The Silver Analyst

Gold Doesn’t Care If It’s IN-flation or DE-flation

I wouldn't argue with Jastram on gold and deflation when we had a gold standard but his book ends in 1976 just as gold was left to freely float right up to 2009. That is the period that is most of interest to us and as far as I can see freely floating gold went DOWN during the disinflation of the 1980s and 1990s. I would be interested to see Leyland's conclusions in the republished book as Jastram's analysis is not as relevant to a floating gold environment.

Will a 'Silver Bullet' Finally Kill the Metal Manipulators?

Jeff,

The ETF makes money in an 0.50% charge as well as charging a fee when they issue/redeem baskets of 50,000 shares for silver. Storage costs are not really that high a factor. Look at goldmoney.com which has an annual storage fee of 0.87% for 50,000 oz or more.

As for doing this for nothing, their annual 2008 report said they earned $14.3M to Dec 31st 2008!


On Jun 04 11:53 AM Jeff Nielson wrote:

>
> To make this sham even more absurd, the same Manipulators who are
> trying to destroy this sector are SUPPOSEDLY buying all the "bullion"
> for ETF's with ZERO premium AND paying all the shipping, insurance,
> and STORAGE costs - THEMSELVES.
>
> Are you really suggesting that bullion-banks would hold bullion ETF's
> at a LOSS to themselves - simply to do a a FAVOR for small retail
> investors, by HELPING them enter this market??
>

Will a 'Silver Bullet' Finally Kill the Metal Manipulators?

Now what has the ETFs got to do with the net commercial position in the futures market? The silver in the ETFs are not marked as deliverable against future contracts. If a bank which is short has to deliver silver they cannot dip into the ETF unless shares are sold in the ETF to indirectly release silver to the market.

The commercials have been net short silver for decades and that didn't rock any boats while there was plenty of "just in time" stockpiles. Perhaps it will be different this time but apart from brief backwardation in the futures there is no sign of it! Unless that basis begins to move, I see no trouble ahead. It is not a default that will signal supply problems but rather a rising price.

And remember, the shorts may not have all the silver to deliver, but the longs may not have all the cash to receive either. It's a paper game on both sides of the contract!


On Jun 04 11:53 AM Jeff Nielson wrote:

> Roland, if the same bullion bullion-banks claim to hold almost ALL
> the "bullion" for "bullion-ETF's" AND also have "short" positions
> at least TWICE as large, then it is IRRELEVANT if their ETF custodial
> agreements are audited - when the MUCH larger "short" positions are
> NEVER audited.
>
> To make this sham even more absurd, the same Manipulators who are
> trying to destroy this sector are SUPPOSEDLY buying all the "bullion"
> for ETF's with ZERO premium AND paying all the shipping, insurance,
> and STORAGE costs - THEMSELVES.
>
> Are you really suggesting that bullion-banks would hold bullion ETF's
> at a LOSS to themselves - simply to do a a FAVOR for small retail
> investors, by HELPING them enter this market??
>
> The mere suggestion of this is patently absurd!

Will a 'Silver Bullet' Finally Kill the Metal Manipulators?

As I commented in your last article, JP Morgan publish a bar list and audit every delivery coming in to cover issue of new shares. They also do not lend or allow lending of the inventory.

I don't see the problem, are you saying there is NO silver there at all (or as I infer from what you say) only 1/3? How do the storage schemes you regard as legitimate get their silver? I think CEF and GoldMoney have nearly 80 million ounces between them.

The Myth of Gold Confiscation

Did the US government "steal" people's gold? The answer is yes and no. If it was stealing per se, people would have got $0 instead of $20 for the ounces they handed in. It was an exchange albeit forced.

However, and I may be wrong, most people held coins (I am not sure jewellery was forced to be handed in) and those coins unless foreign were the property of the US government? What the holder of the coin had was the right to $20 for a double eagle and so on.

As to simply defying the executive order, some who had more than 5oz per person may well have buried their gold. My only question was how they exchanged their gold for cash without getting arrested?

How much was the dollar devalued by? I guess 60% since gold was still the means of international exchange between countries even if it had now disappeared from public transactions. One would also need to look at exchange rates between other currencies which would further obscure the picture since I suspect some of them went through similar gold devaluations.

The Myth of Gold Confiscation

I can see this issue exemplifies a larger and more important issue - The State versus The People. I used to write for Lew Rockwell - a free market libertarian. I still hold many of those views regarding small government. What we see today is the price of democracy. People will vote away their liberties if it fills their bellies. The pendulum has swung too far to the side of big government but while people can drive their cars, watch TV and eat to their hearts' content at relative peace with their neighbour, they will say "Who cares?".

That is why a gold standard is useless, government will just drop it at the first inconvenience. What is needed is free market money - competing local currencies which the people can vote for via their wallets. Unfortunately, control of the money supply is the last thing government will ever give up to the people.

