Gold And Silver Bubble? - Some Retail Investors Taking Profits And ETF And COT Data Suggest Otherwise

From GoldCore

Gold and silver are tentatively lower this morning despite the dollar
and especially the yen being under pressure. The possibility of Japan
being downgraded has seen the yen join the dollar under pressure and
gold has risen to over 124,000 Japanese yen per ounce, some 2% below
the record nominal high just over 126,000/oz.

Gold in Yen - 1 Day (Tick)

Japan’s public finances were already very poor prior to the earthquake
and nuclear catastrophe and are set to worsen considerably, which
should see the yen fall sharply versus gold.

Sovereign debt risk remains elevated in the eurozone and the cost of
servicing peripheral nations’ debt continues to rise. The cost of
insuring debt sold by Greece, Portugal and Ireland rose to records this
morning as have bond yields in Greece which have leapt to new records –
over 16% on the 10-year and 25% on the 2-year. Irish and Portuguese
10-year yields have risen to 10.63% and 9.65% respectively.

Cross-currency Table

Sovereign debt risk can now be seen in the eurozone but also in Japan
and the US, and as long as sovereign debt risk remains elevated,
precious metals will continue to be bought as hedges and for safe haven
purposes. This should lead to the continuation of gold and silver’s
secular bull markets. Although, participants should as ever realise
that there will be corrections – some of which can be sudden and sharp.

Evidence shows that speculation in gold and silver remains muted as
seen in the Commitment of Traders reports and the total gold and silver
ETF holdings – neither of which have shown huge increases or signs of
“irrational exuberance” or investors “piling in”.

Commitment of Traders (COT) data is hardly indicative of an overly
bullish sentiment extreme that would normally precede a sharp sell off.

Total Gold ETF Holdings - 1 Year (Daily)

Total ETF gold holdings (see above) are near the levels seen last June
and below the levels seen in September, October, November and December.

Total ETF silver holdings (see below) have risen in recent days but
are not far above the levels seen in December 2010 – some 5 months ago.

Total Silver ETF Holdings - 1 Year (Daily)

Indeed, the ETF holdings appear to show that ETF precious metal holders
are “stickier hands” than had been expected as gold holdings look to
have consolidated above the 64 million ounce mark.

Total ETF gold holdings at 66.55 million ounces are worth nearly
$100 billion at $1500/oz ($99,825,000,000). Total silver holdings of
498.914 million ounces price at $45.50/oz are worth only some $22.7
billion, suggesting that silver remains under-owned when compared to
gold and could see a sharp increase in holdings in the coming months
and years.

The $22.7 billion (total silver ETF holdings) is a small number when
compared to the huge sums of money at the disposal of high net worths,
hedge funds and sovereign wealth funds. The last quarter saw Apple’s
iPhone revenue alone top $12 billion. This puts the silver holdings
figure in perspective.

One hedge fund alone, the Man Group, has assets of over $69 billion.

Some Clients Taking Profits and More Opting for Coins and Bars

Many of our clients have taken profits on certificates in recent days.
Most continue to be prudent and continue to maintain a core holding
(for portfolio diversification and financial insurance purposes) but
there are definitely concerns amongst some of a bubble.

Others have taken profits on certificates and bought gold and silver
coins and bars (in secure storage or delivered). Recently orders for
coins and bars have outweighed those for certificates and there is
definitely an increased preference for physical coins and bars and for
taking delivery.

Our ratio of sell orders to buy orders is the highest it has ever
been. Industry associates confirm that they have been seeing an
increase in selling on behalf of the public and that speculative buying
continues but is minimal.

The majority of the western public remain unaware of gold and silver
as investments and as stores of value. Most do not even know how much
an ounce of gold costs in local currency terms as precious metals
continue to be ignored by most of the non financial press or media.

This is in stark contrast to the Middle East and Asia where demand
remains robust and may even be increasing due to inflation concerns.

Ignorance regarding gold and silver in much of the western world is hardly indicative of a mania or speculative bubble.

Gold

Gold is trading at $1,508.25/oz, €1,028.10/oz and £911.05/oz.

Silver

Silver is trading at $45.44/oz, €30.97/oz and £27.44/oz.

Platinum Group Metals

Platinum is trading at $1,807.00/oz, palladium at $749/oz and rhodium at $2,250/oz.

