Gold, Silver and Other PMs

» Normxxx - Re: Gold a Buy here for a trade?

It's in the process of bottoming for a move up into April. Maybe 2/6 or 2/9.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only.

-- posted by Normxxx

» Normxxx - Market Commentary

by Leonard Kaplan | February 16, 2004   full text

General Comments:

Last week saw yet another bone shaking rally in the precious metals as the USD continued its recent systemic weakness. News reports from the government, such as the trade deficit, and comments by Alan Greenspan only seemed to embolden the USD bears, taking the Euro from $1.25 on February 6th, to a high of almost $1.29 last Friday. As gold prices have, and are, tracking the Euro price, virtually tick by tick, prices rose by $10 over last week. Volatility was shocking even to those with decades of experience in this market, with prices carving out a $23 range from low to high.

True to its recent history, gold continues to ignore virtually all its fundamental supply/demand characteristics and continues to trade AS A CURRENCY, rather than a commodity. Price movements are dominated by the speculative crowd, rather then the actual demand from consumers or investors. Positions held by speculative forces on futures exchanges are ever approaching or surpassing new highs, and gold prices are being driven higher as the USD falls, and for no other reason. Gold traders/investors are no longer gold traders, they are currency traders, as the fundamentals which are continuing to deteriorate, cast no important shadow upon this market. During 2003, the gold price and Euro had a .91% correlation, a most telling statistic.

While gold prices were up some 17.5% in USD last year, gold rose by only .12% in Euros, basically breaking even. Japanese investors in gold actually saw gold decline in value on the basis of their currencies, while Australian and Canadians experienced none of the reverie of their US counterparts. It is most clear that gold has risen in value over these years ONLY as the USD has fallen, and only experienced by those who live and breathe in US Dollars. It is only obvious that since gold is priced in USD worldwide, and as the value of the USD declines, that ALL commodities or products priced in USD must, of necessity, increase as its "currency denominator" falls in value. It would appear that gold will continue to rally if the USD falls, and will decline if the USD rallies, plain and simple. And, no other facts appear, at this point in time, to be of any importance.

That said, logic forces us to state that gold is not in a bull market. It is not so much that gold is rallying in price, but that the USD is falling in value. Perhaps this interpretation is rather extreme, but it seems deductively forced upon us. I would postulate that gold will be in a bull market, if and when it begins to rise in price against most or all currencies. Right now, it is simply reflecting the economic reality of the decline of the value of the USD.

I find the current situation rather alarming, as it would seem that the fundamentals are no longer important to this market. It no longer matters that jewelry demand is falling rather sharply due to the new higher price ranges, it no longer matters that the positions carried by speculators are near record high levels, in fact, none of it matters anymore. Just the value of the US Dollar. I do not recall any such period in my 30 years of watching this market, and, frankly, I do not expect it to continue for long. Somehow, it seems wrong. My sense is that we are in the very early stages of a bull market for gold, only a few years past the lows, and as such, gold prices are hogtied to an external influence for its sustenance, much as the young child depends upon his mother. As the infant ages, it takes on a life of its own.

-- posted by Normxxx

» Kirk - S&P500 / Gold

Chart of the Day
http://www.chartoftheday.com/

To create today’s chart, we divided the S&P 500 by the price of one ounce of gold. This results in what is referred to as the S&P 500 / gold ratio or the cost of the S&P 500 in ounces of gold. For example, it would currently take about 2.79 ounces of gold to “buy the S&P 500.” This is considerably less that the 5.53 ounces three and a half years ago. When priced in gold, the stock market rally that began in October 2002 appears to be treading water; though it has been doing so long enough to where it has recently broken out of a long-term downtrend. Stay tuned…

Notes:
- What are the latest economic and financial indicators saying about the stock market? Find out with the exclusive long-term stock market charts, indicators, and studies of our premium service Chart of the Day Plus.

