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The vast majority of physical silver is apparently still being sold at spot - eg. 1000oz bars. When the majority of the physical silver trade market starts using prices that are different to 'paper' spot prices - then that's a proper divergence. I don't see how what's going on just in the retail investment trade can be held up as evidence for anything other then the state of play in that small(?) sector of the silver market.

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I think that is a very valid point. I believe Gold Money buy and sell based on the price of silver bars and not the paper market. It will be interesting to keep an eye on the GM price for signs of divergence.

 

I’m not sure if there is any at this point in time. Can anyone confirm?

 

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well, i took my silver today morning, as planned, even with gold going to 710 I don't think silver will be breaking 10.00 , specially with dollar at the 80 resitance & ahead of FEDs meeting, looks to me its a good risk/reward ratio, target : 14.80 (yeah, i think it will be breaking 12.50 channel line)

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well, i took my silver today morning, as planned, even with gold going to 710 I don't think silver will be breaking 10.00 , specially with dollar at the 80 resitance & ahead of FEDs meeting, looks to me its a good risk/reward ratio, target : 14.80 (yeah, i think it will be breaking 12.50 channel line)

 

good call with regard to the drop to the mid 10s / I hope you're right with the +ve prediction!!

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I think that is a very valid point. I believe Gold Money buy and sell based on the price of silver bars and not the paper market. It will be interesting to keep an eye on the GM price for signs of divergence.

 

I’m not sure if there is any at this point in time. Can anyone confirm?

 

QUOTE (Gatesy @ Aug 15 2008, 06:34 PM) *

I just sent this to goldmoney:

 

Dear Mr Turk

 

GATA, with whom you are closely associated, have published the view that the US Mint's suspension of silver and now gold eagles is "overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price". Please could you lay out for me your plan for ensuring that the mechanism for selling physical gold and physical silver via Goldmoney reflects prices for the physical metals rather than 'paper' markets as we see further divergence between the two. I would like to post your response on the Global Edge Investors (globaledgeinvestors.com) website with which you may be familiar, for the benefit of members there.

 

ref:

http://www.gata.org/node/6489

 

Kind regards

 

 

I have a response from James Turk, with my repsonse below that. Very impressed with the personal attention given to my query.

 

 

QUOTE

Hello xxxxx

 

Sorry for the slow response, but I have been travelling.

 

GoldMoney only offers to its customers gold and silver in the form of LBMA bars. Consequently, GoldMoney always bases its prices on the spot market for LBMA bars. This spot market is comprised of several major bullion banks, and they quote throughout the day from Monday-to-Friday from their various branch offices in different time zones throughout the world.

 

When a transaction is completed, the seller has the obligation to deliver to the buyer -- upon payment by the buyer -- physical bullion in the form of LBMA bars. To my knowledge there has never been a default by any trading member selling LBMA bars in the spot market.

 

Transactions in GoldMoney are never priced off the futures market or any paper-based trading market. Further, we have no intention to ever price them off the paper market. We will only transact in a market where we will receive LBMA bars, not paper promises.

 

There is also another aspect to your question. It is, what is the relationship between the market for LBMA bars (which is a market made by LBMA trading members, http://www.lbma.org.uk/assocn/mktmembs) and the market for coins and small bars (which is a market made by thousands of coin dealers, jewellery shops and bullion retailers globally)?

 

Right now, the market for coins and small bars is largely frozen as GATA, me (http://www.goldmoney.com/en/commentary.php) and others have written. However, the LBMA market continues to function normally as near as I can tell (not being a trading member myself). LBMA bars (both gold and silver) can still be had in reasonable quantities. Barring any government intervention and/or government dictates, I would expect the LBMA market to continue operating, regardless what happens in the paper market for gold.

