The Vet

Precious Metals: Breakout, Fakeout or Shakeout?

A nicely balanced technical summary, but if the comment "Sentiment on the precious metals is almost uniformly bullish" holds up, then why is it that the majority of the comments made here in response to the article are actually bearish?

Time for a Silver ETF Renaissance?

Has anyone any comment on the way that silver holdings in SLV act?

Looking at the holdings of silver it is obvious that there are long periods where the holdings remain static, typically up to around 20 trading days, followed by a couple of days of sharp moves. The periods of static holdings seem to be when the silver price is dropping but quite significant changes in the POS often produce no change in the shares issued or the silver held. Generally the trend is up with only a few significant reductions.

The Disconnect Between Supply and Demand in Gold and Silver Markets, Part II

The major risk to the metal ETFs like GLD and SLV is not their structure or management but the fact that as stocks they can be sold short.
Naked short selling is the worse, but even "legal" short selling where stock is borrowed and then sold creates more long holders of stock than there is metal in the vault to cover that stock.

Ultimately in the worse case 100% of the metal could be redeemed leaving zero "real" shares but the same number of borrowed shares would remain in long shareholders accounts backed by nothing except the creditworthyness of the short sellers.

Of course once the backing of gold dropped, few new buyers are likely to step up and the price would fall leaving the shorts sellers of the stocks with a tidy profit and the long shareholders with nothing. Current SEC rules can't even force the shorts to cover or deliver stocks they have sold, so don't expect any protection from the regulators.

Cheap Silver: Whither the Ratio?

Silver is probably the best example that exists of a large "paper" market which swamps the actual physical market. According to figures just highlighted by Ted Butler, in July a couple of US banks dumped over 30k of short contracts (169,025,000 ounces) onto the COMEX futures market. That is far more silver than exists in COMEX warehouses and over 20% of the world's annual production.

Not a single ounce of this silver actually exists and none of it will ever be delivered to a buyer of silver. The whole transaction will be settled some time in the future in paper and in effect has no influence on the true supply or demand for silver metal even though it has a huge influence on the price.

www.investmentrarities...

Thoughts About the Current Bear Market Among Junior Miners

Great insight, but of course this failure for the banks and the markets to commit to any risk is the same reason that commodities, metals, food and oil are in such demand right now. In the dot com days and before, paper projects and paper investments were short term, quick return and had a degree of certainty... until they failed!

Now commodities are high, costs are high and the time, expenditure and risk involved in getting a new mine off the ground is even higher than before, right at the time that the traditional risk taker, the small investor is feeling the pinch.

The need to get starter projects going so that the world will have adequate supply of commodities has never been greater, but investors time horizons have never been shorter, so where will it end.

IMO the solution lies with the few majors who are doing well with their high cash flows and diminishing reserves. They have to step up and start aquiring and investing in the junior sector. Only then will we get the investor interest returning. The majors are not doing themselves an favours with their current "just in time" mentality, as they well know that new projects always take longer and cost more the longer they delay commencement...

Once they start to lose production as mines become depleted, they will lose their income and the currency of their high stock price regardless of the current spot price of their production. Gold at $5000 an ounce is of no help if production has dropped to a pittance.

Get Out of Commodities - Barron's

What a lot of wooly logic... Hydrogen to solve all of our problems? And just how do you get free hydrogen?

Answer.. There are lots of ways but they all require energy in some form or another and as no process is 100% efficient. The energy required to make extract the hydrogen is always going to be greater than the energy utilized when it is burnt for fuel. Innovation may give us better processes to generate and store hydrogen but there is no perpetual motion machine and no free lunch.

Wind power as the saviour? Give us a break! Sure up to 20% of the total electric power consumed could come from wind power, but to depend on any more puts the whole grid at risk. The wind doesn't blow all the time anywhere. So you need another back up for those windless days, and nights... Days, maybe some solar would cover some of the deficit but on those cold windless nights when you are sitting freezing in the dark you will get to realise that depending on too much "alternative" energy which by definition is erratic in supply might not be such a great idea. You might find yourself wishing for a nice big nuclear plant churning out hundreds of megaWatts of baseload power which would keep the wheels of industry and the home "fires" toasty warm.

Besides, all of the alternatives are very "dilute" sources of power. Wind farms have to cover thousands of acres in order to capture a reasonable amount of energy as does solar. Speading these around helps to cover for local weather variations in wind, cload cover etc. but just how do you think this dispersed energy gets to where it is needed.. The electricity gid has be be much larger, cover longer distances and have a large amount of redundency built in in order to use this alternative power effectively. Funny thing, but that needs metals; lots of metal especially copper (form windings, wires and transformers), steel (for transmission towers), silver (for switch gear) etc.

This rosy future where all our energy comes from everlasting 24 hour sunshine and the perennially cloudless sky, with steady breezes that never vary and which blow everywhere power is consumed at a rate to cover the load regardless of time of day or the curent weather, and where no metals, oil, gas, uranium or any other "commodity" is ever needed or used, is a fairy tale straight from the pollyannas of the "green revolution". THINK!

Gold and Silver Will Not Save You From a Sell-Off

It's odd that with this "selloff" of gold and silver that both the GLD and SLV holdings of metal are at record highs... Perception, caused by the respective share prices, of a "selloff" is not backed up by the actual physical holdings. Remember that the ETF's can be sold short. The sellers do not own gold, never have owned gold, and never intend to own gold; they simply see a nervous stock market and they pile on their short sales... They are selling unbacked paper, not metal.