Quote of the Day
"Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man's suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today." - Peter A. Burshre

         PERIOD                Kirk  Wilshire5000  Delta
1 Year Return to 12-31-2003    +77%     +31%         46%  
3 Year Return to 12-31-2003    +25%      -7%         32%  
5 Year Return to 12-31-2003   +171%      +2%        169%  

 

Total Return:
                                  Kirk   S&P500+  NASDAQ 
5 Yrs 12/31/98 through 12/31/03  171.0%  ( 3.0%)  ( 8.6%)
Annualized Annual Return          22.1%  ( 0.6%)  ( 1.8%)
 
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-- posted by Kirk

» Kirk - Gold vs US Dollar 2001 - 2004

-- posted by Kirk

» Normxxx - Kaplan: Market Commentary

by Leonard Kaplan | March 23, 2004

CLOSES INDICATIVE LEASE RATES
Based upon 30 day maturities
APRIL GOLD $412.70 GOLD .00/.50%
MARCH SILVER $ 7.563 SILVER .50/2.00%
APR PLATINUM $890.00 PLAT 5.00/12.00%

General Comments:

Perhaps the most stunning commentary on the commodity markets is that as of last evening, the widely followed Reuter's-CRB Index had reached 23 year highs, not seen since 1981. Accelerating global economic recovery combined with 45 year lows in interest rates, and massive fund participation have pushed commodity prices to lofty levels. It is most illustrative, from a economic viewpoint, to note that back in 1981 these markets were driven primarily by monstrously high levels of inflation, accompanied by equally lofty interest rates, And now, the exactly opposite financial considerations have again pushed the commodity markets to almost record prices. And yet, most analysts still foresee further gains across the commodity complex.

The precious metals had another stunning performance last week, with gold rocketing higher by $17.10, with silver up another 50 cents, as the speculative crowd continues to pile into these markets. While the gold market seems to be trading in rather "normal" trading patterns, silver has been totally wild. Last Thursday, May Silver on the Comex rallied 22 cents, only to fall 22 cents, in about 10 minutes of trading. Volatilities have been frightening, as the large funds throw their weight around like an 800 pound gorilla. Platinum, on the other hand, was down about $17, as further signs emerged that the fundamentals of this market are slightly deteriorating.

One of the most significant bullish influences in the gold market over the past years has been the "dehedging", or the repurchase of formerly sold gold, by producers. This has been a most supportive influence as producer buying has largely overshadowed virtually all other demand sources, with the exception of jewelry. Due to recent consolidations in the industry, it is now expected, as per GFMS, that such buying will accelerate in 2004, even though prices have risen sharply over last year. The noted consultancy said that they expect between 11 and 13 million ounces will be shaved off the global hedge book this year. They also expect that producer hedging, usually demanded by lenders as a requirement for funding, may fall to 2 million ounces this year from the 3.5 million ounces added to the hedge book in 2003.

Another fairly supportive data point is that the costs for mining gold have risen VERY sharply over the last year, up some 25% by the reckoning of the World Gold Council. Cash costs rose to $235 per ounce in the fourth quarter, compared to $188 a year ago. In South Africa, due to the strength of their currency, cash costs rose to $295 per ounce from $197 year on year. Such information goes a long way in explaining why the stock prices of many of the gold producers have lagged the surging gold price of late. But, such narrowing margins for the producers also has the potential for a decided negative, the reintroduction of hedging and forward selling to preserve profitability. Since hedging is now such a dirty word, that is rather unlikely in this environment.

Then add to the equation that India, the largest global demand center for gold, enjoying a very good monsoon season, which enriches the largely agrarian populace, and with the Indian "wedding season" upon us, gold looks to be very well supported at or near current price levels. While gold's day to day fortunes have been largely confined to following the USD, I would believe that EVEN IF the Dollar stages a rally, which many analysts consider unlikely, I would think it very unlikely that based upon the fundamentals, that gold can get below recent lows in the high $380's.

The strength of the gold market has been evident over the past few weeks, where it has been rallying against almost all currencies. But, and a most important but, this has occurred during a time when the USD has been generally rallying. So, in other words, gold has fallen LESS than the foreign currencies, not a totally convincing argument that we are on the verge of the second leg of the bull market in gold, one in which gold rises against all, or most, currencies. My view of gold is that we are still in a rather well defined trading range of perhaps $380 to $430, with the bottom support holding even if the USD rallies mightily.

