23 December 2013

Gold Daily and Silver Weekly Charts - Muddling Through the End of December Delivery

"The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either.

The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures, and corn fields, and thereby to increase, very considerably, the annual produce of its land and labour.

The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver."

Adam Smith, Wealth of Nations

There was intraday commentary related to gold and silver here and here.

If you look at the CME precious metal inventory report below you can see that there *should* be more than enough gold to deliver into the remaining longs that are standing. And January is an inactive month for delivery, so all should be well until February.

Again, and I cannot stress this enough, I am not looking for a default on the Comex in the metals. I think that if there is a market break it will occur in some physical market overseas, and spread in a more domino fashion to the paper markets, including the exchanges and ETFs that may be mispricing the risk of leverage.

There is nothing wrong with the inventory situation at the CME that could not be cured, at least in the short term, by higher prices.  That does not seem to be forthcoming, so we will have to see what happens.

I don't suppose it would help to remind our financial sophisticates of the old saying, 'when you find yourself in a hole, stop digging.'  

Have a pleasant evening.