You are here
Ted Butler: Silver below $7 today is as cheap as silver below $5 used to be
By Peter Brimelow
CBSMarketWatch.com
Monday, May 2, 2005
NEW YORK -- Gold and gold shares are diverging. Why?
Last week was grim for gold shares -- but not bad for gold itself.
Both the Philadelphia Gold and Silver Index (XAU) and the usually
more sensitive AMEX gold bugs index (HUI) lost 6 percent. Bullion
actually rose $1.80.
What does this disparity mean?
One thing it means is gloom and fear in goldbug land. As James Turk
notes in his current Freemarket Gold and Money Report:
"The XAU Index of major gold mining stocks broke its 4-year uptrend
line. ... Think about where gold is at the moment. It's only $21
(less than 5 percent) from a new 17-year high. Everyone should be
shouting from the rooftops, but instead, gloom prevails. ... The
bull has done a very good job of emptying the train."
The poor performance of the gold shares was egged on by rotten
results last week from the major mining companies, particularly
Newmont and Placer Dome.
Alert observers have also noted the failure of the big miners
generally to reduce their disastrous hedge books last quarter.
This raises the possibility that these may be more intractable
("toxic") than generally realized -- a.k.a. they pose financial
risk.
The gold share situation now reminds me of the literature that arose
in the late 1970s, evaluating the 1973-4 stock market crash.
All of us who lived though that miserable experience were well aware
things were bad. As a new Stanford MBA, I had no money at risk. But
I did note virtually all my peers lost their Wall Street jobs.
Still, exactly how bad took a little time to sink in.
The point was that while the 1929-34 crash took place against a
background of almost a 50 percent decline in the wholesale price
level. So the "real" losses in the stock market were not anywhere as
near as nominal numbers suggested.
But the early 1970s decline was accompanied by serious inflation. In
real terms, the losses stood comparison with those the old timers
kept boasting about.
What has happened recently in gold shares is a microcosm of this.
Gold is up 8 percent since the November 2004 peak in the HUI -- yet
the index is 30 percent lower.
Reading the company results, the reasons are obvious: explosions in
oil and steel costs, and a surge in commodity currencies, indirectly
a comment on the curious way gold has lagged overall price changes
recently.
In other words, gold shares may have detached from their normal
tracking of the gold price for legitimate, if unpleasant, reasons of
their own.
Some feel this has gone too far. James Turk has a chart showing that
the Gold/XAU ratio has only been lower -- slightly -- in the last
couple of desperate bear markets.
Taking the view that extreme unhealthiness in the gold mining
industry signifies a bottom, Turk thinks this could be encouraging.
Others might prefer to follow the Gartman Letter's example and
shelter in the new Bullion ETFs, GLD or IAV.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