Silver, on the other hand, is most vulnerable to a sharp sell-off, as this "darling" of the large speculative funds, and numerous small speculators, have pushed this market quite near 6 year highs, to levels simply not justified by the fundamentals. Open interest, the number of contracts now outstanding, has reached almost 127,000, a level not seen since April of 1995. It is clear that this market is totally dominated by speculative excess. This is not to say that I am bearish on silver, quite the opposite is true. In a market as thin as silver, the funds can, and will, take prices wherever they wish, and for now, that looks to be higher. We have not seen these price levels since Mr. Warren Buffet announced his purchase of 130 Million ounces in 1988. And, I think it illuminating to note what then occurred, over the following year, silver prices fell from the $7.80 price to under $5 yet again. It does seem that every five to 10 years we have a silly rally in silver, only to retrace it completely. But, short term, it still looks to go higher.

The platinum and palladium markets seem to have totally decoupled from the gold and silver markets and are trading on their own dynamics. It would appear to me that the fundamental demand for platinum is still healthy, and although the speculators are a major force for short-term movements, current price levels appear to be justified. Platinum jewelry demand in China (down 19% year on year) is waning, but catalytic demand in Europe is escalating as diesel engines gain favoritism. The real key to the platinum market lies in the value of the South African Rand, and the Yen. If the Rand declines in value, then the mothballed expansion plans of the producers there may restart, providing the supply demanded by the market. And the value of the Yen is a most deciding factor as to whether the Japanese public are speculating from the long side or the short side.

Palladium has staged a fantastic rally over the past months, and still appears to want to go higher. Fund buying is most evident in this market, but the "players" appear to be long-term oriented.

Now that the Washington Accord has been resigned, with both France and Germany now formally appearing as sellers, there is ongoing debate over what to do with the proceeds of the sale of gold from their reserves. Bundesbank president, Ernst Welteke, was quoted as saying that the Bank had a "clear position" that gold sales should not be used to fill the budget holes, while a legislator was quoted by Bloomberg as saying "we don't need the Bundesbank's gold reserves any more - we should use it to reduce the country's debt". The Central Banks of both nations favor creating a sort of trust fund from the proceeds, where the interest received would be gifted to aid research. It is also amusing to note that while Switzerland has sold virtually all of its 1300 tons authorized by the first Washington Accord, they still haven't agreed on how to spend the proceeds. And so far, all the sellers over the past years have been on the wrong side, not that unusual for the supposed market timing of Central Bankers.

Commitment of Traders reports, as of March 16th, both futures and options:

GOLD Long Speculative Short Speculative Long Commercial Short Commercial Small Long Spec Small Short Spec
102,411 21,889 135,644 271,451 77,130 21,754
+2,885 -2,950 +8,834 +16,684 +5,166 +3,151

During the reporting period, the gold price was just fractionally lower as open interest rose by over 21,000 contracts. As has been the customary tendency, large specs were the buyers with the short commercials taking the other side of the trade. An interesting question is why the long commercials added mightily to their positions, at a time of year when this rarely occurs? Nevertheless, one can sense that with gold prices above $400 during the relevant week, physical demand tailed away, unlike the fundamental picture seen the week before, when short commercials were buyers of futures as they sold inventory. While the gold market remains VERY well supported, I see it as a trading range, and we will need aide from either the equity markets or a continuing fall in the USD to make substantively higher price levels possible.

SILVER Long Speculative Short Speculative Long Commercial Short Commercial Small Long Spec Small Short Spec
67,575 3,629 16,360 112,451 46,135 13,989
-1,835 +520 +2,665 +1,122 +1,017 +206

Silver prices were virtually flat during the reporting period, and there seems to have little change in the ownership of contracts. Mostly, some of the large specs got bored and liquidated a small percentage of their holdings, pawning it off on the small specs, who, for once, were dead on correct. The ratio of long specs to short specs is still about 6.5 to one, historically monstrously one-sided. The real vulnerability is that IF the long specs decide to get out quickly, or at once, just who do they sell it to? Certainly not the short specs as they far outnumber their counterparts. But, such dangers have existed for a while, and prices still look to go higher, in a most dangerous fashion. As I said last week, history shows us that this rally will end badly, as THEY ALL have in the past, but does it falter from $8, $10, $12 or even higher?

