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The question has been pouring in:  “What happens to gold during a deflation? Of course, many of my readers are equally if not more interested in what happens to silver in a deflation as well.

The views on this topic vary. Some insist that both metals will do well under almost any economic conditions; some, like Bob Prechter, think neither gold nor silver will do well; and others, like Jim Sinclair and Bob Hoye, believe gold and gold alone will be the only thing left standing.

In all matters such as these, studying the past can be beneficial, but—as you have read so many times before—knowing the past is not a guarantee of future results. Personally, I like to let the market speak, and for many years I have forecast that a day would come when the price of the physical silver market would separate from the price “set” in New York or London. Alas, this is the case when looking at the retail market versus the commercial market.

In all fairness, the COMEX price is being used as predicted to capture profits by purchasing COMEX bars and selling 100-oz. silver bars. Jason Hommel of Silver Stock Report has stated:

“I own over 200,000 oz. of silver. I’m not selling out. I’m only selling 12,500 ounces, and I plan to buy more silver, cheaper, but in a different form, such as 1000 oz. bars.

“The price manipulation at the COMEX is so severe, that it has now created the profit incentive to create a free market in silver, through this auction, in order to arbitrage between the two markets, by buying in one, and selling to the other.”

Readers might recall I wrote an article titled Silver Arbitrage, back in August.

Looking at the Opinions

Dr. Marc Faber: “Therefore, under both scenarios—stagflation or deflationary recession—gold, gold equities, and other precious metals should continue to perform better than financial assets.” See article here.

Castrese Tipaldi wrote on Financial Sense University, “I don’t know if in the last week we saw the last gasp of those usual subjects trying to cap gold, and I don’t know if we now have the very last possibility to get silver at a price so cheap.” What makes this quote so interesting to me is he wrote this on April 20, 2004. See article here.

Steve Saville of the Speculative Investor writes, “The most important difference between then (the 1930s) and now is that gold and cash US Dollars were interchangeable during the early 1930s (the deflationary period) by virtue of the fact that the Dollar was defined as a fixed weight of gold. A typical effect of deflation is an increase in the purchasing power of cash. The fact that gold and cash were officially linked during the 1930s meant the deflation caused the purchasing power of gold to increase along with the purchasing power of cash. In other words, under the monetary system that was in effect during the 1930s gold was a hedge against deflation. Furthermore, under such a system the purchasing power of gold would decrease during periods of inflation; that is, when the dollar was defined in terms of gold, it would have made sense to shift investment away from gold during periods of inflation.” See entire article here.

Adam Hamilton of Zeal LLC wrote, “Anything typically financed by debt is likely to see its prices plunge dramatically, like houses and cars, as the ongoing Great Bear bust continues to destroy the gross excesses of debt via higher long rates. Conversely, anything not typically ‘paid for’ with debt, including groceries and general living expenses, is almost certain to rise in the coming years. We are staring down a brutal environment of widespread inflation marked by various sectors witnessing falling prices as debt leverage implodes.” See entire article here.

One of my favorites is from Dan Ascani, who wrote essentially about Professor Jastram’s very long-term study on gold, and he essentially states that Jastram studied four pronounced price deflations taking place. In all four deflations, operational wealth in the form of gold appreciated handsomely. When one sees that just by holding gold for 13 years, from 1920 to 1933 operational wealth would have increased 2½ times, one realizes that gold can be a valuable hedge in deflation—however, a poor one in inflation. See full article here.

Gary North states, “There are a few contrarians who think that deflation is coming: both monetary deflation and price deflation. As far as I know, there are only about a dozen of them who write newsletters or run websites. For some reason, most of the deflationists seem to think that gold’s price will rise in a mass deflation. They do not warn their subscribers, ‘Don’t buy gold or silver!’ If they did, they would have fewer subscribers.

Bob Prechter has written much on the topic; his overview of defining Inflation and Deflation can be found here. Further, Bob goes on and states that neither gold nor silver will do well in the deflation he had predicted for so long. Specifically, “I’ll cut right to the chase: Unless you’re about 80 years old, the United States economy is undergoing the worst downturn in living memory. Every measure of growth is grim. The world’s most recognized stock index—the Dow Jones Industrial Average—is down 30% from its October 2007 all-time high.

“If ever there was a time for the ‘Safe-Haven’ lure of precious metals to surface—now, yesterday, even seven months ago when the Bear Stearns’ bailout launched the historic reshaping of Wall Street—would have been it. Yet, from its March 17 record peak, GOLD prices have plummeted more than 20%.” The entire article can be found here.

