PM End of Week Market Commentary - 8/14/2015

davefairtex
By davefairtex on Sat, Aug 15, 2015 - 1:01am

On Friday, gold fell -1.00 to 1113.20 on moderate volume, while silver dropped -0.18 to 15.22 on moderately heavy volume.  PM rallied early, peaking at around 10:15 EDT, and at around 10:45 the selling started which ended up dropping gold $10 and silver $0.35.  I couldn't tie it to any economic report - the dollar did stage a rally at that time, but it wasn't particularly violent.

On the week, gold rose +19.90 [+1.82%], silver rose 0.44 [+2.94%], GDX climbed +8.13% and GDXJ gained +10.70%.  Platinum was up +3.13% and palladium rose +3.16%.

At long last gold printed its swing low, broke above the 9 EMA, and rallied.  A decent amount of the move was currency-related - the buck dropped -1.11% over the week.  Once gold had rallied for 5 days it had to endure some selling, which was relatively lower volume and bounded by the 9 EMA.  My sense is, as long as the selling doesn't push gold to close below its 9 EMA, and the volume of the down-days stays relatively low, the corrections are not a threat to the nascent uptrend.

Silver jumped above its consolidation area, rallied above its 50 MA, and then corrected back down, finding support on its 9 EMA.  So far, things look pretty good for silver.  If it can remain above that 9 EMA during the corrections, all will be well.  Volume on the up-days also looks quite strong.

Miners

Senior miners printed a swing low, and jumped above the 9 EMA all at once to start the week, rocketed higher, and then corrected.  During the correction, GDX found support at the 9 EMA, which is a positive sign.  However as with gold and silver, if a correction drags the miners to close below the 9 EMA, that will be bearish.  If that occurs, I'd expect the miners to drop back down to re-test the lows.

The juniors looked even stronger than the senior miners, with GDXJ rallying up to the 50 MA before encountering resistance.  GDXJ also found support at its 9 EMA during its subsequent correction.  If the juniors can close above the 50 MA, that would be quite bullish.

The USD

The dollar fell this week, dropping -1.09 [-1.11%] to 96.53, but managing to remain above its 50 MA.  Where the dollar goes from here - its anyone's guess.  If dollar weakness continues, that will encourage PM to rally further but if there is significant strength in the buck we probably lose the PM rally.

From what I can tell, the dollar has largely stopped rallying on news that indicates a Fed rate-rise is increasingly likely.  It is quite possible that a rate rise is now built into current prices.  What might move the dollar higher?  Flight-to-safety issues in Europe, or perhaps more CNY devaluations.

US Equities/SPX

On the week, SPX climbed +13.97 to 2091, moving higher off a bullish-looking hammer candle it printed on Wednesday.  However, the market isn't responding particularly well to good economic news right now - positive Industrial Production reports and good Retail Sales numbers aren't causing rallies.  It appears to me that equities are looking more closely at the Fed and the prospect of a rate increase to get a sense as to whether or not "the party is over".  And if you pull back and look at the monthly chart, you can see that the upward momentum of the SPX has definitely stopped.  This is also visible in the momentum indicators, all of which are saying the same thing.  Looks like a monthly close below that monthly 9 EMA (2067) would be a big danger sign - it hasn't done that since early-2012.

And here's another indicator - the spread of junk credit vs spot treasury bonds - FRED timeseries BAMLH0A3HYC.  In the chart below, you can see that whenever this indicator starts to seriously spike higher, its a definite "risk off" sign for the equity market.  The move this week was quite dramatic, and may be signaling the start of something interesting in the near future.

VIX fell -0.56 to 12.83.  If the CCC credit spreads are foretelling the future, options are quite cheap.

Gold in Other Currencies

While gold rose in all currencies, gold did especially well in Rubles, Rupees, and Yuan this week - falling currencies including the CNY devaluation helped out substantially. 

Rates & Commodities

Bonds (TLT) made a new high on the week but closed lower, dropping -0.31%.  Still, bonds remain above all tthree moving averages, and they still look quite strong.

Junk bonds (JNK) fell -0.48% on the week, dropping alongside oil and making a new low.  That's risk off.

The CRB (commodity index) fell gently this week, down -0.18% making another new low.  CRB closed briefly above its 9 EMA on Monday, but immediately was driven back below it the very next day.  In the chart below you can see that downside momentum has definitely slowed (MACD and RSI show this clearly), but the CRB is still struggling to put in a low.  Note that gold showed these same signs of slowing momentum immediately prior to the nice rally that happened this week.

WTIC fell as well, losing -1.01 [-2.31%] to 42.74, setting a new 6-year low of 41.91 on Thursday.  Unlike for commodities, there is no sign at all of slowing momentum for WTIC.  Brent looks slightly better - it rose +0.23 on the week, but its weekly candle was a gravestone doji, indicating a failed rally, and that's bearish.

Physical Supply Indicators

* Shanghai premiums rose to +6.65 over COMEX.

* The GLD ETF gained +4.18 tons, with 671.81 tons remaining.

