Silver closed last week under $17 for the first time in 4 years. Maybe we have in store another “event” like 2008, 2011 or 2013 where the “price” gets forced down which explodes demand to a point where shortages again show up? I have written several times before how a shortage should never ever show up in any real market if prices crash because of “selling.” If real silver were in fact being sold then the market would be awash in silver and no shortage could exist. …The last 3 episodes there were severe shortages which is your proof that it was not in fact real metal being sold, only paper contracts representing metal, this logic is not arguable.
I have written several times regarding the high and growing open interest in the COMEX silver contracts. It is my belief the Chinese via proxy are the longs and will at some point call for delivery. I was “reprimanded” by a very famous commodities trader telling me that the open interest was high only because of “spread trades.” Spread trades only amount to 23,000 contracts which if subtracted would still leave us with 150,000 contracts or more of silver, still historically high. Something is just not right, the open interest in gold is near multi year lows while silver touched 6 year highs last week, “spreads” do not explain it.
I have also argued that both silver and gold have seen concentrated sales where 50% or more of global production is dumped within 24-36 hours which in a real market where real metal trades, could not ever happen. Who could have this size of metal and who would sell in a fashion to destroy their own price even if they did? The answers of course are no one, and no one. I get it, hedge funds are momentum traders and pile on in whatever direction any commodity is moving but gold and silver have now had access trades open lower or unchanged in 106 out of the last 110 trading days. This is a statistical impossibility. So it is what it is, but what does it mean, and what has silver trading way below the cost of production now unleashed?
The U.S. produces about 33 million ounces of silver per year, the mint has already sold 34 million ounces through October 2nd. Think about this for a moment, this is just mint sales alone. The entire U.S. production has been eaten up by the sales of coins alone, what of industrial demand such as solar, technological and medical demand…which over time will only grow with each newly discovered use? During just the first 2 days of October, the mint sold 1.65 million ounces, this action does not square at all with investors panicking and selling silver. My guess is if the price continues to be hit on COMEX we will again see a 2 tier market where premiums are quite large (over paper prices) for the actual metal and the wait times for delivery again begins to expand with outright shortages existing. I believe the question is going to arise “what really is the price of silver,” is it the COMEX price or the price to actually procure real silver? On the other side of the globe in Shanghai, silver stands now in full backwardation, this argues for scarcity rather than plentiful supply.
COMEX may very well “price themselves out of the market” if they push their hand much further. Think about it, what would $12 silver on the COMEX mean if real silver was trading at $18 or even $24 in Shanghai? Would the December longs have any choice whatsoever but to arbitrage the price discrepancy? Buy it on COMEX and ask for delivery …then sell it in Shanghai and deliver the metal as is required by their law? It is this situation which will eventually drain whatever inventory is left in the COMEX (and SLV) in my opinion.
I will leave you with a comment sent to me by a reader with a little of my own tweaking. He said …”I buy silver with fake money for 20% less fake money than they can mine it for. Will I win? Ask any child able to grasp the concept and they can answer that!” Think about what he is saying here? He is describing COMEX to a tee, they trade nonexistent silver back and forth maybe 100 times or more than is actually produced globally …and THEY set the price. What will happen when one day the premium to purchase real silver rises $2 or $3 while the COMEX contract drops $1 or more? What will a 2 tier market do? It certainly will not create confidence in paper pricing versus cash and carry. The danger as I see it is COMEX may now be pushing their hand too hard and too far …as the Shanghai exchange now exists as a potential check and balance to paper pricing. If COMEX moves the price too far from where the cash price trades, they will effectively arbitrage themselves out of inventory, out business and out of confidence. Time will tell.
Something bad has to be going on behind the scenes for them to be doing this blatant manipulation and driving the price down through obvious trend lines.
yes Dan, very bad. My guess that this is a last gasp to hang on to hegemony.
I am working on grasping the Big Picture here. If Shanghai, or whoever the huge Longs are on COMEX or SLV, actually do end up with a Fail to Deliver, what is their advantage to making this public and notorious?
If their goal is to accumulate real Money as opposed to Legal Tender, why wouldn’t they do everything possible to do this at the lowest possible amount of “Reserve T Bills”?
they already have been accumulating as evidenced by the import numbers. Making it public only happens AFTER a fail to deliver.
Excellent article. You guys at MF are about the smartest in the entire bunch of precious metals experts I listen to. As a silver and gold stacker since ’07, I visit your site daily and always come away knowing I’ve learned something. Wild horses can’t tear my PMs out of my hands no matter how low they smash it!
I would respectfully like to suggest something as a possible way to assist you in answering your questions above and that is: “Think like the Powers That Shouldn’t Be”! Think like them instead of like you. You know enough about them and their motives by now to be able to do just that. If you were in their position (with no physical in the vaults and a bunch of bankers to keep happy), then you must do certain things to maintain the illusion of a free market to the world at large – things which confuse us on the outside of the game, but are perfectly logical to those running the game in order to keep it going. Of course, to think like them you’d have to remove any foundation of propriety or honesty, but if you were fraudsters like they are, what would you do? I think that’s potentially a good way to get a better idea of what “they’re” going to do next and it certainly would lessen the confusion and stress which you could then pass onto us! Just a suggestion.
