Silver and Gold

Quick post on silver and gold. With the CME moving to increase margin requirements by as much as 50% for silver and gold we would expect a selloff similar to that we saw in the softs as speculators bear additional costs and scramble to get margin requirements filled. Instead we see silver ripping to 52 week highs – 32.65 as I write this.

I interpret this to mean that the demand for silver is even higher than previously thought, and with physical silver in short supply  – shown by backwardation in the futures – the PM bull market is becoming a runaway freight train ready to crush all those that stand in its path – add to this mix a declining USD and it is increasingly difficult to find reasons to be short the PM’s. Add to this that plenty of people are already short the PM’s and as we continue to go higher I expect to see much more short covering.

Having said this, I am long SLV calls, SLW calls, ABX calls and NGD calls. I feel SLW is a great way to get some leverage on spot silver, even if you just own the stock. NGD has lagged other gold producers and could break out soon with the gold spot also rising – although we do not see backwardation in the gold futures.

Just some thoughts on the topic. Thanks for reading.

TJWP

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