* GC futures increased its backwardation this week, with the current two-front-month spread at -0.50.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on Aug 14th) of 1114.40 and silver 15.19:

 PHYS 9.17 -0.59% to NAV [down]
 PSLV 5.87 +0.16% to NAV [up]
 CEF 10.73 -11.00% to NAV [up]
 GTU 38.41 -6.22% to NAV [down]

ETF premiums were mixed.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no significant premium for gold, but the offers for silver over the weekend other than in London have widened to 30 cents over spot.

Futures Positioning

The COT report covered trading through Aug 11th, when gold closed at 1107.70 and silver 15.28.

The gold commercials have started to increase their short positions, adding 4.8k contracts on the week.  Managed Money is just starting to go long (adding 4.9k contracts) but has yet to cover shorts in any meaningful way, dropping just 923 short contracts on the week.  We still have yet to see any substantial short-covering fireworks in gold.

In silver, the commercials have yet to add to their short positions, while Managed Money has covered a big 8.4k shorts on the week.  That's a fairly large change (about 20% of the total MM short position), which explains silver's better performance this week.

Managed Money is starting to get nervous with silver, but not yet with gold.  Perhaps if the commodity complex were to turn, we'd see Managed Money bail out of their gold short positions with more enthusiasm

Moving Average Trends [9 EMA, 50 MA, 200 MA]

We're seeing a lot more green in the table this week, but so far it is limited to the 9 EMA.  PM remains in a falling trend in every other timeframe.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver Miners SIL 0.00% -48.97% rising falling falling falling ema9 on 2015-08-10 2015-08-14
Gold COMEX.Gold -0.26% -15.43% rising falling falling falling ema9 on 2015-08-07 2015-08-14
Junior Miners GDXJ -0.29% -49.88% rising falling falling falling ema9 on 2015-08-10 2015-08-14
Platinum COMEX.Platinum -0.49% -32.31% rising falling falling falling ema9 on 2015-08-10 2015-08-13
Senior Miners GDX -1.02% -46.24% rising falling falling falling ema9 on 2015-08-10 2015-08-14
Silver COMEX.Silver -1.21% -23.58% rising falling falling falling ma50 on 2015-08-14 2015-08-14

Summary

Gold and silver buyers finally showed up, pushing both metals sharply higher on the week, with silver outperforming gold.  Gold finally printed a swing low, and everything in the PM complex closed the week above their respective (daily) 9 EMAs.  So far, so good.

The gold/silver ratio fell, dropping -0.81 to 73.16, nearing the mid-point of its recent 10-month trading range.  The GDX:$GOLD ratio took off higher this week, erasing two weeks worth of losses.  The ratio supports an "early bullish" trend change case.  The GDXJ:GDX ratio moved higher this week, continuing its steady recovery that started in May.  All the ratios suggest things are improving.

The COT reports show no short covering yet for gold, but a fairly substantial short-covering rally for silver.  Managed Money is still showing no fear at all in gold, which will limit gold's upside.

Physical shortage indicators are slowly starting to hint at shortages; in the west, ETF premiums were mixed, GLD tonnage rose, but backwardation at COMEX is increasing.  In the east, premiums in Shanghai are increasingly positive.

Commodity prices dropped again this week, though momentum has noticeably slowed - momentum indicators are showing signs that often appear prior to a rally.  Oil continues to look quite weak.  The dollar's correction this week definitely helped PM, but could not rescue plummeting oil prices.  If dollar weakness continues, we likely see another leg up for PM.  As always, a bottom in commodity prices should greatly help PM too.

Can gold and silver continue to rally while commodity prices fall?  So far they seem to be doing just that.  It could be that PM is leading the overall commodity complex, and that commodities will mark a low and start to rally next week.  It would help if oil finally stops dropping, although there aren't any signs of that happening yet.

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23 Comments

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1216
Did every currency drop this week?

Hello Dave,

I was surprised to see the USD dropped this week given the devaluation of the Yuan. Every currency seemed to weaken this week. Is that possible? I thought that the currency wars were a zero sum game where one currency had to go up if another went down. It seems that the only way for them all to go down would be thin air printing everywhere. Simplistic perhaps.

Also, if the rate increase is already priced into the market, what happens if the Fed disappoints in September now that the CNY is plummeting? USD drops and stocks go wild as the party goes on?

Cheers,

Mark

Jim H's picture
Jim H
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Posts: 2379
Silver Out of Stock alert

Texas Precious Metals, whose website is a good reference for availability since they only advertise for sale those items they have in stock, is now showing completely out of stock for high end minted coins, i.e. the Canadian Wildlife series, AND the Perth Mint Funnel web spider coins.  This is a very rare event and suggests to me that the demand for such coins in increasing.. and that there are continued supply constrictions in Silver in general.  These are HIGH MARKUP items, and the mints would keep making them if the blanks were available.  The blanks are not available because there is not enough Silver available, period. 

   https://www.texmetals.com/birds-of-prey-series-silver-red-tailed-hawk-mo...

