Silver ETP Buyers Defy Hedge Fund Exit Amid Price Slump – Bloomberg 09-18-14

Salient to Investors:

  • Silver ETP holdings are near October’s record while money managers reduced bullish wagers by 95% – Coeur Mining has hedged a third of its production through Q1 2015.
  • Retail investors account for 80% of US ETP purchases and expect long-term growth to spur industrial demand from solar panels to electronics.
  • Michael Cuggino at Permanent Portfolio Family of Funds said the rise in the dollar has hammered commodities, including silver, and the funds and several investors are selling, while long-term investors are holding on it as a store of value and as a significant metal to the economy and monetary policy.
  • Peter Jankovskis at OakBrook Investments said, unlike gold, buyers of silver ETFs are not momentum players and will hold it much longer than gold – in 2013 ETF investors did not flee like they did with gold ETFs. Jankovskis does not see many wanting to buy precious metals, and the fundamentals of supply/demand are against silver because supplies are abundant.
  • Silver’s 60-day historical volatility is the lowest since June 2003, while gold’s is the lowest in almost 4 years. Silver’s 30-week correlation coefficient to gold is at 0.82 and to an index of industrial metals is at 0.27.
  • Mark O’Byrne at GoldCore said sentiment remains bad in the silver market, but buyers see silver as undervalued versus gold because they worry about recession but expect industrial demand to stay robust.
  • The median analyst expects silver will averaging $20 in Q4 and $20.40 in 2015.
  • Mike McGlone at ETF Securities said retail buyers are holding silver because they expect increased demand will boost prices.
  • Michael Haynes at American Precious Metals Exchange said silver’s appeal has increased relative to other precious metals. An ounce of gold buys 66 ounces of silver versus the 10-yr average of 57.7 ounces.
  • CPM said industrial demand will rise this year, with the most ever being used in solar panels. 50% of silver goes to industrial items, versus 10% for gold.  CPM said demand will continue to trail supplies for 9 straight years.
  • Randy Smallwood at Silver Wheaton said demand is growing for silver used in high-efficiency electronics and anti-bacteria applications.

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Gold Drops as Climb to 4-Month High Spurs Investor Sales – Bloomberg 07-14-14

Salient to Investors:

  • Hedge funds et al are the most bullish on gold since November 2012.
  • Jeffrey Currie at Goldman Sachs expects $1,050 by year-end as the economy improves.
  • Abhishek Chinchalkar at AnandRathi Commodities said prices are a little overstretched technically as funds are overbought, while gold is vulnerable to a severe pullback should Yellen’s testimony to Congress be seen as not dovish.
  • Barclays says most precious metals look toppy, with downside risk to gold on any earlier than expected interest rate hike.

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Gold to Coffee Drive Bullish Bets to 17-Month High – Bloomberg 02-25-14

Salient to Investors:

Hedge funds’ net-long positions of 18 US-traded commodities rose 18 percent last week to the highest since September 2012. Investors tripled the net-long position in arabica coffee this month to the most bullish since May 2011

Barclays said weather is the big driver of commodities.

EPFR Global data show commodity funds are headed for the first monthly inflows since September 2013.

Brazil is having its weakest rainy season in decades, just when moisture is needed the most for coffee tree roots to absorb soil nutrients.

Rabobank Intl said yields and quality for arabica beans will be constrained during this season and the next, and prices will be supported by longer-term concern that output will be limited.

Rabobank said soybean production in Brazil and Argentina is still projected to climb 10 percent, even with the dry weather. The USDA said corn and soybean harvests in the US in 2014 will be the biggest ever, meaning an increase in stockpiles before 2015’s harvest.

Dan Cekander at Newedge USA said grain fundamentals themselves do not suggest a bull story – not without a significant Northern Hemisphere problem in 2014.

Goldman Sachs said the S&P GSCI Enhanced Commodity Index will fall 4.3 percent in the next 12 months, agriculture will decline 9 percent, and precious metals will fall 14 percent.

Gold bets climbed 31 percent to the highest since October 29.

David Mazza at State Street Bank & Trust said assets in the SPDR Gold Trust are heading for the first monthly inflow since December 2012.

Cameron Brandt at EPFR Global said commodity funds are heading for their first monthly inflows since September.

