of a Middle Eest crisis of some sort makes a number of stocks a good play (mostly short term in my view). 

In regard to the general movement of PMs in the next year or so: I think its really hard to predict.  They are sometimes a "risk off" trade with the general equity markets and sometimes they move with the general equity markets..  I don't know - the bond market just can't keep going up.  Will that money pour into equities looking for returns at some point? - as some people think.  Itend to think that will happen - likely - but with what affect on the AU stocks? Just don't know.  There are so many other factors that would have to be known. I mean honestly I think you can trade on the short term or put some money in for the long term upturn which will come  - but it could be a pretty bumpy ride.  Set your stop losses carefully - look for opportunities.

Oliveoilguy's picture
Oliveoilguy
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Joined: Jun 29 2012
Posts: 578
Sprott Resource Lending

Rob P.....The Sprott fund sounds interesting. Ticker? GG is a favorite of mine. What do you think of CEF?

Oliveoilguy's picture
Oliveoilguy
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Posts: 578
jcat3022 wrote: I listen to
jcat3022 wrote:

I listen to just about every podcast KWN puts out, and Iike Rob said, would recommend taking most of it with a grain of salt.  

What's notable about KWN is who is no longer being interviewed. Among the missing are Bill Laggner and JIm Rickards.. two of the most brilliant minds in the field.

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Jcat I'm with you on that

I wonder why Rickards is no longer interviewed; I wonder whose choice that was.

I think Rickards is really on to something with the possibility (current reality) of a currency debasement war.

Olive: if I wanted simple exposure to the metal prices, I'd definitely look closely at CEF closely. I wonder how closely it actaully tracks the spot price.  Apparently, you can report teh capital gains just like a stock. I think its just a Canadian corporation - right?   But you know, it's nothing like physical ownership - it's a vehicle for price exposure (I think). 

Just a word of warning that I found out the hard way, the Sprott Funds (trusts) Phys and Pslv have special reporting on Capital Gains - they are treated at a the special higher rate for "collectables". Apparently, though, there is some sort of status where it can be treated as regular capital gains, but you have to file some paper every January (promptly) to maintain that status. I don't remember the specifics, but this might just help someone.

ALSO, everyone, the canadian government just created new requirements that you have to file a form proving (stating) that you live outside Canada (and I think, are not a C citizen - pretty sure), OR they take 25% on all income (dividends) before paying into your brokerage account.  Beware on that one.

I like Goldcorp - I've trade in and out of it several times in the last year.  I think it is a solid company in many aspects too, for whatever that's worth..

 

jcat3022's picture
jcat3022
Status: Bronze Member (Offline)
Joined: May 9 2012
Posts: 78
just finished Rickards book Currency Wars

What a read, he is the real deal.  I find his insight and knowledge to be the best out of anyone.  He was calling for the Euro to stay intact and rebound to new highs vs. the dollar when everyone said it was going to fall apart.  He called for QE3 right on time.  He has also called for gold to be on the low end $3500 an ounce and on the high end $44,000 and ounce at peak.  Even as a goldbug, I'd prefer to not see a world where gold is $44k and ounce.

I actually met Rickards as well, he's a nice guy.  My office is in the same building as RT and he used to be a guest on Lauren Lyster's Capital Account show.  Occasionally he'd pop in studio and do the show with her.  Didn't have much time to talk as it was in the elevator, but he was definitely surprised I knew who he was.  Too bad Lauren's moved to Yahoo, miss seeing her all the time:).  She was actually really nice as well.

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2939
Venting

Both gold and silver have been slammed today. With prejudice. 

I can't think of a good reason for this smackdown, coming on the heels of yesterday's negative GDP report and related boost in the PMs, other than someone WANTS precious metals prices constrained. Perhaps to prevent them from sending a signal that all is not peachy with the economy.

Not the first time I've experienced this angst, and it won't be the last. Such is the plight of the PM investor, and the price of holding an asset class that "fights the Fed".

But some days, you just gotta vent....

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Rickards

Yes, I think one of the main things I learned from J Rickards is the idea that the powers-that-be simply cannot let the dollar rise much - if they can help it.  The "printing" is about more than debt and deficits. So much of the GDP growth in the last quaters/years has been in exports - that and the fact that the repatriation of US corporate profits are adversely affected by any strength of the dollar creates strong incentive to keep that dollar low.  I think they'd do about anything to hold DXY below 84 - but that's just my guess.  But the point (Rickards) is that there are multiple downward pressures on the dollar, which should make us all more sanguine about PMs over the long haul. But hey, yeh, what would the US look like if gold were at 44K an ounce.

But you know what?   I can remember back in 2005 when gold was at 400.  Lots of people at that time thought that if it ever made it to 1800 the country and the economy would be totally in shambles, so - makes you wonder.

Jcat -That's cool that you met him.  I think he's a very insightful guy. Maybe he got tired of being associated with so much hyperbole at KWN. 

 

Oh, Olive that sprott symbol is SILU - for the capital corp. 