So we can read many varying views on what will happen to gold and/or silver under a deflation. Right now the financial marketplace is so unstable that it is difficult to put too much faith in anyone’s opinion based upon such a short snapshot. Doug Casey has repeated often that the metals, and particularly gold, are a CRISIS HEDGE. I think this is the way to look at the situation. As I stated so many years ago in my Ten Rules of Silver Investing…

Rule # 1. When ALL else fails, there is silver.

“No one likes to be a prophet of doom, but the simple truth is that silver is the world’s money of last resort. Should a severe economic collapse occur, leaving paper assets worthless, silver will be primary currency for purchase of goods and services. (Gold will be a store of major wealth, but will be priced too high for day-to-day use.) Thus, every investor should own some physical silver-and store a portion of it where it’s accessible in an emergency.”

When the editor of the book who published all ten rules called me back, he was “all over” this first rule and stated he had never really thought of silver’s role before. Of course, he was quick to scoff at the idea of an economic collapse. I wonder what his thoughts on the subject are, currently. It is an honor to be,

David Morgan

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, is devoted to education about the precious metals.

Mr. Morgan publishes a private newsletter for serious precious metals investors. He hosts the web site:He has been a private economist for over two decades his background in engineering , with an advanced degree in Economics/Finance. He has been interviewed on Don McAlvany's radio talk show, Financial Sense Newshour, Hard Money Watch, and appeared on television. Currently he does an internet radio wrap up each Friday discussing the economy and precious metals. Mr. Morgan was published in Global Investor regarding ten rules of silver investing. Currently, he is writing a book on silver.

There are numerous auctions now at seekbullion.com, a site run by Peter Spina, of goldseek.com and silverseek.com.

Auctions run by others, include:
Two monster boxes of Eagles are closing in 9 hours.
20 Gold Maple leafs closing Sunday night.
20 Generic Brand 100 oz. silver bars closing Sunday night.

--THOSE ARE NOT MY AUCTIONS, but the prices for those items right now are GREAT, some of the best in the industry!

The 125 bars sold in my last auction, that closed yesterday on Wednesday, were sold for an average price of $15.56/oz., and, at the time, silver was $10.33, so the premium was $5.23per ounce for Engelhard bars, a premium of 50.6% over spot.  The 26 separate auctions were won by 16 different bidders.  One person won 70 bars in the auction!  95% of the silver was shipped out today, to everyone whose wire came in.

Silver market commentary:

People are asking me about Jim Sinclair's 3 comments on silver, points 11-13:

11. Sliver will demonstrate the fact that it is more industrial a metal than precious.
12. Silver is not a currency because it is simply too HEAVY to settle debts or to be universally fungible.
13. Silver performs best when there is reasonable industrial demand and distrust of currency.  When this happens rounding up the gang and their money will have a lot to do with which party is elected.

Regarding #11.  What silver IS, is a function of philosophy.  What silver is mostly used for, is a function of statistical surveys.

I have long parroted the CPM Group's surveys that say that of silver demand, about 90% is industrial, and 5-10% is for investors, or only about 100 million ounces.  This is rapidly changing.  Investment interest was so small, that it recently increased by 10 fold this year, as inflation expectations are now mainstream, and many potential silver investors cannot find any silver at their local shops.  Yet, despite the mainstream expectaion for inflation, still less than 1 person in 1000 is buying silver, by my own estimations.

What this means to me is that if investment demand increases only a little, the price must go up.  But investment demand for silver is usually siphoned away into paper silver, such as Silver Futures Contracts, and the SLV.  Thus, silver prices are often driven by billion dollar funds who don't own silver, but only paper silver.

The billion dollar funds should understand that there is less than a billion dollars of silver to buy, in a year, and they should review my report on how to get into silver, for Billionaires.

Immediately after my report, silver shortages began to get extremely bad.  Note the date:

For most of my readers, it is TOO LATE for them to buy silver under $20/oz.  My mere 84,000 readers must own or control about $8 billion of capital, and most of that is locked up in illiquid, and declining, real estate.  There is no way that $8 billion of physical silver could be purchased for investment, without driving silver prices up about 8 times higher, to beyond $80/oz.

Yes, most silver per year goes to industry.  But investors are now proving that they are demanding silver for savings, more than "industry" can provide!

Investors can also invest in the collectible gemstone the market of gemstone is still the registered market place in some usual gemstone mine in the cut and rough gemstones There only few gemstone you can invest like ruby, sapphire, emerald, Tsavorite etc.,

Investors trump industry.   Investors will be more attracted to silver as the price moves higher, as everyone is a trend investor.  And low prices are also attracting investor demand, as inflation can be seen by blind men.