Mark Luschini at Janney Montgomery Scott said the decline in prices last year has helped re-establish equilibrium between supply and demand, so better growth should pull industrial commodities higher, though we are not back in the middle of a commodities super cycle yet.

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Jim Rogers thinks gold will bottom 2014 – Jim Rogers Blog 01-30-14

Salient to Investors:

Jim Rogers said:

  • Precious metals are overdue for a modest rally as everybody got negative and everybody got short. Won’t buy or sell the rally, but wait until later in the yearn when gold will fall and hopefully make a nice bottom around $900-$1100 so we can buy gold again.
  • Prefer silver to gold but not buying either.

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Silver Vault for 200 Tons Starts in Singapore as Wealthy Buy – Bloomberg 07-28-13

Salient to Investors:

Demand for physical precious metals is increasing among Asia’s wealthy even as silver leads declines this year. Investors in silver are mostly private individuals, investors in gold are mostly institutions. 50 percent of silver is used in industry, versus 10 percent for gold.

Cap Gemini and Royal Bank of Canada said the number of individuals with $1 million or more in investable assets climbed to 3.68 million in the Asia-Pacific region in 2012, boosted by additions in Singapore and Hong Kong.

Silver holdings in ETPs is 1.6 percent higher in 2013, while assets in gold-backed ETPs have contracted at a record pace, down 25 percent.

Barclays said China accounted for 43 percent of worldwide economic growth from 2007 to 2012.

Goldman Sachs predicts $19.60 for silver and $1,175 for gold in 12-months.

Jan Hatzius at Goldman Sachs said the Fed will start tapering in September.

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Gold-Silver Ratio Seen Rising to 70 Amid Rout: Chart of the Day – Bloomberg 07-28-13

Salient to Investors:

Dominic Schnider at UBS said an ounce of gold will be worth 70 ounces of silver by the end of 2013 as demand fails to soak up an excess of silver. The average multiple over the past decade is 58, and last reached 70 in February 2010. Schnider said silver is in fabrication surplus, and the only thing keeping it alive is investment demand and there is no meaningful increase in ETFs.

Morgan Stanley forecasts global silver supply will outpace fabrication demand, including sales for electronics and photography, in 2013, a 5th year of surplus.

50 percent of silver is used in industry, versus 10 percent for gold.

The IMF forecasts 3.1 percent global economic growth for 2013.

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61 Tons of Silver: Scenes of 3-Mile Treasure Haul – Bloomberg 07-23-13

Salient to Investors:

Value of sliver found is $36 million versus the cost of exploration and salvage of $21 million at a depth 3 miles, versus 2.5 miles for Titanic.

There are 3 million estimated wrecks in the ocean.

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Silver Faithful Taking $5 Billion Hit in Crossfire: Commodities – Bloomberg 06-13-13

Salient to Investors:

Trust in precious metals as a store of wealth is diminishing amid concern that growth is weakening.

Bloomberg survey in December 2012 expected silver to gain 33 percent  in 2013 either because , or accelerating growth would spur more industrial buying; but silver is on track for its worst performance since 1984. The median prediction is for a rally to $23.50 by the end of 2013.

John Stephenson at First Asset Investment Mgmt said silver has been caught in the crossfire between being a precious and industrial metal – investors were selling gold and enough economic growth needed to happen to be valued as an industrial metal.  50 percent of silver is used in industry, compared with 10 percent for gold.

The US Mint predicts that gold and silver coin sales may reach a record in 2013, while the Austrian Mint sold 2 million ounces of silver in April versus 8.8 million for all of 2012. Degussa Goldhandel said silver sales last month were double the Q1 average.

Hedge funds et al have turned bullish and are holding a net-long position of 1,230 futures and options versus the 5-year average of 21,400 contracts.

Barclays says silver consumption by industrial users will rise 1.7 percent in 2013 and 2.8 percent in 2014, while supply will expand 8.9 percent in 2013 to 5,512 tons – the cumulative surplus since 2009 will reach almost 10 months of mine output  by the end of 2013.

The median economist expects the Fed to trim monthly QE purchases to $65 billion in October. The IMF predicts growth of 3.3 percent in 2013 and 4 percent in 2014 versus 3.2 percent in 2012.

Scott Gardner at Verdmont Capital said continued Fed talking down the market and trimming QE will hurt precious metals, and unless you see a sustained rise in gold you will not see any improvement in silver prices.

