Spot gold and silver prices rose slightly again this morning after hitting a one-month high yesterday as equity markets internationally came under selling pressure. The Moody’s downgrade of Greece and worryingly poor US economic data again pushed investors to seek the safe haven of bullion. Gold reached new record nominal highs in sterling yesterday (£945.62/oz) as the pound fell on concerns about the UK economy.
Silver Prices and Rates
Markets await key U.S. data on nonfarm payrolls Friday, while ongoing concerns over Greek sovereign debt and contagion in the Eurozone also affected market sentiment and supported the precious metals.
COMEX Silver Bullion Registered Inventories – January 1996 to May 31st 2011
Friday’s U.S. payrolls is likely to show that the world’s largest economy is weakening and may be on the verge of a double dip which will likely lead to further safe haven demand.
Seeing as the extent of the recovery was always exaggerated, this is not a surprise to us.
The supply situation in the silver market gets more interesting by the day.
Registered COMEX silver inventories have fallen to multiyear lows at 29,631,268 ounces. In the last 5 days they fell from 32,132,903 ounces to Tuesday’s holdings of 29,631,268 ounces. As can be seen in the table below registered silver inventories fell every single day last week leading to a sharp fall of 8.4% in 5 days.
Registered metals are those metals which meet the standards for delivery under the silver futures contracts and for which a receipt from an Exchange-approved depository or warehouse has been issued. Eligible metals are those which meet the delivery standards as stated in the rules for which no receipt from an Exchange-approved warehouse has been issued.
This is a long term trend that has been seen since the early 1990’s when total COMEX silver stockpiles were over 101.45 million ounces.
However, the scale of the drop in inventories since early 2008 is significant and the trend has accelerated in recent weeks.
Registered silver inventories are down a sharp 38.5% in just two weeks – from 41,044,280 to 29,631,268.
COMEX Silver Bullion Registered Inventories – June 2009 to May 31st 2011
The record nominal highs near $50/oz, seen 31 years ago and again at the end of April, are likely to be seen again sooner rather than later due to the increasingly delicate supply demand balance.
The scale of current investment demand and industrial demand, especially from China and the rest of Asia, is such that it is important to keep monitoring COMEX warehouse stocks.
The Hunt Brothers were one of a few dozen billionaires in the world in the late 1970’s when they attempted to corner the market. Today there are thousands of billionaires in the world, any number of whom could again attempt to corner the silver market.
Also, today unlike in the 1970s, there are sovereign wealth funds and hundreds of hedge funds with access to billions in capital.
The possibility of an attempted cornering of the silver market through buying and taking delivery of physical bullion remains real. However it would be very difficult to corner the silver market due to the very small nature of the silver bullion market.
A COMEX default remains a risk as does a massive short squeeze which could see silver surge as it did in the 1970s and again recently leading to silver targeting the inflation adjusted record high of $140/oz.
As ever price predictions from gurus should be take with a pinch of salt and diversification remains of paramount importance.
Gold
Gold is trading at $1,543.05/oz, €1,066.53/oz and £941.40/oz.
Silver
Silver is trading at $37.33/oz, €25.80/oz and £22.77/oz.
Platinum Group Metals
Platinum is trading at $1,821.75oz, palladium at $775/oz and rhodium at $2275/oz.
News
(MarketWatch) — Gold, silver futures drop as dollar rises
http://www.marketwatch.com/story/gold-silver-futures-drop-as-dollar-rises-2011-06-02?link=MW_latest_news
(Wall Street Journal) — PRECIOUS METALS: Gold Marginally Down In Asia; Silver Up
http://online.wsj.com/article/BT-CO-20110602-701855.html
(Bloomberg) — Gold May Advance as Economic Slowdown, Greece’s Debt Turmoil Spur Demand
http://www.bloomberg.com/news/2011-06-02/gold-may-advance-as-economic-slowdown-greece-s-debt-turmoil-spur-demand.html
(Reuters) — Gold steady on weak US data, Greek crisis
http://www.reuters.com/article/2011/06/02/markets-precious-idUSL3E7H202820110602
Commentary
(ZeroHedge) — Why Gold Is Still a Good Long-Term Investment
http://www.zerohedge.com/article/why-gold-still-good-long-term-investment
(David McWilliams) — There is life after default, take a look at Argentina
http://www.davidmcwilliams.ie/2011/06/01/there-is-life-after-default-take-a-look-at-argentina
(ZeroHedge) — Scotia Mocatta Loses 60% Of Its Physical Silver In One Month To "Reclassification", Total Comex Registered Silver Now Under 30 Million Ounces
http://www.zerohedge.com/article/scotia-mocatta-loses-60-its-physical-silver-one-month-reclassification-total-comex-registere
(National Review) — Keynesians vs. the Entrepreneurs
http://www.nationalreview.com/articles/267555/judge-jury-and-economist-kevin-d-williamson
(Reuters – John Wasik) — Gold crash: What could trigger the inevitable (Comments are more astute than column)
http://blogs.reuters.com/reuters-wealth/2011/05/30/gold-crash-what-could-trigger-the-inevitable/#commentform
(Wall Street Journal) — Double Fear: Gold and Dollar Rising Today
http://blogs.wsj.com/marketbeat/2011/06/01/double-fear-gold-and-dollar-rising-today/
