Archives for October 2008

Gold and Silver News & Headlines for October 29

October 29, 2008 by admin Leave a Comment

It’s the great new outdoor activity of our time. Prospecting for Gold.

Three men attempt to buy foreclosed properties with bags of gold and silver. The sheriff conducting the sale opines that the three men are “anarchists” engaging in “paper terrorism.”

The Coin Market As We See It

A market report from Legend Numismatics. The last section is of interest. Would be buyers of gold bullion are increasingly turning to generic gold coins instead, meaning semi-collectible coins such Gold Double Eagles from the early 1900’s.

New policy on purchase and sale of silver Libertad coins

A new policy from a Mexican bank with over 800 branches. They will raise their re-purhcase price for silver coins to align with the re-sale prices and try to match public supply and public demand. Basically, they will establish a price for silver based on actual market forces rather than Comex prices.

Filed Under: Uncategorized Tagged With: Gold, Gold Coins, Silver

Premiums for 100 Ounce Silver Bars

October 28, 2008 by admin 4 Comments

There has been much recent coverage of the rising premiums being paid to purchase physical gold and silver bullion. This has been cited as a consequence of the extreme demand for precious metals and evidence of the growing disconnect between market prices and physical prices.

I decided to look at some data to calculate exactly what kind of premiums are being paid and see if any trend or patterns in the data could be determined.

Specifically, I looked at selling prices for 100 ounce silver bars on eBay. I decided to use this as a source of data since 100 ounce silver bars have historically been a low premium method to acquire silver. Also, bars of silver are relatively undifferentiated. Bullion coins from different countries or with different dates often carry premiums based on those differences.

I used eBay data because it was accessible. Completed auction records can be obtained for the prior two weeks or more. Also, I believe that eBay represents a real time, liquid market of buyers and sellers who discover prices through a bidding process. Quoted dealer prices may be for delivery at a later date and may not represent actual available supplies.

There are some possible flaws with this method. It does not take into account potential premiums for different manufacturers. I don’t know if people pay more for different makes of bars. Also, shipping costs are not included in the price data used. Some auctions may carry higher shipping charges which would impact the final selling prices. And lastly, some auctions were “true auctions” which start at a minimal opening bid while others were fixed price listings.

Data was available from October 13 to today’s date. I did not include data for today or October 13, since it may represent partial data. I determined the average price for each day’s auctions which closed with a sale. I compared this to the closing market price of silver for each day.

Here is a summary of the data:

Average Price for 100 Ounce Silver Bars on eBay Compared to Market Price of Silver

Date	Bars Sold	Ave Price	Market Price	Premium	Premium %
14-Oct	12	$1,557.17	$10.89	$468.17	42.99%
15-Oct	10	$1,524.70	$10.92	$432.70	39.62%
16-Oct	29	$1,465.07	$9.99	$466.07	46.65%
17-Oct	19	$1,427.68	$9.56	$471.68	49.34%
18-Oct	28	$1,422.00	$9.56	$466.00	48.74%
19-Oct	46	$1,419.04	$9.56	$463.04	48.44%
20-Oct	21	$1,431.76	$9.79	$452.76	46.25%
21-Oct	17	$1,391.94	$9.86	$405.94	41.17%
22-Oct	19	$1,428.11	$9.84	$444.11	45.13%
23-Oct	25	$1,382.84	$9.34	$448.84	48.06%
24-Oct	37	$1,367.78	$8.88	$479.78	54.03%
25-Oct	13	$1,389.31	$8.88	$501.31	56.45%
26-Oct	33	$1,329.91	$8.88	$441.91	49.76%
27-Oct	15	$1,337.33	$9.01	$436.33	48.43%

Some charts based on this data appear to the right. (Click for larger versions) The data is only for a limited time frame, but it does spur some interesting observations.

The premium paid for a 100 ounce silver bar has ranged from 39.62% to 56.45%. The premium represents the amount paid in excess of the so-called “market price” of silver. People are clearly paying astounding premiums to acquire physical silver.

On October 15 and 22, the market price of silver dropped. In each instance this caused the percentage premium to rise. This lends some evidence to the anecdotal observation that a decline in market price only spurs greater demand for the physical metal.

Two distinct prices for silver seem to exist. The paper price for the contractual right to acquire future silver, and the physical price to acquire real silver, in hand. How and when will this situation resolve itself?

There have been several recent reports of bullion buyers seeking to take physical delivery of silver and gold from the COMEX. This would allow buyers to purchase real silver at the heretofore “fictional” paper price. If these deliveries take place and become a dependable source of purchasing physical silver, premiums for 100 ounce bars and other physical silver would likely begin to subside.

