Good as Gold!
Thanks for the cocktail, Laurie!
Another week, another set of dodgy numbers in the making, I'm sure. Let's just deal in facts, hey.
I was out for a few beers on Sunday night with a bunch of mates who had flown across from Perth in Western Australia, to attend the running of the richest 2 year old thoroughbred race in the world, here in Sydney. We backed the winner too, but that's another story. You don't talk business at the races, so we had to have "round two" on Sunday night (following the big Aussie Rules footy match at the Sydney Cricket Ground). Not a bad weekend, all up, but I digress...
Anyway, one of the guys is a Director of an ASX listed gold mining company here in Oz, that has been producing gold for about 15 years and has a market cap of about $100 million. He knows his way around the block better than most. He knows my view on silver and he said to me at the bar of the Light Brigade Hotel in Paddington, "you know you're right, Squirter, there isn't any silver". I asked him what he meant and he relayed to me what happened to him at the Perth Mint a couple of weeks back. This is not conjecture or 3rd hand hearsay.
He had finally got around to buying some silver and so he went to the Perth Mint which is where anyone would go to buy PHYSICAL metal, especially if you live and work in Perth. He lobbed up to the counter and said he wanted to buy $25,000 dollars worth of silver. The person behind the counter was very professional and told him what the price was and all the stuff and how many ounces he'd get blah, blah, blah. Anyways, he got given the spiel that the silver is stored at the Mint and that it was guaranteed by the Western Australian Government and that the "warrant" was as good as silver and that he could get his silver whenever he wanted. He said politely that he wanted to take the silver with him. Again most professionally he was informed that he should accept the "unallocated" silver and that he could get the silver "whenever he wanted". He said again that he wanted to take the silver. He was then told the same stuff over again. That they didn't want him to take the silver with him is clear by now, even to blind Freddie.
He said to the person there.. " I want to see the silver that I am buying, no, I want to take it with me". They said they couldn't do it. They didn't have it. When could he get it? "We don't know" was the reply. If the Perth Mint didn't have that for him to take then I'm stuffed where you can get it.
This is a lesson in the difference between Physical ownership of silver and paper ownership of silver. People who have a "claim over" or warrant for silver in the same way as is described above don't really own silver. They own an IOU over silver. That it is a government backed IOU means Jack Schitt. When you want the metal, you are at the mercy of someone else delivering it. Allocated stored metal is the only way that you can be more comfortable as you can audit it and you have bar numbers etc and it can't be lent out. There is still risk there, but less than "unallocated". I say the only safe ownership of metal is in your own grubby little hands. Where you hide/store it is up to you, but no way would I rely on anyone delivering silver in the current environment, which is only worsening by the day. Silver is in supply/demand deficit and has been for 15 or so years. Just relaying a conversation with a mate for what it's worth.
Anyway, yesterday gold went down and not unexpectedly after the carnage created by the employment numbers on Friday. Employment numbers mean nuthin' to silver but it got hammered anyway. In fact due to its industrial and monetary uses it should be bullish for it!!! Still sitting higher than $8.
My technical models for gold, and my technician here are looking for $405 and even down to $385-87 in the coming weeks. I obviously disagree based on fundamentals so we shall see what gives. Nothing surprises me anymore.
What I do know is that India is again a buyer at $415-20. Premiums in the major centers tell us they are importing again with prices here. So we shall see what gives as the physical market meets the paper market head on.... Again. This time it's at $415, last time was at $400 and previous was at about $350. The strong Rupee and Indian stock market has given them some sharp new teeth. Physical demand will always prevail over paper selling, it will just take time.
The gold equities are getting slapped around some today but that's cool with me. They could come off another 10% or so, which just makes me smile some (not advice simply an opinion). Golden Star Resources (GSS:NYSE), Newmont (NEM:NYSE) and Gold Fields (GFI:NYSE) are leading the index lower. Note that Golden Star Resources is either the biggest winner or loser on many days. Why, I don't know, but they are a nice exposure to gold, for sure.
Back to the Light Brigade... we had enjoyed a long, liquid and emotional weekend and were just about done for the night, when it was announced at the pub that the weekly "trivia" question was on at 8pm and the prize was $325 if you got the three questions correct. The prize had started at $100 and went up $25 per week that it wasn't won. By this stage the five of us combined had the IQ of a wombat (a large furry rodent that digs holes). The first question was easy.. name the martian from the bugs bunny cartoons... everyone got it...Marvin... no worries. The second was "which Shakespeare character had a daughter called Goneril".. got it .. King Lear (the only one I really read at school!).. so we're looking good for the pub to buy us beers for the rest of the night. The third question was a poetry question. I have read 2 poems in my life I think but I knew who wrote the two of them. That's it as far as poetry goes for me... I walked to the bar to buy my own beers..."Who wrote Anthem for Doomed Youth"... light switch clicks above the head .. "Wilfred Owen".. the only poet I've ever read, and thank you Mr. Deegan, my high school English teacher who shoved it in our heads way back in 1982... Bingo... winner... Free Beer all round!! Geez, I love it here in Oz.
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