GOLD RECOMMENDATIONS:
Expected trading range: $403 to $426

Short term traders should be playing the range lets say buying near support at $405 or so, and selling as we approach $420. Near term support also exists at about the $415 range. Unless the USD makes a convincing new low, I think gold is a fairly good sell at the top of the range. Continue to expect vicious and violent movements within these boundaries. At this point, I am neither bullish nor bearish on gold; I continue to expect range trading.

The USD movements will continue to dominate all influences in this market. With adequate evidence that the gold market is VERY well supported at lower levels, selling out of the money puts seems most prudent at this time. I really like the June 380 or May 390 puts, and would be rather aggressive selling these options. Call our offices for specific recommendations for your account.

SILVER RECOMMENDATIONS:
Expected trading range: $6.80 to $7.80

Volatilities are incredible high as the funds throw their weight (and billions of dollars) around. This is not a market for the feint of heart as last week we saw prices move over 10%. From a very short term trading perspective, look to buy silver at about $7.50, use a 10 cent stop, and pray vigilantly. This strategy appears dangerous and should only be taken by those clients with risk tolerance.

My sense is that it is best to have very small positions in this market at present. Anything can, and will, happen. Probably, though, silver will simply follow, in exacerbated fashion, what occurs in the commodities markets in general and is, of course, at the whim and caprice of the large speculative funds that hold nearly record long positions. As per the Commitment of Traders reports, speculators now hold long positions worth almost one years total global production. If some external influence discourages the large spec funds, I assure you that they will have no one to sell to. Things are way too dangerous in this market, but I would be a buyer, against technical support levels, with very close stops on small positions. Sorry, but I cant come up any option strategies that make much sense at present.

PLATINUM RECOMMENDATIONS:
Expected trading range: $880 to $920

Again, as this market is dominated by the large specs, there does exist the chance of a sharp sell off. But, I have no idea of what to do here. There is no rule that says I have to play in a market without a clear picture of where it may go.

Leonard Kaplan
Prospector Asset Management

-- posted by Normxxx

» Normxxx - Shorts Gone Wild - Gold & Silver

By: Theodore Butler | 31 March 2004

The latest Commitments of Traders Report (COT) was a shocker for gold, as the tech funds plowed onto the long side and dealers went short in massive numbers. Adjusting for the trading since the Tuesday cutoff, the commercial net short position in COMEX gold is at the highest level ever. This raises the strong possibility of a sell-off, where the funds sell out their long positions and the dealers buy back shorts, as has occurred every time the dealers have previously reached record short position levels. Of course, it is always possible for the dealers to be overrun when they are holding giant short positions, but that has yet to occur in gold.

For those who doubt that the dealers can orchestrate and engineer the funds in and out of the markets, as I contend, it might be instructive to review how the dealers manhandled the funds in the sugar market recently. I have rarely witnessed as severe a beating of the tech funds by the dealers in any market as what just took place in sugar. That the regulators sit by and allow speculators and speculating commercials to set and control the price of vital commodities with paper games is outrageous.

Of course, there is no guarantee that the dealers will prevail in gold and succeed in flushing the tech funds from the long side, once again. For instance, there is strong evidence that the dealers lost big, for the first time, in copper over the past few months, as strong physical demand bailed out tech funds longs and the dealers actually covered short copper positions to the upside. In fact, this is the litmus test for determining whether the dealers have been defeated or not in a market, namely, whether they close out positions at a loss after a big net position has been established, or whether they just keep adding to a losing position until they overpower a market eventually.

