Archive for December 2010
(Through misinformation, lies and omission!)
Plus, the year in review, and price predictions for 2011
by Jason Hommel
Posted originally December 29th, 2010 on Silver Stock Report
I’m called upon by my regular readers to refute, rebut, and rebuke this bad article on silver from the Wall Street Journal:
Price of Silver Soaring
Investor-Fueled 74% Gains Dwarf Gold; Race to Open Mines
By Carolyn Cui and Robert Guy Matthews, published Dec 26, 2010
Regarding the WSJ comment: “unexpected surge in investor demand”
Really? Unexpected, you say? But precious metals bulls have been predicting explosions in the price for ten years based on irrefutable fundamentals and unsustainable market manipulation.
How can investor demand be unexpected when the price of precious metals has been going up continuously for ten years now since the year 2000? Don’t investors like to buy things that are rising in price? Don’t investors also try to predict things that will rise in price, and buy them before they really rise? Does the WSJ know anything at all about investing?
Unexpected? Really? When the numbers of silver Eagle 1 oz. coins produced by the US Mint has been increasing steadily for the past 3-4 years, up from 10 million oz. to nearly 40 million oz. this year? How can a single year’s investor demand be unexpected, when its increase is already a steady trend?
Regarding the WSJ comment: “Prices are rising despite oversupply”
What oversupply? What do you even mean by oversupply? Here is the dictionary definition of oversupply:
http://www.thefreedictionary.com/oversupply “A supply in excess of what is appropriate or required.”
Ah, the WSJ is no longer reporting fact, but throwing out opinion now. There is no oversupply, and can never be any oversupply of things such as gold and silver, since they have the least diminishing marginal utility of all things on earth, since they are money. Nobody ever complained that they had too much money.
But what does the WSJ mean by oversupply? The supply and demand numbers produced by such surveys as http://www.silverinstitute.org/ who the WSJ quotes as a source, have “sum up” categories called “Implied Net Disinvestment” and “Implied Net Investment”.
http://www.silverinstitute.org/supply_demand.php When investors are buying, this is often called a surplus, or as the WSJ says, an “oversupply”, and when investors are selling, that is called a deficit.
So, apparently, the WSJ is saying that when investors are buying silver that’s “oversupply”. And thus, when they describe that action as an “oversupply”, they are really saying that silver purchases by investors are “inappropriate”. Thus, they reveal their bias, with one word.
WSJ: “Many analysts expected those factors would keep a lid on prices in 2010”
But most silver analysts are employed by LBMA bullion banks who have a vested interest in manipulating silver prices downward, since silver is the Achilles heel, or arch enemy, of the banking system. Thus, “mainstream” silver analysts have never gotten a single year’s prediction correct in the last ten years of the bull market in silver and gold. They always “predict” prices for next year that are within about 5% of current prices, and never any higher. Meanwhile, silver prices have risen from $4.15/oz. in 2003 to $30.60 now in 2010, which is a cumulative return of 637%, which, over 7 years, is an average annual gain of 33%. They never come close to predicting such gains.
Check my math, here: http://www.smartmoney.com/compoundcalc/
Have any of the mainstream analysts predicted a silver price gain of 33%, for the following year, or even close, in the last 7 years? Never. Thus, they are worse than useless, they are purposefully deceiving, or willfully ignorant, as is this WSJ article. That should be no surprise, and neither should silver’s price rise.
WSJ: “What they didn’t expect was an overwhelming flow of money into the market from investors eager to ride a commodities rally”
Overwhelming flow of money into silver? Really? Let’s see, there is $14,000 billion to $18,000 billion of paper dollars in the US banking system, which does not count dollars in overseas banks, and the rest of the world is printing up paper money like crazy for competitive devaluations. Meanwhile, the US government has an annual deficit of $1500 billion or more, depending on how you count, if you count off budget items, it could be as high as $3000 billion depending on who you read. Meanwhile, a tiny $3 billion pours into silver, which is a paltry 2% of 1% of the money in the US banking system, and a mere 10% of 1% (or 1/1000th) of new US money creation.