Dave said,

Physical shortage indicators are slowly starting to hint at shortages

To my sensibilities, the market is now screaming of shortages.  You can read more here;

http://www.silverdoctors.com/wholesale-silver-shortage-confirmed/

The market is teetering here.. delays are pushing out farther and farther.  We are all about to be, "capital controlled" out of our ability to buy retail Silver... watch and see.  The Silver ATM is being shut down... you are all watching this happen in slow motion but you don't understand what you are seeing.  Dave will tell you to go buy a 1000 ounce bar - good luck finding one of those (http://www.apmex.com/product/81/1000-oz-silver-bar-comex-deliverable).  Governments/banksters are making choices for us by not minting coins... they are making choices for us by allocating the supplies of available blanks away from generic rounds.  They are making choices for us by allowing industry to be supplied with cheap Silver vs. those of us looking to save in Silver.  

Your option for escaping the $$ system into Silver, at least before the paper vs. phys reset happens,  is going to time out.     

 

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Report from Northern VT

Hello,

While I definitely agree with Jim H. and his belief that at some point the other shoe has to drop, I specifically asked one of my three sources today about demand....he isn't seeing it yet.  Jim, you have your pulse on the entire market much more than I do, so people should defer to your observations....maybe we are starting to see more people buying.

Any of comments I am relaying from my dealer should be taken with a touch of reality.  Here in northern VT I know of only three dealers who sell silver, and they are all within 45 minutes of my house.  I imagine most people who visit PP would have a fair bit more opportunity to buy physical.  More stores, higher population centers.  At least in Vermont, the demand may not be high, as the dealers here probably use ebay, etc, to get a lot of their product.  We are talking really small time.  Small demand in one of the smallest markets really doesn't add much to the conversation I guess.

However, Jim's comments about this happening in slow motion is a great observation.  Who knows how much longer we have before the meaning of paper and physical because obvious to everyone.  Just wish I could buy more.

 

Peace,

Jason

Petey1's picture
Petey1
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Joined: Sep 13 2012
Posts: 58
Soon Jim

I think something will happen soon. Gainesville coins looks to be running low on a lot of silver also. Where I live real estate is going crazy. Lots of people from out of town buying with cash looking for a place to put there money. 70 percent of sales are cash. The frenzy of buying and building is making the 2005 boom look tiny. Bubble territory!

davefairtex's picture
davefairtex
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Joined: Sep 3 2008
Posts: 5062
currencies, shortages

Mark-

This week: EUR/USD +1.13%, AUD/USD -0.53%, JPY/USD +0.09, CAD/USD +0.34%, GBP/USD +0.97%.

Also, CNY/USD -2.92%.

So the buck sank against most of the "USD Index" currencies, but it rose against the CNY.  How can this be?  The USD index was constructed long before China was an economic power, and so USD index does not include CNY.  Normally we can ignore CNY since China maintains a peg, but times like this when they let the peg loose, our standard measurements fail to inform us properly.

There is a different dollar index - the "broad trade weighted dollar index" which changes composition every so often that FRED provides - DTWEXB.  Unfortunately, they give this to us with a 1-week delay, so my last update to that was on Aug 7th.  The delay makes it useless for our more real-time needs - explaining "what happened today."

JimH-

You are right, you can predict what I'll say.  If you are desperate for silver, PSLV has a premium of exactly +0.16%.  Go buy a bunch of PSLV shares, and take delivery of a big bar.  No doubt there will be delivery charges, but they aren't all that expensive.   If PSLV premiums are this low, we don't have a silver shortage.

Please repeat after me: a coin blank shortage is not a silver shortage.  Its just a coin blank shortage.  You are welcome to turn that into a grand conspiracy - and it may even be a grand conspiracy - but as long as we consumers can get big bars without substantial premiums, so can industry, and so can investors, and so your super exciting silver coin shortage is simply about form rather than metal.

Most silver is not in coin form, its in big bar form.  Thus, it makes sense to look at the big bars rather than the coins.  Tail, dog, wagging, etc.

I know this is not what you want to hear, and frankly its not what I want to say, but that's what the evidence is telling me.  Your coin shortage tells me that retail is buying the dips.  That's good, but its not producing a silver shortage.  It is just making extra money for those who happen to have silver coins in inventory.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5062
HAA prices and premiums (Sat Aug 15)

I just wrote some code to scrape the HAA site for prices and premiums.  Here are the results, sorted by premium.  I think the answer is, "don't buy Silver Eagles in Sydney."  Even 1oz rounds in New York are only at 5% premium.

You tell me.  Do we have shortages?  It does look like the silver 1000 oz COMEX bars are at a 3.65% premium, which is higher than the gold 100oz COMEX bars at 2.27%.  That's something.

We definitely have shortages of Silver Eagles.  If you absolutely have to have your silver in that form, you're going to pay through the nose for it.  Do you think, perhaps, coin shops that stock silver eagles enjoy this situation?  What might they tell you if you were to go there?  "OMG we're running out of silver!  Buy my silver eagles quick before they're all gone!"

To quote a line from the intro to Bored of the Rings: "A <blank> and his <blank> soon are <blank>."

Unfortunately, I don't have history for these values.  Wouldn't that be nice to have?  I'm sure the HAA people have better things to do than maintain data for me.

