April 25, 2024

Investing in Rhodium, GLD ETF Holdings, COMEX Delivery

January 7, 2009 by Leave a Comment

I haven’t had a round up in some time, so here’s one to bring us up to date with some of the most interesting gold, silver, and precious metals related stories found around the internet.

Rhodium: The Ultimate Reflationary Trade

After reaching a high of $10,010.00 per ounce, rhodium collapsed more than 90% to a low of $760 per ounce. As one of the rarest metals on the planet, is it time to buy?

Don’t Miss the Coming Gold Bull

A well written article, which gives an excellent outline of the bullish case for gold.

Biggest Gold ETF Holds Its Weight

Holdings of the SPDR Gold Shares exchange traded fund (GLD) held record levels of gold at the end of 2008, signaling firm underlying demand for gold.

A Nevada Town Escapes the Slump, Thanks to Gold

Quote from the story: “Times are good around here. People are happy.” When’s the last time you heard someone say that?

Is the Comex Doing Fractional Reserve Delivery of Gold?

A small precious metals fund reports that they were promised delivery of certain weights and serial numbered gold bars from the COMEX. The following day they were informed that they would instead be issued a “Warehouse Delivery Receipt” in place of the gold bars. Is something fishy going on?

Filed Under: Uncategorized Tagged With: , , ,

Did Platinum Just Break Out?

January 3, 2009 by Leave a Comment

After falling below the $900 level in late October, Platinum spent more than two months trading in a relatively tight range between $780 and $900.

In the final days of 2008, Platinum pushed above $900 and now stands at $946. This recent move looks bullish to me.

Chart courtesy of stockcharts.com

Filed Under: Platinum Tagged With:

2008 Gold, Platinum & Silver Performance

January 2, 2009 by 2 Comments

As trillions of dollars in equity values were vaporized this year, a strong November and December performance pushed gold into positive territory by year end. Gold’s annual gain was 4.32%. This marks gold’s eighth consecutive annual gain. The “lost decade” for stocks, has been quite the opposite for gold. Silver and platinum were less fortunate, posting losses of 26.90% and 41.31% respectively.

(Figures calculated from Kitco’s London PM Fix prices)

The headline numbers only tell part of the story. I rounded up a bit more data which paints a more complete picture of the 2008 performance of gold, silver, and platinum.

Gold Silver Platinum
Dec 31, 2007 Close 833.75 14.76 1530.00
Dec 31, 2008 Close 869.75 10.79 898.00
Annual Change +36.00 -3.97 -632.00
Percentage Change +4.32% -26.90% -41.31%
2008 Low 712.50 8.88 763.00
Change from start to low -121.25 -5.88 -767.00
Percentage Change -14.54% -39.84% -50.13%
2008 High 1011.25 20.92 2273.00
Change from start to high +177.50 +6.16 +743.00
Percentage Change +21.29% +41.73% +48.56%

The first section of the table above shows the performance of gold, silver, and platinum from start to finish during 2008. The second section lists the lowest closing price for each metal during 2008, and calculates the percentage change from the start of the year to the low price. The final section lists the highest closing price for each metal during the year, and the percentage change from start of the year to the high price.

Some observations:

Often when the mainstream press writes about gold as a potential investment option, they usually caution that prices are “extremely volatile.” A look at the figures above shows otherwise. While it seemed like a year of extremes for gold, at its lowest it was down 14% and at its highest it was up 21%, probably making it one of the least volatile investments of 2008.

Platinum, which is starting to draw my interest, basically went straight up during the month of February to its peak price of $2,273 per ounce. Then it experienced three months of nearly continuous declines from mid-July to mid-October where it reached its low of $743 per ounce. At its high it was up nearly 50%, at its low it was down more than 50%. Briefly, the price of gold exceeded the price of platinum, but the situation has now reverted to the norm.

Silver experienced a similar plight, up more than 40% at its peak and down more than 40% at its low. The period of decline also took place from mid-July to mid-October. Many have pointed to the enormous concentrated short position taken by a handful of banks in July as responsible for the decline.

