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Archive for December, 2011

Nothing Shines Brighter Than SILVER” – Chris Duane

A special end of the year silver update with ‘Silver Shield’ Chris Duane

Did Bankers Deliberately Crash MF Global to Crash Gold and Silver Prices?

Did bankers use the MF Global bankruptcy to suppress gold and silver prices and create the panicked appearance of collapsing precious metals to give themselves additional precious time to delay the crash of the Euro and the US Dollar? As crazy as this sounds, a closer investigation of some key data seems to imply this possibility. Though bankers claim that they created futures markets to provide a mechanism for commodity producers to hedge against volatile market prices, I have never bought the kool-aid the bankers were selling in this explanation for the rationale behind their creation of futures markets. Given that today, futures and spot prices for gold and silver in the short-term are entirely set by banker manipulation of the supply and demand for paper derivatives that often have no backing of any physical metal, I believe that bankers created futures markets for the explicit intent of allowing themselves to manipulate the prices of commodities and to enrich themselves, and themselves only, through the process of alternately and artificially inflating and deflating prices as would not be allowed in any type of free market. In other words, bankers invented futures markets to allow themselves to siphon off and steal money from other parties that wanted to invest in commodities with a mechanism, risk-free to them, that required deception and zero honest work and zero integrity.

The futures markets in commodities is such a deceptive market that it is hard to know even where to begin to unravel its many mechanisms of deceit in all their glory. Futures contracts traded on the world’s largest commodity markets such as the COMEX in New York and the LBM in London allow bankers to commit reverse alchemy, turning real physical gold and real physical silver into nothing but false paper contracts and air. Secondly, through futures contracts traded in New York and London, bankers routinely defy the economic principles of supply and demand, and set short-term prices for gold and silver that literally have zero to do with the supply and demand dynamics of the physical gold and physical silver market. In the world of physics, such an illogical, comparable feat of deception would be the indefinite suspension of the law of gravity. Bankers invented paper derivative gold and silver markets to allow themselves to literally defy and suspend every single sound economic principle that exists.

This is important to understand because not only does understanding this concept make the bulk of what you learn in business school a lie and entirely useless, but also because bullion banks such as Deutsche Bank, Citibank, JP Morgan, Goldman Sachs et al that serve as the puppet conduits for more powerful families that control Central Banks, routinely used to lease physical gold into the open market as their primary mechanism to suppress the price of gold and silver. However, as their mechanism of fractional reserve banking began to threaten the viability and utility of the most widely used fiat currencies in the world, the USD and the Euro, bankers understood that they needed to utilize and/or create another mechanism to suppress gold and silver prices that could replace selling physical PMs into the open market as they no longer wished to give up a solid asset with no third party counter-risk for what they knew they were turning into essentially worthless pieces of paper. Thus bankers increasingly turned to the paper futures markets to manipulate and control the price of gold and silver and also served up additional bogus derivative products to the public like the GLD and SLV ETFs. Bankers knew that there was no way they could possibly control the price of gold and silver if the supply and demand determinants of physical gold and physical silver had anything to do with the price, so they conspired to fool the world into believing that the fake paper price they set was set by the supply and demand of the physical markets.

Collapsing OI of Gold/Silver Futures Markets Directly Related to MF Global Collapse?

And here’s where MF Global enters the banking cartel gold and silver price suppression scheme. Today, short-term futures and spot prices of gold and silver have almost nothing to do with the physical supply and demand dynamics of gold and silver, as odd as that may sound. Bankers created the futures markets and paper derivatives in gold and silver to kill free markets and for the express purpose of suppressing gold and silver prices. Today we literally have no idea what the free market price of gold and silver should be or could be, besides the fact that both would be multiples higher than their current price, because of the fake paper market in gold and silver that the bankers created.

As well, bankers ensured that they armed a legion of worker bees in commercial investment firms all over the world that would represent these paper derivatives backed by very little physical gold and silver to their clients as the equivalent of investing in 99.999% pure physical gold and silver. In doing so, the worker bees thereby lured people all over the world into what will turn out to be the fatal mistake of not buying millions of troy ounces of physical gold and silver and instead buying their offering of fool’s gold and fool’s silver. When we receive a massive default of gold and silver futures contracts that stand for delivery on the COMEX or LBM, or if the SLV and GLD default, then, and only then, will the public start to see true price discovery of physical gold and physical silver in action. However, for clients of MF Global, unfortunately, they have already experienced the mistake of buying fool’s gold and fool’s silver from the bankers and have received air in exchange for gold and silver futures contracts they purchased that stood for delivery.

Bankers invented fake paper gold and silver contracts, because they knew that if they could not fulfill contractual obligations to deliver physical gold and physical silver because the contracts were a binding lie to begin with), that they could always renege on these contractual obligations and give the people the nothingness they truly owned in return. And thus, we have the story of MF Global.

Ratings agencies downgraded MF Global on Oct 25 and MF Global declared bankruptcy on Oct 31. If one scours the data that the Chicago Mercantile Exchange (CME) releases via its aggregated Commitment of Trader (COT) reports during this time period, one may not notice any data that immediately stands. However, investigation of the disaggregated reports reveals far more interesting patterns that almost undoubtedly can be traced back to the collapse of MF Global. In a period just preceding the MF Global collapse, from late August to mid October, the open interest (OI) in longs in gold and silver futures within the Managed Money category collapsed by 33.75% in gold (202,430 to 136,103) and 44.74% in silver (29,849 to 16,494). During this exact same time period, shorts in the gold and silver futures in the Managed Money category increased by 19.3% and 83.82% respectively (see the chart below). Within the Managed Money category, between Sept 13th and 27th, in just a two-week period, the drop in OI in the longs in gold and silver futures was even more pronounced, with a 25.41% plunge and 34.3% plunge in silver. I imagine if someone could trace the connection of this plunge in OI in the Managed Money category in the gold and silver futures markets, one would discover that a good deal of the plunge was somehow directly tied to the impending MF Global bankruptcy and its freezing and/or liquidation of gold and silver futures accounts in its possession.

After Phase I of the collapse in OI in the gold and silver futures markets, Phase II followed. When the story about MF Global’s legalized client theft hit the presses, an enormous public distrust of the entire futures markets started to build. If clients lost millions of dollars in gold and silver futures accounts due to forced liquidation or freezing of contracts that they were holding for delivery, anyone that had considered using the futures markets to take delivery of real gold and real silver following the MF Global debacle obviously reconsidered their options. Thus, due to the massive fraud of the futures markets that was revealed by the MF Global collapse, another huge drop in the OI of gold and silver longs in the Managed Money category occurred during Phase II (as labeled in the above chart) that respectively amounted to an additional respective 11.79% and 7.48% plunge. In essence, it appears that the MF Global collapse served up the exact same price suppression effect as a CME issued initial or maintenance margin hike in gold and silver futures, which forces a tidal wave of unwanted and involuntary liquidation of gold and silver longs that consequently violate technical support lines and trigger technical sells.

