Lear Capital: Gold and Silver Buy Signals Measure on Richter Scale

In the case of gold, you have three major supply sources.  You have mine production, scrap and Central Bank selling.  One writer says we are headed for a gold production cliff.  Other references to a steady decline in production are everywhere.  Maybe that’s why mining stocks are down.

Scrap is a volatile source at best.  As the 2008 crisis descended upon us, like the plague of frogs, there was no lack of motivation to turn Grandma’s heirloom into much needed cash.  Today, the motivation has diminished and so has the supply of scrap.  In fact, if you haven’t sold your scrap by now, you are likely waiting for the next run up, to cash in Grandpa’s old watch.

That leaves Central Bank selling.  In 2012, Central Banks bought 535 tonnes of gold, a record amount.  And, according to the World Gold Council, that trend is expected to continue through 2013.  As I have asked before, “If those who control the supply of our currency are buying gold, why would you sell?”  Now, I’m not saying gold is getting so scarce you can’t buy it, but the numbers tell the story – new demand is exceeding new supply.  Selling gold now would be like selling your life jacket on the Titanic.

Then there is silver.  Reports of a vanishing silver supply are even more pervasive than that of gold.  Not only are we seeing reports of shortages, we are seeing shortages.  Twice this year the U.S.Mint has run out of Silver Eagles.  That’s not speculation that’s revelation.  And, while the U.S. Mint was in short supply, the Royal Canadian Mint was rationing Silver Maple Leafs.  A curious trend seems to be developing.

Then there are the blogosphere stories about Apple’s production delay of the new IMac. An Apple contractor has surmised, a silver shortage caused the delay, saying it’s so unlike Apple to miss production goals.  And the German automaker?  The story circulating is that a major German automaker expects silver to run out so they are stockpiling now in order to avoid production delays of the sophisticated electronics needed to build its cars.

Now, had any of these silver stories surfaced on their own, it would be easy to write it off as hype.  But, when the mint starts running out, it has to make you wonder.  And, when it runs out twice because of record demand, you just gotta go ahh nuts.  What the heck is going on?

Gold and silver prices tend to tell a different story.  Supply shortage usually means higher prices.  Instead we are seeing lower prices, both are down for the year.  Some cry manipulation, others use the “C” word (conspiracy) and I say, who cares? The price is down and facts are facts.  The facts point to rising prices.  And, if the facts point to rising prices, that means low prices are a buying opportunity.

As always, the opinions expressed herein our mine and buy signals do not really measure on the Richter scale.  But, if you are curious enough to want to learn more, visit LearCapital.com for free reports and breaking news. Or follow @DaveTheGoldDr and @ScottCarter   See the signs!

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