On the other hand, some are voicing the possibility that since the COMEX only has small coverage of physical metal for outstanding contacts, if enough contact holders demand delivery they will be forced to default and settle in cash. If this occurs, the likely result would be soaring market prices for silver and potentially greater premiums as the argument for physical scarcity gains another leg of support.
[phpbay]100 silver bar, 3, 39489, “”[/phpbay]

Filed Under: Silver Tagged With: Comex, Silver, Silver Bars

Gold and Silver News & Headlines for October 27

October 27, 2008 by admin 1 Comment

More linkworthy gold and silver news and headlines from various places around the internet.

Mints struggle to meet metals demand

Provides some specific insight into the Royal Canadian Mint. They have doubled their output twice in the last right weeks. Quote from a bullion dealer, “Now it’s 99 per cent buyers and one per cent sellers, and people are buying whatever’s available.”

Goldcorp: Implosion Offers Shiny Opportunity

If you follow gold stocks, you know that they’ve all been decimated in recent weeks. The last time Goldcorp traded at its current price, gold was at $400.

Filed Under: Uncategorized Tagged With: Gold, Goldcorp, Royal Canadian Mint

US Mint to Sell Final Inventory of 2008 Platinum Eagles & 1/10 oz. Gold Eagles

October 25, 2008 by admin 2 Comments

A few weeks back the US Mint announced that they would be taking unprecedented actions to deal with the demand for bullion coins. This included production halts for some bullion coins and limited production for others until existing blank inventories were depleted. Read the full US Mint memo with details of the actions.

Yesterday the following memo was released announcing that starting Monday, the US Mint will resume taking orders for the remaining 1/10 oz. Gold Eagles and Platinum Eagles. The memo also provides some insight into how the US Mint will ration the remaining supplies.

October 24, 2008

MEMORANDUM TO ALL AMERICAN EAGLE BULLION COIN AUTHORIZED PURCHASERS

SUBJECT: 2008–Dated Bullion Coin Products

On Monday, October 27, 2008, the United States Mint will resume taking orders for 2008-dated American Eagle One-Tenth Ounce Gold Bullion Coins and all sizes of American Eagle Platinum Bullion Coins.

Final inventory for these bullion coins is based on current in-house blank supplies and some supplies are very limited. The United States Mint will allocate these remaining coins among the Authorized Purchasers (APs).

The United States Mint will use a slight modification of its standard allocation process, which is as follows:

Monday morning, the inventory available for sale that week will be divided into two equal pools for each bullion coin product.

The first pool for each bullion coin product will be allocated equally to all active American Eagle Gold One-Tenth Ounce and American Eagle Platinum APs respectively (active APs are those which have purchased American Eagle Gold One-Tenth Ounce or American Eagle Platinum Bullion Coins in the past three fiscal years).

The second pool will be allocated based on each AP’s sales performance for each bullion coin product in the last three fiscal years (e.g., an AP who purchased 30% of all American Eagle Gold One-Tenth Ounce Coins during this time will be allocated 30% of this second pool).

Each AP will be advised via fax Monday morning (or if a government holiday, Tuesday morning) of its allocation, and will have until 3 p.m. on the following Friday to place an order for its allocated coins.

Any unordered coins remaining after 3 p.m. Friday will be put back into the pool for allocation the following Monday only until coin inventory for each product is depleted.

Included in the communication with each AP’s initial allocation on October 27 will be its allocation percentage based on sales performance.

Please note: The inventory for the American Eagle Platinum One-Tenth Ounce Bullion Coins is very limited and will be allocated to the Authorized Purchasers with the highest sales performances for the past three fiscal years for this product.

Available inventory will remain on allocation each week for the American Eagle Gold One Ounce and American Eagle Silver Bullion Coins.

We will keep you informed when more information becomes available for the American Buffalo Bullion Coins.

Thank you for your patience and your continued support of the United States Mint Bullion Coin Program.

Filed Under: Gold, US Mint Tagged With: Gold, Platinum, US Mint

Gold and Silver News & Headlines for October 25

October 25, 2008 by admin Leave a Comment

Links to some excellent gold and silver related stories and blog posts:

A Golden Opportunity?

In Russia, investing in gold is difficult and any profits are hampered by 18 VAT charged on bullion purchases. As an alternative, some turn to jewelry. Sales of gold jewelry have surged 50% in the past two months.

Why the Price of Gold is Sinking Fast

Some great outside the box thinking about what’s keeping the price of gold down. Read the full post, but here’s my attempt to quickly summarize the idea: Gold and stocks are supposed to be negatively correlated. But since diversified investors now own both, does that make gold and stocks correlated?