Of course, we also have to factor in the temporary OI-increasing effect of the risk-on CME event when they lowered initial margins to a 1:1 ratio with maintenance margins at the onset of November. Still, given the figures presented in the chart above, it seems that bankers used the MF Global collapse to force liquidation of gold and silver longs in the futures market quite rapidly and drastically. Why is this important? This is important because typically strong hands ride out any temporary banker manipulations of gold and silver prices downward. In this case, strong hands, if they existed at MF Global, were not given this opportunity and were forced to liquidate or had their accounts frozen whether or not they desired such an outcome. Furthermore, if primarily strong hands were forced out of the futures market, this would leave the majority of volume in the gold and silver futures markets primarily in the hands of the criminal banking cartel. We’ve seen repeatedly, this past year in the US S&P 500 index, when low trading volume primarily controlled by the banking cartel has translated into curious and inexplicable market bounces of 2% in a single day. In other words, low trading volume allows bankers excessive and easy manipulation over markets. If this was indeed the scenario bankers deliberately created with the MF Global collapse, then the MF Global collapse and simultaneous collapse of open interest in gold and silvers futures certainly would have paved the way for the banking cartel to easily manipulate gold and silver prices.

There was also further circumstantial evidence that bankers used the MF Global collapse to collapse gold and silver futures markets at the end of 2011. For example, in an article posted on the SilverDoctors blog by Jim Willie in which he gathered data regarding the amount of physical gold and silver ounces represented by the longs at MF Global that were standing for delivery in the futures markets before these contracts imploded, he stated: “JP Morgan increased the amount of registered silver and gold by precisely the amount that was suppose to be delivered [by MF Global]…JP Morgan effectively averted both a Comex default and a European Sovereign Debt implosion.”

Silver Lining in the MF Global Debacle?

Can there be a silver lining in the MF Global debacle? I believe that in the long-term, this extremely unethical, negative event could transform into a positive game-changer in the way people buy large amounts of gold and silver. Obviously, the futures market is not a safe market for anyone seeking to take delivery of millions of dollars of physical gold and silver as many MF Global clients learned. The GLD and SLV ETFs, of course, are no safer than any gold or silver futures contract for the same reasons. So in the future, and I mean the immediate future starting now, I believe that large buyers of physical gold and silver will now opt to bypass the bullion bank’s middle men in the futures market and go directly to the gold and silver mining companies to buy large quantities of bullion. This should eventually help usher in the death of futures markets as a mechanism for buying physical gold and physical silver and be a step towards establishing a free market for gold and silver prices for the first time in our lives. Mark Cutifani, CEO of AngloGold Ashanti, recently echoed the same: “Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding it’s hard to get physical gold.”

People that want to own physical gold and physical silver never should have been buying the GLD, SLV, or gold and silver futures. Now, in light of the MF Global debacle, scores of people will stay away from these fraudulent vehicles for good.

About the author: JS Kim is the Chief Investment Strategist and founder of SmartKnowledgeU,

COMEX: The March to Irrelevance

Written By: Jim Willie

Divergence between paper gold and physical gold price is happening, the process begun. Actual physical shortages have kept the price up. The naked shorting of futures has kept the paper price down. The fraud cases and lawsuits, with no hint of prosecution, provide the levered force to create much wider divergence, as traders and entire firms depart the tainted crime scene that is the COMEX.

Trust has vanished along with private accounts. At the center of the backdrop for the divergence, apart from the criminal events, is the economic deterioration and asset market downdraft. It leads to margin calls, loan payment obligations, fading investor confidence, negative sentiment, and a desire to avoid loss. Hence the huge liquidity concerns, selling of good assets that command a strong price, and central bank encouragement of gold sales even with lease.

These forces conspire to push down the gold futures price from the discovery process, called the paper gold price. These forces, although real, are exaggerated by the Syndicate to explain all. On the other side is the desperation among central bankers to cover debt securities up for sale or rollover funding. They resort to utter hyper inflation by monetizing the many types of government bonds. They are obligated to aid their banker cohorts, and thus purchase truckloads of badly impaired sovereign bonds and other collateralized bonds. Over time these sovereign bonds have proved toxic. The compelling need to stimulate economies, to redeem toxic bonds, and to recapitalize and nationalize the big banks adds to the monetary inflation outcome. Therefore, two sides are in opposition in a battle to the death of one or the other. No middle ground can be achieved, not any longer. It is the quintessential battle between monetary hyper inflation and restoring bank system integrity to avert collapse. The insolvency has recently met illiquidity. The battle features strong forces on each side. The divergence between physical and paper gold price is widening.

The incurable speculator junkies committed to the addictive leveraged game rigged by the Forces of Evil seem stuck at the casino tables, where fingers are lost, finally entire hands and arms. If their practice was to purchase physical, they could benefit from the paper price swoon, and join the Forces of Good team, rather than fighting the evil side on their dominated turf. To be sure, many aware analysts in the news maintain a small gold position in COMEX that is rolled over constantly. Many have physical positions but keep with the paper trades as a hobby, better described as an addition to the juice. Leverage cuts both ways. Their continued activity has left them exposed to theft, while knowing the criminality was widespread within the arena. So many players and firms are departing the arena altogether like Ann Barnhardt of BCM Capital. The divergence between physical and paper gold price is widening.

The desperation of the bad team is growing. The gold cartel has benefited significantly from the fresh Libyan gold supply (144 metric tons) and Greek gold supply (111 metric tons), not to mention the ample Dollar Swap Facility. It is the bankers New Gold, as reported by intrepid Jeff Neilson. In a fresh sign of bankster desperation, the lease rates for gold have been pushed down to net negative levels. The fresh supply from the two broken nations has greatly aided the COMEX, providing new cannon fodder. Perhaps more wars to liberate the oppressed can be conjured up, to release more tyrant wealth. It is not a coincidence that negative gold lease rates came when Libyan gold was made available (heisted) and when Italian sovereign bonds went into critical DEFCON mode. The gold supply helped to aid the lack of bond demand. The gold lease story is analyzed more fully in the December Hat Trick Letter.
Inelasticity Blemish

A preface is warranted. The paper Gold market is very different in its internal dynamics from the physical. The paper Gold market shows signs of inelasticity that borders on comical. Witness the low demand in 2001 and 2002 when Gold had a paper price tag at $300 or less per ounce. Witness nowadays the amplified selling when the paper price declines. The leverage from the corrupted paper mechanisms forces margin pressures and sales. The leveraged game goes opposite to the real world of price mechanisms. On the upside, global demand rises with a rising physical price, called the gold fever. The inelasticity on the supply side is prevalent in the paper market, while the inelasticity on the demand side is prevalent on the physical market. To confuse the mix, mining firms realize some inelasticity as price falls, they are stuck with a liquidity crunch on their forward sales ruin. A huge amount of money is required to cover their losses, urged on by Wall Street advisors. Their mining operations suffer from lack of funds, and projects are curtailed. The paradoxical differences in dynamics help to push the gap between the paper and physical Gold price. The incompatible forces work to rip apart the COMEX. The divergence between physical and paper gold price is widening.
Illicit Usage of Client Funds as Collateral

The hypothecation battle will bring sufficient publicity to help the divergence along. As more assets are seen as committed, involved, and tainted in the process of grabbing, snatching, and securing collateral, even by illegal means, the physical assets will be removed from the system. Parties will remove accounts and metal from the COMEX in response from basic self-preservation. On the investment and speculation side, harm has been rendered to managed risk. The client funds have begun to flee. The protection and security of money in private accounts has been under siege in recent weeks since the MF Global crime scene was established and the yellow tape cordon has been put in place. Investors are pulling money out of hedge funds at a rapid rate. The COMEX will be increasingly isolated. Clients funds were redeemed to the tune of $9 billion in October, almost four times as much as they pulled in September, according to Barclay Hedge and TrimTabs Investment Research. Investors in October yanked more from hedge funds, setting a single month high over the last two years.