News

(Reuters) -- Silver steadies, gold perky ahead of Fed decision
* Gold, silver may be rangebound ahead of Fed meeting
* India shows strong appetite for physical silver
* Coming up: U.S. Fed chief Bernanke briefing; 1815 GMT

Silver steadied on Wednesday, after its largest one-day slide in
over a month the previous day, while gold profited from a weaker dollar
which came under pressure ahead of a U.S. Federal Reserve interest
rate decision.

The Fed is not expected to signal any rush to scale back its
multi-billion dollar support mechanisms for the economy, so investors
are waiting to hear more on the outlook for monetary policy from
chairman Ben Bernanke when he gives the central bank's first
post-decision news conference later in the day.

With the dollar under pressure and its inverse link to gold
strengthening for the first time in a week, the bullion price was set
for a second day of gains, although a string of public holidays in the
United Kingdom restricted volumes.

Spot gold XAU= was last up 0.4 percent at $1,506.90 an ounce by 0940
GMT, about 0.8 percent below Monday's record high at $1,518.10. U.S.
futures for June delivery GCv1 were last up 0.3 percent at $1,507.30.

"It's consolidation. Gold has done a bit better than silver over the
last couple of days, but we're still in a holiday period here in
London so trading volumes are not as high as normal and I don't think
there will be a huge move (ahead of the Fed," said Mitsubishi analyst
Matthew Turner.

"I don't think there's much outlook until after the press conference," he said.

Gold could continue to draw strength from any weakness in the
dollar, particularly if the Fed maintains its accommodative policy
stance, in contrast with the European Central Bank, which has raised
rates as it attempts to curb inflation.

"The market is a bit mixed ahead of the Fed meeting, which will
influence the move of the dollar and precious metals," said Peter Fung,
head of dealing at Wing Fung Precious Metals based in Hong Kong.

Silver steadied somewhat, following its largest one-day fall in a
month the previous day. The price is on track for a 21 percent gain
this month and a 47-percent rise this year, making it the top performing
precious metal.

Dealers in Asia said strong physical demand was offering some
support to silver, although holdings of silver in the world's largest
exchange-traded funds staged their largest one-day outflow in nearly two
weeks by April 26. [GOL/ETF]

Spot silver XAG= was last flat at $45.48 an ounce, having recovered
from a 3-percent drop on Tuesday, its largest one-day slide in six
weeks.

U.S. silver SIcv1 was last up 1 percent at $45.52. Implied
volatility in silver options has been at its highest this week since
November last year as the spot price has swung from lows around $43 to
highs above $49 in the space of a week.

"The recent sharp increase in volatility is an indication of the
increasing nervousness of market players and could be a sign that the
rally in the silver price is approaching an end," said Commerzbank in a
note.

In fundamental news for silver, MMTC, India's largest bullion
importer, plans to double its silver purchases this fiscal year to
1,500 tonnes, to catch up with exploding investment interest.

Platinum XPT= was last up 0.4 percent at $1,804.49 an ounce, while palladium XPD= was flat at $750.00.

(Yonhap) -- S. Korean depositors look to foreign currency, gold
An increasing number of South Korean bank depositors are putting their
money into foreign-currency denominated deposits or gold-buying
deposits this month, data showed Monday, pointing to a growing appetite
for safe assets.

Four local banks including top lender Kookmin Bank drew US$12.6
billion in foreign-currency deposits as of Thursday, up $149 million
from the end of March, according to industry data. The deposits
rebounded in February after falling for the fourth consecutive month in
January.

The rise came as customers try to put their money into such deposits at a time when the value of the dollar remains weak.

The South Korean currency, which hit a 32-month high to the dollar
last week, has risen about 5 percent per the greenback since the start
of this year. The won is widely expected to be under upward pressure
against the dollar, aided by robust exports and sustained inflows of
foreign capital.

As the dollar has slid against major currencies amid the U.S.
Federal Reserve's soft monetary policy, gold has extended its rallies,
sending the price of the precious metal above $1,500 per ounce.

The risks of global inflation are raising expectations that the
price of gold might rise as a tool of hedging inflation risks, market
experts say.

Demand for gold-buying deposits in South Korea has risen, reflecting
the popularity of gold as a form of investment, industry watchers
said.

Such deposits came to 269.1 billion won (US$248.9 million) as of
Thursday, up 13.6 billion won from the end of the previous month,
according to Shinhan Bank. The deposits rose by 68.7 billion won from
the end of last year.