In my mind, the only way for the dealers to be defeated after they have taken a large net position (long or short), is for the real physical market to trump them, like recently happened in copper. What's so crazy about this is that how I'm describing the rare instance of the dealers actually losing (being overpowered by the real physical market) is, by law, how the markets are supposed to function all the time. The real world of supply and demand should be setting the price continuously, and not be the rare exception. That's why I claim these paper trading games are manipulative.

Since gold is not an industrial commodity, like copper, it is not likely to experience an industrial physical shortage. This makes it easier for the dealers to maneuver the tech funds in gold. This is not to say that the buyers of physical gold can't be more aggressive than the sellers, causing the price to rise, just that gold is unlikely to be in an industrial shortage, like copper, steel, or silver. So, when the dealers put on a record net short position, like now, it would take something other than a physical shortage to cause them to panic and cover those shorts at a loss. That "something" has yet to occur in gold, as the dealers have yet panic and cover at a loss. It appears that the dealers and tech funds have basically broken even for the past 15 months or so in their COMEX gold trading. The price of gold has advanced over that time, so I'm not suggesting that the dealers have been cleaning the tech funds' clock in gold, as they did for many years. What I'm suggesting is that the dealers continue to maneuver the tech funds in gold, and even if they aren't booking big profits, they aren't losing big either. There has been no COT dealer defeat in gold (yet), and the next time will still be the first time.

What about silver? Whereas gold has just experienced a big jump in commercial shorting, silver's COT position has remained near a record net dealer short position for months. While this has not prevented the price of silver from climbing sharply, the dealers haven't covered their shorts, as they have in copper. Therefore, the issue is still open and unresolved. Like in gold, the dealers, as a group, have yet to cover their short positions in silver at a loss. My sense is that the dealers have set the tech funds up on the long side of gold, in their hopes that a resultant sell-off in gold will cause a corresponding sell-off in silver. While it remains an open question as to how the extreme COT positions in gold and silver will be resolved, there are a number of important things we can say specifically about the silver short position.

As you know, I have long maintained that COMEX silver has the largest short position of any commodity in history, when compared to world annual production and total known world inventories. You've never seen anyone contradict that statement, nor will you. Today, I'd like to examine the extreme silver COMEX short position in some new ways. As always, I'll try to rely on the public record and common sense.

Let's look at the public record. Each week, the CFTC releases the COTs for all US-traded commodity futures. The positions of traders, by categories, is listed on both a gross and net basis. Net is, obviously, smaller than gross, and is more "pure", in that it represents the true overall position by category. Looking at the net commercial short futures position for all real commodities traded (leaving out financial futures), COMEX silver still stands out like a sore thumb when compared to all other commodities.

Even on a net basis, the short commercial position in silver, at nearly 500 million ounces (including options), almost equals total world production, while most commodities have a commercial net short position rarely greater than 5% to 10% of their respective world productions. Some commodities (cotton and cocoa) don't even have a current commercial net short position, as the dealers are net long. In fact, over the past 20 years, COMEX silver is the only commodity in which the commercials have always been net short. The commercials have been significantly net long, at some point(s), in every commodity except silver. You should be asking yourself - why are the commercials always net short in silver, and why are they usually net short, like now, in amounts many times larger than any other commodity, when comparing net short positions and respective world productions? What is it about silver, alone among all commodities, that attracts such massive commercial shorting, consistently for 20 years?

There is another clear aberrant pattern that comes into focus when comparing the commercial category of silver and the other major commodities, as posted in the COT, for positions as of 3/23. Major commodity is defined as one having a total futures open interest of at least 75,000 contracts. When you compare the gross long commercial position, to the gross short commercial position of every major commodity in the current COT (futures only) report, you see that the gross short position rarely doubles the size of the gross long position. (A gross short twice the size of a gross long equals a 2.0 ratio.) Here's the actual breakdown (in contracts):

