Gold & Silver Digest: 3/25/13

Adam Taggart
By Adam Taggart on Mon, Mar 25, 2013 - 6:50pm

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.

3/25/13 6:36 PM EST US close metals price quotes from Finviz

Reuters:  Gold down as Cyprus bailout deal ease market fears

Gold fell in heavy trade on Monday as a bailout deal to avert a collapse of Cyprus' banking system and possible economic chaos in the euro zone decreased the metal's safe-haven appeal.

The metal sharply pared losses after comments by Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, dealt a blow to investor confidence in the European banking sector. Hopes of prolonged Federal Reserve stimulus also lifted gold off its lows.

Clive Maund: Gold Market Update

With an astronomic and ever growing debt and derivatives overhang, there are essentially only two choices for the world economy. One is to deal with it head on, which would trigger a deflationary implosion that would create an economic wasteland leading to anarchy, riots and revolution etc. Quite clearly nobody wants that, least of all those in power. So that only leaves one other option, which is to keep things limping along for as long as possible by clamping interest rates at zero to stop debt compounding and to print whatever quantity of money is required to keep the status quo going. The big difference between now and 2008 is that this is now a truly global strategy with the WWEW, the World Wide Elite Web, now controlling and directing a coordinated campaign of liquidity enhancement to achieve this objective. For evidence of this you need look no further than the Fed delivering boatloads of newly created cash to the European Union to prop up its banks, or to Japan suddenly abandoning decades of deflationary policy to get with the plan, which is why the yen has collapsed. However, the Fed’s generosity towards Europe may not extend to saving the euro, which US elites may view as a nuisance because it potentially undermines the dollar’s reserve currency status.

321Gold: Backwardation in a down market! Gold and silver are poised to go much higher

What is the significance of backwardation in a down market? 

We are witnessing backwardation (spot price higher than future price) in a down market, which is unusual! Why? Because backwardation normally only occurs when prices are rising and there is such strong demand and such limited supply that the prices for spot are higher than the future prices, which include interest and storage costs. Backwardation especially happens just before the harvest of agricultural (consumable) commodities when there is a lot of demand and no supply yet and when a situation of scarcity exists. The situation is different for precious metals because there is no scarcity of above ground gold and silver inventories. The main reason for backwardation in the case of precious metals is that the supply is extremely scarce because holders of gold and silver don’t want to dispose of their physical gold and silver, not because there isn’t enough gold or silver, but because the gold and silver investors don’t know if they will be able to get the physical back in the future if they sell it spot, now. 

The Globe and Mail: Insider buying of gold stocks surges to multi-year highs

The TSX global gold index has lost about a third of its value over the past two years. The S&P/TSX Venture Exchange, stock full of gold mining juniors, hit a multi-year low this month.

Yet, executives and officers who work within those businesses are showing remarkable confidence that the sector is poised for better times.

According to INK Research, there are now seven precious metals stocks on the TSX with insider buying for every one with selling. That’s a near doubling of the ratio since mid-January and represents a level of lopsided transactions that is usually only seen during major market peaks or valleys.

Wall Street Journal: Lower Gold Prices Could Make Miners Worthless, BofA Says

Falling gold prices are casting a shadow on the battered gold mining sector.

Gold’s 11-year bull run has sputtered in recent months. In a doomsday scenario, a drop to $1,000 a troy ounce could make half the gold industry worthless, Bank of America Merrill Lynch says.

SilverSeek: Silver Market Update

Although silver’s long-term charts are more messy and difficult of interpretation than gold’s, on its long-term 7-year chart we can see that it, like gold, is getting close to a lower supporting trendline drawn parallel to the definite upper trendline drawn across the 2006, 2008 and 2011 highs, where the chances are good that it will successfully find support and turn higher, particularly as this trendline has now risen steadily to come into play underpinning the strong support level where the price has repeatedly reversed to the upside over the past 18 months. A short-term dip into this support, which looks likely for reasons we will look at shortly, will be regarded as throwing up an important buying opportunity.

SilverSeek: The Good, Bad and Ugly

I’ll save the good for a moment, but the bad and the ugly seem to permeate the silver and gold and other markets. On Wednesday, I mentioned that one reason gold and silver failed to move higher after the Cyprus news was such a rally would have interfered with a planned takedown in copper, platinum and palladium, which was evident on Monday and Tuesday. For the record, there was the expected substantial commercial buying in copper and platinum, a bit less in palladium. My point is that commercial positioning on the NYMEX/COMEX is the strongest short term price influence, way ahead of anything else, including actual news and developments in the real world of supply and demand. This is so contrary to commodity law that I believe the regulators must be thought of as corrupt.

Even worse is that silver (and gold) investors seem to be confronted on a daily basis with the proposition that the US Government is working against the interests of silver investors. While every conceivable effort is undertaken by the USG to help push bond, equity and real estate markets higher, there appears to be an effort to depress silver prices that goes beyond ugly. It’s not that silver investors are asking for or expecting any of the special favors and incentives doled out to investors in other markets; it’s more a case of silver investors being discriminated against by the US Government. This discrimination gets old and I sense that is what many must feel. I know I do.

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