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Silver ETF


De Beers?


"Praise, like gold and diamonds [and silver], owes its value only to its scarcity."

The ratio spread trade would appear to be on (funds buying silver and shorting gold) of late, at least in part as a function of anticipation of Barclay's filing of a registration for a silver ETF sometime in the near future. We've mentioned the continued strength recently and the charts seem to support the near term bullish silver / bearish gold scenario. Pepe chimed in as well to note that silver has actually been outperforming gold since Feb 10th.

Will silver meet the same fate as the Gold ETF (GLD), which sputtered out of the gate / now 10% off the high? From a longer term perspective the key would seem to be the action in the dollar. Although it hasn't mattered so much in the last few sessions (in part due to the ETF buzz and impact of the France / EU voting?) - the correlation dating back two years is significant at -0.811.

Laurie raised another critical point in the discussion the other morning highlighting the huge supply deficit, government stock piles are down approximately 30% this year (along with some big speculator short positions) as a tailwind for white lightning. It would therefore seem hard to bet against the laws of supply and demand. Any further thoughts from our metal mavens (or anyone else for that matter?)


Hi Greg,

Diamonds are everywhere! (just ask De Beers).They are only scarce because De Beers makes them so.

I think this is a fair buzz, although the ETF is just a sideshow, IMO. The real story is real silver vs. paper silver. Someone is forcing larger than normal deliveries. I think the dollar / silver correlation will break down further as will gold (but not by as much). The gold / silver ratio got down to 52 (or maybe it was 48) on last big move lower. Good big point about official holdings though....

Speak to you later (hopefully with a new "Aussie resident" on my arm!)


Position in gold & silver



Indeed, I have the spread on right now as I am short gold / long silver (fairly aggressively too). That's not a recommendation whatsoever but I like it as I view silver as a cheap option on the Fed and a hedge against my long U.S. Dollar stance.

What do I mean when I say "a cheap option on the Fed"? If indeed we are right, and the Fed is ready to take their foot off the brake as a response to rising signs of global eco-turbulence and a return of intensifying trade disinflation subsequent to the ever-increasing reliance on the U.S. consumer as the final demand engine (and exacerbated by a slowing final demand dynamic in that same US consumer), then perhaps this means the Fed is willing to accept a higher level of reflation along the periphery than they have in the past (ala energy, metals and other industrial commodities). As such, we would benefit by being long silver, which is priced cheaply, relative to other commodities.

C'mon, in reality, housing stocks, particularly reits and homebuilders,
continue to hover near NEW HIGHS while gold remains above $400 and crude is still above $50 brl. Yet, despite this, the Fed is ready to stop raising rates?

Can anyone say ... pseudo-stagflation ???

And we say pseudo, because of the concurrent LACK of income reflation, which remains a KEY factor on a macro-secular level.

Greg Weldon

Position in gold and silver

No positions in stocks mentioned.

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