 

Right now the demand for physical metal in the form of LBMA bars has been very strong. I can only wonder where all the bars are coming from to meet the soaring demand at the current low price. For example, Resource Investor notes http://www.resourceinvestor.com/pebble.asp?relid=45611 "In fact, just since August 15, SLV has added a huge 308.839 tonnes to hold 6,474.04 tonnes of average 1,000 ounce silver bars." There are only about 25,000 tonnes of silver mined in one year. Yet over the past 10 days, SLV reports that it has added 308.9 tonnes, which is an annual rate of 11,120 tonnes, or 44% of this year's newly mined silver. And that's just SLV, not to mention all the other LBMA bars acquired by other sources during this same 10-day period.

 

Lastly, paper is used by the gold cartel acting under the direction of central banks to force prices lower. When prices in the paper market drop, prices in the physical market follow paper prices lower until prices become too cheap. We've reached that point with coins and small bars. We may also some day reach that point in the LBMA market, which means that gold would go into backwardation, i.e., the price in the spot market is above a future price of gold.

 

I trust this answers your question, but please let me know if I can be of further help.

 

Regards

James

 

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I take it any silver bulls are absolutely pulling their hair out right now, and i get the impression nobody has a real clue what is going on and why the price has collapsed to such an extent. Must seem a waste of time to all the chartists and technical analysis boys who put in all that work...whats if for ?

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and today's kitco message on the homepage is.........

 

'In order to reflect the current strong demand for Silver Maples and Silver Eagles, Kitco is temporarily increasing its current bid (buyback) price for these particular products. Please visit our Selling to Kitco page for more details.'

 

oops they forgot to tell you there also out of stock of the above

 

OK - as some have pointed out, 'teeny-weeny' coins wont set the market alight, but if you want some coins best get em soon eh?!

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OK - as some have pointed out, 'teeny-weeny' coins wont set the market alight, but if you want some coins best get em soon eh?!

 

Bows head in shame. :(

 

Look, i wasn't taking the proverbial. They are very pretty, IMHO. :P

 

 

 

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I take it any silver bulls are absolutely pulling their hair out right now, and i get the impression nobody has a real clue what is going on and why the price has collapsed to such an extent. Must seem a waste of time to all the chartists and technical analysis boys who put in all that work...whats if for ?

 

My thoughts FWIW:

 

1. I wish my crystal ball had enabled me to know in advance that the world financial system wasn't going to collapse until at least now.

 

2. If I had had that 100% guaranteed knowledge, I would have been happy to forego my precious metal insurance, and I would have waited.

 

3. I would now be full time trying to pick the bottom, or be averaging in some time now.

 

4. This silver dip offers a tremendous opportunity.

 

5. Unfortunately, I do not possess a crystal ball, and so I can't tell when my house is going to catch fire, so I maintain my house insurance through times when no fire breaks out. Likewise I am happy to maintain my precious metals insurance.

 

6. The size of this dip shows how volatile silver can be. I like that, because it shows me how far up it can go too.

 

7. Pulling my hair out ? Nope. I've suggested people should hold 10% of their liquid portfolio in gold & silver. I don't think anyone who has done that has any reason to moan. Those who bought a greater percentage will have made up their own minds based upon their own research. Hopefully with that extra knowledge they will be calm at times like this.

 

8. I agree that when markets are significant;y manipulated, it is very difficult to predict what is going to happen short-term. That's why gold & silver are always described as long-term. Because long-term reality will always win over manipulation.

 

We may be seeing this at the moment:

 

Rocket_Failure.jpg

 

But sometime things will change, and look more like this:

 

Imploding_USA1.jpg

 

 

 

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Between James Turk, Ted Butler, and Dr.Bubb's "Paulson to China" scenerio, I feel like I just woke up :mellow:

 

Question for anyone, when James Turk says " I can only wonder where all the bars are coming from to meet the soaring demand at the current low price.", do you think he's suggesting that SLV might not be holding the silver they claim they are?

