RSSGold/Silver Ratio Tops 80-To-1
By Brad Zigler | October 13, 2008 | 1:39 PM | 0 Comments
With all the gasping and panting recently, it might have been easy to miss the milestone reached in the metals market. The gold/silver ratio has made new highs. The early London fix on Friday had the ratio at 78-to-1; by midday Monday, the ratio had climbed to 81-to-1.
Gold/Silver Ratio (London Fixes Through Oct. 10)
Silver bulls have been perplexed by gold's outperformance amid all the financial tumult recently. And now that ratio's crossed above 80-to-1, there are renewed calls for a surge in silver demand. This time, however, the demand is seen coming from holders of gold, who seem ready, according to some wags, to swap yellow metal for white.
The trouble is, the cash metal market is tight. VERY tight. Premiums for bullion and bullion coins in the retail market are high - if there's any inventory to be had at all - to frustrate those would like a "trade-in."
Futures now seem to be the only place to swap the metals near spot prices. Oh, I know there are the gold and silver grantor trusts such as the SPDR Gold Shares (NYSE: GLD) and the iShares Silver Trust (NYSE: SLV), but to make or take delivery through them, you need to be able to swap in or out the equivalent of 50,000 or 100,000 shares. You got that kinda size?
On NYMEX/COMEX, the primary U.S. market for metals futures, gold is delivered in 100-ounce lots; silver is dealt in 5,000-ounce silver tranches. If that still seems a little rich, you can use the NYSE Liffe's "mini" metals contracts, which are only a fifth or a third the size of COMEX standard futures.
Yes, the venerable old NYSE is now a futures mart. Well, technically, a NYSE Euronext subsidiary became a U.S. regulated contract bourse when the Chicago Board of Trade's precious metals business was purchased earlier this year (see "NYSE Chief: Becoming A Competitive Futures Mart"). The deal was made after the CBOT itself was snared by its longtime crosstown rival, the Chicago Mercantile Exchange (the CME was attempting a buyout of the NYMEX/COMEX and used the metals sell-off as a regulatory sweetener).
The NYSE Liffe mini gold contract is sized at a kilo (32.15 troy ounces), while the silver contract calls for delivery of 1,000 ounces. Plainly, these are much more manageable sizes for retail investors.
Of course, if you want to take advantage of exchange facilities for metals deliveries, you must deal through an exchange member brokerage firm (or a firm that clears through an exchange member). You must also establish a commodity futures trading account. Be forewarned, the paperwork required for "good delivery" can be daunting. Most retail commodity brokerage representatives - that is, the people actually executing your orders - have never handled a delivery. After all, only 2%-3% of futures contracts are settled by delivery. Your rep will rely upon his or her back office to handle much of the transaction.
If you don't already have a commodity brokerage relationship, you can search for a broker near you through the CME's online Broker Search function.
But don't tell the NYSE how you found your broker.
| 
|
