MIKE

Posts Tagged ‘silver bullion’

By Mike Getlin
September 29, 2011 1:18 PM EDT
International Business Times

We gold bulls have been licking our wounds over the last few weeks. This summer’s intense upward price movement set the stage for major volatility on the precious metals markets, and long term gold investors are stuck riding out the storm, at least for the moment. Yesterday however, something was brought to my attention by someone out on our trading floor. One of his clients who bought a diversified investment grade coin position early in the month was actually dead even on his overall position. While gold had tumbled by over $300 per ounce, his coins had stayed right where they were showing him no loss whatsoever. Needless to say, this needs a bit of explaining.

Let’s take a look at gold’s correction versus the price movement in a variety of $20 Liberty certified coins. Gold closed at $1895 on September 6th. Over the course of the next 20 calendar days, it shed $297 to close at $1598 on September 26th. That is an overall correction of 18.58% in 14 trading days. The certified $20 Liberty coins fared much better. See the chart below for the comparison.

Click Image for Larger View

The major difference between raw gold bullion and certified coins is the premium (which is often significant) that the coins carry over the spot price of gold. For example, the $20 Liberty in Mint State 66 condition is a coin that sells for well above $15,000. Most investors look at that and wonder why in the world anyone would buy a one ounce coin for over 15 grand! Yet this month, the one who did would be laughing all the way to the bank while the rest of us dream longingly of weeks gone by and $1900 per ounce.

Now this is not to say we should all rush out and dump all our bullion in favor of certified coins. That said, there is clearly an advantage to be gained by owning some of these products that help insulate investors from these volatile markets. The real question is what causes certified coin premiums to change, and what place do these products have in a healthy and diversified gold portfolio.

The debate over whether to buy bullion or certified coins (also referred to as numismatics) has been raging for decades and will probably continue to produce spirited cocktail hour conversation for a long time to come. Some people swear by investment grade numismatics, while others think only a fool would buy anything other than bullion. So who’s right? Both of course. As with most arguments like this, there is a lot of truth to both sides, and each strategy has significant advantages and disadvantages.

On the bullion side, the main argument against certified coins is that they are too expensive. Why pay $3000 per ounce or more for a gold coin when you could buy a Gold Eagle or a bar for $1800? The premium, as well as the dealer’s bid/ask spread is much higher on certified coins as they are more difficult to source and procure. The other argument against them is they tend to move more slowly than bullion coins. For investors who need instant liquidity, or are trying to pop in and out of the markets with some frequency, certified coins present some major drawbacks.

In contrast, numismatists (people who study coins) never forget one simple fact: value comes from scarcity. If you purchase a gold bar this year and sell it in 2015, there will have been millions upon millions more produced and sold between now and then. If you purchase a certified $20 Liberty, you can sleep well at night knowing that never again will a single $20 Liberty coin be produced. It’s hardly even a question of supply and demand, because there really is no supply. Thus when you look at the $20 Liberty MS66 in the graph above, you see it actually increase in value during gold’s worst month in 20 + years. The premiums on certified coins can move quite independently from the gold market and often times increase when gold goes down. This provides strong buoyancy during gold market corrections; something a lot of gold buyers would have loved over the last few weeks.

All in all, there is no real “right” answer as to whether investors are better off with bullion or certified coins. As such, we’re strong believers in owning both. Ideally, a healthy gold portfolio would have both bullion and certified coins. The bullion will move more quickly, provide more gold per dollar invested, and can be bought and sold at lower margins. The certified coins may have higher long term profit potential, benefit from strong demand and scarcity, and can provide stability in a gold market that is likely to become increasingly volatile in the coming years. As with most arguments, the best answer probably borrows a bit from both sides. As with most investments, the best strategy is probably a diversified one.

Read the entire article HERE.

By Sungwoo Park
Jul 21, 2011 7:24 PM PT
Bloomberg

Silver may more than double to $100 an ounce if the current bull market follows similar patterns seen between 1971 and 1980, according to technical analysis by Citigroup Global Markets Inc.

The attached chart shows spot silver had “two legs up” with an interim corrective move down in the last major bull market from November 1971 through January 1980, Citigroup analysts led by New York-based Tom Fitzpatrick wrote in a report. In the current uptrend that started in November 2001, the metal jumped 5.8 times through March 2008 before slipping 60 percent, they said. The price then rebounded and tested the 1980 high earlier this year, they said.

“If the final rally in the last bull market repeated then we can expect $100 over the long term,” Fitzpatrick and two other analysts wrote. “While the high so far this year was at the same level as the peak in January 1980, we are not convinced that the long-term trend is over yet.”