Item Loco Price/Oz Premium
Gold.Bars.400.Oz New.York $1,137.63 2.24%
Gold.Bars.400.Oz Salt.Lake.City $1,137.63 2.24%
Gold.Bars.100.Oz Salt.Lake.City $1,137.92 2.27%
Gold.Bars.1.Kg New.York $1,138.57 2.33%
Gold.Bars.1.Kg Salt.Lake.City $1,138.57 2.33%
Gold.Bars.100.Oz New.York $1,138.82 2.35%
Gold.Bars.400.Oz Zurich $1,139.88 2.44%
Gold.Bars.1.Kg Singapore $1,140.53 2.50%
Gold.Bars.1.Kg Zurich $1,140.53 2.50%
Gold.Bars.1.Kg Sydney $1,142.24 2.66%
Gold.Bars.1.Kg London $1,143.18 2.74%
Gold.Bars.400.Oz London $1,143.28 2.75%
Gold.Bars.10.Oz New.York $1,144.10 2.82%
Gold.Bars.10.Oz Salt.Lake.City $1,144.10 2.82%
Gold.Bars.1.Oz New.York $1,145.00 2.90%
Gold.Bars.1.Oz Salt.Lake.City $1,145.00 2.90%
Gold.Bars.10.Oz Zurich $1,147.90 3.16%
Gold.Bars.1.Oz Singapore $1,148.00 3.17%
Gold.Bars.1.Oz Zurich $1,148.00 3.17%
Gold.Bars.1.Oz Sydney $1,149.00 3.26%
Gold.Bars.1.Oz London $1,153.00 3.62%
Silver.Bars.1000.Oz New.York $15.77 3.65%
Silver.Bars.1000.Oz Salt.Lake.City $15.77 3.65%
Gold.1.Oz.Canadian.Maple.Leaf New.York $1,158.00 4.07%
Gold.1.Oz.Australian.Kangaroo New.York $1,162.00 4.43%
Gold.1.Oz.Australian.Kangaroo Salt.Lake.City $1,162.00 4.43%
Gold.1.Oz.Austrian.Philharmonic New.York $1,162.00 4.43%
Gold.1.Oz.Austrian.Philharmonic Salt.Lake.City $1,162.00 4.43%
Gold.1.Oz.Canadian.Maple.Leaf Salt.Lake.City $1,163.00 4.52%
Gold.American.Eagle.500coin New.York $1,163.84 4.60%
Gold.1.Oz.American.Eagle New.York $1,164.00 4.61%
Gold.1.Oz.South.African.Krugerrand New.York $1,164.00 4.61%
Gold.1.Oz.South.African.Krugerrand Salt.Lake.City $1,164.00 4.61%
Gold.1.Oz.Australian.Kangaroo Singapore $1,166.00 4.79%
Gold.1.Oz.South.African.Krugerrand Zurich $1,166.00 4.79%
Gold.1.Oz.American.Eagle Salt.Lake.City $1,168.00 4.97%
Gold.American.Eagle.500coin Salt.Lake.City $1,168.47 5.01%
Gold.1.Oz.Australian.Kangaroo Sydney $1,169.00 5.06%
Gold.1.Oz.Canadian.Maple.Leaf Singapore $1,169.00 5.06%
Gold.1.Oz.Canadian.Maple.Leaf Zurich $1,169.00 5.06%
Silver.1.Oz.Rounds New.York $16.00 5.17%
Silver.1.Oz.Rounds Salt.Lake.City $16.00 5.17%
Gold.1.Oz.American.Buffalo New.York $1,173.00 5.42%
Gold.1.Oz.American.Buffalo Salt.Lake.City $1,173.00 5.42%
Gold.1.Oz.Canadian.Maple.Leaf Sydney $1,173.00 5.42%
Gold.1.Oz.American.Eagle Zurich $1,176.00 5.69%
Platinum.Bars.1.Oz New.York $1,052.00 5.73%
Platinum.Bars.1.Oz Salt.Lake.City $1,053.00 5.83%
Gold.1.Oz.American.Buffalo Singapore $1,178.00 5.87%
Silver.Bars.100.Oz New.York $16.13 6.03%
Silver.Bars.100.Oz Salt.Lake.City $16.13 6.03%
Palladium.Bars.1.Oz New.York $647.00 6.73%
Palladium.Bars.1.Oz Salt.Lake.City $647.00 6.73%
Gold.Half.Oz.Canadian.Maple.Leaf Salt.Lake.City $1,196.00 7.49%
Gold.Half.Oz.American.Eagle Salt.Lake.City $1,198.00 7.67%
Gold.Half.Oz.Canadian.Maple.Leaf New.York $1,200.00 7.85%
Gold.Half.Oz.American.Eagle New.York $1,202.00 8.03%
Silver.Bars.100.Oz Singapore $16.48 8.33%
Gold.Valcambi.CombiBar.1.Oz New.York $1,207.00 8.47%
Gold.Valcambi.CombiBar.1.Oz Salt.Lake.City $1,207.00 8.47%
Palladium.1.Oz.Canadian.Maple.Leaf New.York $658.00 8.55%
Palladium.1.Oz.Canadian.Maple.Leaf Salt.Lake.City $658.00 8.55%
Gold.Valcambi.CombiBar.50.g New.York $1,213.66 9.07%
Gold.Valcambi.CombiBar.50.g Salt.Lake.City $1,213.66 9.07%
Silver.Bars.10.Oz.RCM New.York $16.60 9.12%
Silver.Bars.10.Oz.RCM Salt.Lake.City $16.60 9.12%
Silver.Bars.100.Oz Sydney $16.64 9.38%
Gold.Qtr.Oz.Canadian.Maple.Leaf Salt.Lake.City $1,220.00 9.64%
Gold.Qtr.Oz.Canadian.Maple.Leaf New.York $1,224.00 10.00%
Gold.Qtr.Oz.American.Eagle New.York $1,232.00 10.72%
Gold.Qtr.Oz.American.Eagle Salt.Lake.City $1,232.00 10.72%
Gold.Tenth.Oz.Canadian.Maple.Leaf Salt.Lake.City $1,240.00 11.44%
Silver.Bars.10.Oz.RCM Singapore $17.00 11.75%
Gold.Tenth.Oz.American.Eagle New.York $1,250.00 12.34%
Gold.Tenth.Oz.American.Eagle Salt.Lake.City $1,250.00 12.34%
Gold.Tenth.Oz.Canadian.Maple.Leaf New.York $1,250.00 12.34%
Gold.PAMP.MultiGram.25.g New.York $1,282.71 15.28%
Gold.PAMP.MultiGram.25.g Salt.Lake.City $1,282.71 15.28%
Silver.1.Oz.American.Eagle New.York $18.00 18.32%
Silver.1.Oz.American.Eagle Salt.Lake.City $18.00 18.32%
Silver.1.Oz.Austrian.Philharmonic New.York $18.00 18.32%
Silver.1.Oz.Austrian.Philharmonic Salt.Lake.City $18.00 18.32%
Silver.American.Eagle.500coin New.York $18.45 21.26%
Silver.American.Eagle.500coin Salt.Lake.City $18.45 21.26%
Silver.Bags.715.Oz New.York $19.81 30.19%
Silver.Bags.715.Oz Salt.Lake.City $19.81 30.19%
Silver.1.Oz.American.Eagle Singapore $20.00 31.47%
Silver.1.Oz.American.Eagle Sydney $20.00 31.47%

