Independence Day: Decoupling Gold and Silver from the Dollar
Yesterday, something interesting happened. Precious metals went up, while the dollar went up. Everyone is amazed. But, the news shouldn't really be surprising, because it is nothing new. Gold and silver have never been tethered to the dollar, or anything other than the principles of supply and demand. When looked at in the long term, they have been rising against a falling dollar, but, also, against a rising euro and pound, for over 8 years now.
All the world’s Central Banks - most notably the Federal Reserve (the Fed), but, also, the European Central Bank [ECB], the Bank of England [BOE], the Bank of China [BOC] and the Bank of Japan [BOJ] - have been heavily printing paper money in the last few years. All have increased their M3 money supplies by staggering percentages (see shadowstats.com). Making matters worse, the central bankers are now accepting mortgage backed paper from their friends at major politically connected banks, as collateral for cash and/or government securities. Problem is, the mortgage backed bonds are suffering high default rates.
There’s no way to avoid the inevitable. No amount of lying will avoid basic truth. Our money is losing its value. Yes, the dollar has been temporarily up against other paper currencies, in the past few weeks, but that gives little solace. The rise does not reflect the positive factors operating inside the American market, but rather the fact that things are worse in Europe now. Both the dollar and all other major paper currency, is down against itself. American consumer prices have leaped up to double-digit levels, and the government is lying about it. You can read an in-depth discussion of the Bureau of Labor Statistics use of so-called “geometric” weighting here.
Simply put, regardless of what Ben Bernanke says, high levels of inflation can no longer be avoided. Even if forthright intelligent men suddenly took control of the Fed, the Treasury, and the private banking world, too much damage has already been done. We will endure higher inflation and lower growth levels as a result. The situation, now, will be much worse than back in the so-called stagflation era of the 1970s. To make matters worse, many years of bipartisan economic mismanagement will provide either a recession or an outright depression, at the very same time as inflation is rising. It is a terrible combination, but one that can no longer be avoided, at the societal level, no matter what we do.
But, can we do something to protect ourselves and our families? During the last 8 years, precious metals have appreciated more than 3 times against the dollar, but have also risen substantially, against every other paper currency in the world, including the euro, pound, franc, crown, drachma, dinar, and rupee. Many tunnel vision analysts tell us that the value of gold and silver is tethered to the dollar’s relative value in terms of other currencies. This is incorrect.
Like all commodities, gold and silver are priced in dollars. A major change in the value of the dollar can positively or negatively influence overall demand because it makes precious metals cost more or less in terms of other currencies. But, overall supply and demand is the key to the cost of any commodity, not the value of paper money. When demand exceeds supply, as it does now, the price of an item will rise in the long term.
In today’s double-speak world, with the availability of 99 to 1 leverage in the fantasy futures world, those fundamentals can be manipulated out of whack, in the short run. However, in the long run, values will always be based on supply and demand.
This is most basic of economic principles, and the one so many analysts are quick to forget. Precious metals are like fine wines, needing adequate time to age and reach full favor. The wise buy precious metal for the long term, not with the idea of trading for short term profits, and they don’t buy on leverage. It is especially unwise to trade gold and silver with high leverage, as some hedge funds were doing recently. They are now badly burned, having lost billions, after a recent manipulation on the COMEX fantasy futures and spot markets, in New York, created an artificially low price. That foolishness created a shell-shocked gold investing community, and played right into the hands of those people who are corrupt, and well connected enough, to get away with market manipulation.
Some lessons, hopefully, were learned by the folks who got burned. One cannot make money, in the long run, on leveraged trading of gold bullion, or futures, unless:
1) You have inside information on the manipulations
2) You are a genius in technical analysis at a godlike level never before seen in humans
3) You have a working crystal ball
Need I remind you that persons in the first category are criminal co-conspirators engaged in a felony? If, like the rest of us, you do not fit into one of these 3 categories, you should not buy precious metals for the short term. Look at least for the medium term, and, preferably, for the long term.
Very similar, though less severe, macroeconomic conditions existed back in the 1970s era of so-called 'stagflation'. Similar, though much smaller problems, had to be overcome. It was the second phase of precious metal decoupling from paper currencies. Prior to 1974, the dollar and most other currencies were officially tied to gold through something we call the 'gold standard'.