Credit Suisse said gold may drop to $1,100 in a year and Goldman Sachs sees gold at $1,345 in 12 months.

The 30-week correlation coefficient of silver to gold is 0.85 versus 0.68 in 2011.

Silver in ETPs rose 1.1 tons in 2013 –  within 5 percent of the record in March – versus a rise of 1,621-tons in 2012, and, while gold holdings have dropped 19 percent this year.

Jeremy Baker at Harcourt Investment Consulting said investor sentiment will remain poor, as with gold, and the real risk will come from further ETP liquidation.

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Silver Slump Splits Hedge Funds From Ingot Hoarders: Commodities – Bloomberg 04-16-13

Salient to Investors:

Hedge funds have a net-short position on silver for the first time since at least 2006, but holdings in ETPs are within 1.3 percent of the all-time high reached in mid-March 2013. Silver entered a bear market on April 2. The median analyst expects silver to rise to an average of $31.25in Q4.

53 percent of supply goes into products so faster economic growth should be boosting prices, but instead manufacturers are relying on inventories at a 15-year high. Standard Bank estimates China has stockpiles for 18 months of industrial use, up from 4 months in 2009.

Stanley Crouch at Aegis Capital said silver will catch a few panic bids but that will be limited because people are realizing that the world is not coming to an end, though demand lags supplies.

Charles Morris at HSBC Global Asset Mgmt said silver is the leveraged bet on gold – if it is not good for gold, it is not good for silver either.

Goldman Sachs cut its gold price estimates on April 10 and Societe Generale said the metal is in bubble territory on April 2. Barclays, Credit Suisse, Danske Bank and BNP Paribas predict lower average prices in 2014 than in 2013.

The composite economist expects the global economy to accelerate every quarter in 2013.

Nik Bienkowski at Boost ETP said retail investors account for 60 percent of silver ETP purchases in the US.

Barclays says supply outpaced demand by a combined 15,247 tons in the past 4 years and expects a 5,512 ton surplus in 2013. Barclays says industrial demand will rise 1.7 percent to a 3-year high in 2013, and another 2.8 percent in 2014.

CPM Group said China almost tripled mine production since 2000 and imported 28 percent less metal in February, the fifth decline in 6 months. Economists expect China to grow 8.1 percent in 2013, the second-slowest pace in the past decade.

James Paulsen at Wells Capital Mgmt said the major overriding force is the risk premium and it has come out of both gold and silver as the US shows signs of growth. Paulsen said whether industrial demand will be able to offset the drop in prices because of waning safe-haven value is the big question.

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Gold Miners Approaching $1,300 Pain Threshold – Bloomberg 04-16-13

Salient to Investors:

Gold miners will accelerate spending cuts and trim high-cost output as gold’s biggest fall since 1980 threatens to make about 30 percent of production unprofitable.

Gold is down more than 20 percent since its record close in August 2011, thus signalling a bear market.

Dundee Capital Markets said the average all-in cost of 20 gold producers was $1,306 in Q4 2012.

Joseph Wickwire at Fidelity’s Select Gold Portfolio said that below $1,300, 30 to 40 percent of mine production is not cash-flow positive, but the gold price drop looks similar to declines in 2008 and is only temporary, so buy gold companies now. Wickfire said the space is akin to a financial-assets insurance policy – you buy your insurance policy when it’s cheap and not obvious that you need it.

Gold companies have underperformed bullion for each of the past six years due to money-losing takeovers, over-budget projects, and investors chose gold-backed ETFs.

Stephen Walker, Dan Rollins and Sam Crittenden at RBC Capital Markets said the average all-in costs for North American gold producers is $1,200, so balance sheets could experience significant pain in a sustained slide under $1,300 as companies cut all discretionary spending, cut capital spending sharply, defer new capital development programs, and in some cases cut dividends.

Barry Schwartz at Baskin Financial Services recommended standing aside and avoid the train unless you are able to look out many months.

Andrew Kaip at BMO Capital Markets said we are at levels for both gold and silver where investing capital has to stop for a number of operators.

Jeffrey Burchell at Aston Hill Financial advises waiting before looking for buying opportunities because we need a shakeout, when the high-cost producers move away from high-cost production and take supply out.

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