Silver for immediate delivery has dropped 21 percent from an all-time high of $49.79 an ounce on April 25. Still, the precious metal has more than doubled in the past year and is the best performer on the UBS Bloomberg CMCI Index. It declined 0.4 percent to $39.26 an ounce at 9:22 a.m. in Singapore.

“The move down from the April high this year has come to an end and the double bottom is a good platform for a turn back up,” they said in the July 15 report. Fitzpatrick confirmed July 20 via e-mail that their view is unchanged.

A weekly close above $38.84 would confirm the break higher, opening the way for $44, the report said. Spot silver closed at $39.3050 last week. “A test of the trend highs again at $49 would not surprise us.”

Technical analysts watch for patterns on daily charts, such as moving averages and resistance levels, for clues to price direction.

Read the entire article HERE.

Joe Weisenthal
Business Insider
Jun. 24, 2011, 12:21 PM

Despite the imminent end of QE2 — and the fact that Bernanke has made it fairly clear that QE3 is not imminent — Treasuries keep grinding higher, moving against bond god Bill Gross, who has said they’re due to tank.

Nonetheless, he’s been vocal about his belief bondholders will get screwed in various ways, and that inflation is on the march.

Now he’s even getting conspiratorial.

Here’s the latest tweet from PIMCO (which is actually probably one of the best corporate twitter feeds).

Catch that about the silver?

Back in May, when silver was literally going parabolic, the CME hiked margins on speculators. Conspiracy theorists thought this was a deliberate attempt to keep the price down, though the CME (and others) noted that the exchange has established formulas for hiking margins when volatility spikes.

We’re not interested in joining that debate right now, though we’ll just note that Bill Gross (or at least PIMCO) has thrown his lot in with the conspiracy crowd.

Read the entire article HERE.

By Frank Tang and Aaron Pressman
Mon May 16, 2011 7:31pm EDT
REUTERS

Famed gold bull John Paulson held his ground, but Soros was joined in the retreat by several other big names, including

Eric Mindich and Paul Touradji, according to 13-F filings with the U.S. Securities and Exchange Commission that provide the best insight into where hedge funds are placing their bets.

Soros, who has been bullish on gold in the past several years, cut his holdings in the SPDR Gold Trust (GLD.P) to just $6.9 million by the end of first quarter, compared with $655 million in December, becoming the most high-profile investors to turn his back on one of the market’s best-performing assets.

He also liquidated a 5 million share stake in the iShares Gold Trust (IAU.P), the filings showed. His total holdings in gold-backed ETFs was $774 million as of December.

Gold rose for a tenth consecutive quarter in the three months to March, hitting record highs above $1,400 an ounce, buoyed by political turmoil in the Middle East and North Africa and lingering worries about indebted European countries.

The gains accelerated in April, but peaked at the start of this month, reaching a record $1,575 an ounce on May 2.

Prices have since fallen more than 5 percent amid the biggest commodities slump since late 2008, a move partly triggered by a Wall Street Journal report that Soros’ $28 billion fund was selling precious metals — and felling fears other big funds were also seeing a peak.

Eric Mindich, who runs the Eton Park Capital Management, nearly halved his stake in the SPDR gold trust to $326 million for the first quarter, a filing showed on Monday.

Mindich’s fund also owned $839 million worth of call options by the end of first quarter, compared with $1.1 billion worth of put options at the end of the fourth quarter.

Touradji Capital Management, one of the world’s largest commodities-oriented hedge funds run by Paul Touradji sold 173,000 shares in the SPDR Gold Trust during the quarter. Those shares would be worth about $25 million at current prices.

But John Paulson, who notched the industry’s biggest ever payout last year, kept his 31.5 million share or $4.4 billion stake in the SPDR fund, remaining the biggest shareholder of the world’s largest gold-backed exchange traded fund for the quarter, according to regulatory filings.

DEFLATION THREAT RECEDES

The sales make sense given that Soros said he had bought gold because he was worried about deflation, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Pittsburgh.

“It’s pretty hard to make the case for deflation right now so if that was a reason you were buying gold, you should take this signal from Soros,” he said.

Inflation is now the greater concern, Luschini said. So most investors should still keep about 3 percent to 5 percent of their assets in gold to protect against inflation and possible further problems in the world financial system.

Soros also slashed stakes in gold and silver mining companies during the first quarter. The firm owned 1.4 million shares of Kinross Gold (K.TO) at the end of the quarter, down from 4 million shares three months earlier. Holdings in Novagold Resources (NG.TO) dropped to 3.5 million shares from 12.9 million.

Gold ended the first quarter little changed, as the spot gold prices were only $10 higher to end at $1,430 an ounce on March 31, and the SPDR Gold Trust was up 1.3 percent.

In the second quarter, gold hit a record high $1,575.79 an ounce on May 2 fueled by the outlook of low U.S. interest rates.