 

Another question, if SLV and other ETFs are eating up these LBMA bars like crazy, at some point there has got to be a shortage in that market, which would push the paper market up, no? Doesn't it seem that should happen soon? What interest would SLV have in NOT holding the silver they're supposed to be holding? I'm trying to figure out what's going to keep this paper market low for much longer.

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Perhaps the view is, anybody in SLV i.e. the public or small funds are LONG on silver.

 

 

They say that they can use the money long on SLVR against itself, to SHORT it.

 

 

So in effect the longs ETFs are being lent out to be shorted.

 

Thats good for Barclays, they can buy back the ETF silver at rock bottom prices. Nice work if you can get it.

 

 

There must be a short covering comming up IF that is true - i.e. a upturn in the price. No stock goes down in a straightline.

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COT chart very bullish or gold this week, but not especially for silver.

 

Bob Hoye sees a return in gold - silver ratio of 100:1 .

 

Why does Hoye think this? Is that how you see it Frizzers - silver looks to get left behind? Anyone who's opinion you rate think otherwise?

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COT chart very bullish or gold this week, but not especially for silver.

 

Bob Hoye sees a return in gold - silver ratio of 100:1 .

 

Any thoughts people? Divergence between silver and gold? Silver seen as a poor short-term / long-term choice now?

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Bob Hoye is expecting the mother of all deflations. I am guessing here that he thinks silver along with commodities will remain down whereas gold, being more purely money, will kick up in a currency crisis.

 

Still makes sense to me to own a bit of silver besides gold. Who really knows for sure what will eventuate.

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Any thoughts people? Divergence between silver and gold? Silver seen as a poor short-term / long-term choice now?

<_< As long a Silver Eagles sell for a 90% premium on Ebay, I consider this to be a paper problem, and not a physical one.

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I guess it will depend on whether the + effect of people choosing silver as a monetary metal can outbalance any - effect caused by its treatment as a deflating commodity. Could be a bit of to-ing and fro-ing maybe - or would silver's 'money' demand simply be swamped by its commodity trading?

 

Maybe, as banks typically hold gold and not silver, they don't/won't view it as 'money' - and that will mean it diverges from gold. Even if the public choose to buy it for some time...

 

Well, I hope this isn't right / doesn't happen. I'll be knackered as my holdings stand if silver (continues) to diverge from gold! As if holding gold wasn't scary enough it now seems there's far more of a gamble in silver! Maybe I should accept my losses and get out of silver town!

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<_< As long a Silver Eagles sell for a 90% premium on Ebay, I consider this to be a paper problem, and not a physical one.

 

How does the premium compare to before in pounds, rather than as a percentage? It seem to me the premium is generally fixed at an amount, rather than a percentage, so you would expect it to rise (in % terms) as the price fell, but remain more constant in £/$.

 

 

 

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Any thoughts people? Divergence between silver and gold? Silver seen as a poor short-term / long-term choice now?

 

Hello Mr Pipples

 

It sounds as though I am in a similar position to you.

 

My largest holding is in silver with GM. The Bob Hoye view of the GS ratio going to 1:100 I must say has me worried, 1:70 is bad enough.

 

If you missed it, it’s here;

 

Bob Hoye Radio Interview

 

When I’ve checked against the long term silver price / GS ratio chart it looks as though he is right – the GS ratio increases into and after a financial crisis. Don’t know why I didn’t spot it before!

 

600yearsilver.gif

 

Thinking about it, it would make sense. Gold is almost wholly a monetary metal, with little utility other than to preserve wealth. Silver on the other hand has largely become (at the moment) an industrial commodity, more directly affected by a slowdown in consumption.

 

So in the situation that now seems apparent – a huge financial shock, you would expect (ignoring the speculative fog of Comex shorts, imminent defaults, wholesale shortages, war with Iran, emerging market consumption offset, yada, yada, yada) silver to under perform gold at least initially.

 

Question is, if the above is true –how do I make the best out of this situation.

