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Minyan Mailbag: Gold/Siver Ratio



Editor's Note: Minyanville is a community of people who share an interest in fiscal literacy. As perspective is an important aspect of our daily routine, we share this exchange with hopes that it adds balance to your process.

G'Day Laurie! Sorry to miss ya' at Ojai, but I really dug the suggestion for next year at Whistler as I can just about see it from here!

Anyhow, I note that the gold -silver ratio is widening of late, and I usually have seen that happen in a bear market for the PM group. Any ideas as to what is up?

Minyan Bully

Hi Bully,

Good to hear from you and I reckon Whistler is a BIG winner for next year. Gets my vote, by a long way!

The first thing that comes to mind is that this is more "PAPER GAMES," Bully. Physical delivered silver is about 25c over spot! At my breakout presentation I talked about the many "metal traders" who have million ounce positions in silver and they wouldn't have a clue what a silver bar looks like, comes from or that they may have to deliver 5000 ounces for every contract they play with. Seeing and feeling pure silver bars illustrates to most what each "paper" commitment (which is what a futures contract ultimately is) entails. There's only 110 million odd ounces in Comex warehouses, and maybe a total of 600 million ounces available, above ground, in the world. Do the math, it's a rounding error for some funds/companies to take EVERY ounce of silver known in the world. Poor man's gold has less above ground stock than the real yellow stuff!

The gold/cilver ratio is out at 66 which has been a target of mine to buy silver/sell gold for a while now. I have no idea what's gotten up the silver markets arse this last week and can only sit here and scratch my head, do some digging and just suck it up. I keep referring to "paper silver" and that's what this move is, IMO. Technically silver looks outright ugly and I can't discount it heading lower to 6.30-35 at first blush.

For gold to move lower there's gonna be a truckload of gold heading to India/Asia. They are importing the stuff at record levels, as even Gold Fields Mineral Services has recently acknowledged. I have mentioned many times about the "wealth effect" in India. It appears to be very conducive to more physical gold purchases by Indian Public.

Let's get Whistler/ Blackcombe sorted out as the venue for MIM3! Now that would rock!


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