The first phase of decoupling had already happened, back in 1933. President Franklin Roosevelt was elected in the midst of the worst economic downturn in history. That downturn had occurred, much like our current problems, because of irresponsible behavior involving the U.S. Treasury and the Federal Reserve. During the 1920s, they had printed far more dollars than they had gold to back them. So, in 1933, a law had to be passed, banning private ownership of gold bullion. The government was acutely low on gold, and was forced to confiscate it from its citizens.
This, of course, was a manifest violation of the Constitution that had, for so many years, had forbid the government from destroying private property rights. Indeed, the Constitution dictates that no money, other than that backed by gold and silver, should ever exist in the United States of America. But, after having packed the U.S. Supreme Court with his own appointees, and given the emergency situation at hand, the Court looked the other way, and allowed it to happen.
After 1933, the gold standard was limited to trading between sovereign nations. You could no longer trade in your dollar for 1/20th of an ounce of gold. This massive change of conditions caused the first major dollar depreciation. The value of the dollar dropped almost immediately by 75%, in terms of gold. It probably would have fallen by much more, had the government not set the new price for inter-governmental gold trading at $35 per ounce, or its equivalent. This new gold value was a vast increase from the previous $20 per ounce level, and was designed to stem the dollar outflow from the United States, to foreign nations holding dollars.
Meanwhile, the U.S. dollar continued to depreciate. Some years later, the USA “lucked out”, in terms of economics, by exiting WWII with the world’s only intact major industrial economy. In the wake of overwhelming U.S. military and economic power, and a vast depreciation of war stricken currencies, dollar depreciation was relatively limited. People believed in the USA, and the full faith and credit of the United States of America really meant something back then. The “golden age” of the paper dollar (but mostly without gold) was underway.
After a bout of traditional American overspending on wars, social programs and other pork projects, however, by the 1970s, things were, once again, beginning to fall apart. Nixon’s decision to sever the dollar completely from gold helped speed things along. In the early to mid 1970s, the dollar was rapidly falling against most European currencies, including, particularly, the German mark. The former German mark now is the bedrock upon which the “euro” has been built. So, it is instructive to use the dollar/mark conversion ratio, back in the 1970s, for demonstrative purposes.
On January 6, 1971, you needed 3.65 German marks to buy 1 U.S. dollar. By August 26, 1974, you needed 2.63 marks, a devaluation of over 28% in a three year period. Now that the dollar was largely a fiat currency, with no real backing by gold or silver, U.S. supplies being insufficient to support the overwhelming number of dollars already flooding the world, its value could only be measured by the faith of its people, and by extension, the rest of the world, in the success of the overall American economy.
Between 1971 and 1974, the London gold fixing rose from about $37.87 to $106.76 per ounce, or 282%. As you can see, the change in the relative value of the dollar versus the mark was considerably less than both changed against gold. Both the mark and the dollar fell, dramatically, against gold.
By April 1, 1977, you needed 2.39 marks to buy a dollar. On April 21, 1980, you needed only 1.85 marks. This was a net drop of about 23% more, in comparative paper money value, in a period of another three years. On April 3, 1978, London fix for gold was $148.10, but, by April 21, 1980, you had to pay $850 per ounce, or 574% higher than three years before. Once, again, the value of gold increased 551% more than the mark had appreciated against the dollar.
Why did this happen? The answer can be found in the supply and demand factors for gold, and, secondarily, in some levels of hidden overall inflation, both governments must have been very eager to hide. Then, as now, both Germans and Americans were experiencing high levels of financial instability and fear. The demand for gold, which is highly elastic and depends on human sentiment, soared. The supply is highly inelastic, and cannot be expanded. Physical limitations on how much you can mine exist because both a very rare and difficult to extract. So, prices soared.
The longer term price of precious metal is not based on the relative value of the dollar versus other paper money. As I have said many times before, long term prices are always based upon fundamentals of supply and demand. Everything else you hear is worthless market chatter, and you must tune it out. If you don’t, you’re going to lose money.
As noted, in my last article, U.S. investment demand for gold has increased by 850% to 940% from 2007 to 2008. Demand is currently running at a 141.1 ton per year rate, and rising. By the end of 2008, it is probable, given the upward curve of investment demand increase, that the USA will consume 250 tons of investment gold in 2008, compared to 16.6 tons in 2007. This, of course, is in addition to amounts consumed by jewelry fabrication and dental demand. Investment demand will probably reach close to 1,000 or more tons if the current trends continue, and economic disruption drags on into 2009. This is now very likely.
