Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold didn’t have a very exciting day yesterday but it did manage to close on the positive side of the ledger, so I guess we should be thankful to JPMorgan et al for these small mercies.
The high for the day was in around 9:00 a.m. Eastern time…and then got sold off a bit starting the moment that the London bullion market closed at 4:00 p.m. local time which is 11:00 a.m. in New York.
The price was briefly below Tuesday’s closing price, but recovered a few dollars going into the close of electronic trading at 5:15 p.m. Eastern. Volume was pretty light.
Silver’s price movements were about the same as gold’s, right down to the sell-off after the London closed. From that New York low, silver recovered almost back to its high of the day, which I found very encouraging. I’m also glad to see the price put some distance between it and the $40 mark as well.
The dollar didn’t do a whole lot of anything yesterday, and the scale of the graph makes the price action look more spectacular than it actually was.
The selling pressure on both gold and silver prices that began at the close of London trading at 11:00 a.m. Eastern time, is more than obvious on the graph below. And even though the gold price managed to squeeze out a small gain on the day, the gold stocks couldn’t manage the same feat, with the HUI finishing down a smallish 0.45%. For the most part, the silver stocks had a much better time of it.
The CME’s Daily Delivery report showed that 82 gold, along with 3 silver contracts, were posted for delivery on Friday.
Both ETFs showed declines for the second day running. GLD was down a chunky 107,251 ounces, while SLV had an eye-watering withdrawal of 7,806,880 troy ounces, which I’d bet is probably the biggest one-day drop in SLV history. I would also guess that it had little to do with the big price sell-offs of Monday and Tuesday. Someone obviously needed a chunk of silver in a hurry, because the price drop over the last couple of days certainly wouldn’t account for a withdrawal of this size.
The U.S. Mint had a smallish sales report yesterday. They sold another 1,000 ounces of gold eagles, along with 1,500 one-ounce 24K gold buffaloes.
For the third day in a row, the Comex-approved depositories did not receive a single ounce of silver and for the third day in a row, they shipped more out the door. On Tuesday they shipped out 249,418 troy ounces of the stuff. The link to that action is here.
Combine the approximately 1.5 million ounces of silver shipped from the Comex warehouses over the last two reporting day…along with the 8.8 million withdrawn from SLV since Monday, and it’s obvious that over 10 million ounces of silver have disappeared to parts unknown in the last three business days. As Ted Butler pointed out, frantic activity like this is not a sign of a market in surplus, it’s indicative of a market that is short of physical product to deliver.
My bullion dealer had another huge day on Wednesday that was even bigger than the one he had on Monday. It’s obvious that investors are buying the dips, not only in the silver shares, but in the physical metal itself.
| The Wrap |
| The thing to remember is that if my readings on physical silver conditions are correct, that will go a long way to explaining why I think the nice price pop could be a big one.Few of us have much experience with pricing in a shortage in general…and especially in silver. Therefore, it may be hard to grasp just how strongly prices can react in a genuine shortfall. The best example currently is in the rare earths, where prices have moved by unprecedented amounts recently. I’m not trying to be sensational in projecting price; I’m just trying to point out that in a genuine commodity shortage, the price action must be sensational.– silver analyst Ted Butler, April 13, 2011
Gold volume yesterday was a bit over 110,000 contracts net of all roll-overs…and the preliminary open interest number was a pleasantly small 2,763 contracts. Today’s final o.i. number should make for very happy reading. Gold’s final open interest number for Tuesday’s trading day showed a decline of 2,697 contracts…which is a huge drop from +5,395 preliminary o.i. number. But, to tell you the truth, both Ted and I were hoping for better than that. Hopefully tomorrow’s Commitment of Traders report will show more detail of who the longs and the shorts were, as this data will be in it. Silver net volume yesterday was a hair under 70,000 contracts…but the o.i. number was a very chunky 4,259 contracts, which is a lot considering the price action on Wednesday. How that number resolves itself later this a.m. remains to be seen. Silver’s final open interest number for Tuesday’s trading day showed a drop of 1,102 contracts, which is a far cry from the +5,821 contract preliminary number. The backwardation situation in silver remains basically unchanged from what it was on Tuesday. As I mentioned above…and in yesterday’s column…I was very encouraged by the fact that silver didn’t close below $40…and every attempt to sell it down below that level ran into serious buying. In his letter to his paying subscribers yesterday, Ted pointed out he following…”Price action over the past few days are making me think we may have already seen the shake out. The only question in my mind is…do we get the big up-move forthwith…or after a quick shakeout?” Judging by the price activity in silver while North America slept, it looks pretty much like we’ve seen the bottom for this move down…but I wouldn’t bet the ranch on that until I see what the U.S. bullion banks do during Comex trading today. There are lots of examples [Monday being the latest] where the silver price soared overnight, only to be taken down in London and New York later the same day. So I’ll keep the party favours on the shelf for the moment…but within easy reach. As of 4:45 a.m. Eastern time, silver is up 46 cents…and gold is up five bucks. Volume in gold is pretty light…and, in silver, it’s pretty decent…so this little pop in the silver price is not going unopposed. Here’s the 1-year silver chart updated with Wednesday’s price action. It’s still way overbought…but, like I said yesterday, it may not matter anymore. I would think we’ll find out if that’s the case in pretty short order.
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