If people put their money into such gold-buying deposits, they can
invest in the equivalent amount of gold in accordance with changes in
gold prices.

(Reuters Life) -- South Korean infants hit by gold price surge
Surging gold prices have forced South Koreans to cut down on
traditional rings given to mark the first birthday of the children of
friends and relatives, making jewellers to come up with a lighter and
cheaper alternative to boost sales.

A gold ring is a traditional present to wish a baby good luck and
fortune, but a rise in gold prices to a record $1,508 an ounce on
Thursday has priced even the most devoted out. The rings are sized to
the baby's finger and its name may be engraved inside.

"On average, monthly sales of dol (first birthday) rings is only
one-tenth compared to last year," said Yoo Dong-soo, chairman of the
Korea Precious Metals Association.

A new one-gram ring, much lighter than the customary baby gift
weighing an eighth of an ounce or 3.75 grams, would help lift sales and
preserve the long-standing tradition, he added.

The first birthday is a huge ceremonial occasion in Korean tradition
that includes a birthday party. During the party, a baby, sometimes
wearing gold rings, selects an item from among things such as thread, a
pencil or money to predict their future, while families and guests
watch.

"The one-gram ring sounds just doable for both party hosts and
guests, we don't have to feel it's a burden," said Park Su-yeon, a
34-year-old mother who's planning her baby's first birthday party in
May.

But sentiment only goes so far. Some parents have actually sold the
rings engraved with their infant's name to take advantage of rising
gold prices.

(Bloomberg) -- Silver May ‘Pull Back’ in Short Term, Standard Chartered Says
Silver may drop in the short term after the metal’s ratio to
gold was “overextended” and prices touched a record in London, Standard
Chartered Plc said.

“We look for a pullback in prices in the short term amid continued
volatility,” analysts led by London-based Dan Smith said in a report
today.

(Financial Times) -- Does every pause have a silver lining?
Count references to the Hunt brothers in leading newspapers
and the results for 2011 look not unlike the stratospheric rise of
silver – the market they infamously tried to control in 1980.

But since Monday’s $49.70 an ounce peak – close to the record just
above $50 reached during the Hunt brothers’ episode – the metal is off
more than 8 per cent.

Is this market “sticker shock” – the jittery trading that surrounds
big round numbers – that can be overcome? Or is this the end of a
frothy, speculative rally?

There has certainly been speculation in the form of market-savvy
momentum-chasing hedge funds and the sort of retail investor interest
often seen during bubbles.

But there is also genuine end-user interest: Indian consumers,
priced out by the rally in gold, are increasingly turning to silver.

US consumers too have been doing their bit. Sales of silver coins
have rocketed since the financial crisis. Some of this is linked to
fear of the damage to the dollar from the Federal Reserve’s ultra-loose
monetary policy.

Silver’s rally needs to be put into perspective. At almost 150 per
cent over seven months, it is stunning, but far short of the
spectacular 400 per cent in five months managed during the Hunt
brothers episode.

Put against gold, silver does look distinctly racy. The ratio of
gold to silver prices is at its lowest since 1980, and has plunged from
46 in January this year to 33.

There are reasons enough to think silver’s rally could fade. Fed
“fears” should ease if, as expected, it confirms today that it will end
its quantitative easing in June, even if no rate rises are yet in
sight.

There is, however, no logical reason for $50 an ounce to be anything more than a psychological issue for investors.

But it would do no harm for investors to at least pause to take stock before even considering another push higher.

(Bloomberg) -- Hong Kong Mercantile Bourse to Start Trade With Gold May 18
The Hong Kong Mercantile Exchange, backed by the world’s
largest lender, will start trading dollar- denominated gold futures on
May 18, tapping demand for the metal which has rallied for 10
consecutive years.

The exchange received permission from the city’s Securities and
Futures Commission, it said today in an e-mailed statement. The futures
will be the bourse’s first product, and there are plans for industrial
and other precious metals, energy, agriculture and commodity indices,
it said. Gold futures are currently traded on the Comex division of the
New York Mercantile Exchange.

Immediate-delivery gold soared almost 30 percent last year and this
week reached a record $1,518.32 an ounce, as investors sought to
protect their wealth from further currency debasement and accelerating
inflation. Chinese demand may advance 15 percent this year as investors
seek a hedge against inflationary pressure, according to the China
Gold Association.

