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Silver Surges 21% in January - Silver Demand Is “Diminishing A Supply Surplus”

Commodities / Gold and Silver 2012 Jan 31, 2012 - 07:59 AM GMT

By: GoldCore

Commodities

Best Financial Markets Analysis ArticleGold’s London AM fix this morning was USD 1,738.00, GBP 1,102.23, and EUR 1,317.27 per ounce.

Yesterday's AM fix was USD 1,720.50, GBP 1,097.40, and EUR 1,310.06 per ounce.


Cross Currency Table – Bloomberg

Gold edged higher in Asian and again in European trading today. Gold has broken through all major moving averages and Fibonacci levels this week due to a weakening dollar and geopolitical concerns regarding Iran and the European solvency crisis.

Euro gold appears to be breaking above resistance which should lead to new record highs above €1,359/oz.

Gold at €1,315/oz is now just 3% below the record high from September 2011. The correction and consolidation of recent months was necessary and healthy, and the intractable Eurozone debt crisis should result in further falls in the euro and €1,400/oz gold is likely.

Dennis Gartman, economist and newsletter writer, said he is buying more gold priced in euros after he “returned to this trade” last week. It is “time to add to the trade and we are doing so this morning,” he said today in his daily Gartman Letter.

"Mission Accomplished" As Venezuela Welcomes Home Final Shipment Of Repatriated Gold Bars
Venezuela repatriated 160 tonnes of gold that was held abroad with the last shipment, 14 tonnes , arriving from Europe at the Caracas airport today.

Declaring the process a "mission accomplished," government officials and state news crews met the 14-ton load at a Caracas area airport and heralded the televised event as a boost to national sovereignty.

“In two months, we’ve brought 160 tons of gold valued at around $9 billion back to Venezuela,” Central Bank President Merentes said on state television from the Caracas airport. “Today marks the last day of the mission.”

Venezuela has the 15th largest holdings in the world, according to the World Gold Council. Venezuela will leave around 15% of its reserves, (50 tons), outside of Venezuela for financial transactions, said Merentes.

CFTC Data
CFTC data shows speculators are gradually beginning to enter the gold futures market again.

Fund managers increased their bullish bets in Comex gold futures and options in the week ended Jan. 24, according to Friday afternoon data from the Commodity Futures Trading Commission (CFTC).

Reuters Global Gold Forum

The net non commercial gold position rose for a third week in a row - by 6,194 contracts to 142,223 lots versus an overall decline in total futures OI. This marks the longest stretch of gains in CMX net non-com futures OI since July/Aug last year. Money managers raised their gold holdings by more than 8,000 lots to 117,156 contracts, also the largest weekly increase since mid-November.

This raised their net long position 8.5% to 126,937 contracts, from 116,978 a week earlier.

The managed fund net long position represents around 12.6 million troy ounces of gold.

Importantly, the recent increase in net long positions are from multi month record low levels after the liquidation seen after gold’s sell off from nominal highs over $1,900/oz.

This suggests that gold should see further gains in the coming months as these positions continue to be added to.

Silver Surges 21% in January - Silver Demand Is “Diminishing A Supply Surplus”
There continues to be no coverage of silver in the non specialist financial media and little coverage of silver in the specialist financial media. However, both the Financial Times and Bloomberg cover silver today which might be a harbinger of short term weakness.

The majority of articles on silver are bearish and most bank analysts remain bearish on silver again in 2012 – as they have been in recent years. Prices will average $37.50/ounce in Q4, according to a survey of 13 analysts by Bloomberg.

The lack of coverage of silver and consequent “animal spirits” in the silver market is of course bullish from a contrarian perspective.

Analysts look set to get the silver market wrong again as recent rocketing industrial demand for silver, from solar panels to batteries to medical applications and growing investor demand for coins, and small & large bars is “diminishing a supply surplus” according to Nicholas Larkin of Bloomberg. This has led to silver’s best January gains in 30 years with silver up over 20% from below $28/oz to nearly $34/oz.

Barclay's estimates that manufacturers will need a 2.5% increase of the metric tons used last year and investment demand continues to grow due to risks posed by both inflation and systemic risks.

Silver like gold – cannot go bankrupt and will always have a value.

Silver supply shortages are something we and other analysts who are bullish on silver have been warning of for some time. This is because the silver market is small versus the gold market and tiny versus equity, bond, currency and derivative markets. This is why we believe silver should rise to well over its nominal recent and 1980 high of $50/oz in the coming months.

While focus has been on silver’s fall from $50/oz last year – there is very little focus on silver’s long term performance and how silver has massively outperformed most asset classes in recent years.

SILVER
Silver is trading at $33.55/oz, €25.46/oz and £21.26/oz.

PLATINUM GROUP METALS
Platinum is trading at $1,614.00/oz, palladium at $683/oz and rhodium at $1,325/oz

For the latest news and commentary on financial markets and gold please follow us on Twitter.

GOLDNOMICS - CASH OR GOLD BULLION?



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This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

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