The silver market is increasingly becoming an exercise in contradiction. On one hand, the silver spot price has disappointed thus far in 2013, falling from the low-thirties in early January down to its current level around US$29.00/oz. Given that price direction, one would be forgiven for assuming that the silver ETF's had experienced outflows over that time - but they have not. While we have seen the SPDR Gold Trust (GLD) shed 141 tonnes of gold year-to-date with the price of gold reacting accordingly, silver ETF's have in fact ADDED to their stockpiles since January 2013, representing more than 20 million ounces of additional silver.
Chart 1 below, courtesy of Bloomberg, compares the total ETF Holdings of gold versus that for silver since the beginning of the year. As can be seen, silver ETF's have enjoyed considerable inflows over the past three months, while gold ETFs have seen redemptions. Given the positive correlation between the prices of gold and silver, it is indeed strange to see the metals' most popular exchange-traded vehicles experience completely divergent investment flows.
In addition to the ETF's, we are also seeing this divergence play out in the physical market, where the US Mint's silver coin sales have already reached an all-time high of 13.2 million ounces in the first three months of 2013. If annualized, the Mint is on track to surpass 52.8 million ounces of silver sales by the end of the year - which would represent a new all-time annual record. These are certainly not the levels of physical sales one would expect to see during a prolonged doldrums phase for silver. In fact, when we compare the dollars invested in silver eagles vs. gold eagles, the divergence becomes even more pronounced. On a year-to-date basis, investors have spent slightly more on one-ounce silver eagle coins ($383mm) than they have on one-ounce gold eagles ($360mm). In other words, more dollars are going into physical silver than gold, implying that investors are buying 56X more silver ounces than gold ounces - and yet the silver price continues to languish. Silver is not 56X more available than gold on a supply basis either.
Interestingly enough, in 2012, the US Mint's silver coin sales surpassed the amount of physical silver produced via US domestic mine production. According to the United States Geological Society, US mining operations produced 33.6 million ounces of new silver in 2012. The US Mint, meanwhile, managed to sell 33.7 million ounces of silver in the same year - representing the second highest annual silver sales in its history. According to silver specialist, Ted Butler, the US Mint has now become the single largest buyer of silver in the world, and barring some static silver stockpile we don't know about, it would appear that the US Mint is now importing foreign silver to meet its coin demand. Again, not the kind fundamental flows we would expect given last year's price action.
Although the silver spot price continues to waver just below $30/oz, silver investors should take solace in the growing divergence between the silver spot price and the investor demand implied by the ETF inflows and US Mint coin sales. The silver market's paper vs. physical contradiction has never been more pronounced. We may finally be approaching the time where silver's tightening physical market takes the lead in setting the metal's spot price. Given the investor flows noted above, it would certainly make sense to us if it did.
For those with physical or non leveraged silver positions things look ok ---all except the price. While they say its getting ready to explode they have been saying that for a long time. I don't disagree with them but price is not acting that way.
For those with LEVERAGE --- its a different story. We can't afford to see silver plunge down from here.
As we get ready to move to the weekend there are a few considerations.
First since silver is acting so weak I'm beginning to wonder if that means that if it weren't for the CYPRUS situation, would gold also be weak ? If that is the case ---- whatever decision is made this weekend could impact gold very negatively. And if gold starts to tank silver would surely be following.
The fact that silver failed at 29.30 yesterday was a real letdown. the chart looked great and its now a 3rd failure at 29.30. The turn down to 28.50, while still at support is worrisome.
The other side of that coin is what if this is a price fake-out and Monday will be a lot higher? That's possible but with LEVERAGE what if its not?
Of course this is all happening at the APPOINTED TIME -- the time i've discussed that is likely the most important time for the metals this year --- March 22nd to March 29th. It is amazing how this exact date is playing out for this major decision that could propel the metals much higher or provide the final plunge for the seasonal lows. And of course its happening on a weekend. And the markets re-open on Sunday night with the thinnest volume and liquidity. And for those who follow the Illuminati --- today's calandar reads 322 !!!!
But it gets better:
Go read this blog by Martin Armstrong. He discusses the Russian implication and tomorrow there is a 224 YEAR CYCLE TURN in his model of USA POLITICAL CHANGE and these decisions are coming on the EXACT DATE !!!
Saturday
THE CYPRUS BANKING CRISIS
The VOTE is due this weekend on what will happen on Monday.
So what if there's a vote to not take the money? That could mean that gold opens with a GAP down in price and the bears could walk all over that and I'd get stopped out with a 20 dollar hit per ounce at my 1585 stop. That's if the gap isn't deeper and there's liquidity.
The opposite of course would be that GOLD opens with a huge GAP UP and that would maybe carry silver to break even. If it does, I'd probably exit.
But if holding both silver and gold and we get a vote that doesn't favor the metals ---then they both could tank.