Regarding Jim's #12.  I think Jim means to say that for a given value of silver, the weight is too heavy.  I agree.  I lifted a lot of it today.  HEAVY!  But that shows that it is cheap!  You get so much for your money!  If you have ever held silver, you know that part of the allure is the density, or the heavy weight, which is unusually heavy for an object so small.  A bag of $1000 face 90% silver weighs 54 pounds.

But oil is heavier.  $10,000 worth of oil, at $72/barrel, is 138 barrels.  Now tell me, which is easier to lift and store?  Will the general public ever buy 100+ barrels of crude oil to store on their front lawn, and have it delivered in 18 wheelers to the suburbs?  Or will they go to their local coin shop to buy a bag of silver, or whatever they can afford?

I've been saying that for years.  I was right.  They cleaned out the coin shops, and the major wholesalers, until there was nothing left!  Probably not one person in 300 million has bought 100 barrels of oil to put on their front lawns!  Thus, the difference between silver and other commodities is self-evident to all thinking men.

And copper is also much heavier.  Copper is $2.27 pound today.  Thus, $10,000 worth of copper is 4405 pounds.  Which amount of equal value is easier to lift?  the 54 pound bag of silver, or the 2 tonnes of copper?  Silver is not an industrial metal, it is a monetary metal, and copper is the industrial metal.

Regarding Jim's #13.  I have no idea what he is saying.  I have an opinion about old men.  They over value their own personal experience, and undervalue the lessons of history.  For over 100 years, silver has been going through a process of demonetization.  Nations have been abandoning silver's use as money.  There is not another nation that can do that again, they have ALL stopped using silver as money.  This process must reverse.  There are no historical examples to even show us what is going to happen.  Both history and experience are useless.  You need vision.  You have to imagine what will happen to silver prices as monetary demand returns to silver.  Silver will be an excellent store of value, and it already is!  Real silver prices are increasing much faster than the prices of silver promises.

SILVER PRICE NEWS UPDATE:  As some of you know, I've been buying COMEX bars.  My contact man to help me source a new supply of COMEX bars reports to me that Kennecott wants over $3/oz. over spot for 1000 oz. bars, AND you have to show them 3 years of audited finanancial statements!  Clearly, I won't be buying 1000 oz. bars from them, and I will stick to my usual two sources.

MY NEW AUCTION:

24 Bags of 90% U.S. Silver Coin:

I'm auctioning 8 individual bags in 8 different auctions.
Then, 2 bags, then 3, then 5 bags.  That's 18 bags total of Roosevelt Dimes.

Then, 6 bags of 90% silver Quarters, in one auction.

My 90% Auction ends Monday, October 20th, Noon Eastern time, or 9AM, Pacific.

So, it's a series of 12 auctions scheduled, running over the course of 13 minutes..

Here's a picture of 20 of my bags for this auction: (they crushed the folding table, right before I warned it would happen) (See, nobody listens to me!):

I can ship immediately upon receiving the wire transfers from the customers, after the auction.  Wires must be sent within 24 hours after the auction's close!

About 90% bags:

Definition:  90% US Silver Coins come in "bags" of $1000 face value, which consist of 10,000 dimes, or 4000 quarters, or 2000 half dollars.  The coins were regularly minted, circulating U.S. silver coinage dating 1964 or earlier.  Usually, a "bag" is split up into two or four actual canvas sacks to make it easier to carry.  The coins exclude silver dollars, which are another product.  The silver is 90% silver, the rest, the other 10% is copper, to help harden and toughen the coinage.  There is 0.72 of an ounce of silver in each $1 face value, or 10 dimes, 4 quarters, or 2 half dollars, but the industry counts it as if it's .715 ounces, due to coin wear.  A full $1000 bag weighs about 54.5 pounds.  The most common form is quarters, about 70% of the time.  20% of the time, you get dimes, and 10%, half dollars.  Seems that the dealers hold back the dimes and half dollars because they might be more interesting.

I wrote about 90% silver back in May, when 90% silver was among the cheapest form of silver out there.

But one of the best things about 90%, is that they don't make any more!  It is now among the highest price silver out there.  This changed about 2 weeks ago!

PRICE INDICATION:

Fidelitrade was rumored to have "about 1000" bags for a long time this year.  It appears they are running out, or are very close.  They used to have a spread of about $300 per bag, among the lowest spread in the industry.  It's changed.  Look here:

The spread has increased to over $2500 between their buy and sell prices!

Right now, they are selling at $9873 per bag!  Divided by 715, that's $13.80 per ounce.

Right now, silver spot is $9.69/oz.

So, fidelitrade's bags sell for $4.12 per ounce over spot, or a premium of 4.12/9.69 = 42%.

The other industry leading wholesaler is Tulving.