 

Admittedly I have limited experience but I can see two choices;

 

1. Hold tight and await second tier safe haven buying to kick in i.e. when gold becomes too expensive / unavailable, or cross my fingers for an event to appear out of the speculative fog. Hmmmmm…..

 

2. The decline in the price of silver so far as I can tell looking over the charts back to the sixties is unprecedented; you would expect a rebound to some degree. Assuming a rebound from now until the end of September – sell into near term strength and await an entry point after seasonal declines and the US elections. Bob Hoye’s view.

 

I would be very grateful for members input as to a better strategy.

 

Odd

 

 

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<_< As long a Silver Eagles sell for a 90% premium on Ebay, I consider this to be a paper problem, and not a physical one.

 

Well, I wish I could take encouragement from the spot/price difference on silver coins - but, as I've posted before, that situation only applies to the relatively v. small retail investor sector of the silver trade market and, with regard to coin shortages, is likely just down to temporary distribution and processing hold-ups rather then any real and lasting silver supply shortage. Do you not see it this way Goldfinger?

 

Hello Mr Pipples

 

It sounds as though I am in a similar position to you.

 

My largest holding is in silver with GM. The Bob Hoye view of the GS ratio going to 1:100 I must say has me worried, 1:70 is bad enough.

 

If you missed it, it’s here;

 

Bob Hoye Radio Interview

 

When I’ve checked against the long term silver price / GS ratio chart it looks as though he is right – the GS ratio increases into and after a financial crisis. Don’t know why I didn’t spot it before!

 

600yearsilver.gif

 

Thinking about it, it would make sense. Gold is almost wholly a monetary metal, with little utility other than to preserve wealth. Silver on the other hand has largely become (at the moment) an industrial commodity, more directly affected by a slowdown in consumption.

 

So in the situation that now seems apparent – a huge financial shock, you would expect (ignoring the speculative fog of Comex shorts, imminent defaults, wholesale shortages, war with Iran, emerging market consumption offset, yada, yada, yada) silver to under perform gold at least initially.

 

Question is, if the above is true –how do I make the best out of this situation.

 

Admittedly I have limited experience but I can see two choices;

 

1. Hold tight and await second tier safe haven buying to kick in i.e. when gold becomes too expensive / unavailable, or cross my fingers for an event to appear out of the speculative fog. Hmmmmm…..

 

2. The decline in the price of silver so far as I can tell looking over the charts back to the sixties is unprecedented; you would expect a rebound to some degree. Assuming a rebound from now until the end of September – sell into near term strength and await an entry point after seasonal declines and the US elections. Bob Hoye’s view.

 

I would be very grateful for members input as to a better strategy.

 

Odd

 

It's a sod ain't it?

 

Guess it may depend on:

 

if we are entering a prolonged period of deflation or this is more of a blip

 

whether PMs (inc' silver) will be driven differently for this global 'mother' of a crisis

 

Edit: Bob Hoyes latest: http://www.321gold.com/editorials/hoye/hoye091508.html He thinks Gold is due to climb - but (I think) he thinks silver will continue to diverge.

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It's a sod ain't it? You're not wrong Mr P.

 

So far today's price / ratio action further confirms Bob Hoye's outlook.

 

Looking at the period 1990 GS ratio that he's talking about, the ratio widened from about 70 to 100 over a six month period, in not far off a straight line!!!

However I wouldn't say the PMs where in a bull market at the time.

 

post-59-1221480184_thumb.png

post-59-1221480201_thumb.png

 

Maybe 73-75 would be a better comparison - the GS ratio rising and falling to it's start point over a two year period.

 

 

My intention is to hold PMs for another 3-5 years but at some point I'm going to lighten up on the silver.

All the same I'm not going to panic and maybe it's a mistake but I ain't selling weakness.

 

Talk about heaven and hell - what was it Kipling said about Triumph and Disaster!

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