Friday, December 5, 2014

Important Developments in Gold and Silver

I'm still digesting this report by Paul Mylchreest but this has to be one of the most profound reports I've read in years.

From Zerohedge:

From Paul Mylchreest of ADM Investor Service International

Long Nikkei/Short Gold: Profitable, dangerous and missed by everybody?

Has the market completely missed a huge long/short trade which has helped to drive up the Nikkei and drive down the gold price for more than 2 years? One that puts risk-taking and leveraged speculation by our industry in an unfavourable light again.

Alternatively, what if somebody knew that the gold price was being pushed down on the back of a leveraged short trade rather than on fundamentals? Might they gradually build up a long position in silver on the basis that the weakness in the gold price was not sustainable?

We don’t know but…

The much smaller size of the silver market, limited above-ground silver inventory, and stretched level of the gold/silver ratio, means that a major reversal in the gold price would have a disproportionate impact on the silver price.

Silver is unique as it is both a monetary metal and an industrial metal. Unlike gold, there are limited above-ground stocks of silver because so much has been consumed in industrial applications. As stated earlier, the official estimate for the world gold stock is 177,200 tonnes, or 5.7 billion oz.

Nobody knows the level of above-ground silver stocks, although the majority of estimates are in the 1.0-2.0bn oz. range, i.e. between 17-35% of the comparable figure for gold.

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