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This past Friday’s
action was particularly telling, in that world-wide jitters and
early US equities trading looked as if a rout was on.
Pre-opening indications on stock-index futures indicated
something approaching a total wash-out capitulation for the
already beaten-down US stock market. Paradoxically, gold
followed suit, trading as low as $681 in New York early Friday
morning.
All in all, on Friday October 24th, the average Joe eating his
Wheaties and watching CNBC (or the average Jane checking her
Blackberry while driving through a Starbucks), were left with
the impression that nothing, absolutely nothing at all, was
worth what it used to be.
Perhaps Barron’s Alan Abelson best expressed the extraordinary
mood of the world investor markets early Friday morning in his
“Up and Down Wall Street” column of 10/27/08:
the revelation that the nightmare of imploding economies was no
nightmare. It was real and it was imminent. The great awakening,
in short, triggered an orgy of dumping, right across the board:
commodities and currencies, as well as stocks and bonds and
their myriad derivatives, got tossed helter-skelter into the
dumpster…. And the global rush to unload assets, hard, liquid,
soft and paper alike, came despite efforts by governments
virtually everywhere to stem the tide of offerings. One might
ever argue that the strenuous exertions to thaw the credit
markets and shore up economies in recent months might have added
to the frantic rush to sell by intimating that officialdom was a
heck more worried than it professed to be.”
Later on Friday, both stocks and gold rallied. The Dow ended the
day losing only 312 points, which is a veritable walk in the
park by the standards of the past few weeks of plunging equities
prices and unprecedented volatility. Gold rallied some $50 from
its morning low, with the most active Comex contract, December,
closing at $730.30.
What roused them was
So, while an interesting day, it was not the end of the world.
Yet.
Coincidentally, there is some speculation being bandied about
that trading in the December gold contract may end with an
unusually high number of contract-holders taking delivery, in a
test of the viability of the Comex as an honest price discovery
mechanism. Such a move could put those who are short the
December contract in a bit of a bind, if deliverable gold is
actually in as short a supply as is argued by those who maintain
that there is an insurmountable gap between the price of ‘aper
gold’ versus the actual demand for ‘physical gold.’
Silver bulls have made much the same argument, most loudly in
the present time of greatly reduced prices on the silver futures
exchanges and a distinct shortage of convenient silver bullion
out there in the market. Arguments that silver futures prices
are a ‘fiction’ have grown out of just such disparities between
futures prices and the actual retail prices of bullion silver in
the forms of coins and bars.
But, this being a free country, the past few weeks have seen
many different entrepreneurs buying up the 1000-ounce .999
silver bullion ‘delivery’ bars, melting them down, and starting
to produce one-ounce silver coin rounds, and 100-ounce silver
.999 bullion bars for sale to the retail physical silver bullion
market.
In the next few weeks, those looking for convenient retail forms
of bullion silver will see more and more of these new products
being offered, much of them struck or poured by refiners and
coiners that you probably haven’t yet heard of.
We might even offer some of them ourselves when they become
available. Silver prices, like those of the other industrial
precious metals, platinum and palladium, have gotten clobbered
over the past seven months. Silver, which on Friday fixed at
$8.88 in London, is now trading for 57% less than its March 17th
high of $20.92.
At some point in the silver market, perhaps when the economy
shows signs of being a little healthier, there will start to be
a legitimate value argument for the ‘poor man’s gold.’
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