Tulving is selling 90% for $4.99 over spot.  At $9.69, that's $14.68/oz..  That, times 715 = $10,496 per bag from the internet's other leading wholesaler!

Given the premiums, which show a desperate market need, I will sell out of most of my bags of silver, and I don't anticipate ever being able to buy any more.  I will buy COMEX bars instead, and I will keep about 10 of my best bags for myself, in reserve.

Every rich man ought to have AT LEAST ONE BAG, just in case times get really rough.  A bag of silver dimes holds $1000 face value of silver, which is 10,000 dimes!

A dime used to be a day's wage in many places and times in most of human history.

A Silver Dime Worth a Day's Wage?
History Shouts 'Buy' Louder than Anything Else

If a man works 250 days a year for 40 years, that's 10,000 days worked during a lifetime.  Think about that bag of 10,000 silver dimes, and what it really represents.

AUCTION FORMAT:

I did something new this auction, since some people were confused about how proxy bidding works.  I set the proxy bid increment at $1.01.

In a normal auction, if you are sitting there, bidding on anything, as you begin bidding, you know, in advance, how high you will bid, but you don't reveal that to the other participants, you just start bidding, and bid higher and higher, until you get to your "reserve" price, the highest you want to bid.

The online auction works the same way.  You just put in one bid, your reserve bid.  This bid is hidden from all others, and if yours is the highest, you become the leading bid, but your top bid is not shown.  Then, the software takes over.  If another person bids higher, but not higer than your price, the web site automatically bids for you, just enough so that you automatically bid over their bid, immediately, but never over your bid price.  They are told that their bid did not win, but their bid pushes up the price you'd have to pay.

I decided to set this bid increment at $1.01.  I made it an unusual number, specifically so that people can detect and understand when an automatic bid has taken place, and easily see that.

It's not deceptive for the system to "hide" the top reserve, or proxy, bid.  People do that all the time during auctions, they don't "show their cards" so to speak, that's a normal feature of auctions.

You don't have to enter a high reserve bid right away.  You can always enter a higher bid later.

The bidding system at seekbullion.com uses PROXY BIDDING!

WHAT IS PROXY BIDDING?

How to bid:

First, register at

Proxy bidding at seekbullion.com works similar to ebay.com, however, the "bid increments" at seekbullion are much smaller.

The high bid wins, but is never what is paid.  The second highest bid mostly determines the price!

The highest bid is always hidden from view.  The bid you see is nearly always the second highest bid, plus a small increment over that, due to the automatic proxy bidding of the highest bidder.

For example, if by the auction's close, one person has bid $10,000 for a bag, and the next highest bid is $9000 for a bag, then the auction software lists the highest bid as $9001.01, and the person who bid $10,000 is the highest bidder, but will only pay $$9001.01.  The person who bid $9000 will not win, and their bid is only used as a base for the automatic proxy increment bid of $1.01 over that price.

Thus, it's like each bar is bid at least twice at very near the price you see.

This really prevents price gouging, because the bids have depth--at least two buyers are willing to pay very similar prices.

If you want a free market in silver, then please tell people about the auctions at:

 

Silver COT Report - Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
28,140 11,218 18,546 30,987 58,158 77,673 87,922
-742 -565 -49 207 -2,451 -584 -3,065
Traders
67 26 35 29 24 104 80
Small Speculators
Long Short Open Interest
20,923 10,674 98,596  
-703 1,778 -1,287  
non reportable positions Change from the previous reporting period
COT Silver Report - Positions as of Tuesday, October 14, 2008

 

 

Silver COT Report - Futures & Options Combined
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
22,896 10,952 46,386 47,846 71,798 117,129 129,136
-278 -565 -499 663 -1,732 -114 -2,796
Traders
68 34 55 33 26 124 95
Small Speculators
Long Short Open Interest
25,449 13,442 142,578  
-1,185 1,496 -1,299  
non reportable positions Change from the previous reporting period
COT Silver Report - Positions as of Tuesday, October 14, 2008

  Close Gain/Loss On Week
Gold $785.95 -$16.20 -7.75%
Silver $9.345 -$0.22 -10.92%
XAU 85.85 -2.80% -14.63%
HUI 203.24 -3.25% -18.09%
GDM 602.61 -2.80% -15.62%
JSE Gold 1738.50 -119.47 -8.43%
USD 82.40 +0.09 -0.28%
Euro 134.23 -0.22 +0.22%
Yen 98.53 +0.15 -0.97%
Oil $71.85 +$2.00 -7.53%
10-Year 3.938% +0.002 +1.99%
Bond Error Error Error
Dow 8852.22 -1.41% +4.75%
Nasdaq 1711.29 -0.37% +3.75%
S&P 940.55 -0.62% +4.59%

The Metals:

Gold rose 1.6% to $815 in Asia before it fell back off in London and dropped to as low as $772 by late morning in New York, but it then rallied back higher in the last couple of hours of trade and ended almost $14 off its low with a loss of 2.02%.  Silver rose 3.7% to $9.92 in Asia before it fell to as low as $9.075 in New York, but it ended nearly 3% off that low with a loss of just 2.3%.