Adam if you think this was a bad day - were you around at the end of last week? That was the relentless takedown - Weds through Friday was a double prozac event if you ask me.

But if you look at the big chart, it's just rangebound - toward the bottom end now.  

 

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2939
For you Rickards fans

In case you didn't see it back it February, here's the podcast Chris did with Jim Rickards:

jcat3022's picture
jcat3022
Status: Bronze Member (Offline)
Joined: May 9 2012
Posts: 78
agreed Adam

I look at the price of metals at least 4 or 5 times a day & log on to see where my mining stocks are a couple of times.  Today there have been a couple loud "BS" shouts from my office when it got knocked down to the high 1650's.  Frustrating at times for sure, but as long as you buy into the narrative and where PM's are going it will pay off.

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
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Posts: 578
Rickards: Currency war simulation

I also met Jim. Very sincere and beyond brilliant, AND he does not talk down to mere mortals. His intelligence and National Security background adds another dimension to his economic views.

This is a great you tube clip if you have not seen it.

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1517
Rickards and war

Rickards is one of my favorites too.  This is because his knowledge of macro economics is informed by the big political/national security picture.  These two move together and influence each other because they're joined at the hip, and we need to keep that in the center of our focus.  That being said, I think he's right and very clear without being a doom and gloomer that what we're going through now and what the future almost inevitably holds for us is a very bad WAR, or a series of very bad wars.  The scenario linked by Oliveoilguy says it all.  For the life of me, I can't see why some country (China, Russia, Germany, whatever) hasn't taken the bull by the horns and created their own gold-backed currency and thrown one hell of a wrench in the works.  After all, I firmly believe the old adage, "He who panics first, panics best!"  Of course, I've always had trouble seeing more than three or four moves ahead in chess (just don't have the patience for it I guess).  Maybe we still have that to look forward to...

sootsme's picture
sootsme
Status: Member (Offline)
Joined: Feb 2 2013
Posts: 23
...economy in shambles...

Hi Rob,

I guess it all depends on how one defines "shambles". Mid '60s, I worked for ~$4/ hr min. wage and gas was about 20 cents/gallon (Denver area). Now, min. wage is about $7 or 8 and gas is about $3.50 or so/ gallon (Salt Lake area- cheapest in the country). This represents a decrease in purchasing power of a factor of 10... an hour's worth of baseline labor now buys about 2 gallons of gas vs. 20 gallons around 1966. I call that "shambles". I haven't done the math, but my suspicion is that the gold or silver to gallons of gas ratio is much closer to stable. Interesting times, indeed...

 

 

Denny Johnson's picture
Denny Johnson
Status: Gold Member (Offline)
Joined: Aug 13 2008
Posts: 348
Bogus minimum wage data
sootsme wrote:

Hi Rob,

I guess it all depends on how one defines "shambles". Mid '60s, I worked for ~$4/ hr min. wage and gas was about 20 cents/gallon (Denver area). Now, min. wage is about $7 or 8 and gas is about $3.50 or so/ gallon (Salt Lake area- cheapest in the country). This represents a decrease in purchasing power of a factor of 10... an hour's worth of baseline labor now buys about 2 gallons of gas vs. 20 gallons around 1966. I call that "shambles". I haven't done the math, but my suspicion is that the gold or silver to gallons of gas ratio is much closer to stable. Interesting times, indeed...

Welcome to the site, soot.

Most folks here are trying to see things as clearly as possible, shooting from the hip w bogus data won't get you much respect.

I agree w your thought re G&S being more stable, but your distorted minimum wage data does not help the argument.

Minimum wage '63-'67.....................$1.25

                         '67-'68.....................$1.40

                         '68-'74.....................$1.60

http://www.dol.gov/whd/minwage/chart.htm

 

 

sootsme's picture
sootsme
Status: Member (Offline)
Joined: Feb 2 2013
Posts: 23
confused about minimum wage...

Hi Denny,

Maybe I was confused about min. wage. I started working for King Soopers in high school in '66 at about $4/hr, and didn't know anyone among my friends making less, so perhaps I assumed (we know what that does...) Still, grocery baggers around here (SLC) presently make around $8/hr, so I still didn't miss the mark too badly. I am pretty sure about the gas- I specifically remember "gas wars" where the price went as low as 16 cents per gallon. In any case, early in my career I set about learning how to earn more in order not to be so much at the effect of such things... My point is that wealth based on tangible assets is better because it is not easily manipulated outside of the owner's control. I'm not a financier, but I think this is what they mean when they say there is no counterparty risk.

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 800
Another metric

I don't remember gas being 16 cents per gallon, but I do remember buying it for 2 silver dimes per gallon (20 cents.) The current melt value of those 2 dimes is $4.60 http://www.coinflation.com/, According to this metric, gas is still cheap. At $3.50 per gallon, it takes a little more than 1 and a half silver dimes to buy a gallon (1.522 dimes.)

Wages haven't kept up with inflation simply because labor used to be the limiting factor to growth and now is in surplus. What else would you expect?

Grover

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