Gold and Silver Have Consolidated a Little Bit

Monday and Tuesday were calm trading days. Both prices of gold and silver ended almost at the same levels. Gold was more successful on Wednesday contrary to silver. Gold gained almost $ 31 to repeat the same on Thursday when gained $ 37 and moved up. Silver waited for Thursday as well to assign almost $ 1 during the day. We would end much higher if there is no downturns smash of prices after the London close on Friday on both metals.

Gold finally closed on $ 1462.9 per ounce what was $ 56.4 higher compared to previous week. Silver closed on $ 24.04 per ounce what was up $ 0.75 compared to previous week. The gold/silver ratio is 1 to 60.85 (i.e. you could buy 60.85 grams of silver for 1 gram of gold, it was 60.39 week before). So silver was a little bit less successful compared to gold this week. HUI index (index of the most important gold mining companies) was $ 276.39 and was down another of $ 10.02 compared to previous week. XAU index (index of gold and silver mining companies) was $ 106.31 what was $ 3.42 up compared to the previous week. Net short concentrated positions of bullion banks on COMEX were quite down on silver but significantly down on gold when commercials closed the biggest number of short positions this year.

Gold and silver community is full of stories about higher demand for physical gold and silver products especially of coins and smaller bars due to the fact of lower prices. This is important point. The trend shows us that people – many small investors – are realizing that today´s world problems are definitely not solved and they are using this opportunity to buy the stuff. We have to point out that some demand / supply inconsistencies are caused very probably by the fact that wholesale industry compared to retail industry has different kinds of products (smaller coins vs. bigger bars); and to match demand for smaller products takes some time. Therefore we are witnessing some kind of higher premiums over the spot and some shortage. On the other hand it is definitely worth to mention that physical retail demand has touched inventories of wholesale industry and we are witnessing that their inventories had plunged to all-time lows as it is in the case of the JPM which decrease its inventories of 65 ton of gold just within this week. But we have to realize as well that there is no objective shortage of metals itself; it is only the fact of the mispricing of current stock. So did we reach the price bottom? Be careful to state this. We have to realize that prices are still set up on the paper COMEX market and due to the vast concentrated positions of bullion banks we can still go anywhere. The fact is that once the price moves down we would probably witness another higher demand for physical precious metals which disconnects paper market and physical market even more.

Overview of the prices of gold and silver for the remaining periods:


Gold chart


Silver chart



Matúš Pošvanc

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