 

robie robinson's picture
robie robinson
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robie robinson's picture
robie robinson
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Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 573
IMHO
Jim H wrote:

Texas Precious Metals, whose website is a good reference for availability since they only advertise for sale those items they have in stock, is now showing completely out of stock for high end minted coins..... This is a very rare event and suggests to me that the demand for such coins in increasing.. and that there are continued supply constrictions in Silver in general. 

Last month my PM dealer mentioned that 50% of his customers are new.  I view the increase in retail silver sales as an increasing distrust in government and a desire to diversify out of government controlled paper money.  Silver represents the easiest, most affordable way to get off the paper grid and into something tangible.  We are in the early stages of an awareness that something is horribly wrong. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5062
bron on coin shortages

Here's a detailed post on why shortages occur at retail.

Goldbugs who expect each new retail coin shortage to turn into an inevitable COMEX default (and who have not yet been chastened by repeated experiences to the contrary) probably should not read this article due to threat of exposure to facts that may be contrary to worldview.

On the other hand, if you want to know how to figure out if the current coin shortage is starting to turn into an actual silver shortage...its probably worth a look.

http://research.perthmint.com.au/2015/08/12/coin-shortage-faqs-telling-a-real-shortage-from-a-capacity-shortage/

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
When is a blank shortage a Silver shortage?

SRS Rocco put the Silver Doctors article up on his own website, and then answered one of his posters this way,

http://srsroccoreport.com/silver-doctors-wholesale-silver-shortage-confi...

SRSrocco says:

Luis,

Thanks for stopping by and leaving comments. I know you spend a lot of time looking at energy, so its quite refreshing to see you taking the time to come visit a precious metal blog.

Your question is a loaded one. However, I do believe you have underestimated the amount of silver investment demand. I encourage you to check out the 10 year trend of the silver market at the Silver Institute link: https://www.silverinstitute.org/site/supply-demand/

You will notice that physical silver coin and bar demand prior to the collapse of the U.S. Housing and Investment Banking Market, was quite low… 51.6 million oz (Moz) in 2005, compared to total supply of 955 Moz. Thus, it was only 5% of total supply in 2005.

Now, if you look at 2013, you are going to see a much different picture. Total silver coin and bar demand in 2013 was 243.6 Moz compared to 1,000 Moz of supply. Not only is physical silver bar and coin demand the largest growth sector of the entire silver market (over the past decade), it consumed nearly 25% of supply in 2013. So, I would disagree with you that physical silver investment demand is a relatively small component of the complete silver demand structure.