The redemptions are the largest for the hedge fund industry since July 2009, when $17.8 billion was returned. The Barclay Hedge office put lipstick on the corrupt pig by commenting on how investors have lost patience with lackluster investor returns. To be sure, the average hedge fund is down by about 4% this year. The global hedge fund industry size has been reduced to $1.66 trillion, still sizeable. It is always interesting, if not amusing, to read the spin from the isolated corners. Hedge funds are seeing capital depart for the simple reason of moving away from crime centers. In the process the COMEX is being isolated. With increased isolation comes the easily recognized fraud. Look for some major stories soon about the raids to the GLD and SLV inventories by their custodians engaged in naked shorting. The Exchange Traded Fund fraud story is analyzed more fully in the December Hat Trick Letter. The divergence between physical and paper gold price is widening.
Dynamics of Paper Versus Physical Basis

Grand divergence dynamics are becoming clear. Ann Barnhardt explained in detail how the COMEX will go away. It will not default, but rather fall into irrelevance. He laid it out in credible detailed form with numerous factors coming to play. The COMEX might still suffer the shame and spotlight of criminal prosecution. It will more certainly suffer from being ignored and shunned. The physical basis market will not respond to the declines in the paper futures market. The current dominant market will go away due to lost integrity and eroded trust. The consequences and implications of the recent major scandal and coverup are enormous, staggering, and sweeping. The changes from the MF Global failure and theft of private segregated accounts will come in time, perhaps accelerated by another similar event to slam the message home. The Syndicate has turned desperate, resorting to theft in the open daylight, which has resulted in direct consequences. Hundreds of COMEX clients waited in line for delivery of gold, and had their wallets stolen by JPMorgan. Their Gold & Silver set for delivery found its way into JPMorgan accounts at the COMEX. The details of the missing silver then reappearing silver is discussed in the December Hat Trick Letter. The slow mentally overlook this fact. The alert who point to fraud consider it a smoking gun. On its face, evidence mounts that JPMorgan simply converted 614k ounces of MF Global client silver into JPM licensed vaults. Big hats off to the Silver Doctors for excellent financial fraud forensic analysis. Do not expect prosecution over the crime, for MF Global, for JPMorgan, or for the accomplices in London, not even Jon Corzine. The Fascist Business Model in the Untied States does not permit prosecution. The bigger the crime, the more likely the perpetrator is in control of the government high offices, the financial ministry, the printing press, or the regulators.

Ann Barnhardt explained how the COMEX will fade away into oblivion. Its final chapter will be marred by a grand price divergence, where the futures market price declines from shunned avoidance, while the cash physical market price holds steady then rises. Many including the Jackass had thought that a slew of delivery demands would force a drain in their gold & silver inventory, eventually leading to a slew of lawsuits, together to shut them down as a corrupt enterprise arena. The MF Global theft reveals the alternative route that seems more clear. The gold cartel led by JPMorgan and secretly by the USFed will not go quietly. They have resorted to theft of private accounts on the open stage. The money is not missing. That is the lie. It is held in JPMorgan accounts in London, where fraud laws are more relaxed. We have seen this Madoff movie before, but it will be shown on the silver screen again. The divergence between physical and paper gold price is widening.

Financial Sense Newshour: Ann Barnhardt: The Entire Futures/Options Market Has Been Destroyed by the MF Global Collapse

The backlash has begun and will gain strength. Barnhardt offered many cogent arguments with detail on how the COMEX will be ignored from distrust and suspicion of further thefts, as clients remove funds and close accounts. Here are her main points. They apply to Gold & Silver. She has the Barnhardt weblog.

Arbitrage is set to kick in. Players will buy at the cheaper corrupt paper market in COMEX and sell in the higher honest physical market, wherever brokers can match to make deals. (It is the same phenomenon that ripped the Euro sovereign bond market apart, as the German Govt Bond yields remained much lower than the Spanish and Greek.) They will take advantage of a strong basis, buy at the discount offered by COMEX, and sell into the cash spot physical market.
A linchpin holds the market together. Keeping the futures markets tied to the underlying cash physical market is the fact that the futures contracts permit taking delivery. That delivery mechanism just broke as linchpin in full view. The futures market has lost viability and trustworthiness because of the MFG collapse and theft.
The entire delivery mechanism has been corrupted and undermined. Taking delivery has meant a holding of physical metal bars is stored in a certified vault with your name attached. No longer are such holdings considered safe. Thefts occurred, and lawsuits have occurred to decided upon ownership of bars in dispute.
The de-coupling process comes when arbitrageurs finally lose all confidence in market interaction dynamics, as the cash market will lose connection on price from the futures market. Players will not be willing to take the risk of having their money, positions, and physical metals stolen or confiscated.
As players flee the futures market, the paper futures prices will decline. The cash physical market will hold steady. The divergence will come and be noticed, then be widely publicized. The players will realize that the physical market is the only remaining game to be played with honest rules in effect. The cash dealers will ignore the futures prices, no longer a valid price discovery, seeing that market demand for their physical inventory is robust, and maintain their prices steady. Later, they will even raise the physical prices. Then later still, the parabolic spike comes for physical Gold & Silver.

The Great Shun By Miners

Asset management funds are appealing to mining firms for direct metal supply. They are bypassing the COMEX in a new trend. It is a natural development, as miners seek a fair price and the funds seek a reliable supply. The COMEX is cut out of the process. The Sprott Funds have revealed how they sourced their precious metal from mining firms last year. The official exchanges are being cut off, a form of isolation as a result. The divergence between physical and paper gold price is widening.

See the Ashanti story as typical. The COMEX is seeing reduced supply lines, reduced operations, more criminal implications, horrible publicity, and fewer clients. Criminal fraud does that, as lawsuits will follow like cold rain. The trend shapes up well for higher gold & silver prices. Mark Cutifani is CEO of AngloGold Ashanti, a $16 billion mining firm. He said, “Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding its hard to get physical gold.” The clear message is that the COMEX has no spare available metal at all.Cutifani has good insights into the commodities and precious metals markets, and describes a fascination new trend regarding the global picture. He pointed out that major gold buyers are emerging from the Middle East and Asia. See the Bull Market Thinking article.
New Markets Flowering

New gold centers are forming, where the safety is most assured. Hong kong and Dubai have emerged as reliable honest brokers, and will continue to provide valid safe haven. Switzerland, London, and other locations are fading fast. They are the corrupt centers where fascism has become prevalent, laced through the financial system.Takahiro Morita, the Japan director of the World Gold Council, reported that Japan’s gold exports in the 10 months ended October totaled 95.6 metric tonnes, their highest level since 2008, when it registered at 95.5 metric tonnes. People who bought gold and jewelry in the 1980 and 1990 decades are selling back what they purchased, according to precious metals traders. Japan has turned into a big exporter. Contrast to the official side. Central bank purchases have risen by 114% over the previous quarter. Purchases by central banks could hit 450 metric tonnes this year, concludes the investment research at the council. The volume represents the highest level of central bank buying since at least 1970, perhaps the greatest in recent history. A veteran gold trader with actual experience in these locations pitched in to explain. He said, “These are not sales in Japan. They are exports, an important distinction. Many investors are busily relocating their precious metal bullion to Hong Kong and Dubai UAE. Look for Dubai to be the HK of the Middle East. The Chinese have made that decision, and it is being implemented with lightning speed.” Most of the relocation from Japan shows up as exports, which require payments.