On a housekeeping note:

Sorry for the lack of posting on Gold and Silver Blog during the end of December. I should be back on a regular schedule for the new year. I aso plan to add some new sections to the site, which compile historical data relevant to gold and silver watchers. Thanks for reading and let’s make 2009 a great year!

Filed Under: Gold, Platinum, Silver Tagged With: , , ,

Two Milestones for Gold

December 18, 2008 by 3 Comments

In the past week, gold quietly marked two important milestones.

First, as of Monday the price of gold is now showing a gain for the year. The closing price of gold on December 31, 2007 was $833.75. The price of gold today is $854.60.  That makes gold up 2.5% for the year to date. If gold can hang onto this gain into the end of the year, this will also mark the eighth year in a row that gold has had a positive return. For the year and for this decade, gold has humbled its naysayers and rewarded its investors.

Second, on Tuesday the price of gold exceeded the price of platinum. The two metals now trade within a few dollars of each other with gold at $854.60 and platinum at $858. This is a big change from earlier in the year when platinum was trading over $2,200 per ounce, more than double the price of gold. If I’m not mistaken, the price of platinum has been higher than the price of gold for this entire decade. Not since the 1990’s has gold been more expensive than platinum. Considering that platinum is thirty times scarcer than gold, this makes a strong statement about the demand for gold.

Filed Under: Gold, Platinum Tagged With: ,

Perth Mint to Resume Gold & Silver Sales

December 11, 2008 by Leave a Comment

Safe

Today the Perth Mint announced that it will resume taking orders for gold and silver bullion coins on January 12, 2009. Sales of bullion products have been suspended since November 22, making this a very lengthy suspension for a major world Mint.

Notably, sales will be resumed for a “streamlined range” of gold and silver products. By limiting the number of products which will be offered, they expect to increase production volumes. Products which will be unavailable include fractional and non standard size bullion coins.

This is similar to measures taken by the United States Mint. For the past several months they have been focusing primarily on producing and selling (on an allocated basis) one ounce Gold Eagles and one ounce Silver Eagles. Recently, they announced the delay of all 2009 dated bullion products, except one ounce Gold and Silver Eagles.

Fractional gold coins have been favored by survivalists and investors with smaller budgets. Historically, the US Mint has offered gold in 1/2 ounce, 1/4 ounce, and 1/10 ounce sizes. As world mints hunker down to deal with ever escalating demand, these products might become a thing of the past.

Filed Under: Perth Mint Tagged With:

Gold Backwardation, Tracking COMEX Depletion, Banks’ Gold and Silver Short Positions

December 10, 2008 by Leave a Comment

Red Alert: Gold Backwardation

Posted late last week explaining the how gold went to backwardation for the first time in history. The implication is that backwardation will lead to a breakdown of the delivery mechanism for gold, which takes us to the next link…

Vaporize the COMEX

Tracking gold and silver deliveries from the COMEX versus registered inventory in COMEX warehouses. After today, gold is 43% depleted and silver is 37.1% depleted.

“On the fly” Gold and Silver COT Information

A small number of US banks continue to hold an ever increasing porportion of all commerical net short positions for gold and silver futures. Three US banks accounted for 66.97% of the net short gold positions, and two banks accounted for 98.64% of the net short silver positions.

Gold shines on

A brief piece published on Fortune outlining the bullish case for gold.

Filed Under: Uncategorized Tagged With: , , ,

Negative Opinions on Gold

December 9, 2008 by 3 Comments

With all of the positive articles on gold, one reliable way of getting attention is to publish an article forecasting an impending plunge in the price of gold. Two recently published articles caught my attention for their decidedly negative stances on gold.

I previously wrote a post exploring bullish analyst opinions on gold. I guess this post will present the flip side.

IMF Gold Dump Theory

The first article examines the opinions of a so-called “interventional analyst” who sees the price of gold plunging on December 10. He sees the initial plunge and subsequent declines bringing the price of gold 40% lower to around $455 per ounce. All of this would take place in a matter of weeks. The plunge would be caused by the IMF dumping 3,000 tonnes of gold, flooding the market and destroying prices.