It is not likely that American gold buying propensity will turn similar to that of the Vietnamese, but, if it ever did, U.S. demand would eventually reach over 21,500 tons per year. This compares with a total mine production of 2,475 tons in 2007, and a supply deficit, last year, of about 1050 tons. Last year’s supply deficit was filled by scrap gold sales, as well as both sales and swaps out of the holdings of various central banks, around the world. Even if American investment demand caps out at 250 tons, the deficit will increase significantly this year over last.
Demand is not only increasing in America, but all over the world. The worldwide gold deficit will be very likely to far exceed 1,300 tons this year. For example, in just the last few days, reports say that the Royal Canadian Mint asked several brokers and banks if they could borrow 400,000 ounces of gold (see here). Mitsui & Co., Japan’s second largest brokerage house, and a global metals dealer, said, on August 25, 2008, in its Refining Monitor,
"The Gold Market has changed remarkably over the last four weeks…The pickup in physical demand has been a characteristic across not just India, but also Europe, the Middle East, Asia and the United States. Volumes are returning to levels that were more reflective of conditions back in 2006… Indeed, gold Krugerrand coins are also in limited supply, with many retailers reporting a depletion in stocks Where supplies are not exhausted, significant delivery delays exist." (source)
Last year, in the wake of a rising euro, and a good economy, there was almost no investment gold buying by Europeans. This year, everything has changed. Europe, a previously “sleeping giant” of gold-buying potential, is beginning to awaken, in the face of a stressed economy and a declining euro.
People in so many places have so much more paper money than ever before. This money is chasing the same amount of goods. Never before did people demand such quantities of gold and silver for jewelry, investment and industry. The supply and demand factors are much more favorable now than they ever were, in the 1970s. Out of control North American demand is combining with a huge and ever increasing demand in places like China, India, Vietnam, Saudi Arabia, Qatar, and the UAE. With the exception of the Arab ruling elites, all these gold and silver buying nations were poverty stricken in the 1970s, and weren’t on the gold-buying map. More than 3 billion Asians, in lands where precious metals are revered, are now empowered with increasing wealth. They will continue to get richer, at an ever increasing rate. They will also continue to increase consumption of precious metals, as well as other raw materials.
It’s not my job to take out a crystal ball, and tell you the future. I can just collect and disseminate the facts. My particular talent is only in tuning out senseless market chatter. Once you have the facts, free of the market chatter, you can think for yourself. Are we merely going to repeat the 1970s? Will gold and silver rise over time, until they are finally capped at their inflation adjusted peaks from April of 1980 (which are $2,300 and $141 per troy ounce, respectively)? Or, will they go a lot further?
Each of you is endowed with a large measure of logic, reason and common sense. It’s God’s gift to you, unique to your species. Use it! The only thing that stopped you, up till now, was the deafening roar of market chatter. We’ve tuned out that noise, and you can concentrate on the hard facts. Let me sum them up. There are 3 billion Asians who love buying precious metals. They didn’t have much money, back in the 1970s. They’ve now have a lot of paper money, and their economies are growing at 9-10% per year clips, even after trying to slow down that growth! Meanwhile, we’ve got the single worst economic crisis in U.S. history, short of the Great Depression. The USA is still the richest country in the world, in terms of paper money, and its gold buying is exploding.
Times are also starting getting tough in Europe, and Europeans are starting to buy gold, for the first time, in years. The U.S. Mint cannot keep up with it. The Canadian Mint is making the rounds, hat in hand, begging for gold! The Indian wedding season and Hindu gold & silver buying holidays, historically the biggest season of the year, for precious metals, is right around the corner. Meanwhile, India’s shelves are completely bare. Even Indian bank vaults are entirely empty. The American and European economies continue deteriorating. Bullion is commanding big premiums over spot, and people are losing faith in the economy. There is every reason to believe that the situation in both America and Europe, will continue to deteriorate, to a greater or lesser extent, for quite some time to come.
So, are precious metals tethered to the U.S. dollar? If it goes up, must they go down? Or, do they have a life of their own? Will they travel only to the inflation adjusted levels of 1980, or will they eventually travel far beyond that? I don’t need to give you these answers. You already know them.
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This article has 26 comments:
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Owen
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138 Comments
Aug 27 12:32 PMI didn't read much further, as this seems to be yet another rehashing of your Colossal COMEX Conspiracy series, with which we are all familiar.