October imports into China from Hong Kong rose 50% over September, and up 40-fold from last year. The more attractive fair price paid in Shanghai reached $50 above the corrupt controlled London price. The arbitrage has been very active. Chinese gold imports from Hong Kong hit a record. The Financial Times reported Chinese gold imports from Hong Kong hit a record high in October and astoundingly, they accounted for more than one quarter of the entire global demand. Data showed that China imported 85.7 tonnes of gold from Hong Kong in October, up 50% from the previous month and up more than 40 times from October of last year. It marks the fourth consecutive month that China’s gold flows from Hong Kong have hit new highs. The article noted that the price arbitrage between London and Shanghai was favorable for Chinese imports during late September and early October, giving astute clever traders an edge. Gold on the Shanghai Exchange traded up to $50 per ounce above the main global market based in London, a record price difference. Purchases from China have fallen since October, as the recent strength in the USDollar has made gold more expensive. Also, considerable new strain has been felt inside China in recent weeks. Conclude that price arbitrage has begun to show itself across international boundaries. The divergence between physical and paper gold price is widening.
One Gold Event, The Big Squeeze

No gold chart will be shown in this article, out of disrespect deserved for the COMEX criminal activity. A story was recounted in recent days from my best source of solid reliable gold information. The aware gold community has overlooked a phenomenon that might be more profound in action here and now. A major squeeze is on that capitalizes on the artificially low COMEX price and the higher honest physical price. The Barnhardt effect can be seen, or at least recounted. A gold trader informed that some multi-$billion purchase Gold orders have been in the process of filling at or near the $1600 price per ounce. The price must remain near $1600 to complete the orders and permit them to clear. Call it Agent2000 who seeks the massive amount of Gold, one of the Good Guyz. The name fits since their goal is to force the Gold price back over $2000/oz after the sale transaction clears. Since so large, the orders take time to fill completely. The low-ball buy orders have been filling for over two weeks. At the same time, the Agent2000 buyer has enlisted the aid of numerous assistants to push down the paper Gold price by putting extreme pressure on some bad players, some nasty types from the usual list of suspects in the Western banking sector. These bankers are being squeezed out of their gold, as they contend with deep insolvency, reserves requirements, falling sovereign bond values, depositors exiting, and more. They are players in what has been widely called the Gold Cartel. The Jackass term has been applied in a wider sense, as they have been part of the Syndicate that reaches into the Wall Street banks, the defense contractors, news media, and big pharma.

The other side of Agent2000 is where additional intrigue lies. He (they) have buyers lined up on the physical side some deals ready to close at $1900 per ounce. Later the price will push over the $2000 mark. The buyers are ready. One must infer that the buyers have a great deal of money ready to devote to the battle. Maybe some is piled up to escape the clutches of the cartel, removed from the system. Maybe some is piled up at a major new slush fund to do battle with the cartel at their own game. Maybe some is piled up and kept out of sight from greedy hands in government officials, like off-shore in the Caribbean or sequestered in the Persian Gulf. This story might be perplexing to many in the gold community since the Good Guyz are pushing down the Gold price in order to facilitate a gigantic order that will work toward crushing the cartel by draining their gold. Their gold cannot be drained without the completion of a great many orders. It is only natural to attempt to achieve the lowest possible price. If the gold cartel insists on pushing the price down, then they open the door for major volume sales at the artificially low and very much bargain price. It is happening, but the gold community does not enjoy the symptoms of the process.

So a huge huge huge buyer of gold is busy, and a multi-$billion order is working through. The buyer demands a $1600 price, while on the other side of the table Agent2000 has a sale lined up for the same metal at a $1900 price on physical. The trade will take gold bullion from the Bad Boyz hands and put it into the Good Guyz hands. In the process, the COMEX supply lines will be drained more. This is consistent with mining firms removing supply lines to the COMEX. The Agent2000 buyer is pushing price down, squeezing some evil parties hard, crushing testicalia along the way. He (they) describe to the distressed seller at $1600 that pressures will continue until the deal is closed. The seller is in tremendous pain with open distress showing. So many assume the Bad Powerz are pushing down the Gold price. Not so!! This event and transaction displays how some pain comes in many isolated cases of Good Guyz pushing the Gold price down to empty the Bad Powerz vaults. My source would not reveal the identity of Agent2000 or the location of the squeeze. It seemed like London. The money is not exclusively coming from China. Word has it that Russia is also applying the pressure, with some Chinese teamwork. The Competing Currency War has a new major flank. The divergence between physical and paper gold price is widening.
London Trader Discusses The Great Raid

Several months ago, the anonymous London trader offered some ripe information about the Chinese accumulating gold bullion from the major metals exchanges. He is back to offer an update. He made some extremely important comments, dense in the message. He said the following on King World News. He begins with a controversial claim that adds credence to what has been reported for a long time, the fraud of the major Exchange Traded Funds. These corrupted funds will be gutted before the clients are informed of owning no metal, and forced redemptions in cash. The COMEX isolation is occurring in full glory, a process well on course.

‘The Chinese have continued to take delivery of both physical gold and silver directly from the ETF’s GLD and SLV. They are also going directly to producers. Entities are bypassing the COMEX altogether and going straight to gold mining companies. Every single month producers have a certain amount of gold and silver they sell. Normally they sell it to the bullion banks and the bullion banks, of course, leverage this gold and sell up to 100 times that in paper markets to control prices. The bullion banks hold that little bit of physical gold and claim they are backed up on their position to the CFTC. I have all my large buyers now going to producers and saying to them, ‘Look, don’t sell it to the bullion banks, we will buy it from you.’ So we are buying directly from the producers and this includes some sovereign entities which are doing the same thing. We are struggling to get the physical out of these producers because they have so many people banging on their door, saying, ‘Sell it to us Direct.’ What these buyers are doing is essentially taking gold out of the system, which means the bullion banks cannot leverage that gold anymore. So this is a huge, dynamic shift that was not there before. These buyers are now cutting off future gold supply from the bullion banks.

This is a huge tectonic shift in price dynamics going forward because it is taking price discovery away from the bullion banks. These large Chinese buyers and sovereign entities which are doing this are going to have a massive impact on the market. Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold. They do not understand what is happening in the physical market. The bullish fundamentals just described to you have enormous implications. We are making a historic bottom right now. The paper gold, or virtual gold market, has diverged so far from the physical market that it is no longer a credible marketplace. That is the key thing that came out of a very important meeting I was in yesterday where we had some serious players. The people I was meeting with are all on the buy side and have been since the lows last week. There are massive physical orders, sitting, waiting for any more discounts, and yet everyone else seems to be short. So you have huge fuel for a rally here. You have to keep in mind this recent plunge was orchestrated with borrowed gold and that borrowed gold is now gone. That is why gold cannot go much lower. Any dips in price will be aggressively purchased. Right now we are witnessing a historic bottom.” The divergence between physical and paper gold price is widening!

We Have Crossed the Rubicon

Do you suppose cows have any idea what’s coming as they’re marched down the chute? Or do they stare with bovine indifference at the tail and hind quarters in front of them, until they’re suddenly – and very briefly – startled by the man with the nail gun?

Perhaps Americans will – likewise too late – ask themselves What Happened in the very near future. Perhaps just after the midnight knock comes and they are taken away into the night.

It is not an exaggeration.

America is now on the cusp of becoming a state that does exactly such things; things exactly like the things done by 20th century horror shows such as NS Germany or Stalin’s USSR. Literally. Not “this is where it might lead” or “the tendency is similar.” Exactly, literally, the same thing. The only difference is that it awaits being done on a mass scale. But the power to do it openly – brazenly – has been asserted.

And is about to be sanctified by law.