And remember… this huge 200+ Moz demand is still only from 1-2% of the market. I will explain more of your question in an upcoming article.

steve

So, the investment demand is now 25% of the market, and has been growing.  There are numerous stories from dealers indicating a significant increase in new buyers.. which is exactly what you would expect in the early stages of a viral awakening... that first step from a market that represents 1-2% of investors.. to one that now involves 2-4% of investors, is a BIG step.  The existence of this awakening, which I can easily grasp since my neighbor has been buying more Silver recently than I have.. and you can imagine how he became awakened : )   In any event, Dave and his fiat system defending buddy Bron are free to diagnose the current shortages as they like.  The fact is more investors large and small,  and awakened savers are turning to PM's, and this will continue to stress the system.  
http://www.zerohedge.com/news/2015-08-16/billionaire-stanley-drucknemiller-loads-gold-makes-it-his-largest-position-first-tim
The growth I speak of is in the investment side of Silver demand... It's hard to imagine that Industry is net growing right now... I would guess industrial demand for Silver is pretty flat... but the fact remains that the total of all mined Silver, on a yearly basis, can be bought for under $14 Billion.  The readers of this thread really need to let that sink in.. because the entire story is right here.  Silver, which is arguably one of the coolest hard assets to own based on it's dual industrial technology/monetary nature, is being priced right now, as a result of forces that have been discussed ad infinitum here, such that any one of about 75 individuals on the Billionaires list could buy it ALL themselves, and still have change left over.  The amount of money and credit sloshing around in the system today is immense .. Total Silver is tiny.  Is it any surprise that investment demand is overwhelming the system.  Is it any surprise that there exist multiple voices here in the blogosphere that will try to tell you, "Keep calm, all is well"?  The money system is dying... those who run the system know that this viral awakening must be stopped or slowed.  But the data presented in the SRS Rocco post above tells you that the demand for Silver has been growing steadily.
 
The thing that Bron and Dave won't tell you is that industry has been steadily increasing their ability to feed this increasing demand.. i.e. the coin blank capacity has been increasing over the years.  That means that 2013's coin blank shortage IS NOT the same as 2015's coin blank shortage... the baseline was different.  The underlying trend is the thing you should be looking at, although the magician's among us will try to avert your gaze away from those facts and toward the argument that, "this has happened before and there was no comex default".  It has not happened yet, and thus it won't happen... cold comfort I say.
 
The hammer will be dropped.  I don't know how.. maybe Silver will be deemed a critical industrial asset and you won't be able to buy it anymore.. maybe it will be taxed heavily (as in parts of Europe today).  I don't know how this plays out.  I do know it is playing out under our noses right now.
                     
 
   
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Jim H
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Palladium is cheap too..

http://www.currentscience.ac.in/Volumes/108/04/0595.pdf

Dry, preloaded NANOR®-type technology makes LANR reactions more accessible. These self-contained, two-terminal nanocomposite ZrO2–PdNiD CF/LANR components have at their core ZrO2–
PdD nanostructured material. The excess energy gain compared to driving input energy is up to 20 times the input.
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silver investment demand: growing?

JimH-

Now, if you look at 2013, you are going to see a much different picture. Total silver coin and bar demand in 2013 was 243.6 Moz compared to 1,000 Moz of supply. Not only is physical silver bar and coin demand the largest growth sector of the entire silver market (over the past decade), it consumed nearly 25% of supply in 2013. So, I would disagree with you that physical silver investment demand is a relatively small component of the complete silver demand structure.

I admit it, I bit on this one.  I went to look at the link he gave.  What did I find out?   2013 had a higher coin & bar demand for silver than 2014.  That's probably why he pointed us at 2013 and not at 2014: the numbers were better.  Is it intellectually honest?  You tell me.  I believe the relevant number is the 2014 number, which dropped from 25% to 19%.  Its still a gain, but he just wasn't content with 19%.   That just wasn't good enough.  Imagine that.

See, I buy the whole argument: silver is a very small market, at some point it will be the cat's meow, and at some point it probably really will disappear into the hoards of people like us.  Its a good story.

So why must your sources continually try to pull this kind of garbage?  They have a good story already, why lose credibility by constantly trying to pump pump pump?

Currently, the hard assets alliance shows that silver is quite available.  There is no shortage currently - except for 90% and silver eagles.  That's just where things are.

But by telling you, "this is where things are", I'm deemed a propaganda artist.  Instead, I should be breathlessly telling you to BUY NOW!! (at a 30% premium, no less) because its all about to vanish - just like the last 6 times this very same thing didn't happen.  According to Jim, this would be me doing a service for you, the silver buyer, because motivating a sale via fear and panic is really the best way to make a sound financial decision.

Will there be a shortage soon?  Perhaps there may.  Will all the silver suddenly vanish overnight in the very near future?  Jim thinks so, but I don't.  I think, like with everything else, a big bar shortage will slowly start to appear, and then it will ramp up, and then suddenly when the mainstream public isn't watching, all the silver really will be gone.  But for those paying attention, we'll see it coming.

Most people are surprised by events because they really aren't paying attention.

Now then, about the real world as I see it:

My computer showed that silver put in a low two weeks ago.  It may not be THE low, but it is probably A low.   Buying here, at these levels is not a horrible idea.  Beats the heck out of $17, and $23, and $32 - all the other times when we were sure that silver prices could drop no further because of coin shortages at retail.

Try buying PSLV.  It should maintain its value even in the midst of a COMEX default, and it has a very low premium: its around 1%.  To my mind, 1% beats 30% any day of the week.  You can hold PSLV until the price of silver pops, the mint makes more eagles, the shortage is relieved, and then you can sell your PSLV and run off to buy your silver eagles at a more reasonable premium.