Euro gold fell to about €583, platinum lost $17 to $859.50, and copper gained roughly 8 cents to about $2.18.

Gold and silver equities fell over 7% at the open before they rallied back higher and saw modest gains by mid-afternoon, but they then fell back off into the close and ended with about 3% losses.

The Economy:

Report For Reading Expected Previous
Building Permits Sep 786K 840K 857K
Housing Starts Sep 817K 870K 872K
Michigan Sentiment Oct 57.5 65.0 70.3

All of this week’s economic reports:

Michigan Sentiment - October 57.5 v. 70.3
Housing Starts - September 817K v. 872K
Building Permits - September 786K v. 857K
Philadelphia Fed - October -37.5 v. 3.8
Industrial Production - September -2.8% v. -1.0%
Capacity Utilization - September 76.4% v. 78.7%
Net Foreign Purchases - August $14.0B v. $8.6B
CPI - September 0.0% v. -0.1%
Core CPI - September 0.1% v. 0.2%
Initial Claims - 10/11 461K v. 477K
Business Inventories - August 0.3% v. 1.1%
NY Empire State Index - October -24.6 v. -7.4
Retail Sales - September -1.2% v. -0.4%
Retail Sales ex-auto - September -0.6% v. -0.9%
PPI - September -0.4% v. -0.9%
Core PPI - September 0.4% v. 0.2%

Next week’s economic highlights include Leading Economic Indicators on Monday, Initial Jobless Claims on Thursday, and Existing Home Sales on Friday.

The Markets:

Oil rose on hopes for signs of recovering worldwide demand next week while OPEC may also announce a production cut at its emergency meeting next Friday.

The U.S. dollar index ended higher in mixed trade as the euro fell on the view that Europe may have more problems going forward than the US.

Treasuries fell on more worries over the need to issue additional debt and whether or not there will continue to be buyers for it.

The Dow, Nasdaq, and S&P fell markedly at the open before reversing to see impressive gains midday, but all three indices then fell back off into the close and ended modestly lower on uncertainty over the health of the economy and financial system overall.

Among the big names making news in the market Friday were ING, Honeywell, IBM, Pfizer, Schlumberger, and Warren Buffet.

The Commentary:

Dear Friends,

  1. As we approach elections everything possible is being done to keep equities from total implosion.
  2. As we approach elections everything possible is being done to keep the hollow US dollar firm
  3. As we approach elections everything possible is being done to keep gold under control to assist in keeping the dollar firm.
  4. Gold is NOT a commodity. It is a currency.
  5. There is an appearance of involuntary liquidation in gold as hedge and gold funds are pressed by redemptions and needs for capital to pay off investors.
  6. Gold never changes. Things change in price comparison to gold, so therefore you can jump up and down on the barometer but that will not change the circumstances it is reading.
  7. The means of keeping all things in check is to demoralize those whose positions oppose the goal while showing some sunshine to those who wish to keep their positions.
  8. Nobody on earth can prevent the CONSEQUENCES of Chairman Bernanke and Secretary of the Treasury Paulson's attempt to offset the unavoidable CONSEQUENCES of the same actions taken by the central bank and treasury of the 1930s.
  9. The different monetary action now in the degree applied will have their own and different CONSEQUENCES in the degree of economic impact.
  10. The dichotomy between the bullion supply/demand picture and the easy to manipulate paper gold market continues. Pedro says: "A "friend" of mine was inZurichyesterday. Aside from the fact that there were no gold coins available in one of the major centers of the world gold trade, it was also noted that there are no longer any large safe deposit boxes available at Credit Suisse Banhofstrasse."
  11. Here is where we are headed to some degree, regardless of the manipulation of markets to paint charts at an unprecedented level.

Most readers will be familiar with the great hyperinflation of Weimar Germany. Indeed, it is often held up as the icon of what can go drastically wrong when government throws off all restraint in regards to the production of fiat money. I do not need to labour the point much as to how billions and then trillions of marks were literally not worth the paper they were printed on and how workers had to be paid by the hour lest their wages rapidly lost purchasing power in the brief time between being paid and spending that same money.