The National Defense Authorization Act will make it official. It will confer upon the executive branch and the military (increasingly, the same things) the permanent authority to snatch and grab any person, U.S. citizens included, whom it decrees to be a “terrorist” – as defined or not by the executive or the military – and imprison them, indefinitely, without formal charge, presentation of evidence or judicial proceeding of any kind. These “detainees” will have neither civilian rights in the civil court system, nor – crucially – even the minimal rights to due process and decent treatment conferred upon prisoners of war. (And we are allegedly “at war,” are we not?)

The language of the bill specifically includes American citizens “caught” within the borders of the United States – aka, the “battlefield.” It is claimed by sponsors that only those awful them – you know, theenemies of freedom The Chimp and his successors like to reference as they systematically gut our freedoms – need worry. But read the actual document, and be afraid. The wording is such that any shyster lawyer for the government will be able to draw up a memorandum at some point in the near future equating, say, criticism of the federal government’s policies in the Middle East with “substantially supporting” the enemies of the United States. As defined by the United States.

That is, as defined by the government.

At its whim. At the personal discretion of whomever happens to be the Maximum Leader, or even one of the ML’s duly appointed minions.

As the always excellent Matt Taibbi of Rolling Stone recently observed, what happens when some nutjob who attended a few Tea Party meetings tries to bomb a federal building? Will the Tea Party itself – and anyone who “substantially supports” it be thus transformed into an “enemy combatant”? How about the OWS protestors? How about this web site – and this author – which have on several occasions called bullshit on the federal government’s usurpations and follies? How hard will it be, really, to describe such actions – such thoughtsexpressed in an article or an interview – as “substantially supporting” whatever the government decides amounts to “terrorism” or the threat thereof against itself?

Surely, the door is now wide open for such an interpretation by some John Woo or Dick Cheney waiting in the wings. Prospective jefe Newtie is practically turgid at the prospect of getting his hands on such power. And there is no longer (or soon won’t be) any legal means available to contest a one-way trip to Treblinka in Topeka – or wherever it is they will send you.

Taibbi writes:

“The really galling thing is that this act specifically envisions American citizens falling under the authority of the bill. One of its supporters, the dependably-unlikeable Lindsey Graham of South Carolina, bragged that the law ‘basically says … for the first time that the homeland is part of the battlefield’ and that people can be jailed without trial, be they ‘American citizen or not.’ New Hampshire Republican Kelly Ayotte reiterated that ‘America is part of the battlefield.’ ”

Graham further stated:

“It is not unfair to make an American citizen account for the fact that they decided to help Al Qaeda to kill us all and hold them as long as it takes to find intelligence about what may be coming next. And when they say, ‘I want my lawyer,’ you tell them, ‘Shut up. You don’t get a lawyer.’ ”

The key thing being, it is entirely up to the government to decide what constitutes “helping” al Qaeda. It can be nothing more than a vague assertion. Indeed, no evidence of any kind whatsoever is necessary to “hold them as ling as it takes” in order to “find intelligence” (not defined, either) by any means it wishes to employ.

As Taibbi notes:

“If these laws are passed, we would be forced to rely upon the discretion of a demonstrably corrupt and consistently idiotic government to not use these awful powers to strike back at legitimate domestic unrest.”

The Fuhrer (oops, President Obama) is about to sign this latter-day Enabling act and when he does, it will mark the moment that America’s coffin is nailed shut. The corpse has been on view since 9/11. But there was always some hope that, perhaps, it might be jolted back into life. Now we know the awful truth. Death is permanent.

And it’s coming for us.

A Strong Future Through Silver Investment

Silver rounds are silver discs that have been privately minted. The design comes in various styles. Some are historical figures or commemorative in design.

Silver made a huge rise above gold in the market between January 4, 2010 and June 30, 2011. Gold had increased its value by 34 percent, while silver went up more than 100 percent, creating an unsurpassed marketable value through silver investing. Silver rounds come in many styles, such as the Mercury Dime silver round. The design follows the true markings of the mercury dime, one of the most highly recognized coins in US history.

Pure silver investments are made through the purchase of .999 fine silver coins or rounds. The rounds are one of the safest ways to make an investment in the silver market. Silver produced in rounds or coins are known as the most liquid and least expensive way to keep your silver at hand and in case the need arises, a good form of trade or barter material.

Rounds carry the lowest premiums compared to spot silver coins such as the Canadian Silver Maple Leaf, the Chinese Silver Panda and the American Silver Eagle. Throughout history, the silver prevails over any other precious metal as a medium of exchange. Modern design in the 1 troy ounce weight rounds produce commemorative coins such as the American Buffalo. The term of “rounds” is used due to the term coins referring to only government issued legal tender.

In 1997, the Taxpayer Relief Act included the precious metal items to be eligible for inclusion in the IRA, creating a wealthier, more stable portfolio through silver investing for the holder. Throughout the world, there is a history of using silver. In fourteen different languages, the words for “money” and “silver” are the same. People have used silver for exchange over gold. The gold used in coins were halted in production, however silver continues to be a strong elemental value in the trade market. Silver rounds are one way to invest in a sturdy, sound financial future.

Why Invest In Silver

Have you been thinking about investing in silver and silver coins? If you’re like most people, you’ve watched your investment values plummet, and interest rates on bank deposits and CDs have dropped to nearly nothing. With these types of failed investments, people are turning to alternative investments to find future growth and asset protection.

Investing in silver is one of the alternatives that most people don’t think about or understand, but those who have discovered this investment in precious metals have been pleasantly surprised at the return it can bring. It can start as easily as collecting pre-1965 issued quarters, dimes, half-dollar and dollar coins that you find in family collections and occasionally in a bank transaction. Another way to invest in silver coins is by purchasing more recently minted coins such as the American Eagle and others. Silver investors can even directly buy silver bars.

You may be wondering what benefits you can get from investing in silver, and probably the biggest one is the demand for silver by industrial applications. There is more demand in various manufacturing processes and industries than the supply can typically cover. Because of this production deficit, silver prices should continue to rise, meaning that your investment will continue to grow.

Silver is also used in more countries than gold as a form of currency, which keeps it in good demand. Silver coins can be used as an investment in an IRA account so they become an excellent product to fund retirement. If you are considering funding a retirement account with a silver investment it is good to consult with your investment advisor or accountant to understand all the important taxation considerations.

Finally, the best reason to invest in silver is to hedge against inflation, deflation or devaluation. Regardless of the economic conditions, silver continues to hold value. Even in the event of devaluation of currency, it can be used as a bartering tool.

Silver Demand Growing with Old and New Uses

Electronics, solar power, health care and nano-particles, along with more traditional uses, will keep silver a good investment despite latest setback.

Silver rallied to $48.70 an ounce in April, and after giving back 40 percent of its value by September, started to recover before its latest setback.  Silver has grown as an investment vehicle in the last decade and has a number of things going for it on the industrial side, says Dillon Gage Metals of Dallas.
“Silver is much more than jewelry and sterling tableware,” says Terry Hanlon, President of Dillon Gage. “It’s not just for wedding presents and birthday gifts but has widespread uses throughout the economy.”

Strong, malleable silver can be made into various forms, wires and threads. It’s a good electrical and thermal conductor for all types of circuits and connections. Silver conducts rather than absorbs heat and can endure temperature swings, making it an excellent soldering agent for joints that undergo expansion or contraction in heat and cold. It’s also a reflector and has anti-bacterial properties.

