MIKE

Posts Tagged ‘SLV’

In Open Thread on Thursday, May 5, 2011 at 12:16 pm

Nowadays everybody has to learn to do more with less. For reasons I’m not smart enough to understand, the SLV is becoming a shining example of that old adage. Since its inception in 2006, the SLV has traded more than 100 million shares exactly 10 times it’s usual trade volume, 9 of which occurred consecutively (April 25, 2011 – May 5, 2011 (today)). In fact today was all-time, #1 volume day for the SLV (295mm). So no doubt the SLV is doing more. What’s utterly amazing is they are doing all this crazy volume 33 million shares less (and ounces of silver) than they had just 7 trading days ago. So in the last 9 trading days, trading has totaled more than 4 times the number of shares currently in existence.

Now that’s doing more with less!

(Click image for larger view)

SLV shares outstanding chart from Stockrageous.com , they also have historic shares outstanding data available for download.

Even mighty Apple at its mo-mo-mo-iest never came close to this kind of volume relative to shares outstanding. In October 2008, AAPL traded 160% of its outstanding shares for the entire month. At the present pace, SLV will trade well over 1000% of its shares outstanding in May. Un-believable. Maybe Blackrock’s Kevin Feldman would like to write another letter explaining to all us conspiracy theorists how the world’s larget ETF is 97.5% backed by silver, and how more trading volume = less silver held in trust. Maybe Kevin would also like to explain exactly when Blackrock decided to deviate from its 2009 SLV prospectus…

(Click for a larger view)

(Screen capture from 2009 SLV prospectus)

Fun Facts: Despite having exceeded the $264.5 million ounce limit in 2009, JP Morgan is still the sole custodian of SLV. As of this writing, JPM still has exactly zero ounces of registered silver in its COMEX vault.

Maybe Kevin would like to retract that statement about “protecting shareholders interests” now, or maybe he would like to publicly thank Jamie Dimon for holding even more silver than the trust intended him to be responsible for.

Selloff, what selloff?

I think it rains because I left my sun roof open, but I don’t go on national television declaring that to be the case. Saying that the CMEs recent margin hikes are responsible for the plunge in silver is supported by even less evidence (open interest in the July futures contract has risen by 50% since April 20). Furthermore, would somebody please explain to CNBC’s Bob Pistrami that there hasn’t been a selloff in the SLV, and even if there had been, it would have zero impact on the price of silver. Now if Bob wanted to report that 33 million ounces of silver vanished from the trust for no apparent reason, that would be accurate reporting. If you look at the COMEX report, you’ll see that there’s not much going on there, but once again, JPMs “customer” is the preeminent seller of silver. Keep in mind, they were buyers a couple weeks back at higher prices. Buy high, sell low. That would be even funnier if I didn’t believe the US taxpayer was subsidizing this trade.

…And the COMEX supply of registered silver remains tighter than ever:

Recap: More volume = fewer shares; Tighter supply = lower prices.

Kidding aside, the time to capture criminals is when the crime is in progress, and if you’ve ever wondered what “yellow journalism” looks like, turn on CNBC today.

I thought this guy didn’t believe in precious metals:

by Robert Lenzner
Forbes
May. 4 2011 – 10:54 am

George Soros apparently thinks the gold bubble reached its peak in April. The multibillionaire hedge fund manager sold his large holding in GLD, the gold ETF in April as the price spiked to the $1550 an ounce level. Soros’ liquidation could well mark the peak for gold since other hedge funds and traders who followed him into the gold trade, could decide to sell before QE2, the Fed’s $600 billion program of quantitative easing is over.

If true, it means that Soros; gold position, first accumulated in 2008 when gold was in the $850-900 an ounce range, made him and his investors a return of at least 60-70% over almost 3 years. Other gold investors believe that continued weakness in the dollar will attract more gold investors like the central banks of China, Russia and India, who see the precious metal as an alternative to paper currency.

To be fair, the Soros gold sales have not been officially confirmed by his office- but have been reported by the WSJ and Bloomberg TV. Other hedge fund managers, who have large positions in GLD include John Paulson, who it is reported, has been suggesting gold could go much higher than $1500 an ounce due to weakness in the dollar. Other large gold investors include Tom Kaplan, who owns a major position in Novagold(NG), a Canadian company, Frank Giustra, a Canadian mining entrepreneur, The University of Texas pension fund and many others such as US Global Investors, a mutual fund company in San Antonio, Texas.

GLD, which became the globe’s 7th largest holder of gold, hit a peak of $60 billion in assets during April.