As ever, gold and silver proved to be safe havens from the ravages of inflation. Indeed, anything other than the mark seemed to a good place to park one's wealth. In those days, that could be anything from bedpans to US dollars to precious metals. However, depending on one's accumulated wealth, gold and silver were amongst the top assets in terms of holding and transporting wealth. Despite this, one set of figures and one notable week in the life of Weimar Germany demonstrated that one particular form of wealth proved to be in particularly heavy demand

  1. Don’t let the unprecedented bullying of all markets to meet political expediency draw your attention off the ball.

There are defined CONSEQUENCES to the new approach taken by the top expert of the 1929 to 1940 depression. The error is that these actions will have CONSEQUENCES different from 1930 and they will be more devastating than one can ever imagine.

Monetary inflation, "the unlimited creation of fiat money," will cause massive price inflation regards of the level of business activity
PROTECT YOURSELF!- Jim Sinclair, JSMineset.com

“December Gold closed down 16.8 at 787.7. This was 12.7 up from the low and 4.3 off the high.

December Silver finished down 0.3 at 9.335, 0.145 off the high and 0.175 up from the low.

The gold market started out on a weak footing and then came under more intense pressure in the wake of softer than expected US housing starts and permits data. However, the gold market seemed to bounce slightly in the face of the mid day equity market recovery and that would further the argument that gold is seeing the threat of too much slowing as a more important element than the potential for aggressive flight to quality buying. While some might suggest that the Dollar action was responsible for the weakness in gold, it should be noted that gold was down early in the trading session when the Dollar was lower. The fact that gold didn't seem to get any lift from stronger energy prices suggests that even the physical commodity market angle wasn't capable of boosting gold prices.

The silver market was weaker throughout the trading session Friday. In fact, silver was down in conjunction with the gold market and even though equity prices bounced and at times before the silver close were moderately higher that didn't seem to benefit the silver bulls. With the Dollar eventually regaining some positive traction after a slump in the wake of the scheduled US numbers one could suggest that current market action contributed to the weakness in silver prices. The fact that copper and energy prices were higher during the session didn't seem to spark much bargain hunting buying interest in silver despite the fact that silver on the week was down roughly $1.30 an ounce from the prior week's close.”- The Hightower Report, Futures Analysis and Forecasting

GATA Posts:

More on the strange disparities in gold, silver markets

Daily bank borrowing from Fed rises to $438 billion

Fears of Lehman's CDS derivatives haunt markets

The Statistics:

As of close of business: 10//2008

Gold Warehouse Stocks: 8,561,477 +37,498
Silver Warehouse Stocks: 133,582,226 -564,824

Global Gold ETF Holdings

Product name Total Tonnes Total Ounces Total Value
New York Stock Exchange Arca (NYSE Arca) AND Singapore Exchange (SGX) AND Tokyo Stock Exchage (TSE) AND Hong Kong Stock Exchange (HKEx) SPDR® Gold Shares 756.86 24,333,868 US$ 19,524m
London Stock Exchange (LSE) AND Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse ) Gold Bullion Securities 123.53 3,971,471 US$ 3,123m
Australian Stock Exchange (ASX) Gold Bullion Securities 11.97 384,414 US$ 303m
Johannesburg Securities Exchange (JSE) New Gold Debentures 26.22 842,882 US$ 676m

Note: Change in Total Tonnes from yesterday’s data: SPDR subtracted 10.74 tonnes.

COMEX Gold Trust (IAU)

Profile as of 10/16/2008  
Total Net Assets $1,689,941,912 Ounces of Gold
in Trust
2,108,859.706
Shares Outstanding 21,400,000 Tonnes of Gold
in Trust
65.59

Note: No change in Total Tonnes from yesterday’s data.

Silver Trust (SLV)

Profile as of 10/16/2008  
Total Net Assets $2,214,205,830 Ounces of Silver
in Trust
221,698,064.200
Shares Outstanding 224,400,000 Tonnes of Silver
in Trust
6,895.58

Note: No change in Total Tonnes from yesterday’s data.

The Stocks:

Harmony’s (HMY) output, IAMGOLD’s (IAG) appointment of Elaine Ellingham as the Senior Vice President of Investor Relations & Communications, Ivanhoe’s (IVN) negotiations with the Mongolian Government, AngloGold’s (AU) non-recommendation of a mini-tender offer, and ECU’s (ECU.TO) assay results were among the big stories in the gold and silver mining industry making headlines Friday.

