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Thursday, May 16, 2013

With Gold Prices Down I Intend to Buy More

Gold Price Close Today : 1387.10
Change : -9.40 or -0.67%

Silver Price Close Today : 22.643
Change : 0.00 or 0.00%

Gold Silver Ratio Today : 61.260
Change : -0.415 or -0.67%

Silver Gold Ratio Today : 0.01632
Change : 0.000110 or 0.68%

Platinum Price Close Today : 1485.60
Change : -5.10 or -0.34%

Palladium Price Close Today : 740.00
Change : 11.70 or 1.61%

S&P 500 : 1,650.47
Change : -8.31 or -0.50%

Dow In GOLD$ : $227.02
Change : $ 0.90 or 0.40%

Dow in GOLD oz : 10.982
Change : 0.044 or 0.40%

Dow in SILVER oz : 672.76
Change : -1.88 or -0.28%

Dow Industrial : 15,233.22
Change : -42.47 or -0.28%

US Dollar Index : 83.60
Change : -0.183 or -0.22%

Silver and GOLD PRICES sang oddly out of tune today, which might be good or bad. Gold dwindled $9.40 (0.67%) to $1,387.10. Silver, however, after falling as low as 2214.4c (49.9 cents lower than yesterday's close), Yet by day's end silver had climbed back to unchanged. Odd.

In European trading, about 4:00 a.m. New York time, gold gapped down from 2250c to 2215c, and traded sideways between there and 2230c until about an hour before New York opened. In New York silver climbed, not spectacularly but steadily, to a high at 2280c. It backed off a little to close at 2264.3c.

If the SILVER PRICE can close higher tomorrow, today's action will constitute the first half of a Key Reversal upward -- but it must close higher tomorrow.

On a five day chart silver shows a long gradual but steady decline until that low and recovery today, which leaves a V-bottom on the chart. Will that hold? I don't know, but clearly whenever silver nears 2200c, buyers wake up.

Gold's chart today mirrors silver's, with a gap breaking down about 4:00 a.m., long sideways trading, then a recovery. This leaves behind on the 5 day chart a V-bottom, but without silver's unchanged close.

Now is the time to keep a close watch. These levels are about where we can expect silver and gold to turn around if they do not intend to revisit their old highs. I intend to take advantage of these low prices to buy more silver and gold, and I'm just waiting for the right moment and a confirmation.

Reader BT, who wisely migrated below the Mason-Dixon line, has asked what it means when gold and silver prices keep on dropping while the premium on physical silver and gold prices items in the retail market is at an all-time high?

First, we have to distinguish two markets in physical gold and silver. In the international market gold is traded in 100 or (more often) 400 oz bars, and silver is traded in 1,000 oz bars. In the retail market, most gold is traded as coins of 1.2057 oz or less, 1 oz. bullion bars, or, occasionally, ten oz or kilo bars. Silver is traded as 100 oz. bullion bars, ten oz. bars, one oz privately minted rounds, a plethora of official coins like the American Eagle or Maple Leaf, that are simply one ounce silver rounds from a government mint. Also traded at retail are US 90% silver coins (dimes, quarters, and halves minted before 1965).

I do not trade in the international market, so cannot testify as to delivery shortages there. I have heard RUMORS that wealthy Europeans have been to their banks demanding delivery of their gold and been put off, but I cannot verify that. I do notice an 8 May report on the Nymex site that Comex gold inventories were 7.9 million ounces, lowest level since 18 July 2008.

The silver and gold retail market that I deal in has a very thin pipeline. Large wholesalers ($5 billion a year turnover or more) are the key suppliers, but when silver and GOLD PRICES suddenly fall, demand usually overwhelms their supply. This doesn't apply so much to gold products as to silver. As soon as supplies disappear and while awaiting re-orders from refiners, they raise the premiums on 100 oz bars and one oz rounds.