I wouldn’t call that an overwhelming flow of money into silver. I’d say that’s only a tiny trickle, wouldn’t you?
WSJ: “‘This is a story almost entirely about investment,’ says Stephen Briggs, senior metals strategist at BNP Paribas”
Well, the silver story, in the future, will be almost entirely about investment, but today, investors are still buying only a tiny fraction of new silver mine supply, with the rest being consumed by industrial applications of all sorts, from fabrication, to photography, to jewelry, silverware, and coins and medals.
From the silverinstitute.org:
2009 mine production: 709.6 million oz.
2009 Implied Net Investment: 136.9 million oz. (oversupply, or investor buying)
But let’s pause here, and examine the numbers more closely. Sprott wrote an excellent silver report that reveals that ETF silver demand is not counted in the “demand” numbers for silver! http://www.industrymailout.com/Industry/View.aspx?id=245442&q=264546678qz%3D3f9465
Fraudulent supply/demand numbers, omitting investor demand, or calling it a “surplus”, is part of the manipulation of silver prices. But this implies a few other things, too.
Either the exchange traded funds are not actually going out into the market to buy silver which means they are mostly all fraudulent, or, their net purchases are more than offset by investors or refiners dumping 1000 oz. silver bars (the only acceptable form of ETF silver) to dealers who sell it directly to LBMA banks. We’ve never had to dump any silver bars in the last 2 years of our precious metals business.
Once again, two bears (inexplicably, one of them is still the Aussie koala) come to grips with the infamous J P Morgue:
by Jordan Roy-Byrne, CMT
Posted Thursday, 23 December 2010
MONDAY MORNING I WAS GREETED via my inbox with a Bloomberg report on Gold. Bloomberg has a series called “The Dark Side of Gold.” Its important to note this isn’t the first time the news organization has attempted a hit-piece on Gold. I wrote about this exactly one year ago and identified the cases and examples of Bloomberg’s gold bashing.
The crux of the biased series (one that even makes CNBC blush) is how Gold ETF’s are responsible for Gold’s rise and contributing to a bubble. It is insinuated that because the ETF’s are easily tradeable, a torrent of sell orders would cause Gold could to fall sharply, ala 1980.
Gold’s rise actually has very little to do with the GLD ETF. It really is a non-factor when you consider any of the following reasons: Threat of sovereign debt defaults, debt monetization in Europe, Japan and US, 0%-1% interest rates, commodity bull market, and falling gold production. The GLD ETF is an effect of the bull market, not a cause. The same is true with mutual funds during the bull market in the 1980s and 1990s.
In the two minute preview video, Bloomberg’s Carol Masser makes two ridiculous claims in a span of about four seconds. She claims that prior to the Gold ETF, only “conspiracy theorists” were buying Gold and that it cost a “fortune” because of holding costs and commissions. This is nothing other than failed hyperbole, seeking to demonize Gold and gold bulls. I’m not an expert on the exact ongoings of the physical market but I’m sure that it at that time it didn’t “cost a fortune” to buy Gold. Meanwhile, any conspiracy theorists have clearly made a lot of money.
Oh, I forgot to note at the very start of the video, the woman claims that even “college coeds” are buying Gold. Really Bloomberg? Where is the evidence of that? Google that and I bet you are more likely to find soft-core pornography than any hard-hitting evidence on such a ridiculous assertion.
Speaking of “hard-hitting,” Bloomberg interviewed Mark Williams of Boston University, who on camera made the case that Gold is in a bubble by providing zero evidence. A googling of the professor reveals he was perfect for this series, as he is a notorious hard-money hater. In November he wrote an editorial about how the gold-standard should be relegated to the dustbin of history. The only thing that will be relegated to the dustbin of history is our fiat currency system. It’s happened before and will happen again.