Even though his current prediction seems a bit ridiculous, apparently he has previously called this year’s collapse in the Dow, the plunge in oil prices, and the current recession. Of note, his gold track record is much less spectacular. According to a quote from the article, he has been advocating shorting gold since it was $413.

Since December 10 is tomorrow, at least we won’t have to wait very long to see if his most recent prediction is correct.

Gold is for Barbarians Theory
Alternate Title: I Like Getting Attention

The second article was published on Seeking Alpha. The author wrote a previous piece that called gold a “sucker’s bet.” He stated that gold should trade below $600, predicted “a lot of sources of selling.” He also questioned gold’s historical status as a store of value (he prefers oil) and denied gold’s ability to protect against inflation. The article was well circulated, resoundingly ridiculed, and received over 100 comments.

He’s back for more in his second article. First he mentions that gold has “plunged” since his first article. Gold is really down about 10% and has been climbing back daily. The decline also corresponded with a horrific decline in world stock markets, which probably had more to do with gold’s weakness than the author’s reasons. Next, he repudiates all of the negative comments received on his prior article in three short sentences, and finally rehashes his prior arguments against gold. He slips in a quip about gold not being used as currency since the time of nomadic herders.

As unremarkable as the article was, it still attracted nearly 100 comments. I guess the moral of the story is that if you want to get the most attention, just make bold claims that are the opposite of the prevailing opinion and common sense.

Filed Under: Gold Tagged With: ,

COMEX Deliveries, Peter Schiff on Gold, India Post Gold

December 8, 2008 by 2 Comments

Here’s a round up of some recent gold and silver news articles and stories from around the internet:

A Memorable Delivery Experience

With the physical price of gold and silver far exceeding the exchange prices, many have decided to take physical deliveries from the COMEX. The above provides an enlightening, first hand account of taking delivery from the COMEX.

Peter Schiff on Gold, the Dollar and Asian Markets

An interview with Peter Schiff from HardAssetsInvestor.com.

India Post is selling fold like hotcakes

Earlier this year, the Indian government began a program to sell gold coins through post offices. The India Post has been “overwhelmed” with the positive response and plan to expand the program.

Local Investors Flocking to Gold Coins

Another story exploring the incredible demand for gold coins at a local coin shop. According to the article, the owner receives 20 to 30 phone calls per day from people looking to buy gold, but “maybe one” phone call a day from someone looking to sell.

Filed Under: Uncategorized Tagged With: ,

Can the US Mint Handle Demand for the Ultra High Relief Gold Double Eagle?

December 4, 2008 by 2 Comments

For much of the year, the United States Mint has been touting the upcoming recreation of what they have called the “nation’s most beautiful coin.” Augustus Saint Gaudens’ design for the Ultra High Relief Gold Double Eagle will be recreated as a one ounce 24 karat gold coin available for sale to the public.

The Mint’s intention to recreate the coin was first announced this March, followed by an official unveiling in July, and a well publicized first striking in November. The US Mint intends to strike the coins throughout 2009 in quantities necessary to meet public demand. So far, coin collectors have responded enthusiastically to the upcoming offering. With the recent main stream attention on gold, there will likely be interest from the broader public as well. Is the United States Mint prepared to handle the potentially significant demand for the new gold coin?

This year the US Mint, as well as most other world mints, have had continuous problems procuring sufficient gold blanks to meet the incredible demand for bullion coins. The US Mint in particular has been forced to suspend sales of some gold bullion offerings and continues to distribute coins though an allocation program since they are unable to meet the full demand.

Next year the US Mint will be at odds with itself as it struggles to meet growing demand for their regular bullion coins and new demand for a potentially hot collectible coin.

To estimate how much demand the new coin might generate, we can look at the US Mint’s 2006 release of the 24 karat American Buffalo Gold coin. Similar to next year’s offering, the coin design was taken from an old collector favorite, in this case the Buffalo Nickel. The coins were offered as one ounce bullion coins and one ounce collector proof coins. Sales of the coins began in late June 2006. In just over six months, the US Mint sold approximately 337,000 bullion coins and 252,000 proof coins for a total of 589,000 ounces worth of gold. Sales of the regular 2006 American Gold Eagle bullion coins totaled only 261,000 ounces.

