Gold & Silver Digest: 5/29/13
The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.
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5/29/13 7:06 PM EST US close metals price quotes from Finviz
Gold rose around 1 percent on Wednesday, reversing the previous session's losses as a dollar drop and declines in equities triggered physical buying.
But analysts said the root of weakness in wider markets improved U.S. data suggesting the Federal Reserve might taper its monetary stimulus was also seen as a catalyst ultimately to take bullion prices lower.
To an extent that reveals a thorough misunderstanding of the market forces, the financial media has failed to consider the different motivations and beliefs that drive the different types of investors who are active in the gold market. By treating the gold market as if it were comprised of just one type of investor, analysts have drawn false conclusions about the recent volatility.
Broadly speaking, the gold market consists of long-term investors, which are comprised of primarily private individuals who believe in gold as a better store of value than fiat currencies, and short-term traders, who are primarily financial professionals looking to play on momentum trades. The groups invest with different time horizons and with varying goals.
According to the Royal Canadian Mint's newest quarterly report just released, Gold and Silver Maple Leaf sales increased substantially Q1, 2013. During the first quarter of 2013, Silver Maple Leaf sales were up 65% at 6.6 million ounces compared to 4 million ounces during the same period last year.
The Royal Canadian Mint had a total of 18.1 million Silver Maple Leaf sales in 2012. If the current sales trend continues, there will be an estimated 23 million Silver Maple Leaf sales for 2013 — 27% higher than 2012.
Asian gold demand from this April to June will reach a quarterly record as bullion consumers in the region take possession of supply freed up by selling from exchange-traded funds (ETFs), the World Gold Council (WGC) said on Wednesday.
Gold prices fell to their lowest in more than two years at $1,321.35 an ounce in mid-April on signs of economic improvement in main markets and fears that central banks around the world could start to curtail their bullion-friendly policy measures.
Well, I couldn't have imagined the response I got, which were mostly negative and angry. The experience made me wonder: why were so many people so upset with me for trying to explain why gold has been going down?
The natural ratio of the occurrence of silver to gold in the ground is typically estimated at roughly nine ounces of silver to one ounce of gold, and yet the recent trading price ratio of 62 to one is almost seven times higher.
After contemplating this curious anomaly, we are left wondering if comparisons between gold and silver may be as fruitful as comparing silver investment demand and silver industrial demand.
A relationship certainly exists between the availability of these precious metals and their relative prices, but it always seems rather abstract.
Investors should have gained confidence from Ben Bernanke’s recent testimony to Congress that the Federal Reserve intends on being accommodative as long as needed. He had a laundry list of job market conditions that needed improving and reiterated that inflation remains low. It’s his belief that “a premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further.”
The Fed’s news is “great for all of us in stocks… and not so great for those with cash in a savings account, with real negative returns for the past four years,” reminded Money Map Press. Yet, at least in the short term, markets interpreted Bernanke’s testimony differently, as stocks dropped during the week of May 20.
Stocks are starting to look 'toppy.'
Things around the world are 'shaky.'
The setup for a major short squeeze in the metals is in place.
So let's see what happens.
China's demand for silver fell hard in April. But is that all there is…?
ANALYSTS at Barclays Bank recently noted that silver imports were down 28% in the month of April year on year.
But in an article reporting that news, the author makes it sound like demand was also off significantly for unwrought silver, for silver powder, and for jewelry manufacturing as well. Only if you take a myopic view would such assumptions be correct. However, just because trade between China and the rest of the world is down does not mean that silver demand is down. What it does reveal is a decrease for external demand of silver from the Chinese market.
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