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phdinsuntanning
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433 Comments
My Website
Aug 27 12:35 PMall commodities down when
global gdp is going down,
even golden ones...sorry,
M3 growth is old history:
they can print more M0,
but M3 is falling with credit
everywhere... like a
(northern) rock now,
so cash is (a poor) king
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Engineer
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40 Comments
Aug 27 01:13 PMWhen real estate is down, stock markets are down, commodities are down, bonds are down, and savings are paying a negative real rate of return, what can the average person turn to preserve their wealth?
Like the author says, I think you know the answer to this question.
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bbzz24
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245 Comments
Aug 27 02:12 PMand historically gold is up due to the reason that supply can't catch up with the supply of money from all central banks, therefore all growth that the world is experiencing now, would be nonexistent and possibly real contraction had there been gold standard.
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Lester
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14 Comments
Aug 27 03:08 PMI am not an economist, but I study von Mises. I was born after the Great Depression. Would someone kindly explain to me why the govt was "forced to expropriate gold from the people"? What role did gold play in the declared "national emergency"?
Did gold somehow mismanage the economy? Or was it someone else?
Was gold ownership an obstacle to production, i.e. feeding the people? Or was it an obstacle to govt control of the economy?
Did gold in govt vaults become harmless to the economy? Or did it become harmless to govt policy-makers?
The reason why I pose these questions is because watching history repeat itself, I concluded that gold ownership renders the individual a little bit sovereign. Not wholly, but some. An economically independent individual is more than likely politically independent as well. At least by using gold-enforced accountability of govt, a sovereign individual can extort valid political rights from govt.
I say "extort", because rights are not granted by the goodwill of govt, but by threat of forcible removal from office. I trust most of you would agree with that process. Any thoughts on that?
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Owen
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138 Comments
Aug 27 03:56 PMInteresting concept. However, remember that government, in its current form, existed long before fiat money. Until a couple of centuries ago, most forms of currency were actual pieces of gold or silver, and government was as powerful then as it is now, perhaps even more so. Fiscal and monetary policy may be a function of a government's ability to fluctuate its currency, but the essence of sovereignty has little to do with gold.
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Cal
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4 Comments
Aug 27 04:05 PMDoes Congress have the foresight to follow our Constitution? It states there in only Congress has the authority to print our money supply(dollars)and based on only Gold and Silver. Both Presidents T.Jefferson and A. Jackson destroyed the Central Banks in their days, because they issued fiat money(non gold backed paper money), which causes inflationary boom and bust cycles! The elite and Bankers love this as they have incredible cheap buying opportunities during these downturns paying pennies on the dollar for business and houses!
John, do you think that the present unfolding of such extreme problems are caused by recent events or has been brewing since U.S. Presidents in 1936 and 1971 forced us & the dollar off a gold standard without Congressional authorization and disregard to the Constitution?
Is fiat money responsible? Would a single world currency help?
Please Reply
Cal
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E.D. Hart
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154 Comments
Aug 27 04:11 PMGlobal GDP could contract and "go down" to negative value, and this is completely consistent with rising inflation. in fact, as inflation accelerates further, it incrementally subtract from GDP. Iflation is not causes by growth, but by increasing money and credit.
it is true that money and credit have been contracting recently--but over the last 8 years, iflation has been galloping ahead. The credit and money supply growth contraction of the last 18 months does not reverse the collosal rising in credit and money supply.
Much of the US currency reserves (of our own government and other governments) are recycled into bonds. This is a an ocean of money sitting on the sidelines--4 to 5 trillions dollars. Some of these holders of bonds are getting nervous and realizing that their "safe haven" status of bonds is not so safe--as inflation is a guarantee of loss over time.
This inflation that was impoted to China, Japan, and MiddleEastern bond holders will now be unwound as we import our inflation back home. Inflation can have a long lag time between the creation of the money and the rise in prices.
In summary: it is possible to have negative GDP growth (recession) globally and still see a rising inflation trend.
And, due to the lag time inherent in the creation of money and the subsequent off shoring of those reserves invested in bonds, and the further eventual repatriation of those dollars--it is possible to have a contraction of the (recent) money supply and of credit creation--and still see global inflation.
In fact that is just what we see, and it will get worse as the bond trade for excess dollar trade unwinds and foreign holders of dollars wise up and see inflation as a biggest threat to their capital. They are both a cause and effected by this rising inflation trend.
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BrunoT
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70 Comments
Aug 27 05:21 PMHow about not trying to win a pulitzer and just write concise informative columns? I already have investing BOOKS.
