Today In Silver

Tulving at www.tulving.com has 50-100 Johnson Matthey/ Engelhard and Ohio Precious Metals 100 oz. bars in stock. The JM bars are offered at $2.99 premium to spot and the OPM bars at $1.99 premium to spot. While these premiums are still very substantial, they are just about the best deal that I could find. With silver currently around $9.50, you can effectively purchase physical silver for $12 to $13 per ounce. Any other “deals” out there you know about?

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Many of you know that one of my favority junior exploration speculations is Exeter Resources. I’ve talked about their prospective Caspiche and Cerro Moro projects ad naseum in the past but I haven’t spend enough time on management. This is mostly because the competence and good business sense of this company’s management team has been very obvious. And in my opinion it continues to be that way judging from the latest press release in which Exeter announces that it is cautiously going ahead with its drilling plans but is mindful of conserving cash at the same time. With all the bad decision-making out there, I find it very refreshing to see such smart junior exploration management. Apparently the market disagrees with me, however, because today it sent Exeter shares to the woodshed to be shredded. Do any of you think the company has made a bad decision that deserved to be punished? Do you know of any other companies making similar tactical decisions? Do you know of any companies still forging ahead with full intention to drain their treasuries as soon as possible?

Disclosure: I own more shares of Exeter than I care to admit and I keep buying more every dollar it goes lower.

silverax Windbag Wisdom

Silver and gold took an extraordinary dive last Friday as the stock markets cratered. While both stocks and gold recovered somewhat in the next several days, silver has remained near its lows. Silver even repeated a mini-version of last Friday’s swoon earlier today, dropping about a dollar before gaining strong round-number support at $10.

I don’t see much difference between this latest action and what we’ve witnessed in the past two months: liquidations, margin calls and adroit manipulations that have punished and taken advantage of the small size of the silver market both on the paper side (COMEX and over-the-counter forward market) and the physical side. The latest technical assessment from our resident mystery chartist (which assessment I hope to make available to Founding Members shortly) has silver trading perhaps down to the high $8’s to mark what could be not only the final bottom but a once-in-a-lifetime buying opportunity (this last part is my opinion, not necessarily his). According to our technician, silver may even visit the mid to low $8’s should gold get pressured lower to once again test the $729 level a second time. The first test was in September when gold went to about $735.

Despite literally trillions of Dollars, Euros, Yen and various other fiat fluff being thrown at the markets, nothing seems to be sticking so far. Case in point is that the stock markets finished yet another crippling session with the Dow and many other indeces down 8% or more for the day. At some point the world’s “responsible” governments will decide to really do something serious and they will then start talking about the tens of trillions of Dollars, Euros, Yen and other currencies that will have to be committed to stop the slide into The Greatest Depression. And the only reliable tool for avoiding that, as admitted by a top helicopter pilot currently working in the banking sector, is to use that wonderful invention called the printing press, or its electronic equivalent.

A reader points out that the Monetary Base as tracked by the St. Louis Fed has now exceeded $1 trillion. Well, I would like to point out that the rise was achieved in a remarkable fashion not unlike a helicopter taking off. Tomorrow we’ll find out what our brave boys at the Fed and Treasury have been up to in the past week. Are they continuing to try to nickle-and-dime the confidence of the markets back to health? If so, the result will remain more like a death by a thousand cuts.

Alright, so where does this leave us silver and gold investors? My strong suspicion is that the world is about to witness a very sobering development, not unlike what beachgoers on the shores of the Indian Ocean experienced on Christmas 2004. Many people on the beaches that day were compelled to watch or even investigate the sudden disappearance of the ocean from the beach. Some even ventured out to pick up fish floundering on the exposed ocean floor. In many cases, water had receded as far as the eye could see. And then the waves came. Almost everybody was caught unprepared and there was nearly universal surprise that water which had drained away so fast could come back even faster.

I suspect we’ll witness something very similar with the monetary system in the next few weeks and months. The experts now fear that money will drain away forever as the banking and financial crisis escalates. There is no consideration being given to the fact that the money supply is not actually shrinking but rather growing. And just like an earthquake that causes a large plate to shift on the ocean floor, the huge and growing liquidity injections have caused a large shift on the monetary floor (the Monetary Base). No doubt most people in the world will be surprised by the speed with which the monetary tsunami will reach our shores. I’m predicting the first wave will appear before December 2009, but it could be much earlier.

