As I write, the price of gold seems to be going nowhere: it has been hanging around $1850 per ounce pretty much for the whole of January and is still there (more-or-less) now. Silver, on the other hand, has been all over the place. One might have therefore assumed that fully-listed Golden Prospect Precious Metals (GPM) - as a gold mining investor - would have been a very quiet place to be. But it hasn’t been...
The reason is that at the last count (the interims to last June), Golden Prospect was 26% exposed to silver and whilst the gold price has basically gone nowhere this year so far, silver has traded between around $25 and $30 per ounce – the peak of which is around the peak in precious metals last summer. Now if gold had returned to its $2062 peak of last summer, you can bet your boots that gold stocks would have shot higher. And so with silver matching its recent peak, silver stocks have done very well although perhaps temporarily as the price of silver has slipped somewhat to around $26-27 now. But that might explain why Golden Prospect has also been volatile. There is lots of talk of a short squeeze in silver all of a sudden. It seems that the motley crew behind the short squeeze at GameStop have turned their attention to Silver, eyeing up a perceived rigged market with a stack of short positions which they believe cannot be filled with physical metal. They think that Silver is therefore an easy target.
Gary Newman commented on this at the weekend in a great article HERE and, like him, I would caution against joining the pitch-fork bearers. For one thing, the big players do have large stocks of silver sitting in vaults. But as another writer, Ross Norman of Metals Daily, was pointing out on Bloomberg TV, whilst the short positions are notified they are often matching buy trades which are not reported. So the short in silver might not be quite what it appears – notwithstanding hefty fines for some in recent years for market manipulation! Silver is a very different kettle of fish to gold, for it has industrial uses as well as having currency value like gold. One of the reasons I haven’t piled in in the same way as I have with gold is that it is also an incredibly wild ride: I’m not clever enough to take that on. I very much hope I am with the yellow metal, however – we shall see over the next couple of years! But I am keen on silver, and Golden Prospect’s silver exposure means that those with a rather better chance of playing it than me are very much in charge. The same is true of the Junior Gold unit trust I also hold.
Now there are a number of ways this could go from here. Silver could just drift back down again – as seems to be happening - as more inventory from vaults hits the market. Or the short squeeze crew could make new friends and push silver even higher. What they are hoping for is to chase the shorts into closing at a loss, and watch the silver price head sharply northwards as a result. If that happens (and I certainly am not banking on it!) and the $30 ceiling in place now goes, then silver will be off to the races – and Golden Prospect shareholders will benefit very nicely. A true silver lining! I don’t expect the pitchfork bearers to win this battle, but never say never. In the meantime, I hope that those in charge at Golden Prospect have taken full advantage of risen share prices. But if the pitchforkers do win, what might happen if they turn their attention to the yellow metal? We had a bit of a crunch last summer in terms of physical supply and new production is at a low. If silver cracks to the upside, I would expect fireworks with gold. In the meantime, I very happy holding my Golden Prospect shares. Whether via the exploits of the Reddit mob or just economic fundamentals showing through in the end, this is a great home for my money and my target firmly remains £1.
Filed under: Golden Prospect, red flag dossier, Iconic Labs, [email protected] Capital, AltynGold
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