Thursday, April 21, 2011
Gold and silver have surged to new record nominal highs in dollar terms (all time and 31-year) with the dollar falling sharply on international markets. Silver has continued to surge in all currencies and has surged to a new record nominal high of $46.25/oz (£27.85/oz and €31.54/oz) on growing rumours of a short squeeze involving a billionaire or state interest attempting to corner the silver market (see FT news story below).
Bloomberg Composite Silver Inflation Adjusted Spot Price – 1975-2011 (Weekly)
Traders and technically minded investors are firmly focused on silver’s record nominal high of $50.35/oz. Some with a longer term fundamental focus continue to see silver in triple digits if it is to match the real record highs of $130/oz seen in 1980. The inflation adjusted silver chart puts the present sharp rise in the all important historical context.
The massive concentrated short positions of some Wall Street banks have incurred serious losses and a desperate attempt to close their futures positions due to the tight physical marketplace may be leading to a short squeeze. This is something that GoldCore and a few other analysts have warned for some time.
Cross Currency Table
We have long said that the very small silver market was ripe for cornering by private or state interests and that appears to be happening on some level. However, there is an increasingly large number of silver buyers who realise the market can be cornered and they are buying in anticipation of this event.
The blogosphere has again been ahead of the curve and dismissal of much circumstantial evidence of silver manipulation, a short squeeze etc. as “conspiracy theories” is becoming less easy to do. It looks like many investors internationally and one or a few private individuals and states are cornering the silver market.
At one stage the Hunt Brothers cornering of the market was a “conspiracy theory” – it soon became fact.
Silver’s volatility is set to increase and sharp corrections are likely, however the sharp falls seen after the Hunt Brothers manipulation ended are unlikely today given the very strong supply and demand fundamentals.
US Dollar Index – 5 Year (Daily)
Gold’s movement today, unlike in previous weeks and months, is a function of dollar weakness as gold has remained at the same price in terms of other major currencies.
The degree of complacency regarding the risk of the dollar coming under severe pressure remains high (as seen in Financial Times Lex column on gold and the US dollar today – see below).
Below the lows of 71.32 on the US Dollar Index (see chart above) is unchartered territory and the US’ massive $14 trillion plus debt will likely lead to the dollar continuing to fall particularly against gold. In a worst case scenario, it could lead to a form of a run on the dollar when speculators smell blood as happened to sterling when the Bank of England was “broken” by George Soros.
Gold is trading at $1,503.80/oz, €1,031.34/oz and £907.49/oz.
Silver is trading at $45.80/oz, €31.41/oz and £27.63/oz.
Platinum Group Metals
Platinum is trading at $1,811.00/oz, palladium at $759/oz and rhodium at $2,250/oz.
This article was posted: Thursday, April 21, 2011 at 7:08 am