Gold ticks down ahead of euro zone bank stress tests

- July 23rd, 2010

On Friday, Gold steadied despite gains in equities as investors took to the sidelines before the release of European bank stress test results, which seek to restore confidence in the euro zone banking sector.

On Friday, Gold steadied despite gains in equities as investors took to the sidelines before the release of European bank stress test results, which seek to restore confidence in the euro zone banking sector.

The press release is quoted as saying:

Spot gold was up $1.00 to $1,196.35 an ounce by 0630 GMT (2:30 a.m. EDT) after rising as high as $1,200.10 on Thursday as strong corporate earnings and rallies in equities spurred buying.

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10 responses to “Gold ticks down ahead of euro zone bank stress tests

  1. 1980 is irrelevant. Here are the real reasons:

    1. Supply is relatively inelastic – over half of the silver is mined indirectly (or as a byproduct) of other mining. Spot price has little impact on this supply.

    2. There is no silver left at central banks – China was the last, and went from being a big seller of there silver reserves until 2005. They have no silver left to sell.

    3. China allowed its citizens to carry precious metals. Investment demand in high inflation China is soaring. China went from exporting 80 million ounces per year to importing 120 million between 2007 and 2009, and this trend is surely growing. That’s a change of 200 million ounces, or 1/4 of total silver production.

    4. Solar cells and medicine have picked up the slack left behind by photography. These applications are relatively expensive and use very small quantities of silver, making the consumption of silver relatively inelastic to changes in current spot price.

    5. Massive shorts by JP Morgan will need to be shored up. It’s been speculated that they have 1/3 of the known silver deposits in the earth’s crust in short positions (lol). Flabbergasted

    Sept 24 – Oct 10

    6. Silver scrap metal is much rarer today. Most silverware and tea sets were melted in 1980 (and for about thirty years after). In 1980, nearly all the melters you see today started up and they were inundated by scrap silver. Today that silver does not exist. Silverware hasn’t been popular for generations. More importantly, in 1980 it was only 16 years after the USA and 13 years after Canada stopped using silver in their circulation coinage so supply was plentiful. The majority of scrap is held by silver bulls.

    7. There is more gold than silver. First time in history. Of the 55 billion ounces of silver ever mined, there is only 1 billion left for investment purposes. Total silver supplies have shrunk 200 million ounces per year since 1980. At the turn of the 20th century there was 12 billion ounces. Therefore, silver should be trading at an all-time high (in human history) and at the smallest ratio between gold and silver (15 to 1, perhaps 10 to 1).

    8. THE MOST IMPORTANT FACTOR: At $30, there is only $30 billion of silver to be invested in. $30 billion. In contrast the gold market is worth $6 trillion. IF silver would all of a sudden become the investment story of 2010 and 2011 (which it did) then based on the market size, it surely couldn’t handle the additional international investment demand. The only way for investors to get a piece of the shrinking supply of silver is to bid the spot price up and that spot price should go up rapidly. You can’t have the investment story of the year in a $30 billion market – there is way to much cheap money and speculation out there.

    9. In the past 2 years, most of the silver was bought up by ETFs. They now consume 55% of the silver market. These ETFs now perform the same function as the Hunt Bros did in 1980 (by limiting supply).

  2. 1980 is irrelevant. Here are the real reasons:

    1. Supply is relatively inelastic – over half of the silver is mined indirectly (or as a byproduct) of other mining. Spot price has little impact on this supply.

    2. There is no silver left at central banks – China was the last, and went from being a big seller of there silver reserves until 2005. They have no silver left to sell.

    3. China allowed its citizens to carry precious metals. Investment demand in high inflation China is soaring. China went from exporting 80 million ounces per year to importing 120 million between 2007 and 2009, and this trend is surely growing. That’s a change of 200 million ounces, or 1/4 of total silver production.

    4. Solar cells and medicine have picked up the slack left behind by photography. These applications are relatively expensive and use very small quantities of silver, making the consumption of silver relatively inelastic to changes in current spot price.

    5. Massive shorts by JP Morgan will need to be shored up. It’s been speculated that they have 1/3 of the known silver deposits in the earth’s crust in short positions (lol). Flabbergasted

    Sept 24 – Oct 10

    6. Silver scrap metal is much rarer today. Most silverware and tea sets were melted in 1980 (and for about thirty years after). In 1980, nearly all the melters you see today started up and they were inundated by scrap silver. Today that silver does not exist. Silverware hasn’t been popular for generations. More importantly, in 1980 it was only 16 years after the USA and 13 years after Canada stopped using silver in their circulation coinage so supply was plentiful. The majority of scrap is held by silver bulls.

    7. There is more gold than silver. First time in history. Of the 55 billion ounces of silver ever mined, there is only 1 billion left for investment purposes. Total silver supplies have shrunk 200 million ounces per year since 1980. At the turn of the 20th century there was 12 billion ounces. Therefore, silver should be trading at an all-time high (in human history) and at the smallest ratio between gold and silver (15 to 1, perhaps 10 to 1).

    8. THE MOST IMPORTANT FACTOR: At $30, there is only $30 billion of silver to be invested in. $30 billion. In contrast the gold market is worth $6 trillion. IF silver would all of a sudden become the investment story of 2010 and 2011 (which it did) then based on the market size, it surely couldn’t handle the additional international investment demand. The only way for investors to get a piece of the shrinking supply of silver is to bid the spot price up and that spot price should go up rapidly. You can’t have the investment story of the year in a $30 billion market – there is way to much cheap money and speculation out there.

    9. In the past 2 years, most of the silver was bought up by ETFs. They now consume 55% of the silver market. These ETFs now perform the same function as the Hunt Bros did in 1980 (by limiting supply).

  3. Is that $5-10 an ounce actually true, or is it that the miners aren’t allocating much of the variable costs to silver and rather allocate it to gold and copper (as most silver is mined indirectly). In other words, are the miners simply moving numbers around on paper rather than representing what the true variable cost would be of increasing only silver production (without gold and copper).

  4. Is that $5-10 an ounce actually true, or is it that the miners aren’t allocating much of the variable costs to silver and rather allocate it to gold and copper (as most silver is mined indirectly). In other words, are the miners simply moving numbers around on paper rather than representing what the true variable cost would be of increasing only silver production (without gold and copper).

  5. Just remember that HSBC along with JPM is short silver and would like nothing more then for the price to drop. Don’t be fooled by these so-called experts who are more interested in their bottom line than yours.

  6. Just remember that HSBC along with JPM is short silver and would like nothing more then for the price to drop. Don’t be fooled by these so-called experts who are more interested in their bottom line than yours.

  7. One thing of importance, I think, is that not too much credit is givern to the fact that we are in times never seen before! The only economic history that has been successful is the Mises/Austrian economic theory. Just like drinking yourself sober you can’t print yourself solvent! World demand for food, commodities, and the action of the US Fed will drive most all commodities up including silver/gold. Time will tell and only about 5 % of the population are NOT sheeple and do understand logic. KYPD cul jlg

  8. One thing of importance, I think, is that not too much credit is givern to the fact that we are in times never seen before! The only economic history that has been successful is the Mises/Austrian economic theory. Just like drinking yourself sober you can’t print yourself solvent! World demand for food, commodities, and the action of the US Fed will drive most all commodities up including silver/gold. Time will tell and only about 5 % of the population are NOT sheeple and do understand logic. KYPD cul jlg

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