WINNERS

1.  Apex Silver SIL +7.56% $1.85
2.  ITH THM +7.21% $1.19
3.  Fronteer FRG +7.01% $1.68

LOSERS

1.  Allied Nevada ANV -17.43% $3.08
2.  Banro BAA -10.34% $1.30
3.  Endeavour EXK -9.57% $1.04

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

All of today's gold and silver stock news:

Sage Closes First Tranche of Private Placement -
October 17, 2008 | Item | E-mail

Aurora Gold Corporation Announces That a Ground Geophysics Program on the São João Joint Venture Project in the Tapajos Gold Province Is Nearing Completion -
October 17, 2008 | Item | E-mail

Cartier Acquires Two New Gold Properties -
October 17, 2008 | Item | E-mail

Manicouagan Minerals Reports Transfer of Shares by Insider -
October 17, 2008 | Item | E-mail

Miranda Reports Termination of Red Hill Agreement -
October 17, 2008 | Item | E-mail

Amerigo Announces Q3 2008 Production Results -
October 17, 2008 | Item | E-mail

Strait Gold Amends Warrants -
October 17, 2008 | Item | E-mail

Freewest Continues to Generate Encouraging Drill Results on its 100%-Owned McFaulds Property, Northern Ontario -
October 17, 2008 | Item | E-mail

Global Gold Registers Significant Discovery in Armenia at Toukhmanuk -
October 17, 2008 | Item | E-mail

Nunavik Nickel Project Exploration Update: New Zone of High-Grade Massive Sulphides Intersected at Giraffe -
October 17, 2008 | Item | E-mail

Western Troy Stakes Claims on Molybdenum Anomaly Southwest of the Troilus Mine in Quebec -
October 17, 2008 | Item | E-mail

Colorado Goldfields Inc. Pays 30% Stock Dividend -
October 17, 2008 | Item | E-mail

Reverse circulation drill results from Bansié Project, Burkina Faso -
October 17, 2008 | Item | E-mail

Farallon Raises $7.75 Million Through Notes -
October 17, 2008 | Item | E-mail

Radisson Mining Completes Acquisition of Mining Claim in Dryden Area of Ontario and Updates Two Drill Programs -
October 17, 2008 | Item | E-mail

Osisko Launches Normal Course Issuer Bid -
October 17, 2008 | Item | E-mail

Probe Mines Exploration Update -
October 17, 2008 | Item | E-mail

Solex Resources Corp. Announces Fiscal 2008 Year End Results -
October 17, 2008 | Item | E-mail

Golden Phoenix Implements Corporate Cost-Cutting Measures -
October 17, 2008 | Item | E-mail

Alexis Discovers Copper-Rich Massive Sulphide Zone With 54.0 Metre Copper-Rich Stringer Zone Adjacent to the Louvicourt Mine in Val d'Or, Quebec -
October 17, 2008 | Item | E-mail

Blue Note to put Caribou and Restigouche on temporary care and maintenance -
October 17, 2008 | Item | E-mail

S.Africa's Harmony output, costs to rise in Q3 - "Africa's third largest gold producer, Harmony Gold (HARJ.J: Quote, Profile, Research, Stock Buzz), said on Friday output and unit cash costs in the September quarter had risen, and it was confident of a higher gold price." More
October 17, 2008 | Item | E-mail

Vena Resources Discovers High-Grade Coarse Gold at Pucara-Gold/Copper Project in Peru and Expands Development Program -
October 17, 2008 | Item | E-mail

Kalimantan Gold Plans Private Placement -
October 17, 2008 | Item | E-mail

Globex: Update on Exploration and Prospects -
October 17, 2008 | Item | E-mail

IAMGOLD Announces Appointment of Senior Vice President, Investor Relations & Communications - "IAMGOLD Corporation ("IAMGOLD" or "the Company") (Toronto:IMG.TO - News)(NYSE:IAG - News)(BOTSWANA: IAMGOLD) is pleased to announce the appointment of Elaine Ellingham as the Senior Vice President of Investor Relations & Communications effective October 14, 2008."
October 17, 2008 | Item | E-mail

ECU Silver and Golden Tag Cut Additional Massive Sulphides at San Diego - "Initial assay results received from drill hole SD-08-34 are very encouraging.. In particular, this hole cut additional massive sulphides with significant grades in silver, lead and zinc (see Table 1 below) and confirms the ongoing continuity of La Rata Vein. The results from the La Rata Vein continue to demonstrate sulphide grades that are among the richest within the San Diego Project area."
October 17, 2008 | Item | E-mail

Ivanhoe Mines and Rio Tinto Reaffirm Readiness To Engage in Investment Agreement Negotiations With Mongolia for Development of Oyu Tolgoi Project- "John Macken, President and CEO of Ivanhoe Mines, and Bret Clayton, Rio Tinto's Chief Executive, Copper & Diamonds, said today that they were looking forward to engaging in negotiations with the Mongolian Government to conclude an Investment Agreement for the development of the Oyu Tolgoi copper-gold project in Mongolia's South Gobi Region."
October 17, 2008 | Item | E-mail

