Gold took a light hit on the London PM fix and the opening of The Bucket Shop this morning. Silver took a hit as well but managed to bounce back up and finish positive on the day, probably because it is in an ‘active month’ on the better parlor on the Hudson.

I read an analyst talk the old ‘gold vs. silver’ argument over the weekend. In my opinion it is a fruitless argument  to consider in the abstract, and so I don’t. 

Gold and silver are both precious metals, but have some not so subtle differences. Silver has a much higher beta, meaning it will go up more and down more than gold. So if you can handle the volatility then silver is fine. If you would like less volatility then gold is more suitable. Gold has less of a component of industrial use than silver, but there is much more free floating silver around than gold, and much of it is produced as a byproduct of mining base metals.

I think there is a place for both in any diversified precious metals portfolio. Arguing about the merits of one versus the other is like arguing about which is better, a screwdriver or a hammer. You have to consider the job at hand for yourself. And you can have a use for both of them.

I am personally persuaded by a growing amount of circumstantial evidence that there is a short squeeze developing in physical gold in London and New York, fueled by excessive paper trading and the insatiable demand in Asia.

New York really trades overwhelmingly on a non-physical basis these days, so The Bucket Shop is more likely to be a late stage ‘tell’ and collateral damage than an actual precipitant of a short squeeze. 
London is a the real Occidental bullion hub, and they tend to shroud their leverage and pricing antics behind a curtain of privileged secrecy. But London and Switzerland are where the physical bullion of the West is flowing East.

Let’s see how the bullion banks deal with this as we wind down towards the historically difficult final months of the year for the gold pool.

There was intraday commentary about A Currency War That Few Economists and Analysts Notice, Much Less Understand.

Let’s keep a close on the gold and silver markets in terms of physical supply, because that is the Achilles heel of all late stage gold pool operations.

Have a pleasant evening.