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Can you please explain to me why the dollar has plunged for the last two days to 78.14, platinum and palladium are rising but gold and silver are still falling.  Could it be that gold and silver are being singled out for manipulation?  How dare we think that!  The fact that margin requirements on the Comex have been increased by 6%, coinciding with falling metals prices, is just a coincidence, right?  I thought that they only raised margin requirements in an overheated rising market. But what do I know.  Only the foolhardy gold bugs would conclude that JPMorgan and the rest of the bullion banks are given special treatment to allow them to unload a mountain of their “short” silver and gold contracts.  I guess I am just another one of those “conspiracy nuts.”I ask why anyone would believe that gold and silver are freely traded, the economy is in dandy shape and the problems in Europe are under control.  Can’t you see that our government’s actions favor Wall Street over Main Street.  Bail out the banks and screw the home owners and small businessmen has been the mantra for the past three years.

I’m sorry to be a stick in the mud, but the way I see it, the little guy is being abandoned while the big banks and hedge funds have been rescued – with taxpayer’s money.  The middle class has been decimated for the benefit of the bottom line of the big multi-national corporations.

The former neocons-led Bush Administration was replaced by the liberal Obama gang but what has changed?  Bush and the Fed gave us QE1 and Obama and the Fed gave us QE2.  Take a look at Obama’s most recent two appointments – William Daily replaced Rahm Emanuel as chief of staff.  Daily, formerly special counsel to the Clinton administration and Commerce Secretary, spearheaded the passage of NAFTA that opened the floodgates and cost America God knows how many jobs as a direct result of this awful piece of legislation.  Obama replaced Larry Summers, chair of the National Economic Council, with Gene Sperling, formerly chair of the National Economic Council in the Clinton Administration. Sperling was the prime force leading to the repeal of the Glass-Steagall Act, which if left in place, would have impeded the speculative frenzy that led to the financial meltdown and the “Panic of 08.”  It doesn’t matter which party is in control – profits were privatized, losses were passed on to the taxpayer and the people got screwed.

I have a running debate with my good friend, Dr. J who wants to be called “Cactus Jack,” and so I shall from now on.  Cactus Jack laughs at me when I tell him that he should have  several month’s worth of food, water, medicine, cash, gold and silver coins and most importantly, toilet paper on hand – “just in case.”  A few guns and sufficient ammunition is also a good idea.  Cactus Jack has lots of guns and ammo but you can’t eat lead.

My position is – I have life insurance, car insurance, household insurance and medical insurance, so what’s wrong with having some of life’s basic necessities on hand – just in case.  That’s what I call survival insurance.

In History of The Future; Top 11 Trends 2011, Gerald Celente (Trends Journal) predicts that the next war front will be cyber-war.  No need to use tanks and missiles when you can do enormous damage with cyber-war.  Deputy Secretary of Defense William J. Lynn III, speaking to the CFR boldly declared “The cyber threat is HERE NOW.  He warned that, “Computer-induced failures of our power grids, transportation system, or financial sector could lead to physical damage and economic disruption on a massive scale.”

Electricity Grid in U.S. Penetrated By Spies

Dennis Blair, Director of National Intelligence, recently told lawmakers “A number of nations, including Russia and China can disrupt elements of the U.S. information infrastructure.” Wall Street Journal, 8 April 2009)

Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national security officials.

The spies came from China, Russia and other countries, these officials said, and were believed to be on a mission to navigate the U.S. electrical system and its controls.  Officials said water, sewage and other infrastructure systems also were at risk.

Celente wroteShould an all-out Category 5 cyber attack be launched it would wreak extended havoc on national grids and infrastructures.  With transportation, financial transactions, FOOD SUPPLIES and communication systems destroyed beyond foreseeable repair, the public will relinquish what’s left of its freedom – as it did following 9/11, in the vain hope that the government will come to the rescue. The result will be a formalized police state masquerading as democracy.

Cyber disruptions will, in effect, put people “off the grid” even if they don’t choose to be.  Survivalist-style strategies for storing resources – money, fuel, food, etc. – may provide the best answers for getting through the disruption for the short term.

They’re heading for the exits

If Ted Butler is correct, then the correction in gold and silver is about over.

Ed Steer wrote the following: But it was gold that was the big surprise, as the Commercial open interest fell a very large 18,591 contracts, leaving the Commercial net short position at 20.65 million ounces. Ted Butler says it’s been a couple of years since the Commercial net short position has been this low. The ‘4 or less’ bullion banks are short 16.9 million ounces…and the ‘8 or less’ bullion banks are short 23.4 million ounces.

The other thing to note about gold this week was that the technical funds went massively short to the tune of 12,379 contracts…or 1.24 million ounces.

In both gold and silver, Ted noted that it was the raptors…all the traders not in the ‘8 or less’ category…that covered a lot of short positions this past week. This is absolute proof that not only is JPMorgan heading for the exits…so is everyone else.

Without doubt, there was further improvement in the bullion banks’ short positions in both metals since Tuesday’s cut-off…especially after the hammering they both took on Thursday. I’d give a day’s pay to see what the open interest numbers are now, without having to wait until next Friday.

Here’s Ted’s “Days to Cover Short Positions” graph that’s courtesy of Nick Laird over at sharelynx.com.

Click here to enlarge.

Ted had a couple of things to say in a private note to clients early on Friday. The first was this…”The sole reason for this latest swoon in the price of silver is coordinated and collusive manipulation upon the part of the big commercial interests, including JPMorgan, on the CME Group’s Comex market. I realize that I have to make this statement repeatedly whenever there is a significant sell-off in silver. I don’t set out to be repetitive, nor do I have my mind made up in advance; it’s just that commercial manipulative behavior always stands out as the sole cause of every silver sell-off. Certainly, one would think if it weren’t so clear, that the commercials were engaged in collusive illegal behavior on what I call a criminal enterprise of a market [the CME], one of them would object to my characterization of them as crooks. I’ll let you know when, and if, that occurs.”

“Collusion is a strong word. I don’t use it loosely. It’s easy for me to label the large Comex commercial trading entities as operating collusively on this sell-off, because they have operated collusively on every silver sell-off over the past 25 years. The proof is simple and clear…and contained in CFTC data…and both the COT and Bank Participation Reports. This sell-off…and every sell-off…have always been met with uniform commercial net buying. There has never been an exception to this pattern. How is it possible that the big commercials can always find themselves to be net buyers on every sell-off? Easy–they are acting collusively. In fact, considering their easily-documented history, it is not possible for them not to be acting collusively. How otherwise could one cohesive group always end up buying big on every decline?”

Here’s the 6-month silver chart including Friday’s candle. If I had to bet ten bucks…I’d make the bet that we saw silver’s low tick for this move down. Ted is hopeful as well. You can never time the market exactly…but if you catch 80% of the move on most occasions, you can consider yourself a successful trader. And, with all the mysterious goings on in the silver market right now, I wouldn’t want to be out of it…or short it.

Click here to enlarge.

As I said in this column yesterday, I know it’s hard to think of precious metals investment opportunities at a time like this. But, as I mentioned in the previous paragraph, you can never catch the entire move…but if you catch a major portion of it, you’re doing well. There’s still time to either readjust your portfolio…or get fully invested in the continuing major up-leg of this bull market in both silver and gold.


David Schectman

Miles Franklin