Gold has been declining in price to t he $1530 mark just as silver continues a much sharper decline- 3.69% so far today and about 25% in the past week- in the wake of margin requirements being severely hiked. Forbes predicted at least a 10% sell- off in gold and silver last week.

Read the entire article HERE.

By Garry White, and Rowena Mason
The Telegraph
6:02PM BST 27 Mar 2011

Certainly, the fundamentals are sound. Declining mine production has resulted in a tight supply as demand continues to rise.

Investors are still keen on silver because of currency and geopolitical concerns. Holdings in the iShares Silver Trust, the largest silver exchange-traded fund (ETF) in the world, increased by 179 tonnes to 11,140 tonnes in the week to March 24. Gold holdings in ETFs fell over the same time period.

“The psychologically important mark of $40 a troy ounce is meanwhile within a reachable proximity,” Commerzbank said on examining the ETF figures.

The fact that investors are keen on silver means that ETFs take supply out of the market, which can mean price rises become a self-fulfilling prophecy.

Silver is also an industrial metal, so demand for it is rising as the global economy recovers. Although it is no longer used much in photography, as the industry switches to digital applications, its use in electronics sectors, especially in semiconductor production, is increasing. There are also new applications for the metal emerging, such as silver oxide batteries.
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Both gold and silver hit significant highs on Thursday last week. Gold futures jumped to an all-time high of $1,448.60 following the turmoil in Libya and further protests around the Middle East. Silver prices reached $38.18 on the same day, the highest in 31 years. Silver prices jumped almost 6pc last week after more than doubling over the last year.

The main argument that silver bulls use relates to the gold/silver ratio, which is simply the price of gold divided by the price of silver in the spot market.

When gold and silver were used as currency, it was decided that 16 ounces of silver had the same degree of purchasing power as one ounce of gold. The silver/gold ratio therefore stood at 16:1.The last time that the ratio reached 16:1 was in the 1980 precious metals spike following the energy crisis.

At the start of October last year, when this column last talked about silver, the gold/silver ratio stood at just under 60. Today the ratio stands at 38.3, having fallen sharply over the last month. At the start of February the ratio was at 49.5. There is definitely a trend that silver is increasing in value relative to gold.

The fact the ratio is below 40 is itself a reason for caution. The long-term average is about 40, so today’s ratio could be about right. Most analysts did not expect the price to rise so sharply this year, so the price could be ahead of itself – especially if there is a quick resolution to the current turmoil in the Arab world.

There are other downside risks, too. Any strengthening of the dollar is likely to cause a dip in commodity prices, as they are priced in the US currency. There has been some brighter economic data from across the Atlantic of late causing some to ask the Federal Reserve to stop its second bout of quantitative easing early.

“The economy is looking pretty good,” James Bullard, president of the Federal Reserve Bank of St Louis said on Saturday. “It is still reasonable to review QE2 in the coming meetings, especially this April meeting, and see if we want to decide to finish the programme or to stop a little bit short.”

Printing money is expected to weaken the dollar over the long term, so any early cessation could cause the US currency to rise. As commodities are priced in dollars, any strengthening makes them more expensive in other currencies causing a weakening of demand.

After such a bull run, any correction in silver prices could come hard and fast, so it may be wise to wait and see if it appears, especially since silver equities now appear to be very richly rated.

However, the US debt is enormous and, at some point, policy makers may decide that inflating away the debt is their only option, prompting the dollar to devalue. This means silver will remain attractive over the long term. But now does not look like a good time to buy.

GW

Read the entire article HERE.

Monday, 29 Nov 2010 | 9:56 AM ET
By: Sharon Epperson and Jessica Golden
CNBC

The price of silver is surging and so is business at many coin dealers across the country. At Plaza Collectibles, an appraisals shop in Manhattan, owner Lee Rosenbloom says he’s seeing a tremendous demand both in new and older silver coins. “This is probably the strongest demand there’s been in the last 25 years,” he says. Silver prices have soared 60 percent in 2010, driven in large part by a strong investment demand, particularly strong buying of exchange-traded funds, or ETFs, backed by the physical metal.

“ETF demand has been an important driver of prices because investors have prepositioned themselves for this central bank buying by emerging markets” says Francisco Blanch, Head of Global Commodity Research at Bank of America-Merrill Lynch [BAC 11.31 0.19 (+1.71%) ].

Other leading gold analysts agree this buying frenzy will continue. Philip Klapwijk, executive chairman of the consulting firm GFMS, says he expects to see $4 billion on a net basis flurrying into silver and gold investment this year. Holdings in the largest silver exchange-traded fund, iShares Silver Trust, are near a record high, trading up 62 percent year to date (as of closing on November 23).

