Upner report 39/2012

Gold and silver did not move compare to last week. Counterfeit gold on Manhattan. Deutsche Bank likes gold. Spain in mess. Hilary Clinton has excellent ideas.

Gold and silver were traded around $1764 and $33.95 per ounce at the beginning of the week. Gold and silver price did not do much during the first three days of the week but trading volumes were pretty high. The crucial jump up had started on Thursday (+$24/day on gold and +$0.67/day on silver) and Friday was compare to it a pretty calm day. Gold closed finally on $1771.1 per ounce what was $1.9 less than the last week. Silver closed on $34.49 per ounce what was $ 0.03 USD less compare to the last week. The gold/silver ratio is 1 to 51.35 (i.e. you could buy 51.35 gram of silver for 1 gram of gold, it was 51.36 week before).

As I mentioned above the price movements did not do much during the first three days of the week but volumes indicated vast HFT algorithms activity once again. If you have observed the market during the week you could see some attempts to direct the price lower but once it happened and some levels were achieved the price was once again up. The volatility could have been connected with the end of the month and the quarter the time when both shorts and longs would like to improve their investment numbers. The Thursday really was connected the most probably with negative statistics from the US (negative expectation of GDP). By the way gold hit the new time record in Euro and Swiss Franc this week.

As we mention last week, short positions has not changed on the COMEX market and the concentration of shorts does not changed as well. According to silver analyst Ted Butler we are in the position that suggests some sell-off. We will see. So if there is some correction on the market, you should not be surprised. One just wonders how deep it could be and at what levels would be the end of it in this very bullish central banks printing environment. But we live in such volatile times that it is really impossible to predict anything from the short term.

Because nothing extraordinary happens in the global economy we are still very bullish on both precious metals from the long term. So if you invest in the long term you can only use this potential coming correction as buying opportunity.

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

News from the world of silver and gold

The commissioner of the U.S. Commodity Futures Trading Commission (CFTC) Bart Chilton told to media concerning the silver manipulation 4 years investigation that “We’re still wrapping it up. There’s nothing imminent, but I envision saying something publicly in the near future”. He stated that he also believes that there was illegal activity, but did not say what that might be. October 12th 2012 will be also the date when speculative position limits go into effect. I think that if we see any correction on the silver market, it will be till this day.

Do you remember the story about the tungsten gold bar from the last week? So the New York Post already found 10 of them. These 10 oz. bars are very popular in the Manhattan and 4 of them were allegedly sold by a well-known Russian salesman who offered them by a great discount. The outcome of the “excellent” deal was therefore much than surprising. To imagine the deal you have to be aware that 1 oz. of tungsten is worth approx. $1 compare to 1 oz. of gold which is $1770. Therefore be careful with whom you do business. Here is how the counterfeit bar looks like:


Strikes in South Africa halt almost 39% of the gold year production. Strikes take place in various mines and are coordinated. Workers ask for higher payments. The companies which operate in the South Africa have faced of increasing of energy costs and now they face the problems of higher salaries. This could have impact on the price of the gold because existing gold is in strong hands and new gold production could fall.

The Deutsche bank sees gold on $2000 very soon. The biggest commercial bank in Germany stated that gold should hit level $1880 to represent an all-time high in real terms and $2960 to represent excessive valuation of S&P 500. Their analysts Daniel Brebner and Xiao Fu argue also about the Gold standard in the context of its possibility. The crucial consequence they see from the reintroducing of it in the change in the behavior of governments which solve their problems by more regulations, taxation and debt at present. They state that there is not lack of gold on the earth, everything is the way of pricing it in the fiat currency and they state towards the deflationary argument that „in fact periodic valuation adjustments for gold could conceivably be an ongoing option…thus a low growth rate in gold volumes could be offset by a small revaluation of the metal itself, thereby preventing deflationary price pressure in an economy.“

Influential news

The ESM should have been worth at least € 2 trillion as Sunday news informed us. Yet on Monday the German Finance Minister declined it and stated „It is not feasible to talk about figures at present. It is purely abstract.“ It seems to me that any Brussels plans are declined by Germans which show us that Germany is not prepared to save the Spain and Italy at once.

