Silver Bulls are taking a breather before the mania begins to make history. While high-profile investors took profits like Eric Sprott, of Canada’s Sprott Asset Management LP – which has a total of $8.5 billion under management, and which is also one of the biggest silver bulls – had cashed in $35 million of his own Sprott Physical Silver Trust ETF (NYSEArca: PSLV), it’s likely the news hit the silver market, too, exacerbating the sell-off.Why would Sprott do this? Remember, he’s a seasoned and astute investor. In an interview with Toronto’s Globe and Mail newspaper, Sprott explained that he’s still very bullish on silver. He told the business daily that “Every dollar of money that was raised by selling shares of [the Trust] … was reinvested in silver or silver equities.”
What’s more, PSLV was trading at a 16% premium to its net asset value (NAV). So right near an interim top, Sprott recognized the relative value (versus his own silver ETF) in both physical silver and silver equities. The trade by this savvy investor – cashing in the overvalued to reinvest in the undervalued – is a perfect example of how the smart money behaves, and why the contrarian investor often comes out on top.
Sprott also indicated that he’s not ditching his trust, and that he continues to own 25% of PSLV, allocated between his various investment funds and charity. Even though such investors as Soros, Burbank, and Sprott have sold silver and silver-related holdings for profit taking, a number of other experts continue to favor gold and silver. We mention gold because silver remains the “yellow metal’s” crazy cousin.
Again to remind the reader, hedge-fund legend John A. Paulson – who solidified his place in investing lore by shorting the subprime mortgage market – not only continues to believe in gold and silver—but proves it. Paulson and Deutsche Bank penned a 1 billion dollar deal recently, according to Der Spiegel. Deutsche Bankers say Paulson “wanted to share with more than a billion dollars at the same time rising gold and oil prices,” according to a May 6th article in Der Spiegel.
A native who works there confirms that John Paulson gave Deutsche Bank $1 billion to manage and to put into gold and oil. That’s no surprise. Paulson said on May 4th last week that he was still bullish on gold. Of course he is!
While the SPDR Gold ETF (GLD) has now grown to such a size that if it were a stand-alone country it would now be the 6th largest holder of gold in the world, which is remarkable, even more remarkable, is this one man – Paulson – who owns nearly 10% of this gold ETF. By the transitive theory, this would make John Paulson, if he was a stand alone country, somewhere in the 16-20th largest holder of gold.
John Paulson’s bet is looking good. What’s going on now in the price of gold is a slow-motion short squeeze–with lots of shorts still looking to get out. (The shorts are the “bullion banks”–the usual suspects–who have made lots of money over the years betting against the gold bugs by viewing gold as more of a commodity than a currency, and by using the size of their bets to trip off the stop-loss orders of the bulls. They grew complacent and arrogant in their success. But now, finally, the swan has come home to roost.)”
But Paulson is far from being the only one. In a column published the other day, for example, Brett Arends, who writes for both MarketWatch and The Journal, made a highly compelling case that gold has yet to top out – and could actually “go vertical” from here. Arends made a compelling case, as did some of the institutional players he spoke to. If gold were to skyrocket, silver would move as well.
Also, while John Burbank of Passport Capital is a little worried about the short term prospects for gold, he’s a long-term bull, and he shares the top reason to own gold: “The biggest reason to stay in gold is because central banks around the world can see the writing on the wall long term, which is that the dollar will be devalued one way or another and that Congress has no appetite for hard decisions which would be deflationary in nature, and therefore, make the dollar higher than gold and not as much of a necessary holding. You also have the Chinese consumer, who has become a very large buyer, matching almost the Indian consumer and I think quite clearly, will exceed the Indian consumer. I think ultimately, physical gold is the story. It is a scarcity story. The more the U.S. dithers and the more the Fed is willing to print money, as opposed to dealing with inflation properly, the more this trend will happen. That is the biggest reason to stay in gold right now. Otherwise, most of the beneficiaries of quantitative easing will be backing off as most investors get back to neutral.”
Back in August, Peter Krauth also recommended that subscribers to his “Global Resource Alert” advisory service add silver to the portfolio when silver was trading at $18 an ounce at the time, but Krauth’s research indicated that a major upsurge was imminent. That upsurge came, though Krauth chuckled, and admitted candidly in a recent interview that “even I didn’t expect this kind of run…” A run that was long overdue to healthy corrections as the team of analyst at Regal Assets had been stating for quite some time.
So, before we all throw our hands up in the air over Silver correcting, let us not forget the huge short position of J.P.Morgan and the “big 8″ including HSBC. One should ask if CME is raising the margin requirements to bail out JPM. One should also report on the obvious untenable and un-fillable contracts still on the books that cannot be delivered on at ANY PRICE. Anything the exchanges due is suspect and they are under the microscope but trying to wiggle out by raising margin requirements. The case for silver remains highly bullish–short, intermediate, and long term.
sumber : gold coin