A sharp selloff, particularly in silver, on the last trading day of the year wasn't enough to prevent either gold or silver from finishing the week higher. Gold snapped a six week losing streak, ending $18 (1.6%) higher, while silver finished higher for the second week, ending higher by 20 cents (1.3%). As a result of gold's relative outperformance, the silver/gold price ratio widened out slightly, to just over 72 to 1. I'm going to stick to a weekly format, but for the year, gold ended more than $90 (8.5%) higher while silver ended the year up by more than $2 (14.4%). Silver's relative outperformance this year resulted in the silver/gold ratio tightening in by 4.5 points from last year's 76.5 to 1 close. I suppose I shouldn't complain about silver and gold ending higher for the first year following three years of lower finishes; but considering everything, I…
December 28, 2016 – Mechanics of a Price Explosion
The Mechanics of a Price Explosion When I first started looking into silver's supply demand fundamentals more than 30 years ago (as a result of a challenge by Izzy Friedman), I concentrated on just that a study of the metal's actual production, consumption and inventory status. But in searching for the explanation for the puzzling low price in the face of the most bullish circumstance possible in any commodity (the long term structural consumption deficit), I stumbled upon a mechanical reason for the low price the unusually large concentrated short position on the COMEX. I have continued to study silver from a supply/demand perspective to this day, but have come to learn that changes in actual production and consumption have little to do with short to intermediate term price movements. When it comes to the price moves that garner the most attention, one has to…
December 25, 2016 – Weekly Review
Weekly Review Gold fell for the seventh straight week, but in a break in pattern, didn't set new intraweek lows and only finished $1 down on the week. In contrast, silver ended the week a sharp 35 cents (2.2%) lower; pushing the silver/gold price ratio wider to nearly 72 to 1, the second week of 1.5 point widenings. Silver is still within the same rough relative valuation it has been to gold over the past couple of years, meaning that no one over this time is much better or worse off for having switched from one to the other; but I remain convinced that we will look back in amazement one day and marvel at how cheap (and for how long) silver had become compared to gold. And how cheap it had gotten near this year's end on any basis. There have been a number of…
December 21, 2016 – Interview with Jim Cook
Interview with Jim Cook Here's a recent interview I did with Jim Cook, President of Investment Rarities. Afterwards, I'll comment on recent developments and price action since the weekly review. Cook: People that have been holding silver for several years are beginning to lose patience. What do you say to them? Butler: The facts surrounding silver have never been more bullish. Cook: Such as? Butler: Over the last few years, enormous changes have recast and transformed the silver market. Cook: Can we have an example? Butler: In only a few years, JPMorgan has accumulated the largest hoard of silver in the history of the world. Cook: How does that compare with the Hunt Brothers in 1980? Butler: They have five to six times as much as did the Hunts, maybe more. Cook: How do you prove that to people who doubt you? Butler:…
December 17, 2016 – Weekly Review
Weekly Review The late Wednesday into Thursday price smash sent gold lower for the sixth week in a row, this time by $26 (2.2%). After two prior weeks of gains, silver fell more sharply, ending the week 75 cents (4.4%) lower. As a result of silver's underperformance, the silver/gold price ratio widened out by nearly 1.5 points to just under 70.5 to 1, the same amount it had tightened in by the previous week. Yes, the silver/gold price ratio remains in the same fairly tight trading range of the past couple of years and yes, the weekly changes have little to do with any actual physical switch from one metal to another and everything to do with paper contract positioning on the COMEX. As always, COMEX paper contract positioning was responsible for the mid-week selling frenzy, accompanied by the convenient cover story excuse of Federal Reserve interest…
December 14, 2016 – The Royal Flush
The Royal Flush In order to make a point, I'm going to address a very popular question, by giving the answer first and then providing the question. The answer does involve a bit of imagining on your part. I ask you to picture yourself at the highest stakes poker game imaginable, where quite literally many billions of dollars are at stake and in which you have just been dealt the indisputable best hand possible – a royal flush. Please accept that you are guaranteed to win. It's the last deal of the game with winner take all. The pot is enormous and all the other participants have been dealt very high and normally winnable hands and are flush with funds and every player is intent on raising and re-raising as each new bet is made. You have plenty of betting funds left and know that you must win…