World industrial demand for silver could reach a record 665.9 million ounces in 2015 versus 487.4 million in 2010, according to a Gold Fields Mineral Services (GFMS) study for The Silver Institute, released in early April.

Electrical and electronics uses are major sources of demand for silver and were a record 242.9 million ounces globally last year, according to GFMS. Used in switches and contacts, silver is one of the best electrical and thermal conduits.

Cell phones consumed 13 million ounces of silver globally last year and computers used 22 million ounces, according to GFMS. Thick-film photovoltaic modules utilized 47 million ounces in 2010, while automobiles used 36 million ounces. Solar power has boosted silver demand considerably in recent years.

Silver is found in batteries in everything from cell phones, cameras, calculators and toys to pacemakers and hearing aids. Silver conductive inks are used in printed electronics, and the metal is utilized as a coating material for DVDs and other optical data storage media. It is employed as a catalyst in chemical reactions, such as formaldehyde manufacturing.

Brazing or joining of materials is enhanced by silver’s fluidity and strength. Silver brazing alloys are used in applications ranging from air conditioning and refrigeration equipment to power distribution devices in the electrical engineering and auto industries.

New uses of silver center on its conductive properties in solid state lighting and Radio Frequency Identification or RFID tags. Supercapacitors — devices that store and release energy indefinitely with no loss of performance — are a potential growth area, according to GFMS.  Supercapacitors are used in solar panels and hydrogen fuel-cell car batteries.

According to GFMS, silver’s use in medical applications could grow rapidly over the next five years. Silver is used in water purification and is found in wound treatments, dressings and creams. Catheters and medical implantation devices, including prosthetic heart valves and vascular grafts, often contain silver.

Tiny particles called nanosilver are of growing interest to industry and policy makers. Silver products and applications using nanosilver include water filters, pigments, photographics and wound treatments. Nanosilver is included in coatings, plastics, textiles and medical devices. Nano-sized particles of silver fight bacteria and mold, and are used for food storage.

“Silver is hardly just ornamental,” says Hanlon. “It has existing and growing new uses that suggest prices can strengthen over the next few years.” As demand for silver continues to expand, investors will want to consider silver as long-term investment, he says. Investment options include bars, ranging from one ounce to 1,000 ounces, along with one-ounce silver coins from U.S. and foreign government and private mints. “And like any investment, you should research who you purchase from,” Hanlon advises.
Author: Dillon Gage

The Silver American Eagle

The Silver American Eagle

The official silver bullion coin of the United States of America is the American Silver Eagle. The U. S. Mint guarantees the coin is .999 pure silver. Its weight is one troy ounce, a measure used for coins and precious metals, was authorized by the U. S. Congress as the official weight standard for coins in 1928. The troy ounce is equal to 31.1034768 grams.

The U. S. Mint first issued the American Silver Eagle on November 24, 1986. President Ronald Reagan requested the silver coins be issued from the U. S. defense national stockpile as a way to pay down some of the national debt in 1981. Earlier presidents tried to sell off some of the defense national stockpile on the basis that U. S. silver production far exceeds the strategic needs.

Idaho and other mining states congressional representatives resisted the proposal fearing the release of silver from the stockpile would lower its value. Every time the U. S. government advocated the sale of silver there was a prompt drop in price. The Wall Street Journal attributed this drop to silver futures investors selling off their contracts in anticipation of an increase in the supply of silver.

The American Silver Eagle bullion coin is stamped at the West Point (NY) Mint and have been since 1999. San Francisco was the first mint to make the Silver Eagle bullion coins. San Francisco issued the coins from 1986 until 1998. There are preparations under way now for San Francisco to mint the coins again. The coins were minted in Philadelphia and West Point from 1999 and 2000.

Ever since these silver eagle coins were first issued, demand has been very high for them. The first release in 1986 sold out faster than expected. Many people buy silver coins as a hedge against inflation, especially when the price of silver drops.

Buy Silver…Now!

Silver is an amazing metal…which is why it’s likely to soar over the coming years…

You see, silver has more than 10,000 uses. It’s one of the world’s best conductors of heat and electricity. Inventors filed more patents on silver uses than any other precious metal in the world. And when silver is used for most industrial and technological purposes, it is used up forever… It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.

I’m not saying industry is going to use up all the world’s silver. That simply can’t happen. But scarcity is a real issue.

Our rapid consumption of silver leaves very little to meet any uptick in demand from investors. A spike in interest will send prices spiraling higher…

Here’s a breakdown of the silver market. The table below shows the percentage of the total amount of silver consumed by each category over the past four years…

Percentage of Silver Supply Consumed by Various Sourcs of Demand

As you can see from the table above, only 12% of the silver supplied to the market made it to bullion in 2010. That means only a little more than 100 million ounces of silver became bullion for the entire investing world.

That’s a tiny fraction to sop up all the investment interest in the world.

Of that silver, about 43 million ounces went to exchange-traded funds like the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSLV).

That means you could buy all the extra silver bullion for about $2 billion. We could buy all the surplus silver bullion from the last four years for about $10 billion.

That’s the same as the market value of the iShares Silver Trust today. If you wanted to build another silver fund, you couldn’t. There just isn’t enough silver bullion out there to fill the order.

Even trying to amass that much physical silver would send the silver price soaring. It’s a simple market fact… When there is more demand than supply, it drives the price up.

And the economic problems confronting Europe and the United States have increased interest in precious metals… Silver gained a colossal 174% from August 2010 to April 2011.

In May 2011, however, the price collapsed 31% in just four weeks. The bull market simply ran up too far, too fast… and the decline wiped out many highly leveraged silver traders.

The big money is tiptoeing back into silver.

Last month, commodity trading advisors, pool operators, and hedge funds — the “big money” — weren’t interested in silver AT ALL…

But as they move back into the market, silver prices could soar. Let me show you what I’m talking about…

Jason Goepfert created SentimenTrader, a service that tracks investor sentiment toward various asset classes. According to Jason, silver just bounced off its most pessimistic reading in four years.

The so-called “commitment of non-commercial traders” hit 10,352. That’s incredibly low. The last time sentiment numbers were that low was in August 2007. Six months later, the price of silver was 59% higher. It rose from $12 per ounce to $19 per ounce.

I went all the way back to 2002 and found that silver sentiment bottomed near 10,000 six times… On average, the price of silver rose 33% in the next six months and 54% over the next year. This chart shows the last four times it bottomed…

Here’s how the silver price performed after each of the last four times silver sentiment bottomed out…

Recent Lows in the Silver Price that Coincided With Negative Investors Sentiment

The best return came after Bottom No. 2, which coincided with the US banking/credit crisis. Silver soared an eye-popping 405%, including its parabolic rise in 2010.

As those numbers indicate, silver is one of the most volatile assets in the world. Over the last year, silver has seen massive price swings, including an 81% rally and two 30% drops. That forced many traders to liquidate their silver holdings in order to meet emergency short-term requirements. (Plus, the debacle at commodity broker MF Global has scared many folks out of the market.)

But the long-term drivers of gold and silver’s uptrends are still in place. Enormous and growing Asian economies like China and India are getting richer…and they have deep cultural affinities for precious metals. Plus, the Western world has lived way beyond its means for a long time…the debts and liabilities it has taken on can only be paid back with devalued, debased money. This is bullish for “real money” assets like gold and silver.

With sentiment so negative toward silver (and just beginning to turn back up), it’s a great time to take a position in this long-term bull market.

If gold and silver prices are nearly certain to rise over the next few years (and probably rise dramatically), the simplest way to play that trend is to buy bullion…real, hold-in-your-hand silver coins.