According to Blanch, the increase in silver prices has also been spurred by a rise in industrial demand, which is up 18 percent year over year. A hike in demand for silver from solar panels and pent up demand from the industrial sector is helping to push up prices. He expects to see further growth next year but at a slower pace.

For many investors, silver is a more affordable alternative to gold. Gold coins are traded based on a spot price that is currently almost $1,400 an ounce.

Silver coins are based on futures prices that are under $30 an ounce. “Silver coins are a relatively cheap gift and way for people to accumulate wealth,” says Blanch.

The strong interest in silver has created a record month for sales of the 2010 Silver American Eagle bullion coin, according to the U.S. Mint. Silver coin sales are up 22 percent compared to this period last year and 30 percent since 2007.

Alternative Investing – A CNBC Special Report

Yet, analysts say investors who want to get in on the action and are deciding between holding the actual silver metal or an ETF should weigh their options carefully, since coins ultimatley may cost a higher premium.

Read the entire article HERE.

NEW YORK (TheStreet) — Gold price manipulation is the most controversial theory that has circulated among gold bugs for 20 years.

Conspiracy theorists think that gold prices have been illegally suppressed over the last two decades by central banks and governments. GATA or Gold Anti-Trust Action Committee is the biggest complainant.

Central banks reportedly have 32,000 tons of gold, with the International Monetary Fund accounting for 2,800 tons. Under the Washington Agreement on Gold, its members can only sell a maximum of 400 tons a year thereby restricting the amount of gold in the open market place.

GATA argues that central banks in actuality have less than 15,000 tons of gold and that the missing gold has been secretly sold into the market preventing gold prices from rising to their actual price, which helps the country’s paper currency, bonds and interest rates. The suppression theory means that global economies are in worse financial shape than investors think and that gold should be bought as the ultimate safe haven.

The New York Post recently reported that the the Commodities Futures Trade Commission and the Department of Justice have launched criminal and civil probes into JPMorgan’s trading in the silver market to determine if the investment bank depressed the silver price for their advantage. There are also rumors circulating that a major New York law firm will launch a similar lawsuit against the investment bank.

I interviewed Chris Powell, secretary and treasurer of GATA to get the facts of this alleged manipulation.

Can you explain the basics of silver/gold manipulation?

Powell : Gold, and to a lesser extent, silver are currencies. Governments have intervened in the gold market in the open throughout history. Our complaint is that more often now they’re doing it surreptitiously as a mechanism of supporting their currencies, supporting government bonds and suppressing interest rates.

So can you break it down, how the government is doing it on the sly as you said?

Powell: Yes, the manipulation of the gold market now is achieved through two mechanisms mainly. One is the outright sale or leasing of central bank gold reserves to add gold to the market. The other is the sale of futures and options, gold derivatives by the big investment banks that have special relationships with the central banks, particularly with the Federal Reserve. These are essentially naked short positions in the gold and silver markets.

We believe they are pretty much backed up by the central banks, which will, at least in the gold market, provide whatever gold is necessary when somebody actually wants to remove gold from the system to really liquidate a position. The problem is the gold supply has been inflated in the futures market so there’s so much more gold paper out there than there really is gold.

For someone who has no idea what this means, how do the central banks lease to the bullion banks?.

Powell: It basically began as a carry trade. It was in the interest of most central banks and the investment banks. The central banks would lend gold at a very low interest rate, perhaps 1% to an investment bank. The investment bank in turn would sell the gold for cash and use the cash to fund its operations.

And this worked very well for the investment houses as long as they had some confidence that the gold price would not rise and destroy the carry trades. Central banks liked it because it kept the price of gold, the competitive currency down. It kept interest rates down. It supported the government bonds and the government currencies. Now this carry trade is breaking up a bit. We think because central banks are running out of gold that they can distort.

So that doesn’t seem so bad. You lease gold, it goes into the markets. So what’s the problem?

Powell: Well the problem is it’s surreptitious. It’s a matter of deceiving the gold market and more importantly, the currency and government bond markets as to what the government is doing. It also gives inside information to the investment houses that are working the trades that the government wants done. It’s a grand deceit. If it was done in the open, people would understand what the government policy was. But open policy would not have the effect of deceiving the markets. If you remove the deceit from the gold pricing scheme, the scheme is of very little use.

How long do the investment banks get to lease the gold for, from central banks?

Powell: The leases may be written in limited periods of a year or two years or three years. We believe that most of the central bank gold sales, or supposed gold sales in recent years, were not really gold sales at all. They were cash settlement of lease gold that could not be recovered and returned to the central bank without causing a huge spike in gold prices.

Continue the article HERE.

Purchase Professionally Graded Gold and Silver Coins HERE.