AngloGold Ashanti Does Not Recommend or Endorse Below-Market Mini-Tender Offer From TRC Capital - "AngloGold Ashanti announced today that it has been notified of an unsolicited below-market "mini-tender offer" by TRC Capital Corporation of Toronto, Canada to purchase up to 4,000,000 American depositary shares ("ADSs") of AngloGold Ashanti Limited (each of which represents one ordinary share), representing approximately 1.14% of AngloGold Ashanti's outstanding share capital, at a price of US$18.00 per ADS. AngloGold Ashanti cautions shareholders that this offer represented a 2.65% discount to the US$18.49 closing price of ADSs on the New York Stock Exchange on October 15, 2008, the day prior to the date of the offer and a 2.39% discount to the US$18.44 closing price of ADSs on October 16, 2008."
October 17, 2008 | Item | E-mail

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My 200 Engelhard 100 oz. bar auctions end Wednesday, October 22nd, 3PM Eastern time, or Noon Pacific.  It's a series of 30 auctions that close a minute after each other, over 30 minutes.  The last auction is for 50 bars.

Here's a major twist on the 90% auction:

Hannes Tulving of emailed me to say he would bid $4/oz over spot for all of my 24 bags in my auction!  I asked him if he wanted to lock in the price based on the spot price of $9.35 for the weekend close, and he said yes.  He also said I could publish his bids!  Normally, a person would not advertise their "reserve" bid, which is hidden by the software, so others don't know how high they are willing to bid.  But Tulving's bid is $9.35 + $4 = $13.35 per oz. x 715 per bag = $9545.25 per bag.

That would be a $229,086 trade, if Tulving buys all bags at that price, but that won't happen.  He will either pay less, or be outbid.  I think he will be outbid, but he may get some bags, it's hard to say.

This is extraordinary.  Unprecedented.  Tulving is announcing the price of his top bid, and wants me to do so!

What does Tulving get out of it, by announcing his bid price?  He wants me to advertise his "buy" price, so that others will sell to him. He'll buy anyone's 90% silver at that price, in full bags!

So, this market between us, is fully open.  Anyone else can now enter this "deal flow", between Tulving and me, and get silver at "wholesale" by bidding a small $1 over Tulving's reserve price of $9545.25 per bag, and get in between Tulving and me, and squeeze Tulving out of the deal!

Or, the market might not bid up to Tulving's price, and he could get the bags for less, because of the way the auction software works.  See, the final price is not $9545.25, but less, as can be seen right now.  The final price is a result of at least two bids, because of the way the system places automatic proxy bids at increases of $1.01 over the second highest bid.

One person was upset and depressed, looking at the bid history, thinking Tulving was somehow determined to bid up to $20,000 per bag or whatever it took to win, because Tulving's proxy bids came in so quickly.  But the proxy bids are automatic, and placed by the software immediately.

This is the ultimate free market.  The bidding is open to anyone.

Admittedly, it is not open to all sellers.  But most sellers, as we know, have already sold out!  And many other sellers refuse to trust any free market based auction format.

Right now, seekbullion.com is just starting out.  They have no staff, and little income.  They intend to charge a 1-2% fee on all trades.  Until they get enough income and can hire people, their auctions are only open to major dealers and wholesalers, who actually have major physical product in stock available for immediate delivery (and not "on the way").  They cannot list everyone's products, and have no intention of competing with ebay, with smaller listings.  If you are not a dealer, I suggest you use ebay.com.  My own family is using ebay!

I will again plug my mom's ebay store, where she is selling 1 oz. generic rounds, and 10 oz. bars, in small lots.

If she can sell on ebay, then you can, too.

I don't want to leave you with the wrong idea.  I'm a silver buyer more than a seller.  I'm a very eager buyer, and only a very reluctant seller.  This is why I'm rationing off my silver, through auctions.  The auctions help me to ration my product, in small lots, over time, to the highest bidder.  If I was an eager seller, I'd merely rent an 18 wheeler, drive it all to LA, and dump it to Tulving or Amark, and you would never hear about it, nor get a chance to buy it.  The fact that I'm advertising my sales and selling what are small lots for me, proves I'm a buyer!  I was thinking of posting my purchase orders, to prove it to people who are skeptical that I'm a buyer, but why bother?  Such people who need such convincing have no brains, would remain unconvinced, or accuse me of making it up, and don't read my emails anyway.  If they did have brains and read my emails, they would know I'm a major silver buyer, and why.  By the time I've auctioned off over 200,000 ounces of silver, that will be further proof that I have not sold out, but I'm buying more.