Gold was down $2.70 in London this morning when the US market opened and silver down .01. After 20 minutes gold is holding steady at $437, down $2.70 and silver dropped another .10 to be down .11 at $7.10

It looks like the central banks are putting the squeeze on the precious metals paper players. All lease forward rates are up on gold, silver, platinum and palladium today. This is the second day in a row for all of the rates to be up on silver.

In the Fed's policy statement, due around 1815 GMT, the central bank is almost unanimously forecast to increase its funds rate by a quarter-percentage point to 3.25 percent and is likely to signal more credit tightening ahead.

(7-8-05) Gold closed down $4.40 for the week at $422.70. Silver closed up .11 at $6.96. The euro is down .0019 at 1.1953 and the canadian dollar is up .0141 at .8197 against the US dollar. All silver lease forward rates were up today leaving only the one month contract as a viable turn over.

(7-15-05) This week gold closed down $2.20 at $420.50 and silver closed down .02 at $6.94. The euro closed at $1.2053 and the Canadian dollar at .8192. The silver lease forward rates were unchanged today with the one month at .8%, the two month at 1%, the three month at 1.2%, the six month at 1.9% and the one year at 2.1%

Taken from Financial Sense University:

Silver
Silver is an intriguing metal. It has so many uses that it is being consumed by industry at a faster rate than it can be mined from the ground and recycled from previous uses. Although there were billions of ounces of bullion silver in government warehouses just a few decades ago, those warehouses are now empty. It seems likely that there exists less than a few hundred million ounces of bullion silver remaining in other warehouse stocks to be consumed at the lowest cost for silver. As those stocks become more depleted, the value of silver must rise to give private holders of bullion, coins and jewelry an incentive to feed their silver into the industrial silver consumption machine. In addition to the value which must be added for depletion of supply, silver prices will also respond aggressively to the price pressures generated by rising inflation.

An interesting sidebar is that the table shows both nominal prices and real adjusted values of silver to continue rising through the projected recession of 2013 – 2014, even though demand for silver would likely slow somewhat during a recession. That price advance would occur because much of silver’s production is a byproduct of copper and zinc mining. In a recession, the prices of copper and zinc could drop close to or even below the cost of mining, so the mine output would be substantially reduced. That in turn would also reduce the amount of byproduct silver which is dumped on the market. Total silver supply would decrease faster than demand would drop, and so a recession would actually increase the price pressure on silver.

Another point to consider is that silver is actually being consumed by industrial processes around the world at a faster rate than it can be mined from the earth, so the above ground total supply of silver diminishes daily. Gold, in contrast, has less destructive consumption, so most of the newly mined gold adds to the above ground supply in the forms of bullion, collectibles, jewelry, etc. If that trend continues, silver will be less plentiful than gold. The combination of relative scarcity and industrial demand pushed platinum to much higher prices than gold, and it can do the same for silver.

As a final note on silver, this hypothetical set of price and value trends does not try to forecast the dislocations that are inevitable when manufacturers who need silver panic to buy the limited supply, or when the commercial interests who are massively short silver futures and options are finally forced to cover their short positions. Each of those events could rocket silver prices higher by orders of magnitude, and stair step the progression shown in the table to much higher price levels. Once again, the Optimist demonstrates his perpetually positive nature by cheerfully forecasting that silver could be more expensive than gold when the price of gold rises higher than the DJIA in the years ahead.

Silver is finding commercial short covering and fresh commercial buying taking place anytime it dips down toward the 710 region and below. It especially finds strong commercial buying interest near the 685 region and above. At the same time it does, the zombie-like trading funds who cannot tie their own shoe laces much less think without a black box telling them how to do so, decide to unload all their longs and institute fresh shorts. Needless to say, between the gold and silver markets, it is a wonder that we have not seen more of these hopelessly inept trading fund managers who are wasting their clients’ money go belly-up by now.

The skinny in all this is that the downside risk in silver appears to be quite small at these levels and I suspect there are more than a few traders who are eagerly waiting to buy any further dips in the silver market. I would especially expect the region just above 685 to offer major support and a strong buying opportunity.

About the only thing that might derail such a scenario is if some sort of fundamental realignment were to take place in which the trading funds could actually be induced to move to a completely net short position. How or why this might happen is difficult for me to conceive given the fundamentals underlying the silver market. Even then, it is hard to see silver heading lower than 655-660 as that has proved to be the bottom of a long term trading range in which silver is ever so slowly constricting or coiling for a major move.
Dan Norcini

The silver lease forward rates are no longer rollover candidates.  Yesterday the 1 month and 2 month rates went over the viable economical level.  The 3 month, 6 month and one year rates have been out of range for quite some time.  This is putting pressure on the paper players.  If it continues the shorts will have to cover at any price.

At the moment silver is up .19 for the week.

(7-22-05)  This week gold closed up $3.90 at $424.40 and silver closed up .11 at $7.05.  This week the euro was up against the US dollar by .0028 at 1.2081 and the Canadian dollar was up .0018 at .8210.

(7-29-05)  This week gold closed up $5.10 at $429.50 and silver closed up .17 at $7.22.

Gold, silver and platinum are all up this morning with platinum breaking strongly through $900.00 to reach $917.00 before backing off to the current $905.00.

Demand high for gold, jewelery

http://www.chinaview.cn 2005-08-03 16:04:00


   BEIJING, Aug. 3 (Xinhuanet) -- A latest Ministry of Commerce report predicts that China's gold and jewellery consumption will maintain a fast growth trend this year.

   With the country's rapid economic growth and improving living standards, gold and jewellery ornaments have become another hot consumption item for the Chinese, like houses and cars.

   A survey on market supply and demand development trends in the latter half of 2005 sponsored by the ministry, and an analysis of 600 kinds of main consumer goods by concerned experts found that China has a large number of consumers for gold and jewellery, especially as the generation born between 1960s and 1980s enters the period of consumption.

   The survey also indicated that the depreciation of the US dollarin recent years has stimulated investment in gold and diamonds.

   In the first half of this year, the retail sales volume of 1,000of China's major gold, silver and jewellery companies increased by13.9 percent.

   China's diamond imports reached 900 million dollars in the period, up 17.5 percent.

   Twenty-five percent of the respondents believed that gold ornaments prices will rise in the later half of this year, 19 percent said that the price of platinum ornaments will also rise.

   Also, 65 percent of the informants believed that the demand andsupply for gold and jewelry ornaments will keep balance in the second half of this year.

   China's platinum consumption exceeded half of the world's total output in 2004 and both China's gold output and sales volume rank fourth in the world.

   In 2003 and 2004, China's retail sales of gold and jewelry ornaments increased by 11.7 percent and 27.5 percent respectively. Enditem

Fifty minutes after the US PM market opened platinum is holding strongly above the $900.00 dollar mark, up $9.00 at $914.00 with gold up $2.90 at $434.30 and silver up .04 at $7.26.

Gold closed up $8.70 today at $444.80 and silver closed up .10 at $7.14