Gold was up 3% last week and silver surged nearly 8% (more on silver below) and in normal circumstances profit taking would be expected in the early part of this week. But with oil remaining near record levels and inflation concerns increasing significantly, gold (and silver) may again surprise to the upside. Oil was up by 4.6% last week and is up another 1% today. Gold and silver will outperform oil in the coming weeks.
Gold was up $7.70 to $925.60 on Friday and silver was up 32 cents to $18.24. Gold traded up in Asia but has moved sideways in early trade in Europe. The dollar is slightly weaker against most currencies except the euro and sterling which it is slightly higher against and this is supportive of gold.
Today’s Data and Influences
Today, the markets will be quiet with the U.S. Memorial Day and UK bank holiday and markets will look for direction from commodity and currency markets. There is a busy schedule for the rest of the week which should result in another hectic week in the markets.
The eurozone’s flash PMIs for May are due for release this morning and will be watched closely. Both the services and manufacturing indices are predicted to dip from previous levels, supporting the view of a slowing in the pace of activity. At the same time, however, inflation and stagflation concerns mean there is little chance of a near term rate cut from the ECB.
Silver Coin Shortages and Rationing Could Spread to Entire Silver Market Resulting in Sharply Higher Prices
This weekend’s article in the Wall Street Journal is essential reading for anyone wishing to understand the silver market: http://online.wsj.com/article_email/SB121149011951015323-lMyQjAxMDI4MTIxMzQyOTMwWj.html
“The government rationed food during World War II and gasoline in the 1970s. Now, it’s imposing quotas on another precious commodity: 2008 dollar coins known as silver eagles.
The coins, each containing about an ounce of silver, have become so popular among investors seeking alternatives to stocks and real estate that the U.S. Mint can’t make them fast enough. In March, the mint stopped taking orders for the bullion coins. Late last month, it began limiting how many coins its 13 authorized buyers world-wide are allowed to purchase.”
. . .
The rare shortage offers a glimpse into the growing love of a commodity known as "poor man’s gold." With more silver mined than gold traditionally, silver has always been far cheaper than gold and today has less than 2% of gold’s value.
But silver is growing in popularity, and some investors are betting that its value will surge as inventory shrinks. Big investors are loading up on silver eagles, which are the only American silver coins allowed in individual retirement plans. For small investors, they are an accessible way to get into the metal boom."
This WSJ article confirms that silver in smaller denominations is in very, and increasingly, short supply which will result in higher prices in the coming months and investors would be wise to invest in silver now prior to the coming price spike.
As knowledge of shortages in the silver coin and small bar market enters the mainstream there will be powerful and possibly unprecedented demand for silver eagles and all forms of silver in smaller denominations in the coming weeks.
The silver market remains a tiny finite market (all of the above ground refined silver in the world is only worth at today’s prices roughly a miniscule $9 billion <500 million ounces X $18>) and if even a fraction of the world’s increasingly skittish investment capital flows into the silver market prices will rise to multiples of the current price.
Gold Investments continue to believe that silver should surpass $25 in 2008, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high (as many other commodities including oil already done) of some $130 per ounce in the next 5 to 8 years. These are conservative estimates.
Silver is trading at $18.21/18.26 per ounce at 1200 GMT.
Platinum is trading at $2177/2187 per ounce (1100 GMT).
Palladium is trading at $453/458 per ounce (1100 GMT).