And I recommend everyone do just that… Buy some silver and store it away.

Buying Silver Is Like Buying Gold At $554 Today

I think that buying silver today is like buying gold for $554 an ounce. Let me explain: As I am writing, silver is currently trading at about 65.2% (32.6/50) of its 1980 high. If gold was trading at 65.2% of its 1980 high, it would be trading at $554 (0.652*850).

Now, I really like gold, even at today’s price of $1 738, but why should I pay $1 738, if I can get it for $554 by buying silver and then exchanging it for gold when the gold/silver ratio is at an extreme (in favour of silver). The reason for this logic comes from the fundamental relationship between gold and silver as explained in my previous article.

For my argument to be valid, silver has to outperform gold over my investment period, and at least equal gold’s performance relative to its 1980 high. That is, for example, if gold reaches five multiples of its 1980 high ($4250), then silver should do the same ($250), in this example, giving us a gold/silver ratio of 17.

Now, if silver outperforms gold, then that means that the gold/silver ratio should decline over my investment term. In my previous article called: Why Silver for a Monetary Collapse, I analysed the gold/silver ratio from a very long perspective (200 years). Here I would like to take a slightly more short-term view (40 years).

Below, is a long +/- 40 year chart of the gold/silver ratio:

On the chart, I have identified two fractals, which I have both marked with points 1 to 3. The two patterns are visually very similar. I have indicated two option of where we could be currently (on the current pattern), compared to the 70s pattern. The ratio appears to be at a major crossroads, ready to make a big move, up or down. This could means that a massive move in the gold and silver price is due shortly.

Based on the patterns, if it moves up, it would likely signal the end of the precious metals bull market, similar to January 1980. A move down would be an acceleration of the current bull market in gold and silver, similar to August/September 1979.

The question is therefore: Do you think the bull market in precious metals is over? Before you answer that, first consider the following:

On the above graphic, the top chart is the current gold bull market from 1999 to date, compared to the bull market of the 60s and 70s, the bottom chart. The previous bull market in gold was about 14 years long, from a peak in the Dow/gold ratio to the bottom in Dow/gold ratio. The current bull market is 12 year old, from the peak in the Dow/gold ratio to date.

The previous bull market ended with a parabolic move in gold (on the above scale). The current bull market has not made a parabolic move (on the above scale); in fact, it has been rising steadily over the last 12 years.

To me, these two charts suggest that we are more likely to have a parabolic rise in the gold price, than being at the end of this bull market. Therefore, it also suggests that price action for gold and silver, and the gold/silver ratio is likely to be more like 1978/1979 than like January 1980.

So, back to my argument of buying silver, in order to get gold at $554: I certainly think that silver will outperform gold over the remaining part of this bull market in precious metals, as well as, at least equal gold’s performance relative to its 1980 high. I can certainly see how gold could be at $4250 with silver being at $250, or at higher prices, with the gold/silver ratio being at 17 or less.

For more analysis on silver and gold, you are welcome to subscribe to my free or premium service.

Warm regards and God bless,


The Long View

Written By Ted Butler

With more financial uncertainty in the world than in memory and with price volatility going through the roof, it’s hard to think about the long term. The only problem is that our lives are still measured in the long term. In financial terms, starting families, raising and educating children, preparing for retirement and preserving hard-earned wealth are not day to day considerations; we are forced to look ahead.  In looking and planning ahead, there is no crystal ball; no guarantee that things will turn out as we expect.  All we can do is to make assumptions based upon what we now know and then try to position ourselves for what may come.

Imagine that you are going on a journey for ten years and will be out of touch for that time. With no short term trading allowed, what assets would you choose to invest in until your return?  Silver is an asset that can offer spectacular returns and preserve value with low risk. It is a vital resource and essential industrial material in addition to being a precious metal.  And because so few investors are familiar with the real silver story, it is a near certainty that silver will become more appreciated over time.

There are limitations on the future supply of silver. Every metal resource in the world becomes more expensive to produce each year.  That’s due to the growing cost of extraction and because ore grades have declined (the biggest and cheapest deposits have already been found and exploited). The grades for silver ounce per ton of ore 150 years ago at the Comstock Lode were hundreds of times richer than grades being discovered today.   It takes greater effort and expense to extract metals from the earth, to say nothing of new environmental restrictions.

The world population now stands at seven billion.  Over the next ten years, the world will add another 750 million and perhaps a billion people on top of that over the twenty years.  That’s six times the equivalent of the current population of the U.S.  That will most likely be accompanied by an increase in the standard of living throughout the world. One measure of an increased standard of living includes greater use of electrical appliances and electronic devices of all types, from TV’s, refrigerators, washing machines to computers and cell phones. Since silver is the best conductor of electricity it is sure to be in greater demand. Plus silver has other important attributes.  It’s the best reflector of light, the best transfer agent for heat and has important biocide properties, making it indispensible to modern life.

Silver performed better than any other asset over the past decade. But don’t buy silver because it did well, buy it for the new forces in place in the world. Ten years ago, there was no net investment in silver.  Only in the last five years has the world taken to investing in silver. Over that time, over 600 million ounces of silver have been bought in Exchange Traded Funds (ETFs), with hundreds of millions of additional ounces of silver bought in coins and bars.  Five years in a worldwide investment movement is a very short time frame.  In per capita terms, the world only bought one-tenth of an ounce of silver per person.  It would be accurate to suggest that a worldwide movement towards investing in silver is in its infancy.

There is more investment capital today than ever before.  Between the banks, large investment pools, and hedge funds, that capital base is more concentrated than ever.  We are talking about many trillions of dollars.  All the silver bullion in the world is valued at less than $35 billion. Despite silver’s great investment performance over the past 5 and 10 years, it has yet to attract investment from these big concentrated pools of wealth.  It is only a matter of time before the really big guys wake up and make a move into the metal. Considering how little silver exists to accommodate them, the effect on price when it occurs should be explosive.

One thing that didn’t exist ten years ago is the growing unease over government debt.  For the first time in living memory, sovereign debt in the developed nations has come to be questioned and shunned. This is not going to go away or be resolved easily. It is not hard to imagine the distrust of paper growing. A distrust of paper is a distrust of someone else’s promise to pay.  The only escape route is to switch to assets not dependent on someone else’s promise or ability to pay. Silver is a premier example of such an asset. The kicker with silver is that without any rush from paper assets it will still be great.

The growing distrust of European sovereign debt is occurring at the same time there has been a rush to deposit money in government paper obligations and insured bank accounts. Given volatile stock markets, a troubled real estate market and broad economic malaise, people are voting for safety, despite historically low returns on deposits. Investors are flooding the banks with deposits that earn little or no interest. Money is piling up on the sidelines like never before. In due course, it will seek better investment returns than the near zero returns currently offered on insured deposits.  Silver will attract some of this money. Either we’ll come out of this economic mess and all the money currently flooding into the banks will increase industrial demand for silver; or we’ll slide into further distrust of paper which could set off a buying panic in silver. In either outcome, it’s hard to see how silver won’t be the place to be.

The outlook for silver looks better than ever.  There are important regulatory changes afoot that promise to powerfully impact the price. There will also be closure to the current CFTC investigation of wrongdoing in the silver market. The manipulation to the downside in silver has many times the awareness that it did a decade ago and there are fewer counterarguments to explain it. Take advantage of the current low prices to establish a long term position in silver; I doubt you’ll regret it. As unsettling as financial events may be, they are actually quite positive for silver.