“Our new platform will offer Asia a bigger say in setting global
commodity prices,” Barry Cheung, chairman of the exchange, said in the
statement. “Market participants in the region have had to rely on
Western exchanges for price discovery,” he said.

The new Hong Kong gold futures will be 1 kilogram per contract, with
physical delivery in Hong Kong. Trading hours will be between 8 a.m.
and 11 p.m. local time.

Trade on the Hong Kong bourse will start with at least 16 members
including Morgan Stanley and MF Global U.K. Ltd., the exchange said.
Transactions will be cleared through London-based LCH.Clearnet Ltd.,
the company said.

LCH.Clearnet is Europe’s largest clearing house, and has members
including the London Metal Exchange, the world’s largest marketplace
for copper and aluminum.

The Industrial & Commercial Bank of China, the world’s largest
lender by market value, bought a 10 percent stake in the Hong Kong
Mercantile Exchange in December to become a founding shareholder.

Comments

[Turtlelord]

Well, looking at it as dispassionately as possible, I decided to liquidate my meagre Silver holdings at a very handsome 25% return in the six months since I got them. (I know, 25% looks pitiful but it's translated into CHF terms so it's quite good really).

At the moment I'm using a fraction of the profit to short for the short term and then hopefully jump back in round about the $30-$35 level.

I'm not particularly worried about the near term as:

1. CHF is continuing to climb vs. USD
2. There will be a rally in silver eventually (Summer/Autumn)
3. I actually consider it sane strategy to always enter the market later and exiting somewhat earlier.

Time will tell, but if anything, I always put my money where my mouth is.

[s0lspot]

Spanish national TV news just aired a 3 or 4 minutes subject about silver & gold, experts interviewed were quite positive about the metals and said there was no bubble but massive buying because of fiat money & geopolitical situation. Pretty well informed piece and definately lacking in the "DO NOT BUY METALS" propaganda BS usually seen on TV...

Will try to find the piece on youtube tonite.

[rosiescenario]

...well, those poor souls live in a country where trust in their fiat has evaporated, unlike here in the U.S., where we all know the dollar is strong and will so continue given the leadership at the Fed Reserve and that in D.C.

[Johnny Lawrence]

I don't understand why people like Math Man get so angry when talking about PMs.  Chill out.

[monopoly]

Good summary. If silver gets close to 40 will add. Looking for more of a pull back in gold than 20 dollars, but I may not get it.

[LRC Fan]

Looks like APMEX has raised their premiums on Eagles yet again.  Can't find any for under $50.  "As low as $5.49 over spot" on 2011 Eagles, shipped in a month.  Lul. 

[monopoly]

Agree, I do not trade miners day to day. I am just not that good. Like what I got and sleep well at night. Just have 0 interest in a manipulated market. Dollar better hold here. Long way down if it starts to cascade.

[lsbumblebee]

That's a new one. Dumping paper for physical means PM's are in a bubble. Go figure.

[Turtlelord]

It's clearly not the case and you're right.

Silver's not in (much of) a bubble. The thing that worried me was the hasty arrival of otherwise clueless people to the silver trade. When silver goes (too) mainstream then rollercoaster rides tend to happen and whether you want to call it correction, re-evaluation or mini-crash; the truth is it does happen.

I too share the view that the fundamentals are solid and Silver has a long way to go (or rather, USD has a lot of proving to do). But when I hear ordinary people on the street talking about purchasing silver (paper or physical), I think it's time to take a back seat, get a breather and wait for all the fuss to die down before committing oneself again.

[lsbumblebee]

Yes, but hearing people on the street talking about silver doesn't necessarily mean it's a mania. I just think that some are beginning to catch on. I wouldn't waste any time converting USD into physical PM's whenever possible. It's futile trying to time these markets.

[Robslob]

Of course PMs are in a bubble...paper PMs that is...

[stitch-rock]

From what I understand: Macro trending appears as vectors like a slow-motion crash

and defines the system in which micro movements happen. The Bernakes speech today

will have influence on the short-term fluctuation of commodities and equities

but, until that BIG music stops, there seem to be very few sure bets.

PM's are historically that hedge (especially against inflation). From what I see,

The impact of inflation, especially here in the US, has only JUST started upending

the confidence that is the true foundation of any economic system.

No confidence, no economy = PM's rise.

This is just one train of thought supporting a macro rise of silver.