And if the unlikely COMEX default happens, PSLV will pop right along with the price of physical silver.  All bases covered.

 

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phusg
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Will the real magician please stand up?
Jim H wrote:

as a result of forces that have been discussed ad infinitum here, such that any one of about 75 individuals on the Billionaires list could buy it ALL themselves, and still have change left over.

...
 
The hammer will be dropped.  I don't know how.. maybe Silver will be deemed a critical industrial asset and you won't be able to buy it anymore.. maybe it will be taxed heavily (as in parts of Europe today).

If any individual tried to buy all the silver they would be prosecuted under competition law, so that's a misleading argument.

And why are you stating that If silver started to be taxed more heavily, demand would sky rocket? I imagine the exact opposite would happen.

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cmartenson
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If it weren't for the collectibles tax...
davefairtex wrote:

(...)

Try buying PSLV.  It should maintain its value even in the midst of a COMEX default, and it has a very low premium: its around 1%.  To my mind, 1% beats 30% any day of the week.  You can hold PSLV until the price of silver pops, the mint makes more eagles, the shortage is relieved, and then you can sell your PSLV and run off to buy your silver eagles at a more reasonable premium.

And if the unlikely COMEX default happens, PSLV will pop right along with the price of physical silver.  All bases covered.

*sigh*  If it weren't for the collectibles tax I would love to sell my eagles now for a big premium, buy PSLV, and then reverse the whole operation when the premium spread narrowed pocketing the difference in extra eagles.

Unfortunately, or fortunately I guess, I find the whole tax/accounting side of the equation so burdensome as to be off-putting.  I wish there were an easier way...

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Re: If It Weren't For The Collectibles Tax...

Who is the counter-party on PLSV?  Can they pay if TSHTF?

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Jim H
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Thank you Dave..

A well measured response.  We agree that Silver is a small market relative to other types of financial assets.. this is really the most important point I think.  My point in showing how individual billionaires could buy all mined Silver was not to suggest that they would be allowed to.. only that this is yet another means by which to comprehend how tiny the market is.  Is this so because Silver is a naturally tiny market, or because it is dramatically undervalued?  If Gold is not presently overvalued, then the Silver-to-Gold ratio would suggest that Silver is indeed undervalued.

Good point about Steve S. cherry picking data.. I think the truth is though that 2015 will blow out the records yet again for investment Silver... so the 2013-2014 data issue will become moot, lost in the noise so to speak.  

http://srsroccoreport.com/the-coming-market-crash-will-wipe-out-global-s...

Then we had a new update on U.S. silver imports from the folks at the USGS.   According to the data for May, the U.S. imported another 475 metric tons (mt) of silver.  If we add up all U.S. silver imports JAN-MAY, it turns out to be a whopping 2,510 mt (81 million oz).

Total U.S. Silver Imports May 2015

As we can see, total U.S. silver imports year to date (2,510 mt) are 523 mt greater than the same period last year (1,987 mt).  Thus, silver imports are 26% higher than they were during the first five months of 2014 and are on track to reach 6,000 mt in 2015.  This continues to be a surprise because the U.S. market demand for silver is probably less than it was last year.

India is Hogging Silver as well;   http://www.bloomberg.com/news/articles/2015-07-08/toe-rings-spurring-ind... fabricators in India boosted silver use by 47 percent last year to a record 1,936 tons, overtaking China as the top consumer in that category, the industry-funded Silver Institute estimated. By comparison, global jewelry fabrication rose just 1.5 percent. The metal is also used to make utensils and gifts for festivals and weddings.The bulk of purchases are by rural farmers who don’t have access to banks and prefer the metal as a store of value, said Suresh Hundia, a former president of the India Bullion and Jewellers Association Ltd. Because so much buying is linked to agriculture, demand can be influenced by monsoon rains from June to September that determine the health of crops, Hundia said....

Notice how the Wall Street mass media headline would lead one to believe that Silver demand in India is just a toe-ring fad... at least they admitted the truth (see my bold above) in the body of the article : )   

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Nasby
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Avoid Collectibles Tax

Instead of selling your silver and paying collectibles tax, consider using your silver as collateral for a loan.   Try to get as close to 1:1 as possible for your loan proceeds vs market value of the eagles.  Use the cash to buy PSLV at lower premium to spot.  Unfortunately, sometimes people must default on their loans and forfeit their collateral ... but even at 1:1, the lender does not lose, and should consider you a good credit risk in the future (why not, with 100% collateral?).  After spot silver rises and coin premiums fall, sell your PSLV and buy more Eagles.

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Jim H
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PSLV

Prospectus here;     http://sprottphysicalbullion.com/sprott-physical-silver-trust/prospectuses/

The salient features of these Sprott Trusts, both PSLV, and PHYS, for me are that they are held outside the banking system, at the Canadian Mint.  Is this a perfect solution?  No, I don't think that a perfect solution exists.. but I think when you combine the benefits of storage outside the banking system with the ability to redeem (for large holders) you have what amounts to the best way to hold physical metal in a brokerage account.  For me, diversification is more about different ways to hold the metals vs. holding different assets.  My belief is that, in the end, only the metals will maintain value, and I don't know which forms will remain viable.  Hence I believe one should hold;

1)  metal safely stored in country

2)  metal in brokerage/retirement accounts, PSLV/PHYS being one good means.  There are other solutions, i.e. physical metal IRA, even ways to structure self-held (which kind of brings you back to #1 and defeats the purpose of diversification).       