And the help will be needed in Spain very soon. As last figures show us the GDP of Spain is contracting and nobody believes to official forecasts that GDP will contract by only 0.5% in 2013 with newly introduced taxes; it will be more probably 1.5% according to Standard & Poors. Rating agency Egan Jones already downgraded Spain from CC+ to CC, with an outlook of C, so it is very likely that their borrowing costs will rise. Although Spain introduced some reforms their spending cuts are worth of €7.5 bn. which means only 0.75% of their GDP. And it is still not clear if they implement them because of huge disagreement of the streets. At the revenue side of the budget they presuppose that tax revenues are likely to increase by 3.8% next year. The only question is how it will be possible when the GDP will decrease. Thanks to God they are going to create budgetary authority to keep Spain on the fiscal straight and narrow. The new office or committee always helps. You could bet on it! It is also very likely that the outflow of deposits from Spanish banks will continue and their banking sector will need more help. We still did not mention the problem with housing bubble and the exposition of Spanish banks to these mortgages. And it is still not the end. We have regional election in Spain in October, Catalonians want secession and Spanish Military threatens them with treason. The interesting is that Spain is still not hurt by crisis like a Greece. So if you think that the Greece is problem wait for Spain. You will be surprised how they redefine expression “chaos”.

The UK will have probably higher budget deficit than Greece. Analysts of Morgan Stanely calculated that Britain’s budget deficit could be 7.8% of their GDP in 2013-14. Fitch warned that it downgrades UK’s AAA rating because of „weaker than expected growth and fiscal outturns in 2012 have increased pressure on the UK’s ‚AAA‘ rating, which has been on Negative Outlook since March 2012.”

Germans lose their optimism. The Ifo Business Climate Index which is a leading indicator for economic activity in Germany shows that German entrepreneurs remain skeptical about the German economy and business environment. Germany was relatively resistant to the euro zone debt crisis but the time is going to change and its companies see falling demand for their products from European partners.

Chinese industrial companies’ profits dropped for a fifth month in August. The statistics shows that net income fell 6.2%. This was one of the fastest drops this year. Second largest was in the July by 5.4%. The earnings fell because of falling prices, higher costs and slower demand. Nobody expect that but the richest city of China Dongguan will face bankruptcy. But it happens because up to 60% of its villages are running into the deficit as a consequence of the voting system. Many mayors of villages tried to attract voters and promised them direct payments for their votes. Beloved democracy.

Hilary Clinton brings a genuine idea. Tax rich people. It is not very innovative of course but she proposed to tax them all over the word. Genuine and simple. New aims of the US foreign policy are probably set and we should only hope not to be enforced by the power in the future. San Francisco FED president John Williams said that if the economy does not respond correctly to the purchases of mortgage bonds and long term debt, they will expand purchases on U.S. Treasurys, mortgage-backed securities, and debt issued by agencies such as Freddie Mac and Fannie May. It is seems to me that everything will be on the balance sheet of the central banks one time in the future. But what then? Then nothing.

Do you want to join the iPhone American debt club and be trendy? But the really trendy, not only American style trendy? Buy a gold iPhone5. But be hurry, they have just 100 pieces:


Matúš Pošvanc

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About matus.posvanc

Trhu so zlatom a striebrom sa venujem od roku 2011. Prešiel som rôznymi fázami a pohľadmi na problematiku. "Trh je manipulovaný. To je jasné!" Inak by cena zlata predsa nešla dole. "Zlato na úrovni 100 tis. USD? Žiaden problém." Najneskôr do pár rokov. "Futures trh je najväčšie zlo a tzv. papierové zlato je nutné zakázať". Nuž, po dlhom štúdiu tejto problematiky, som hlúposti a táraniny opustil. Ostalo to, čo považujem za podstatné. Význam zlata je veľký. Avšak bez pochopenia trhu okolo neho, sa sám od seba znovu neobjaví. Kúpiť zlato ako časť svojho portfólia má zmysel. Snažiť sa na zlate zbohatnúť? To je iný príbeh. Jednu jeho časť nájdete na mojom blogu.
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