Commodity Com'l-Long Com'l-Short Ratio

Wheat (CBOT) 63,555 100,288 1.58

Corn 291,610 469,505 1.61

Soybeans 97,222 166,079 1.71

Soybean Oil
71, 324 151,413 2.12

Soybean Meal 89,788 142,870 1.59

Live Cattle (CME) 50,818 62,395 1.23

Cotton 51,358 51,198 1.00

Cocoa (CSCE) 84,053 70,220 0.84

Sugar 114,630 217,011 1.89

Coffee 41,838 82,971 1.98

Heating Oil (NYMEX) 92,092 113,815 1.24

Natural Gas 185,484 210,214 1.13

Crude Oil 387,245 483,735 1.25

Unleaded Gasoline 81,350 30,204 1.60

Copper 27,411 54,600 1.99

Gold 49,762 204,617 4.11

Silver 10,670 97,561 9.14

Certain numbers should jump out at you, namely, the ratios of gold, but particularly of silver. Why are the commercials so lopsided in their short versus long positions in gold, but especially silver? These are aberrations that demand a reasonable explanation. Let's first eliminate what isn't a reasonable explanation - because the price is up. The price of many commodities on this list are up, and there is no lopsided ratio. That's because commercials should have legitimate hedging needs on both sides of the market in a rising price environment, such as users protecting themselves. In most of these commodities, it is clear that there is significant and legitimate commercial long side participation, even though the short side may be larger. In silver, it should be obvious that there is virtually no long side commercial participation. Let's cut to the chase and explore why that is so, even though the last thing we need is still more evidence that silver is manipulated.

There is one reason, and one reason only, why the commercial dealers are overloaded on the short side and barely inhabit the long side in COMEX silver - because there is no competition between the dealers. They are all reading and acting from the same play book. They act in unison. They never break ranks with one another. They operate as one against all comers - the tech funds, the big and small speculators, the real silver value investors and any one who stands to gain from a free silver price. The silver commercials are a disciplined and unified wolf pack, kept in tow by the leaders of the pack, the Silver Managers. This wolf pack operates by the rules of force and the wild, and not by the rule of law. Protected and coddled by the CFTC and the NYMEX/COMEX.

The key feature of the silver dealer short wolf pack is that it is operating against the laws of true supply and demand. Nothing that they are doing is in conformity with legitimate economic purpose, save one - take as much money as possible, the law be damned. And stay alive. Aberrant short figures and ratios aside, there is no sound economic reason for holding the largest short position on record in a commodity in a structural deficit. I'd like to see someone step forward with a plausible and legitimate explanation for a net short position, of anything, greater than what exists in the real world. And this epic short position didn't materialize as a result of the recent increase in price, as it was just about as obscenely large $3 lower. It can't be covered to the upside without destroying the wolf pack. For that reason alone, the manipulation couldn't be more obvious.

You've read, many times, where I highlight how unprecedented the COMEX silver short position is compared to world production and total known inventories. It doesn't matter if I'm talking of total gross or net position, held by all the commercials or just the concentrated largest traders, it's always bigger than known bullion inventories, currently no more than 150 million ounces. But even that vastly understates the real short story. That's because the commercials don't control anywhere near that total 150 million ounces. They'd be lucky if they controlled 10 or 20 million ounces of that total. There's a verified and documented net short commercial position of nearly 500 million ounces and they have less than 2% to 4% in real silver backing. Their short position may be 50 times larger than what they really own. No wonder they stick together. If one breaks rank and covers to the upside, they all will perish.

There has never been, in all of financial history, such a case as we have in silver, where the public has been so favorably aligned against the insiders. The public holds a long position that they can not be collectively shaken out from. The insiders hold a short position that they can't collectively deliver against in a thousand years. All the insider shorts can do is to stall and try to shake as many longs from the tree as possible. The short insiders must resort to spreading false private stories of fading silver demand, while the true stories of delayed delivery, whether on the COMEX or by the Central Fund of Canada are open to all. (In another recent public offering, the Fund has committed to buy another 5 to 6 million ounces of real silver, even though they haven't received the last million or so ounces from their previous stock offering, 4 months ago. They've been told it may take 3 to 6 months for the new silver to be delivered. Does that sound like fading silver demand to you?)