Since the arrival of the silver American Eagle in 1986, most dealers have shown little respect for US 90% silver coin, which during the 1960s, 1970s, and 1980s was the workhorse of the retail silver market. In the 1980s they carried a 40% premium, dropped to roughly melt when the silver AE appeared as dealers switched inventory to AEs, but in the late 1990s Y2K buying ran that premium up to 40% again. I watch this premium closely because USUALLY a fall signals a coming fall in silver, and a rise underlying strength and a coming rise. For years I have directed customers primarily into 90% coin because its premium was so much lower (0 to 50 cents over spot vs. $2.50 to $4.75 for American Eagles) and because OVER TIME PREMIUM ALWAYS DISAPPEARS. Also, their silver content is well known, and they are very divisible (14 dimes to an ounce).

Most dealers still believe there are loads of 90% bags available, but there are not. They've been steadily melted over the years, and one day will resume their high premium when folks figure that out.

The fall 2008 panic and price drop drove premiums on US 90% to 50% over melt, and drove up premiums on every other silver item, too. Deliveries stretched out to 6 or 8 weeks. Gold coin premiums at wholesale roughly tripled, with Krugerrands at 8% and American Eagles at 11% (peak of 2008) and long delays. Those premiums peaked about when silver and gold prices bottomed, then fairly quickly disappeared, returning to normal by June 2009.

So most of the presently high retail premiums on the SILVER PRICE can be explained by high demand, but not quite all. The US 90% silver premium began climbing from about 30 cents an ounce in December to $5 an ounce when May began. It has since fallen back to about $2.90, but remains stubbornly high. Through January, February, March, and April the 90% premium was forecasting a silver reversal upward any time, but it has proven a false signal -- for the first time I can remember.

Conclusion seems to be that huge retail demand is driving that premium, even though cheaper forms of silver are available, and that the lower the silver price falls, the more retail customers crowd in to buy it. It's probably dangerous to generalize about the price's direction from this, other than to notice the general support at lower levels, since the retail markets here, in Asia, and in Europe are not the largest market segment by any measure. It does show, however, that savers around the world recognize that they must save in gold or silver, or be gutted by their national fiat currencies -- which makes them about five times cannier than every central banker in the world.

Well! Man bites dog. The stock indices did NOT make all-time new highs today.

S&P500 lost 8.31 (0.5%) to close at 1,650.47. Dow Industrials lapsed 42.47 (0.28%) to 15,233.22. Both remain ridiculously oversold, both have built rising wedge formations, both have overthrown their upper channel or trend lines. Both, in other words, are begging for a big dive. (Tuck away in your mind that this dive will likely not be the end. It should be followed by another rise to more all-time highs, and the dive that will be the end, later this year.)

Today threw an interesting curve to the Dow in Gold and Dow in Silver. Dow in Silver shrank 1.88 oz to close 672.75 oz. Dow in Gold, on the other hand, rose a bit to 10.982 oz, virtually identical to yesterday's 10.938. Hesitating or turning? We'll see tomorrow.

US dollar index lost 18.3 basis points (0.24%) today to end at 83.602. That no doubt helped boost silver and gold a little, but didn't change the dollar index chart. It is still headed higher strongly. Saw one of those headlines today that makes you scratch your head because everybody in the world is saying the same thing, and everybody can't ever be right: "Dollar is the world's strongest currency." Yeah, buddy! Maybe it's been taking one of them Charles Atlas strong man courses, so the other currencies won't kick sand in its face at the beach. Other than that, it's still the same rotten patchwork of propaganda and Biggest Army In the World that it's ever been, so strong that since 2001 it's "climbed" from 1.21 to 83.602. No, wait, that isn't a climb, is it? That's losing 31%. But I will concede that presently the central banks have talked the dollar up into the air. I hate to tell 'em it's just like playing catch with a bowling ball -- stay out from under it.

Yen barely moved, closed 97.81 cents/Y100. Euro close $1.2884, about where it closed yesterday ($1.2878).

Somebody said to me today that we've given "way too much real estate" in our hearts and minds to fear of government. She was dead right. They rule us by fear. Wonder what would happen if, like our forebears, we took back that real estate, and feared no power but God?

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
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To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. Be advised and warned:

Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't.