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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: Proud Deplorable who wrote (11131)	5/12/2006 12:56:03 AM
From: aknahow	Read Replies (1) of 78420

"Just like two other exchange traded funds buying gold directly.." "The ETF buys it and stores it." "said Ted Butler, an independent commodities analyst. "But we've seen two other ETFs come out that buy gold directly." "Since its launch, the iShares Silver ETF has bought 48.5 million ounces of metal. That makes it the largest single purchaser of silver in the world. "And that's only after a little more than a week on the market," said Butler. "Think of how much we're going to see demand driven up by this ETF over the course of a full year." Too bad all these big bright people use such careless wording. Neither the gold or silver ETFs buy metals. They have no demand for them and make no decisions on the advisability of buying or owning the metals. They receive deposits of the physical metal from authorized participants who wish to receive new shares to cover those they have sold short at a premium to the metal they are delivering. Understanding this may help one understand the the situation and limitations to demand. There is no group of authorized participants demanding and buying physical because they love to get shares of paper. There is a group of authorized participants that will short shares and cover at a guaranteed profit by buying and delivering physical to obtain newly issued shares that are issued at par with zero premium. This means that at some point new purchases of physical may not be made since outstanding shares being both bought and sold reach equilibrium and a sufficient premium does not exist for a sufficient time to allow or entice the authorized participants to short profitably. While I understand the above I still am unable to figure out how to benefit from this specific knowledge. One should in theory be able to figure out aproximately when and how much physical is or will be bought based on volume of shares traded and the premium from spot. Lack the computer skills to create a program to monitor and analyse the data.

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