Think I'm overstating the cohesive and predatory pack behavior of the commercial silver shorts? Play a little mind game with me. Imagine, if you would, that the tables were reversed. Instead of the dealers being massively short silver, imagine that they were massively long. I know it is hard to realistically picture anyone else going short to the extent necessary to enable the dealer silver wolf pack to be massively long, but just imagine it did. Knowing what you know about the real silver fundamentals and the deficit and evaporating inventories, etc., and you added that the silver wolf pack was long and not short - what price would you put on silver, when the wolf pack longs put it to the hapless shorts? $100? $500? $1000?

But the commercials have a record net short position, and not a record net long position, so you must behave accordingly. The wolf pack is always on the prowl for unsuspecting and innocent victims. Don't expect help from the regulatory authorities, as they are a big part of the problem. Don't expect the miners to fight back. You must arm and defend yourself. How? Easy. Rely on your common sense. Hold only fully paid-for positions. Don't hold leveraged positions that you will be forced to jettison and lose in a sharp sell off. Prepare and steel yourself for the coming volatility. Let's face it, you or I can't control the volatility. All we can control is our reaction to it. Focus on the long term. If the pack succeeds in engineering one more manipulative sell off, put it to your advantage by being prepared to buy, both financially and emotionally.

Even when the COTs stink, like now, you must hold a full core position because, in the long run, we will go shockingly higher, probably without notice, as the fundamentals play out. The bad news is that any sell off, if it comes, is likely to appear disorderly and designed to frighten those unprepared out of positions. The good news is that any sell off should end dollars higher than the average prices of recent years. Now is the time to harden your resolve about silver and prepare for whatever the increasingly desperate shorts throw your way.

-- posted by Normxxx

» Normxxx - SILVER

By Brady Willett | April 7, 2004
BWillett@fallstreet.com

Keep in mind that the regulators - if indeed they are acting in tandem with the manipulators - are ruthless. Yesterday COMEX raised (again) the margin requirements on silver, and a spike in silver lease rates to begin this week has suddenly vanished. It would appear that certain parties were ready to lease silver in increasing quantities even though the price of silver has risen dramatically.

In short, although the payoff is potentially huge, it is not prudent to bet against the commercials. Quite frankly, the commercials - which are currently adding to a short position that is 55.3% higher than their average short position since 1986 (nearly a record) - are capable of crushing silver prices lower the second speculators flinch. Granted, no one knows exactly when this will take place, and silver could go considerably higher before it does (speculative long interest is only at 23% of the average speculative long interest position since 1986). Nevertheless, with wild, unpredictable swings in the price of silver likely going forward, selling some of your silver holdings now seems prudent. After all, investing in unpredictability is not wise.

What if the proverbial 'jig is up'? Although I have my doubts that the jig will ever really be up, if the manipulation is exposed look for panicked buying in silver and plenty of defaults.

-- posted by Normxxx

» Austrian - Re: SILVER

Normxxx,

I've posted before that I have a significant position in silver equities. If you think silver is in a bull market, then do not sell. If you think the move from 4 something to 8 something is just a trading opportunity then sell.

As for me, I think Silver is in the beginning phases of a secular bull market, so I am holding and looking for places to add to my positions.

Regards,

-- Austrian

-- posted by Austrian

» Normxxx - Re: Re: SILVER

I can add what I do with my gold asset alocation. I don't think the future is knowable. I do believe that dollar devaluation is a given, based on what has already transpired and the avowed position of our government. I do not believe that the explosion of commodity prices for the short to intermediate time frame is a given-- I believe it is largely a speculative play and will crash at some point. I prefer to sit the crash out. The long term may be very long indeed, especially if our government changes in November or we go into a sudden, severe deflation (not impossible). Therefore, because timing is so difficult, I generally have about 50% of my gold as a "core" holding, and trade the other 50%. Currently, I am 100% in gold, but looking to get out (of the 50% tradeable portion) if gold hits $435 or makes a break below $400.

I hope you are not buying silver on margin.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only.

-- posted by Normxxx

» Austrian - Re: Re: Re: SILVER

Normxxx,

I do not use margin.

I think this will continue to be a very tough year for the PMs while they consolidate recent gains.

Regards,

-- Austrian

-- posted by Austrian