The Phaserl


Gold Daily and Silver Weekly Charts – IMF: ‘Gold Only Financial Asset With No Counterparty Liability’

from Jesse’s Café Américain:

“The IMF has put Monetary gold right at the top of the global reserve assets list – above SDRs. The IMF writes, ‘…The gold bullion component of monetary gold is the only case of a financial asset with no counterpart liability.'”

Koos Jansen

Gold took a light hit on the London PM fix and the opening of The Bucket Shop this morning. Silver took a hit as well but managed to bounce back up and finish positive on the day, probably because it is in an ‘active month’ on the better parlor on the Hudson.

I read an analyst talk the old ‘gold vs. silver’ argument over the weekend. In my opinion it is a fruitless argument  to consider in the abstract, and so I don’t.

Gold and silver are both precious metals, but have some not so subtle differences. Silver has a much higher beta, meaning it will go up more and down more than gold. So if you can handle the volatility then silver is fine. If you would like less volatility and more ‘insurance’ then gold is more suitable. Gold has less of a component of industrial use than silver, but there is generally more free floating silver around than gold, and much of it is produced as a byproduct of mining base metals.

I think there is a place for both in any diversified precious metals portfolio. Arguing about the merits of one versus the other is like arguing about which is better, a screwdriver or a hammer. You have to consider the job at hand for yourself. And you can have a use for both of them.

I am personally persuaded by a growing amount of circumstantial evidence that there is a potential short squeeze developing in physical gold in London and New York, fueled by excessive paper trading and the insatiable demand in Asia. I was electrified last week when Jim Rickards said that the gold trade at the LBMA in London is unallocated. I had thought it was a split trade. If this is the case, the indications that have slipped out that the LBMA trade is running at 100:1 leverage is an enormous exposure to a shortfall and an unwinding of that leverage.

New York really trades overwhelmingly on a non-physical basis these days, so The Bucket Shop is more likely to be a late stage ‘tell’ and collateral damage than an actual precipitant of a short squeeze.

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