Tuesday, January 15, 2008

Sketchy, yet all part of the Script

this afternoon I bought back half the silver I sold yesterday at a discount of about 45 cents an ounce. I have a limit order for the remainder set at 15.75. that's about what the trend line's coming up to. I won't consider adding to my position in any major way unless we get a more substantial decline.

I guess my mild trepidation yesterday proved somewhat justified. the volume on GLD was massive today at nearly 24 million shares. the second highest day ever, if I'm not mistaken. but it only ended up ninth on the etf volume board, as it was a very active day in the market.

by contrast, comex volume was about 175,000. while I wouldn't call that low, considering the number of 200k plus days we've seen the last few months (I count 10 since November) it's not that impressive either.

still, when you add up the ounces of gold represented, the volume in GLD amounts to but a small fraction of what's traded at the comex. (Ted Butler has made a similar point regarding GLD holdings vs. comex open interest.) in light of this we could conclude that even with the recently increased media attention to gold, the public, or retail investment sector remains substantially in the dark. as I've mentioned in the past, we shouldn't expect any mainstream money to move into metals until the Dow/Gold ratio declines at least to 10/1, which is where it stood in 1995, at the foot of the Great Bubble.

to sum up, I guess I'm trying to say that caution should be excercised in the short term, but in the big picture metals are doing just super.