You are here
Gold production is most important to poor nations, World Gold Council says
By Ted Butler
InvestmentRarities.com
Tuesday, May 24, 2005
The most recent commitment of traders (COT) report confirmed the
continued powerfully bullish market structure in COMEX silver. For
three weeks running the dealers have maintained their lowest net
short position in years as the tech funds have abandoned the long
side and have rushed to the short side in silver. As such, the
downside remains limited and the upside wide open.
While such a constructive silver COT configuration is all one should
need to be aggressively long in silver, the biggest new development
has been in the dramatic improvement in the COT structures of
related markets, like gold, copper, and the dollar. In fact, in
addition to the strongly bullish structure in silver, the COTs of
these other markets are also in their most bullish configurations in
years. And as bullish as the COTs are in gold, I still maintain that
the gold structure is much better than reported, when adjusted for
the large and uncommon non-tech fund long position in the non-
commercial category.
Unless one believes that the tech funds have somehow come to realize
that they have been the patsies and have now tricked the dealers
into getting more long and less short than the dealers have been in
years, it would appear that the tech funds will once again have
their heads handed to them, when we rally in silver, gold, and
copper, and sell off in the dollar. The only real question is how
much pain the dealers inflict on the tech funds when these funds
rush to cover their short positions.
It should be remembered, of course, that the COTs are not a timing
device but more of a directional indicator. As such, we must allow
sufficient time for them to work. Just like in tossing horseshoes or
hand grenades, close enough in the COTs counts more than pinpoint
accuracy. Right now we are structured favorably enough in all the
COTs so as to be "all in" in silver. We may get more favorably
configured amid lower prices, but the bigger risk is in missing the
coming upside move.
Here's a quick update on the May COMEX silver delivery situation.
The day after last week's article, the bulk of the remaining 2,000-
contract open interest was delivered, as expected. The one real
lesson that I think should be learned from the May delivery
situation was the apparent unwillingness or difficulty experienced
by the shorts in making actual delivery. As it is, there are still
200 contracts open, which represents 1 million ounces with only two
days until last trading day.
Once again there is no legitimate economic reason for a short not to
deliver as soon as he can, except that he doesn't have the material.
About the best thing one can say about the May COMEX silver delivery
is that it is nowhere near as extreme as the May COMEX copper
delivery, where there are more than 2,000 contracts open with the
same two trading days remaining.
Interestingly, this number of contracts in copper is more than all
the total copper in COMEX warehouses, something I have never seen
before. This is a very extreme and unusual circumstance. I don't
know what conclusion to reach other than that copper is, obviously,
very tight and that the management of the COMEX doesn't seem quite
on top of the situation in allowing such a development.
The following article appeared in the May 9 issue of Barron's:
* * *
PICTURE THAT!
Digital photos might not sink silver
By Jim Hawe
Barron's
May 9, 2005
Ever since Sony unveiled its Mavica digital camera in 1981, the
prevailing opinion has been that the silver market would fall on
hard times as consumers ditch their clunky old film cameras for the
exciting new world of digital photography.
But according to recent market studies, a very different picture is
developing for silver, one in which traditional and digital
photography will likely coexist for years to come, with digital both
hurting and contributing to silver demand.
According to a J.P. Morgan report, the photo industry gobbled up
6,428 metric tons of silver in 2002, but demand from this sector is
expected to come to only 5,492 metric tons in 2005 as the digital-
camera boom takes its toll.
Ted Butler, Florida-based independent silver market analyst, avers
that the worst may be over for the metal. He argues that traditional
silver halide-based photography will be around for some time, as
costly digital applications fail to make big inroads in the high-
growth, heavily populated countries like India and China.
Keep in mind that digital-camera users typically use personal
computers, printers, battery packs, memory cards, and other
accessories to produce photos. This can run to hundreds if not
thousands of dollars, while a disposable will set you back only
about $10.
Butler also believes that the markets for digital cameras in
developed countries could become quickly saturated. One sign:
According to Japan's Camera and Imaging Products Association,
Japanese digital-camera exports fell in February for the first time,
slipping 0.9 percent from a year earlier, to 3.29 million units.
A surprising development in the digital boom is the fact that many
shutterbugs are taking their prized digital snapshots to processing
shops to have them reproduced on glossy, high-quality photograph
paper, which is loaded with silver.
Digital images printed on plain paper tend to fade and can become
easily damaged by moisture. A lot of people are not willing to take
these risks with their wedding photos or pictures of the new baby.
Photofinishing News, a market research and publishing group, just
completed an extensive report projecting photographic demand for
silver through 2010. While this group expects a gradual slide in the
number of prints from film cameras, it expects this drop to be
offset by a rise in prints of digitally captured images.
While the drop in the number of film rolls being used cuts into
silver demand, it also takes a chunk out of supply, as less silver
is being recycled from these rolls. "The key point to bear in mind
is that photography is a double-edged sword and structural changes
affect both demand and supply," says the J.P. Morgan report. "This
originates in a large portion of traditional film supply being
sourced from recycling and recent trends indicate that while demand
from the photography sector has declined, scrap supply from recycled
film and flakes has declined simultaneously."
Butler believes that this idea of digital photography dooming silver
has shifted the focus away from the many compelling reasons why
investors might want to add a silver lining to their portfolios.
"There is the continuing market deficit, which is the most bullish
condition possible for any commodity," he said, adding that silver
has the largest short position among speculators of any item in the
history in the Commodity Futures Trading Commission's weekly
commitment of traders report. Those bears eventually will have to
buy the silver contracts they sold.
The average spot silver price jumped from $4.80 an ounce in 2003 to
$6.90 an ounce in 2004, roughly the same time the digital-camera
market was exploding. "That's the craziest thing," Butler says.
J.P. Morgan forecasts an average silver price of $7.10 an ounce in
2005, noting that "the price rally which started in 2003 was a
justified price correction that more accurately reflects silver's
fundamental market balance." July Comex silver settled Friday at
$6.96 an ounce.
The present risk/reward scenario "looks great," Butler
asserts. "It's hard for me to see how someone can be hurt with
silver right here and how very good things can happen to someone
with a long-term perspective," he says, adding that any big move
under $7 should be seen as a good time to "load the boat."
That could make for a nice picture.
----------------------------------------------------
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.