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Bron Suchecki
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42 Comments
My Website
Aug 27 08:37 PMYou cannot expect to short term trade a market when the total above ground investment stock is estimated at 2 billion ounces but the only "visible" part of this inventory you can analyse are COMEX, TOCOM, ETFs etc at 36 million ounces (see goldchat.blogspot.com/... for more details).
"shell-shocked gold investing community" I would just change this to "shell-shocked newbie gold investing community". The scary thing is all these new investors coming into gold without any understanding of the fundamentals (and market structure) of what they are buying. It is best for gold that this run to $1000 and drop flushes out these people and leaves the strategic investors in so a strong base support can be built.
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Philman
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69 Comments
Aug 28 01:40 AM-
Philman
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69 Comments
Aug 28 02:13 AM-
Philman
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69 Comments
Aug 28 02:48 AM-
Omaha_farm_boy
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11 Comments
Aug 28 02:57 AMAND how much gold should one have? Hard or soft?
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Philman
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69 Comments
Aug 28 05:04 AM-
User 30121
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339 Comments
Aug 28 08:59 AM-
Bron Suchecki
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42 Comments
My Website
Aug 28 09:25 AMThe US mines also produce, but it may be getting directed into other uses (eg jewellery) leaving a local physical shortage in the US? It does not help that the regulations for US Mint are that they have to use US mined gold, this means they are restricted from simply importing gold from other countries and instead have to compete for local gold. Absolutely stupid rule, I mean gold is gold and there is an international price for F sake so it is not like getting imported gold is really going to hurt US miners. But what that rule does is hurt US coin investors because it results in the shortage for the US Mint because they have to bugger about trying to find US mined gold. It would be more useful for coin buyers to lobby their representatives to change that law/regulation instead of getting all worked up about the suspension 1oz coin production.
The Canadian Mint story sounds like a bit of a beat up. 400,000oz is stuff all, that's not "big". I think what is happening is that Canadian Mint is getting heaps of business from coin buyers who can't buy US Eagles (they are probably laughing at the stupid "US mined only" rule and how it slows down the US Mint supply chain in times when the market is hot) and to meet this demand they need to ramp up production, which naturally requires more gold for work in progress, so they have rung around some bullion banks to lease some more metal in so they can get on with making more coins. If lease rates were 2% or more i could see some sense in the word "beg" but at these rates there would not be any problem. Maybe it is a dealer in a bullion bank having some fun by using the word "beg" - it is realistic that they could be looking to lease metal, but no one needs to beg for it, it is the use of that word that makes me think it is a bit of a beat up or chinese wispers. It is also a breach of client confidentiality, I find it hard to believe a professional would have such loose lips, they better hope the Canadians were shopping around with a few others for that lease otherwise they'll know who leaked and that dealer can be sure they'll get stuff all business from them in the future. Anyway, pure speculation on my part, who knows what the real story is?
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NOWHEREMAN
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1499 Comments
Aug 28 09:46 AMThe Dollar's current strength is GeoPolitical, War has a tendency to increase its strength whether real or perceived.
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richrdinbellingham
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20 Comments
My Website
Aug 28 12:17 PMGold has arisen as the defacto world's currency replacing the US Dollar, $USD, DX, and the Euro, FXE.
And gold has arisen as the measure and means of garnering and accumulating wealth: fiat wealth of currencies, such as the Euro, FXE, stocks, such as the Russell 2000, IWM, the US Stocks, VTI, the world stocks, EFA, and the emerging markets, EEM.
A physical shortage of gold at coin dealers and jewlers is causing gold, GLD, and $GOLD, to move higher.
The US Dollar, DX and $USD, is moving lower.
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Philman
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69 Comments
Aug 28 03:51 PMI guess you could argue that the law that says they can only use U.S. mined gold could partially explain the shortage of gold eagles, though if gold were available, it would be easy just to keep U.S. mined gold for the Mint and sell foreign gold to other buyers who don't care. The USA is the 3rd biggest gold mining nation (bigger than Australia) in the world, so there's plenty of gold here.
Also, I just looked up the enabling law for the Mint, and they were clearly not being honest. It only limits them on gold sourcing, not silver. The U.S. Mint is supposed to source silver whereever it can find silver. They started rationing the silver American eagles even before the gold. Now, silver eagles have been suspended.