So far in the second quarter, SPDR Gold Trust’s bullion holdings gained only about 1 percent to 1,229 tonnes as of Friday, well below its record high at 1,320.436 tonnes set on June 29 last year.

Institutional investment managers are required to file form 13-F with the SEC within 45 days after the end of each quarter.

Read the entire article HERE.

THIS IS HUGE! If you are wondering where you can make a profit for your gold and silver, APMEX is actually paying YOU an overspot price so you will make a hefty profit for your metals. That is of course if you are willing to part with something that will go up in price. Expect other dealers to do the same as shortages continue.

Mike Piromgraipakd

by Tyler Durden
ZeroHedge
04/25/2011 19:22 -0400

Over the past hour Zero Hedge has been inundated with reader comments notifying us that Ampex has, validating the earlier post speculating about a possible silver shortage at the metals distributor, launched a “reverse ïnquiry” in which it will pay “you $3.00 over the current spot price of Silver for your Silver American Eagles. ANY year, ANY quantity!” and “We will pay you $38.00 over the current spot price of Gold for your Gold American Eagles. ANY year, ANY quantity!” So aside from this first public confirmation that one of the biggest wholesale retailers of precious metals is now inventoryless [sic], we can certainly see why Asia has decided to take silver down in the afterhours electronic session.

Read the original article HERE.

Tyler Durden
Zerohedge.com
04/25/2011

With the US Mint forced to cut down dramatically on its Silver American Eagle sales, for some reason various timid elements considered the drop in monthly sales as indicative of a wane in investor interest (record prices aside). Perhaps the following note from Ampex: one of the otherwise “deepest” silver vendors in the market, may restore some balance to the (supply/demand) force.

Read the entire article HERE.

Gold Alert
04/18/2011

The world of institutional investors received a stark message over the weekend regarding the legitimacy of gold as an asset class. The University of Texas Investment Management Company, which manages the endowment for the Texas teachers pension fund, has placed 5% of its assets in gold bullion. This represents a purchase of $1 billion of gold bullion; in excess of 650,000 ounces at today’s prices.

Of note was the fact that the entity chose to place its investment not in gold ETFs, but rather in physical bullion due concerns regarding counter party risk. The request to take physical delivery from the COMEX also casts light on risks of a COMEX default since gold in COMEX vaults only amounts to approximately 5% of the outstanding gold contracts.

In the 1970s, asset allocation recommendations from U.S. brokerage houses and European banks routinely included a 5-10% allocation to gold. Despite gold’s rise, the yellow metal still represents sub 1% of the global market cap of all assets. The news of this $1 billion purchase over the weekend sends another strong message about gold’s re-emergence as a legitimate asset class.

It is somewhat ironic that these events are occurring after a nearly six-fold rise off gold’s $250 per ounce low at the turn of the millennium. Investors will be watching closely to see if this move triggers similar reallocations among other large pension funds.

Read the entire article HERE.

Submitted by Tyler Durden on 02/21/2011 12:04 -0500
Zerohedge.com

The first very shy tick above $34 in the last 31 years is in the history books. Will soon be followed by many more. And only $16 more to go to all time nominal highs… and ~$160 to real ones. What is truly hilarious vis-a-vis claims that the dollar is a reserve currency is that in the period in which gold has risen by 2.9%, and silver, 12.3%, the DXY has dropped by 1.45%. It would be quite amusing if Schumer’s push to unpeg the CNY came true, only for the US to realize that its currency is now completely irrelevant.

The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.

For the 63 straight trading days in Q1, in other words, Goldman Sachs, JP Morgan, Bank of America, and Citigroup made money trading for their own accounts.

Trading, of course, is supposed to be a risky business: You win some, you lose some. That’s how traders justify their gargantuan bonuses–their jobs are so risky that they deserve to be paid millions for protecting their firms’ precious capital. (Of course, the only thing that happens if traders fail to protect capital is that taxpayers bail out the bank and the traders are paid huge “retention” bonuses to prevent them from leaving to trade somewhere else, but that’s a different story).

But these days, trading isn’t risky at all. In fact, it’s safer than walking down the street.

Why?

Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits–by borrowing from the taxpayer and then lending back to the taxpayer.

Why is the US government still lending banks money at near-zero interest rates? Ostensibly, for the same reason that the government bailed out the banks in the first place: So the banks will lend money to small businesses, big businesses, and other participants in the “real economy.”

But the banks aren’t lending money to the real economy: Private sector lending has fallen off a cliff.

And one reason private sector lending has fallen off a cliff is that lending money to the private sector is risky. Lending money to the government, meanwhile, is nearly risk-free. So the banks are just lending money back to the government (by scarfing up US Treasuries), collecting a nearly risk-free 3% spread, and then leveraging up this bet 10-15 times

Read the entire article HERE.
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