How to Buy Physical Gold and Silver on the COMEX

The idea seems to be catching on.

Filed Under: Uncategorized Tagged With: Gold, Russia, Silver

Ten Reasons Gold Is Not Above $1,000

October 24, 2008 by admin 5 Comments

Gold reached its all time high price above $1,000 per ounce a few days after the shocking Bear Stearns bailout. In the following months gold often experienced sharp declines and has stubbornly refused to reattain the key $1,000 level despite more shocking bailouts, bank failures, and bankruptcies.

Reporters, analysts, and bloggers have cited a variety of reasons why gold has not exploded higher amidst the ongoing turmoil. Some of the reasons are more valid than others, but all are worth examining. Without further ado, the Gold and Silver Blog brings you the Top Ten Reasons Gold Is Not Above $1,000:

1.) Dollar Strength

Against nearly every world currency, the US Dollar has been strengthening. The Dollar’s path higher has accelerated in recent weeks. Gold is thought of as a weak dollar play. With the dollar strengthening, selling gold is simply the other side of the trade.

2.) Commodity Collapse

Since the summer months, commodities have been on the rapid decline. Oil has fallen by more than half from its peak price of $147. Base metals and precious metals have experienced similar if not more drastic declines. While gold has been holding up well on a relative basis, the weakness in commodities may be keeping any price appreciation at bay.

3.) Deleveraging

After years of using excessive leverage in an attempt to maximize returns, firms are rediscovering the notion of risk. Massive deleveraging is taking place as firms sell any asset available to pay down debt. As an asset class, gold is not immune to such sales.

4.) Speculative Selling

With the dollar rallying and gold breaching key technical levels, traders may be taking speculative short positions in gold, anticipating that prices will continue to move lower. This speculative selling compounds the impact of selling taking place for other reasons.

5.) Recession

Fears of a worldwide economic slowdown and deep domestic recession will have a big impact on consumer discretionary purchases. This would likely hold especially true for luxury items such as jewelry. Since jewelry production is the largest non-investment use for gold, any slowdown would put a drag on demand.

6.) Deflation

While some fear inflation, others fear deflation. If prices decline across the board, some believe that all asset classes will be dragged down, including gold. Notably some people take the exact opposite position about gold and deflation.

7.) Hedge Funds and Mutual Funds

Some people feel that hedge funds had a hand in driving the price of gold from below $300 to above $1,000. Now that fortunes have turned for their other investments, hedge funds are being forced to unmercifully liquidate large positions in gold. Mutual funds are also being forced to liquidate positions in gold to meet redemptions.

8.) “George Costanza Trade”

On Seinfeld, George Costanza realized that every decision he ever made has been wrong. He discovered if he did the exact opposite of what his instincts told him to do, he would be successful. In relation to investing, when everyone believes that a certain trade or investment philosophy is certain to work, oftentimes with uncanny precision the exact opposite happens. This year, a growing number of people began to believe with absolute certainty that gold would move higher. While the opinion was far from universal, was the opinion widespread enough to invoke George Costanza?

9.) Government Manipulation

There is a growing camp which believes that the primary reason that gold has not moved higher in a big way is due to government manipulation. If gold prices skyrocketed, the public at large would lose faith in fiat currencies and start to panic. It would be in the government’s best interests if this did not happen.

10.) These Things Take Time

Some of the forces mentioned above are going head to head with the economic realities that should be driving the price of gold higher. Eventually we will reach a tipping point when demand for physical gold is enough to overwhelm all other factors. Once we reach that point, the price of gold will rise in leaps and bounds.

Filed Under: Gold Tagged With: Commodities, Gold, Recession, US Dollar

Gold and Silver News & Headlines

October 23, 2008 by admin Leave a Comment

Links to a number of interesting or notable gold and silver news stories or blog posts:

Platinum Almost the Same Price as Gold

Safe haven metal versus industrial metal. Will we reach parity?

Taking delivery of 1 to 5 million ounces a month

A very innovative idea… actually taking delivery of physical silver from the Comex.

Yes, We Have No Silver

Have you recently tried to buy physical silver near its market price? Here is the brief tale of one man’s frustrating quest.

Gold ETF Reaches One Dollar Per Tonne

Even though the price of gold recently experienced a rapid decline, “tonnes in the trust” barely moved. As the author says, “For gold, the price goes down, but investors don’t sell.”