The reason for recent price drops rests with a group of around 20 commercials on the COMEX, including JPMorgan, that know how to suddenly rig prices lower (usually in the middle of the night or at some other thinly traded time).  Knowing that this will scare some people into selling and keep others from buying, this small group of commercials then sits back and waits to buy what they can scare others into selling.  I call this financial terrorism because it causes fear among investors.  The proof is that government data consistently reveals that these commercials are always the big buyers on any sharp sell-off in silver.  No exceptions.  Some might call this just luck on the part of these commercials.  I call it manipulation and financial terrorism.
It’s ironic that most silver and gold investors originally bought precious metals as protection against exactly the type of financial crisis we are going through now.  In other words, the price of gold and silver should be soaring based upon current conditions.  Instead, the manipulation is so pronounced that the crooked commercials on the COMEX have managed to convince the market that a flight from paper assets is somehow bad for precious metals.  That’s preposterous and you should not be fooled by their crooked games.  The proof is that these commercials crooks are buying hand over fist on the contrived sell-offs.  You should do exactly the same.  These rigged price drops are an opportunity like no other.  The fact that it is being artificially suppressed means you are getting a chance to buy it much cheaper than it would be in a free market.  That has to change and when it does it will be like a sling shot in the other direction.  The facts are more bullish than we can fully comprehend.

Sprott Hatches an OPEC for Silver Industry

In a gesture of highlighting the glaring impediments and equally exciting opportunities facing the silver industry today, Sprott Asset Management CEO Eric Sprott issued a “A Call to Action” letter to 17 of the world’s largest silver producers, posted on one the world’s leading sources of breaking news in the bullion markets, King World News.

As a synopsis of the 1,876-word letter, Sprott outlines a compelling case for producers to hold back inventory for the sake of supercharging its balance sheets as well as maximizing future profits in the wake of drastically changed global market conditions from years past – namely, an environment, in which:

1) The dollar’s value is expected to decline more rapidly than it did during the 1970s. Through the Fed’s policy of negative real interest rates, the CRB Index has risen at a 10.3 compounded percent rate since 2002, already rivaling the decade of the 1970s and expected to get worse, as Bernanke has stated that ZIRP rates will last through June 2013, at least, in an effort to mitigate the effects of the crisis in Europe to liquify U.S. banks;

“Fitch Ratings recently warned that the U.S. banks may face severe losses from their exposures to European debt if the contagion escalates,” Sprott stated in his letter. “There’s very little at this point to suggest that it won’t. The roots of the 2008 meltdown live on in today’s crisis.”

2) A U.S., European banking and sovereign debt crisis, which has many years left to monetize, already shows signs of systemic failure, post QE2.

“Given the current environment, we see much greater risk holding cash in a bank than we do in holding precious metals,” stated Sprott, “And it serves to remember that thanks to 0% interest rates, banks don’t pay their customers to take on those risks today.”

3) And to the backdrop of currency destruction of the West lays a top a eye-popping emergence of demand for silver from a combined additional population of 4.3 billion people of Asia and South America for both industrial applications for silver and as an investment.”

During the month of September, the U.S. Mint reported the second highest sales of physical silver coins in its history, with the majority of sales made in the last two weeks of the month,” stated Sprott. “Reports from India in early October indicated that physical silver demand had created short-term supply issues for physical delivery due to problems with airline capacity.

“In China, which reportedly imported 264.69 tons (7.7 million oz) of silver in September alone, the volume of silver forward contracts on the Shanghai Gold Exchange was more than six times higher than the same period in 2010.” See BER articles on China here and on India here and here.

So far, nothing new here – just a recap of the known demand profile of silver. But what is new and mighty interesting about Sprott’s Call to Action letter is his solution to the CFTC’s obvious delay tactics regarding a resolution to the silver price suppression scheme still in progress at the CME – a solution to a similar problem that the Saudis have already implemented as a response to an artificially high US dollar against its sacred and depleting commodity, oil.

From Reuters, April 13, 2008:

Saudi Arabia’s King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world’s top exporter for future generations, the official Saudi Press Agency (SPA) reported.

“I keep no secret from you that when there were some new finds, I told them, ‘no, leave it in the ground, with grace from god, our children need it’,” King Abdullah said in remarks made late on Saturday, SPA said.

Though the Reuter’s article received nearly no play in the U.S., the gravity of King Abdullah’s decision to retain his kingdom’s oil inventory in the wake of global peak oil production and a declining dollar is a natural and understandable business move by him. Why would the Saudis want to give away oil so cheaply when discounting today’s present value of the dollar is so artificially low.

“Local leaders [of Saudi Arabia] have repeatedly said that they feel an obligation to preserve some of their natural resources,” said Jeremy Gilbert, BP’s retired chief petroleum engineer, in response to the Saudi announcement. “These feelings must be intensified when their recent production has been sold for U.S. dollars which have depreciated by 25% or more against other strong world currencies over the last four years.”

Sprott’s call for silver producers to retain more of its inventory is akin to King Abdullah’s decision to inventory Saudi oil, and is exactly what silver producers should do to protect silver, a resource that prolific financial author and researcher Dr. Steven Leeb has said is so “critical” to the alternative energy market that governments may at some point panic in response to its depletion rate.

“I emphasize this, [silver is] a critical . . . the best thermal conductor in the world, the best electric conductor in the world, and one of the best reflectors in the world,” Leeb told GoldSeek Radio in a Sept. 2011 interview. See BER article here.

“And as a result, silver is a critical ingredient in solar panels . . . so silver is critical to making the transition to renewable energy . . . in computers . . . it’s critical in many, many areas,” he added. “So silver has the potential to truly go exponential.

“My prediction is that silver will go high enough [in price], and if we recognize it’s so critical, that the government may even ban public ownership of it, like the government banned public ownership of gold during the Depression,” Leeb concluded.

Silver is today’s monetary metal and tomorrow’s oil; it, too, has had its present value artificially discounted severely via government schemes hatched by the Western banking cartel.

Spott’s idea, not only makes sense from a longer-term business standpoint, but it’s also a righteous one for investors. Who can forget Barrick’s final capitulation to unwind its hedge book due to its shares being shunned by investors? Sprott’s telling silver producers it’s time to take the next logic step – keep more silver as an asset on its books.

“Silver miners need to acknowledge that investors buy their shares because they believe the price of silver is going higher,” stated Sprott. “We certainly do, and we are extremely active in the silver equity space. We would never buy these stocks if we didn’t. Nothing would please us more than to see these companies begin to hold a portion of their cash reserves in the very metal they produce. Silver is just another form of currency today, after all, and a superior one at that.”

Moreover, Sprott’s idea kills more birds with his one stone. Unlike other businesses, mining companies’ inventories deplete, warranting a discount to book value. Carrying mined silver onto its books during a bull market mitigates that book value erosion over time in addition to the virtuous cycle of higher silver prices and stock prices the new paradigm would foster within the industry.

Unlike the oil price, whereas crack spreads at refiners become tiny and unprofitable as crude input costs rise but cannot be passed on to the consumer so easily, the silver price is somewhat elastic to fabricators. But to investors, it’s an asset whose price paradoxically benefits from the rise as investors seek a bull market in something . . . anything . . . to flee the Fed’s ZIRP policy. Right now, silver producers are playing the role of oil refiner. But it doesn’t have to be that way.

Sprott merely suggests, and rightfully so, that instead of silver producers taking a big hit on the price of silver, like the refiners take one in the oil industry, come together and take charge of your inventory – the Saudi way. Investors are sure to like it.