Monday, February 18, 2013

Gold and Silver down 3.2% and 5.3% in February Month to Date

Gold and Silver spot prices are down significantly so far in February.  

Market Price at Close            
  Gold Silver  
  XAU-USD Change$ Change% XAG-USD Change$ Change%
12/31/2012 $1,675.35 $30.3500  
1/31/2013 $1,663.70 -$11.65 -0.7% $31.4600 $1.11 3.7%
2/15/2013 $1,610.15 -$53.55 -3.2% $29.7975 -$1.66 -5.3%
Year to Date: -$65.20 -3.9% -$0.55 -1.8%

As a precious metals bull, this volatility is tough to stomach.  But, I've been through worse before.  Any investor in precious metals can look at the price chart for the last 3 years and see that they are in for.  

I am fully bought in to the theories that gold and silver prices are being managed down by the bullion banks and the world's central banks.  They are managing prices to increase slowly over the years.  Their hold on the market, especially the derivatives market will eventually slip and prices for physical gold and silver will jump.  Currently market prices in the news are from the derivatives market.  One might reasonable expect prices to drop just before the market for physical gold and silver dislocates from the paper or derivatives market.  

What exactly is the XAU-USD that Bloomberg and most other news agencies seem to report as the spot price for gold?  I think it is a contract linked to the market prices of gold as determined by the CME each day.  Trading in gold on the CME offers contracts that are backed by the option of physical gold delivery only on several specific days during the year.  Since the XAU-USD is a spot rate in order to be back by physical gold it requires the option of physical delivery on every trading day.  Daily physical delivery is not available or possible so XAU-USD cannot be backed by physical gold.  Buyer's of XAU accept counter-party risk knowing that the counter party has no physical gold allocated to that contract and would therefore settle with dollars . . . if they can. 

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