We have to remember that the Silver market is miniscule in comparison to other equity pools.

If the current sociological look has 1:20 people looking to hedge against financial debasement with silver,

What happens when that ratio starts to compress?

etc, etc...

[Johnny Lawrence]

Silver still bouncing along the 9-day MA.  If this were a common stock, RobotTrader would say that it's a good sign.

[D1eeeeeNAHHHHH]

Guys, stop wasting your valuable time arguing with Danerous Math posters.  It's clear to me (as it's easily clear on yahoo news comments) that we've been infiltrated by government agents talking trash. 

Silver can end the federal reserve ponzi scheme if it becomes widely accepted.  They are attempting to slow silver buyers down.

Think about it.  They take this guy to court for making silver coins and call him a threat to the US and take his silver.

They have JPM involved with SLV.  They have HSBC involved with SIVR.  Both banks are reported to be wildly short on Silver.  If SHTF, they can lease it (or steal it) and default without any criminal recourse as seen with all the large banks who've been commiting mortgage fraud which goes way deeper than robosigning and squatters.

They are buying time to analyse the situation and to find ways to destroy confidence in silver.  If it becomes inevitable that silver will pass 100 an oz., the US will want to somehow be positioned in a way to take full advantage of the rise politically and financially to stay in control of the system.

The person who ends up endlessly arguing with a person with a foolish position end up to be the greater fool.

[tmosley]

I enjoy target shooting.  It's rare that a group of people will volunteer themselves as moving targets for my amusement.

I'm lovin' it.

Spot on with the other stuff, though.

[Platinum_Investor]

Thank you, Thank you for this pull back!     24 minutes ago    

I was starting to get worried that it was going to go parabolic. I am NOT wanting Silver to go parabolic just yet, we'll save that for the final blow off in the $150-200 range in the next few years.

Pull backs are healthy, 10-15% corrections are GOOD!

Buy the F'ing Dip and hang on for the ride.

The best bullion Physical stores imo are:

Tulving.com - for large quantity orders, they have the best premiums.

Apemx.com

Gainsville Coins

Kitco.com

Pick up some Physical, stash it away, if you ever want to sell, the sites buy them back right away.

[topshelfstuff]

i hope someone who has the time will do a write-up on the plan outlined by Hugo Salinas Price....speaking of using Silver as an alternative to paper. he has used Mexico, China, and the UK in some writings or speeches, but the plan is the same...and if everyone really faces facts, this will have to be implemented by some country...who first ...?...perhaps the BRIC & BRICets, leaving the IMF/SDR constituents [US/UK/EURO/JYen] the 4 "coincidentally" QE'ing, left to play monopoly with themselves

http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=163

and many other brilliant works located here:

http://www.plata.com.mx/mplata/articulos/articles.asp

oh yes, keep in mind that China didn't just suggest the people Buy Silver, the word used was "urges"...you can easily find some of the China TV Commercials  put up by the PRC Gov, just googel [ China urges silver ]

[N_Jones]

It would be really nice if Dangertime can get silver down in the 30's by this weekend.... I'd like to buy some more.

But on a serious note the real problem here is the fact that silver going up does not mean silver increased in value it means that money (read USD) is going down in value. This holds true for most all PM's and commodities in general. The real value of silver didn't change. Money (USD) by the way is a medium of exchange of real assets (labor, property, commodities, PM's ect.) not a store of wealth.

Noel

[slewie the pi-rat]

in the present (as opposed to the future):  47 contracts (!) for delivery, today.DJ Comex Silver Delivery Intentions Breakdown - Apr 27

so, right now, it looks like 1500 is the gold floor, silver is holding 45, and the Gold/Silver Price Ratio is either taking a breather, starting a correction, or perhaps even reversing.  since i am really bad at telling the future, i'll just keep everyone in suspense!  LOL!

[AldoHux_IV]

For a newbie just starting out in buying the physical, anyone recommend a couple places to buy gold/silver?

[N_Jones]

I use APMEX but like others have stated they have high premiums. There is Blanchard and Tuvial not sure of the spellings of those two but Tuvial has a 500 oz minimum. If you hit refresh enough time of the main website you will see two or three different PM sellers.

[N_Jones]

arg...... stop buying silver please. Every time I refresh APMEX they are out of another year and I'm going to have to pay higher premiums.

[Smedley Noshbone]

Has anyone noticed the Dollar is at 72.89?