Even if only the collectible versions of coins are considered, this represents a 50% increase in demand for gold coins. Since the US Mint has been unable to meet the full demand for regular gold bullion coins this year, the prospects that they can handle the additional demand for a popular collectible gold coin on top of already robust gold bullion coin demand seem remote.

Another aspect to consider is that the Ultra High Relief Gold Double Eagles are struck on specialized blanks. The coin will have a thickness of 4 millimeters which is more than 50% thicker than most one ounce gold bullion coins. So far the US Mint has been procuring these specialized blanks from Gold Corp., a wholly owned subsidiary of the Western Australian Government, who operate the competing Perth Mint. Notably, the Perth Mint recently announced that they would be forced to cease taking orders for precious metals until January 2009 due to “unprecedented demand.” So, not only will the US Mint need to procure a large amount highly specialized blanks from an already tight market, they will need to procure them from a competitor struggling to meet their own demand.

Taken together these factors do not bode well for a smooth release of this “recreated materpiece.” I envision a frustrating series back orders, delays, and eventual order limitations for the new coin. The US Mint intended the Ultra High Relief Gold Coin to be “a prestigous example of the highest level of artistic excellence in American coin design.” Instead they might just end up with another gold related headache.

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

Analysts Opinions on Gold

December 2, 2008 by 5 Comments

Recently published commentary from analysts at Citigroup and JP Morgan both paint a bright picture for the future of gold. Citigroup specifically mentions the $2,000 level as attainable. JP Morgan recommends buying gold for the run into the holidays.

The Citigroup report runs down many factors that are well known to gold investors. Citi mentions the possibility that recent financial actions of world authorities will either result in massive inflation if the actions are successful; or further economic deterioration that leads to political instability and unrest if the actions are unsuccessful. Either scenario would have positive implications for gold. Citi also mentions the finite supply of gold in the world, and gold’s indisputable status as a monetary instrument. The full report can be found here (pdf link).

By mentioning the $2,000 price level, Citigroup has trumped Morgan Stanley’s lame recommendation that gold will reach $1,000 in three years and Merrill Lynch’s call for $1,500 gold. If you’re going to make a prediction on the price of gold, I guess you have to make it $500 higher than the last analyst…

JP Morgan’s analysts also mention a collection of well known factors pointing in gold’s favor. They see the strong dollar/weak gold link decoupling, the shrinking supply of gold discoveries, the declining pace of central bank gold sales, and the “seizure” of the gold coin and small bar market.

As a gold investor, should you be worried about analyst’s latest love affair? Analysts have a less than stellar record for timely recommendations about emerging trends. In many cases, their most bullish predictions have come towards the end of a major move and merely represent an extrapolation of the recent past for reasons already well discounted. Is this time different?

In a word, yes.

Although gold has increased roughly 300% from the lows reached seven years ago, gold is still showing a loss for the year. If this was the typical pile-on of bullish analyst calls, it would more likely be taking place amidst a sharp, upward move.

Secondly, analysts are not jumping into a hot market, they are wading into a very confusing market. A continually evolving array of factors are at play which have baffled and frustrated even long time followers of gold. On one side, there are glaringly obvious reasons why gold should be moving higher. On the other side, there are plenty of credible reasons why gold is stuck in neutral.

When this current “tug of war” in the price of gold eventually resolves itself and gold starts to move higher, analysts will likely respond by ratcheting up their predictions in tandem with the rising price of gold. Even when this starts to happen, I still wouldn’t be worried.

Wait until you hear an analyst report come out with the boldest of the bold prediction yet, “Gold to Reach $10,000 Per Ounce.” The report will likely contain countless, well considered reasons that make $10,000 gold seem not only possible, but probable. Handy charts will extrapolate recent moves to harrowing peaks. Around the same time, any arguments against gold investing will seem downright silly and “man on the street” interviews will elicit sage advice on the merits of buying gold…

That’s when you should be worried about rosy analyst predictions on gold.

Filed Under: Gold Tagged With: ,