I don't like holding positions over the weekend when a big vote like this comes and i have no control of my position until the banks open.
So now it comes down to whether I want to risk a gold sell off in order to participate or do I stand aside and if gold opens higher I will have missed an up move.
The tendency is to always want to make a profit and we highlight profits more than we do losses. But losses are the one thing that can eliminate you from commodities. What if decision is bad for gold and it opens 30 lower?
Would it be better to stand aside, and guarantee NO LOSS--- and if the trade opens higher, at least you have a chance to catch a pullback.
The CHOICE is up to you
I can't do that for you. This week, I made 16 dollars per ounce on the gold trades. Perhaps standing aside and not inviting risk is best. For you that may be different.
IF I EXIT NOW --- I break even on the last trade -- the long at 1605.50.
But even if I exit--- it doesn't mean you have too. If you choose that it will be very bullish for gold then you can stay.
BUT THAT IS THE DECISION that needs to be made.
THE GOLD MARKET COULD OPEN A LOT HIGHER ON SUNDAY NIGHT -- IT COULD BE MUCH HIGHER.
But in this crazy market is could be lower -- a lot lower.
Here's more on the story
There's all kinds of scenario's going on. The most popular is plan B.
5.8 BILLION EURO's must be raised by Monday.
A PLAN B scenario is unraveling and there's already a LIMIT of 206 EURO's (400 dollars) allowed to be withdrawn from banks if PLAN B gets voted on.
There's a lot more nervousness climbing amongst the citizens.
PROTESTORS SEEM TO BE GETTING BIGGER CROWDS.
Gov't trying to put plan to re-organize biggest bank. Only guarantee first 100K Euro's. That sounds good but its estimated that up to 40% of the accounts have over 100K.
ONE WOULD SEEM TO THINK THAT ALL OF THIS IS GOLD BULLISH.
I would agree but isn't everything else that is going on GOLD BULLISH ? Yet we've been moving lower for 6 months.
From my end I see silver again --very weak with a choppy and overlapping structure. I haven't played silver much but over the past year i think there's about a 5 dollar gain per ounce from 2012. I regret having bought the position. But it looked like a breakout was in play and instead so far its a fake out.
Since the metals have not been in a bull mode ----and silver seems to be hinting that the only reason gold is rallying is due to CYPRUS it means that a VOTE that favors the metals will have a good gain -- but a vote that doesn''t favors a potential sell-off.
REALLY --in the end -- the control boyz are going to do what they want with gold.
I'd rather not take a loss --- and be guaranteed of that. If its in favor of gold, I'll look for a set-up. But if its not in FAVOR of gold, everyone will be looking to sell on a Sunday evening when volume is the thinest.
THE BOTTOM LINE
THERE COULD BE A MASSIVE EXPLOSION HIGHER IN GOLD --- THE CONTROL BOYZ COULD SELL GOLD OFF
The question is how much risk do you want to take. The payoff could be good --- it could be excellent. It could be the other way around.
Or it could open right where it closes.
Personally, I choose not to take the chance. I'll take my chances once the market opens up. If it opens 50 dollars higher so be it. If it opens 50 lower so be it. My goal is to eliminate risk. I'm just not willing to risk it.
Each person is an individual and you don't have to follow my lead. You have to choose. I can only choose for myself. And I can't choose an option that doesn't give me control of my account because its the weekend. I'll take my chances once the market is open.
THUS --- I'm putting a stop on GOLD AT BREAK EVEN. If the stop is not taken out --- I exit at the close.
In silver --- I've raised my stop to 28.49. If the stop is not taken out --- I exit at the close.
Come what may on Sunday night --- be it 50 dollars higher, 50 lower or just unchanged, the key is that there will always be trades and opportunity for gain and loss.
Since 90% of traders end up losing, it behooves us to make risk and loss a priority. Once the money is gone, the game is over.
IF ONE wants to be long over the weekend --- BUY A GLD CALL OPTION.
Here's the one I would buy ---- each contract is equivalent to 10 ounces of gold but expires in April. For me, I'm standing aside.
Have A Great Weekend
Keep watching
over the weekend for the latest developments about Cyprus crisis.
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GOLD CURRENT TRADE
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Our Position
Bought 1Apr Gold on 20/03/2013
Entry: 1605
Sell Stop : 1605
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SILVER CURRENT TRADE
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Our Positions
Bought 1May Silver on 21/03/2013
Entry: 29.15
Sell Stop : 28.49
Bought 1May Silver on 22/03/2013
Entry: 28.60
Sell Stop: 28.49
YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
Do your own due diligence.
No one knows tomorrow's price or circumstance.
I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.
I do not accept responsibility for being incorrect in my speculations on market trend.
I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.
I do not accept responsibility for being incorrect in my speculations on market trend.
King Regards
