With silver trading at a new multi-decade high trading above $34 and gold up almost $20 breaking above $1,400, King World News today interviewed John Hathaway, Senior Managing Director of the Tocqueville Gold Fund. Hathaway stated, “What I strongly believe is that the amount of paper we are seeing traded in both gold and silver on the Comex and in the derivatives market is nonsense. It has to be something in the order of 100 to 1. The fact that the market is moving today when the Comex is closed tells me it is not New York that is doing this, it is physical demand.”
“I think it is just a tight market. There have been reports of some difficulty regarding physical availability of silver. Retail interest is being driven even further by the price action in silver.
Silver has broken out to the upside and because of that you have technical buying and short covering. This could in fact be a short squeeze.
When you look at the COT, the spec gold longs are below their norm for the last year. Their net long in gold is only 126,000 contracts which is in the 30th percentile of the last 52 weeks.
Circling back around to the paper markets, I cannot stress enough that the paper to gold ratio is out of whack. The huge disparity between the amount of paper contracts traded versus actual physical gives a complete misread on the market reality.”
When asked about gold stocks specifically Hathaway stated, “The shares are way behind, and that is a reflection of the skepticism that still exists in this market.”
John Hathaway is one of the few fund managers willing to tell it like it is regarding the paper market in both gold and silver. On a side note, those who have been claiming there is no shortage in silver have been completely discredited by the price action. As far as the gold market is concerned, I agree with Hathaway that there is a long way to go on the upside.