Blog Catalog Verification

Filed Under: Uncategorized Tagged With: Comex, GLD, Gold, Platinum, Silver

The Sale of Safes is Booming

October 23, 2008 by admin Leave a Comment

Safe

In an interesting sign of the times, the sale of safes has been booming. This story has apparently been making the rounds on some local news programs and last week was the topic of an article in the LA Times.

Safe companies mentioned in the article are reporting sales increases of as much as 50% in the last few weeks. One chiropractor interviewed for the article mentioned that he has recently purchased a fourth safe, which he intends to fill with cash.

Some of the unspoken implications of this recent phenomenon:

People are investing in tangible assets like gold and silver instead of intangible assets like stocks and mutual funds. They are also opting for the physical version of the investment rather than certificates, ETFs, or derivatives. The boom in safes is a result of the need to store all of these new assets.

People have less trust in banks. They are willing to forgo the nominal rate of interest offered by the bank and keep their cash at home in a safe.

People have abandoned belief in safe deposit boxes. In the past, people may have kept tangible assets in a safe deposit box at their bank. Are people growing fearful of bank closures, bank holidays, or a gold seizure?

Here are some semi-hilarious quotes from the LA Times article.

“What people are putting in them I have no idea.”

This comes from a spokeswoman for the company Lowe’s. Not sure why they interviewed Lowe’s to determine what people put in safes, rather than asking the people buying them.

“It’s just stupid.”

This well considered and comprehensive opinion comes from a CPA and Financial Planner. Perhaps some of his clients think his investment advice is stupid. I’ll wait for that interview.

Filed Under: Gold Tagged With: Gold, LA Times

Reaction to: Gold May Pay Only in Case of Maximum Despair

October 22, 2008 by admin 2 Comments

With the price of gold on the decline, flimsy commentaries have started to appear which characterize gold as a fringe bet of foolish people. I am admittedly biased in the opposite direction writing gold and silver blog, but if I wrote a commentary, I would at least make some substantive arguments that go beyond cursory and reckless statements.

I found this recent commentary written by Jane Bryant Quinn for Bloomberg particularly egregious, so I would like to examine some of her specific points.

“Gold is for rich guys… you need a lot of it, stored around the world.”

I’m not even sure what she is trying to say here. Why do you need to be rich to buy gold? It can be purchased in sizes as small as 1/10 ounce, which would have cost about $40 in 2001. There is nothing to prevent “poor guys” from owning gold.

Why do you have to store it around the world? A 400 ounce gold bar worth about $288,000 is 7 x 3 5/8 x 1 3/4 inches. This would fit in an average sized safety deposit box. For the “poor guy,” 1/10 ounce of gold is about the size of a dime. You could store it in your pocket if you want.

“Gold isn’t even a reliable hedge against inflation.”

To prove this argument she quotes the price of gold in January 1980 and states that gold has not yet reattained this peak adjusted for inflation. By that same logic, one could state that stocks never have positive returns by quoting the price of the Nasdaq in January of 2000.

“For the average investor, gold boils down to a speculation on higher prices.”

She seems to mention this with a certain distaste. What investment is not based on speculation of higher prices, whether informed, rational, or otherwise? Would you make an investment if you thought prices were going lower?

“Toward the end of each year, [various world mints] let their inventories run down while gearing up for next year’s run. The surge of buyers left them short of high- quality blanks.”

The US Mint has been experiencing problems fulfilling demand for American Silver Eagles since March and problems fulfilling demand for Gold Eagles since August. The problems have been nearly continuous thoughout the year. The reason seems to be that the US Mint cannot obtain sufficient gold and silver on the open market to meet the physical demand.

“On EBay and the Home Shopping Network, coins sell at fantasy prices. A set of Eagles in four different weights was offered on HSN at $4,999.99.”

She lumps eBay into the same category as the Home Shopping Network. The Home Shopping Network is known for overpricing and overpromoting collectible products. EBay is a relatively well informed community of buyers and sellers whose transactions take place in a liquid market. In general, transactions will occur at whatever price the forces of supply and demand will bear. When you’re favorite bullion dealer runs out of gold, why not purchase it on eBay?

“Gold, by the way, is taxed as a collectible… Your tax rate on long-term capital gains would be 28 percent, compared with 15 percent on other assets. Only a significant price gain redeems your bet. “

The 15 percent tax rate she mentions applies to long term capital gains. If you sold stock which was held for less than one year, it would be taxed at your marginal rate which could be as high as 35 percent. And perhaps more relevant, not too many people have long term capital gains nowadays. If you’ve been investing in stocks or real estate, I think you would welcome a gain taxed at 28% rather than a big pile of losses.

Filed Under: Gold Tagged With: Bloomberg, Gold