3)  miners as a play on metals in the ground - always preferable to hold physical shares if possible.

4)  metal stored in your name, outside the banking system, outside the retirement account legal framework, outside the country.          

From page 7

Storage at the Royal Canadian Mint. The Trust’s physical silver bullion will be fully allocated and stored at the Royal Canadian Mint, to which we will refer as the Mint (or, depending on the quantity of physical silver bullion that the Trust purchases, at a facility located in Canada leased by the Mint from a sub-custodian for this purpose). The Mint is a Canadian Crown corporation, which acts as an agent of the Canadian Government, and its obligations generally constitute unconditional obligations of the Canadian Government.
 
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cmartenson
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Silver production likely to fall

My expectation is that silver production is going to fall somewhat over the next few years.

The main reason is in this chart right here:

Last I checked 70% of silver production comes as a by-product of base metal production.  Copper mining is a main source for silver...so as the world went through the massive China copper spree a lot of silver was produced.

Again, my expectation is that China is about to tumble down a deflationary abyss and that demand for copper will fall badly, and that the price of cooper will plummet below the cost of production and that a lot of copper mining activity will simply stop.

Ergo, less silver hitting the markets.

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davefairtex
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deflationary abyss, silver, PSLV

JimH-

The silver import numbers look promising, as does the whole thing with India.  We aren't seeing any drawdown in COMEX eligible yet - at least no major drawdown.  The supply story is one that shows promise, but until the impact makes itself felt in actual inventory and premiums, its just one of those possibilities that might have an effect this year, or perhaps in five years.  I'm thinking increased solar panel production could be a real game-changer, even more than investment demand.  Eventually.

But none of that long term stuff should drive your buying decision today at retail in a high premium environment.  If we aren't seeing a big bar shortage now, then that says the current retail coin shortage shall pass the same way all the others did, and in a few months those shameless silver salesmen will just pretend once again that they never urged you to buy a product with a 20-30% premium on it.

"Buy Straw Hats in the Winter" - a Warren Buffet philosophy - comes to mind.  That's why I say buy PSLV.  (Full disclosure: I own some PSLV, so your buy-side support is appreciated in advance)

Chris's point regarding mine supply: found this article at mining.com: http://www.mining.com/byproduct-of-metal-price-meltdown-is-a-higher-silver-price/

They support his 70% figure (in terms of silver being a byproduct), but the breakdown shows that its mostly lead and zinc (33%) with copper a bit lower (19%) and gold (12%).  Still I'd assume a deflationary China would depress lead and zinc consumption in much the same way, so the point still holds.

I think Chris is probably right about China.  I strongly doubt the government there will permit a true "deflationary abyss" resolution to appear (they'll suck up all the bad debt and tuck it away somewhere - they manifestly do not believe in "the rules of capitalism") but I do think construction will slow down dramatically.  When I was in Shanghai, I rode a beautiful maglev train from the airport to the city center.  It took less than 10 minutes, it was really nice, and it cost about $8 for a ticket.  I do wonder, however, if it will ever make back the cost to build, which supposedly was $1.3 billion.

Really nice train.  305 km/hr.

As for selling your silver eagles and collecting the 30% bounty - you have to sell at the bid, which I'm guessing is far lower.  Selling at the ask is a privilege is reserved for coin shop owners.  Nice work, if you can get it.  I'm sure that doesn't impel them to "talk shortage."  At least, not much anyways, and then only in a good cause.  (No doubt they pool their money and get Eric King to do it for them).

 

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cmartenson
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Silver and base metal clarification
davefairtex wrote:

Chris's point regarding mine supply: found this article at mining.com: http://www.mining.com/byproduct-of-metal-price-meltdown-is-a-higher-silver-price/

They support his 70% figure (in terms of silver being a byproduct), but the breakdown shows that its mostly lead and zinc (33%) with copper a bit lower (19%) and gold (12%).  Still I'd assume a deflationary China would depress lead and zinc consumption in much the same way, so the point still holds.

Yeah, I was typing a bit quickly this morning....the Copper chart for me is shorthand notation for "base metal mining" ... meaning I assume a hit to copper prices and production equals a hit to zinc, lead, tin, etc. 

Quick and dirty?  You bet.  

Close enough?  When things are moving quickly, I think so...  :)

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KennethPollinger
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What I don't Understand

Let's say some of us buy bullion or PSLV about now--close to the bottom? Or other senior/junior mine stock, at very low prices.

And THEN the "Big" correction/collapse comes down the road (soon or within a few months/years).

Will we not LOSE mucho dinero by following these ideas.  Thus, would it not be BETTER to SELL ALL metal stocks NOW, and wait for the "Big Drop?"  THEN buy such stock?   Sure bullion will be safer, but stocks?

Just a neophyte in these things.    Help!    Ken

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