Today, I read that Johnson Mathley, the big refiner in Salt Lake City has suspended production of 100 ounce bars of silver, and are only pouring 1,000 ounce bars. Sounds like they are rationing. The 100 ounce bars are typically bought by investors, whereas the 1,000 ounce bars are bought by manufacturers of silver products, and the banks.
Meanwhile, I looked at the lease rates for silver, at the London Bullion Market. They are definitely negative. Very negative...but, for players like Mints, I suspect the rate will always be positive. I'll bet dollars to donuts that only fake paper claims to alleged vaulted silver get the negative rate. Mints need real silver, so they need to pay.
There are shortages everywhere. Something big is afoot...
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User 30121
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339 Comments
Aug 28 04:50 PM-
Bron Suchecki
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42 Comments
My Website
Aug 28 08:26 PMFollowing on from that, I do find it interesting if JM has shifted from 100oz to 1000oz. Logically, any busines would prefer to allocate their limited production capacity to the highest margin product. In precious metals this would mean numismatics, then bullion coins, then bullion bars, then wholesale bars. On the basis that retail 100oz bars would attract a better premium than the wholesale 1000oz bars, for JM to shift to 1000oz means the demand for these has created a premium equal to the 100oz bar, which is usual. Now assuming that the only real sizable demand for such large bars are corporates, why would they be so desperate for bulk silver (maybe to make silver blanks for the US Mint!)
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Philman
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69 Comments
Aug 29 01:51 AMSomething big must be happening. Here's what I just learned from Bloomberg News Service:
"Rand Refinery Ltd., the world's largest gold refinery, ran out of South African Krugerrands after an ``unusually large'' order from a buyer in Switzerland."
"The U.S. Mint suspended sales of one- ounce ``American Eagle'' gold coins, Johnson Matthey Plc stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery and Heraeus Holding GmbH has a delivery waiting list of as long as two weeks for orders of gold bars in Europe."
"Johnson Matthey's Salt Lake City refinery doesn't have the capacity to meet investor demand for 100-ounce silver bars, said spokesman Ian Godwin in London. He wouldn't comment on whether the company may expand capacity or end production. The refinery usually gets orders for 1,000 ounce bars from banks and silver grains from jewelers, Godwin said. "
From: www.bloomberg.com/apps...
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Bron Suchecki
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42 Comments
My Website
Aug 29 08:36 PMIt is worth remembering that the gold industry's production capacity is set up for a certain ratio of retail vs wholesale products. This is to be expected - if you are making big $ decisions on equipment you will do so based on past demand patterns. However, what we may be seeing now is a shift in that ratio towards retail products. As a result, in general the industry runs out of capacity for retail product and has excess capacity for wholesale product. As you can imagine, capital expenditure and bringing on new capacity is not like turning on a tap, there is a big lag in getting the machines. I would guess at this time that executives in the refineries and other manufacturers would be asking themselves the question of whether the increase in retail demand is permanent or temporary. If temporary, you don't want to waste money on capacity that will be left idle. Note that some may have relatively flexible production processes that can switch capacity with less cost and time, but the delay in responding may be a result of the executives not being sure about the longevity of the demand rather than physical ability to do so.
Given this natural conservatism, if retail demand continues we can expect continuing shortages of retail product, probably stop/start as one supplier catches up and then runs out. Now i'll speculate two possible scenarios:
1) Continued retail demand results in erratic supply results in increasing premiums for retail product. This fans further hysteria about "shortages", driving more retail demand. Industry executives see the demand and premiums = profit and finally decide to ramp up production. While their is a delay in capacity coming online (some quicker than others depending on how their production process is set up) the hysteria continues, increased physical demand (as well as perception of demand) drives the gold price higher as the "shortages" are picked up by more commentators and media. Eventually capacity comes online and product is supplied. Stories of shortages dry up and hysteria process reverses as now there is the perception that there is "oversupply" of gold, demand contracts and price drops.
2) Retail demand, while increased, is not significant enough to really move the price. Combined with the possibility that suppliers may be more flexible in production capacity than we suspect, product is brought onto the market in a few months. "Shortage" stories dry up, demand drops.
I think it is only me and you, Philman, having this conversation, I think everyone else has lost interest and are into Otto-bashing etc. I will expand upon these ideas for my next blog this Sunday - I like postulatig scenarios, join me at my blog to continue this discussion.
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Bron Suchecki
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42 Comments
My Website
Aug 31 11:12 PMIt will be interesting to see which scenario plays out.
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Philman
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69 Comments
Sep 02 05:11 AM