Safety during an ocean tsunami depends on seeking and finding high ground in advance. Safety during a monetary tsunami depends on seeking and finding gold (and silver) in advance. Will you be safe?

silverax Windbag Wisdom

It is very likely that I will be attending The 2nd Annual Smartinvestment Junior Mining Conference that is scheduled for Saturday, November 1st, 2008, to be held at the Siena Hotel and Casino in Reno, NV. If you would like to meet me in person or just see what this conference is all about, I would like to invite you to attend. Please review the following details and let them know that Tom from SILVERAXIS sent you.

This event includes a brunch that will be served at 11:00am, and a full dinner buffet served at 5:00pm, followed by an open bar. In this intimate setting seven junior mining companies have been invited as sponsors, with four presentations scheduled during the meals. All participants are encouraged to exchange opinions and information, and chat with representatives of the sponsor companies.

All interested individuals are welcome to participate however seating is limited to just 100 people, and advance registration is required. Tickets may be ordered for just $30 per person.

Reservations may be confirmed at this link:

http://www.smartinvestment.ca/html/2008RenoDeposit.html

The conference coordinator has blocked out a number of rooms at the Siena Hotel at a discounted rate of just $99 per night. To reserve a room at the special conference rate, quote the code: 0810SMARTI when you make your booking with the hotel.

For more information, please feel free to contact the conference coordinator:

Mike Kachanovsky
mike@smartinvestment.ca
647-880-7335
www.smartinvestment.ca

silverax Stock Analysis Links

In his latest gold market update, Dan Norcini packages up a lot of stuff about the gold market and ties a nice bow around it. Here are some insightful, if not somewhat obvious, statements from Dan:

What these mindless robots seem unable to grasp is that the Comex is NOT the gold market. It is a paper market which has been the recipient of large speculative buys by commodity index funds. These funds take large positions in an entire gamut of commodities based on the weightings of those particular commodities in the various commodity indices that they use as a benchmark. It some cases it might be the Goldman Sachs commodity index. In others it is the Reuters/Jefferies CRB index; it still others it is the Dow Jones Commodity Index. That means they buy gold, silver, crude oil, corn, wheat, nat gas, sugar… etc… in the same percentage terms as they are weighted in those indices. For example, if the weighting in one of these indices for gold happens to be 5%, then for every million dollars of client money invested, they are required to buy $50,000 worth of gold futures contracts at the Comex. When these funds get redemption requests from clients, who now want out of the commodity sector, they are forced to sell FUTURES across the board to generate the cash needed to send back to their clients. That is why, for the most part, the entire commodity complex is sinking whether it is corn or soybeans or wheat or platinum, etc. If $20 million of cash is required to meet client redemption requests, then $20 million of commodity futures must be sold REGARDLESS OF THE FUNDAMENTALS IN THAT PARTICULAR MARKET.? In other words, it is FORCED liquidation on account of redemption requests.

Indeed, as Dan points out, forced liquidations continue to occur as hedge funds, speculators and johnny-come-lately commodity investors unwind positions in a sometimes disorganized manner.

In the real world,? gold is fetching $1000 an ounce out there in some instances. Premiums for one ounce gold bullion coins are running anywhere from $65 - $100 above the quoted spot price and certainly above the phony price quoted on the Comex. Last year at this time you could buy all the one ounce gold bullion coins you wanted for $20 - $30 over the spot price.

Obviously the premiums on silver are even higher!

To put things in perspective about this open interest decline ? we are down to levels last seen in November 2006. Let?s state this in terms that perhaps convey what I have been trying to say for some time now. NEARLY ALL OF THE SPECULATIVE INTEREST THAT HAS BEEN DRIVING PAPER GOLD HIGHER FOR THE LAST TWO YEARS HAS NOW DISAPPEARED due to this forced liquidation. This is incredible when you think about it a bit. So much deleveraging in gold has already occurred, that nearly all the buyers from the last two years are gone from this market. And yet, in spite of this, gold is still sitting above the $800 level. Back in November 2006, front month gold closed at the price of $646.90. Today, we are nearly $200 higher than that and yet nearly all of the speculative long side interest going back to that date is gone. Someone is buying gold because they see value in it and that buying has been sufficient to hold the price relatively firm compared to nearly every other commodity out there. What can be said about gold cannot be said about any other single commodity out there.

Hard to add anything to this except that it is nice to hear somebody else other than me talking about the massive reduction in speculative interest.

To sum up, as the equity markets fall off the cliff thumbing their noses at the monetary authorities, expect further risk aversion to occur which means further forced liquidation in commodities.

Much of the commodity sector is now trading at or below marginal cost of production, so any further declines will likely result in supply destruction. That means existing supplies will probably be drawn back out of off-exchange stockpiles fairly quickly, which in turn could mean that the bottom of this “commodities bust” could have a very sharp bottom.

silverax Windbag Wisdom