The Myth of Gold Confiscation

Looks like some of you guys misread my 5 ounce subplot. I am not saying you get to keep only 5oz under a presumed new confiscation, who knows what will happen. But the allocation was 5oz PER PERSON, be it your wife, kids, granny, etc. All depends how much you trust your extended family.

Besides, what's the gripe? If the government goes back to a gold standard and calls in gold to back up the dollar - isn't that what many gold holders want - so called honest money? Would some of you sacrifice your gold stash for what you in principle have wanted the government to do for years? If you can redeem your dollars for X oz of gold, what's the problem?

Not that I think a gold standard would work ...

NYSE Runs Out of Gold Bars: What Happens Next?

Hmmm, this article implies the price of gold is driven by investor demand. Is that a fact? Last time I looked nearly 3/4 of gold demand was jewellery - far more than investor demand. Surely jewellery demand goes down in a recession and this MUST have a dampening effect on the gold price.

So, how about this - investor demand for gold is increasing but jewellery demand is decreasing with the net effect that gold is largely down since March 2008. No need for conspiracy theories - just plain economics 101.

V Bottoms and the Twin-Peaked Bear

Well thanks for your comments. The final bottom is approaching, it could be nearer to 500 but that would not appear to be a target that would take long to hit before the rebound.

I wonder how doom and gloom the punters were back in late 1974? Probably also in depression mode looking for a double digit S&P500. Doesn't matter if it is inflationary or deflationary, all that matters is valuation overshoot. A drop to single digit P/Es is not that far away.

Revisiting the Weimar Gold and Silver Ratio

The numbers were taken from a Rob Kirby article (www.safehaven.com/arti...) who copied them from another source (may have been Le Metropole Cafe website). I emailed him at the time and he had no reason to doubt the numbers or source.

Yes, one could argue 160 should be 16 but the politics of that very month makes the ratio leap understandable.


On Mar 04 06:05 PM Mark Anthony wrote:

> I am always skeptical about the claim of an extreme gold:silver ratio
> during the Weimar Republic. Has there any independent verification
> that such extreme gold:silver ratio did indeed happen?
>
> Remember, gold and silver are traded internationally, not just in
> Weimar Germany. There is NO evidence that gold/silver ratio reached
> any unusually high numbers. It stays at 16:1 in USA, for example.
> If gold/silver ratio indeed reached 160:1 in Germany during the time,
> some one would have made tons of money doing the gold/silver carry
> trade. Bring gold to Germany and exchange for cheap silver, and bring
> silver to USA and exchange for cheap gold. No such thing ever happened.
>
>
> Read my take on the coming hyperinflation:
> tinyurl.com/d25abb
>
> I believe the chart you show must came from some historic data recording
> glitch.

Revisiting the Weimar Gold and Silver Ratio

You know, I wonder why people buy silver and gold if they believe it is manipulated? It's a sure fire way to lose money by betting against the government. The definition of a conspiracy is that it is done in the dark beyond the public gaze. A few banks publicly shorting silver in extremis is not something done in the dark. More like investment banks knowing silver's propensity to spike up and down at great profit to those who can read the runes.

Perhaps a clue to silver's price behaviour is more to be gleaned by its high correlation to other metals. You know ... they all go up and down together. Now don't start claiming copper or lead are manipulated as well!

Revisiting the Weimar Gold and Silver Ratio

Occam's Razor, there are simpler explanations as to why gold may be in a certain price range. Try those first.




On Mar 04 12:40 PM Onemonzas wrote:

> 'Either a gold suppression scheme does not exist or it is impotent
> and therefore not worthy of serious consideration.'
>
> Or, (and I favor this one,) the manipulators WANTED gold at the range
> it's at.
>
> Endless speculation as to WHY they did what they did is possible.

Revisiting the Weimar Gold and Silver Ratio

Actually, the dollar denominated gold silver ratio went from 16 in 1920 to 100 in 1939. The reason? Gold was fixed and then revalued from $20 to $35 in 1933. Silver crashed during the deflation ($1.23 to $0.23) but recovered when the government began to stockpile it.



On Mar 04 09:57 AM fubar02 wrote:

> I wonder what happened to the gold/silver ratio when Roosevelt made
> it illegal to own gold and refused to buy back American's dollars
> at 1/20th of an once of gold? Would think that would have made silver
> very attractive to the average investor.

A Fresh Look at the Gold / Silver Ratio

Gold and silver do not diverge much at all except in rare cases such as when Warren Buffett bought a mountain of silver but no gold.

Clearly, the GSR can move in silver's favour but silver drops in price which means that silver is outperforming gold on a downturn which is not likely since silver tends to move down faster than gold (as we have seen multiple times).

So, typically a dropping GSR (bullish for silver) is more likely when silver is rising in price faster than gold.

The Rebirth of Gold and Silver?

Deuxsous,

Silver may be at a similar point to 1974-1975 but in K-wave terms, would you agree it is still somewhere in the equivalent of the 1950s?