I know we’ve all felt a lot of pain not making any gains in a very long time with some being in negative territory. But as sure as the sun rises, the Great Audit is coming and the gains are going to be so immense, the hard times aren’t even going to register as a tiny blip on the memory scale. That’s my story and I’m sticking to it.
thanks Shelley, I have thought like them which is why I believe they will ultimately kick the table over.
What the Fed needs is a good super industrial size enema. Then maybe all will be cleaned out and we can start all over again.
Red, it’s called a new asset backed currency.
Lets see. Ebola + ISIS = Black Swan.
I’m sure you agree.
Keep up the good work
Thanks Gold Man but you forgot a few potential black birds out there.
It’s Hard to keep up with all the potentials. Hopefully more will join the club and get ready.
Bill, Time will tell, as you say. Thank you! I need to add a VERY final comment. I read your article, and it’s excellent quality as usual. I’m repeating myself. Furthermore, who am I to judge!? It’s triple A rated by Mr. G. So, seriously, many thanks to ALL. I’ve been watching the mirror for quite a few days and looks like a probability of 60% NO Foreign eXchange for the upcoming months. How crazy is that. I need a rest for X-amount of weeks. I’m sure you understand. The mind and body requests so. I’ll be reading, but not writing. Please keep up your salient work. You’re the host of this house. Never sell it!
good luck and see you when you are back.
What kinda margin loss you think the longs are sitting on with this privcpiecee drop?
Maybe $15-20 billion all told from $40?
So if US consumption of silver exceeds US mine production what’s the problem in sourcing addition silver from Mexico or Canada? Also is it necessary that all silver consumed in China come from the Shanghai exchange? If the Silver Institute shows a 977 million ounce silver deficit over the past 10 years where did that silver actually come from then? These are questions I have to see answered before I am sure that there is actually a problem in the silver market.
The U.S. was out of their 2 billion ounce stash back in 2003, the only other large (I believe 300-600 million ounces) stockpile was China which I believe was leased to the U.S. and now probably run through. Silver can be sourced from anywhere it is produced, the point is that demand has exceeded supply for many years, it cannot go on forever or in my opinion much longer. By the time you are sure …it will be at least 1 second too late.
They can keep this game up until your in a nursing home. Will China kick the
Rothschilds away from the table? They’re the only ones with the balls to do it, but
I don’t think they will. They will get into the game like everyone else.
What Bill Holter and Andrew Hoffman do not understand ( from their writings at least) is that Gold and Silver are totally different to other commodities.
Quote, “conventional techniques for analysing supply and demand are inapplicable to gold and silver,because the monetary metals have such high inventories” K Weiner 5th Oct 2014.
There is no shortage of supply of either. Think about that…Gold especially, is basically indestructible. It is stored,it is hoarded and it is everywhere.
The $USD is being bought and Gold is getting sold…. FACT
Whether that continues is another story. I think gold MAY hold above $1180.
There is always time,patience is a virtue.
If you are comfortable buying gold now, by all means do so.
It is good stuff to own.
I know Keith Weiner personally, maybe you do as well…?
I am an active participant of the Gold Standard Institute that he is the President of.
While you are correct in Keith’s view of gold and silver supplies being in years, he also fully acknowledges that the US Dollar is doomed within a certain period of time. I have heard him speculate within 10 years.
So, where do you want to put your fiat currency? Is it not better to shift out of it and into metals at lower prices than higher? And even higher prices you pay for silver or gold is better than having no metal when the collapse comes.
I live in Phoenix.
yes you are correct Ragnar.
Ragnar,that is true.
We are on the same page.
I have no doubt that Gold and Silver will go no offer when confidence in the dollar is gone.
And certainly buy the metals at lower prices. Basically that is what I have been saying in my posts.. BUT there was no point jumping in earlier when an obvious downtrend was place plus $ rising as well.
…but what if your timing is wrong and you waited 1 second too late?
Ok well if your timing is wrong and you are 1 sec too late, then you are 1 second too late and you will not be able to buy any PM’s.
That is a severe case of stiff cheese.
However, I think you are oversimplifying Bill.
Its looking promising right now but that has happened 3 times in the last few years, but the trend is still DOWN.
Wait till there is a break and then buy physical. Thats gold at $1308 at this point in time today.
so now we should wait until it goes over $1,308? What if it is $1,307 going into a Friday and goes no bid Monday because something in the system went tits up?
Ah, American Dominance in the world is on the wane, just as Barack has wanted. When a so-called commodity exchange such as the Comex can long longer provide settlement in either physical gold or silver with the warehouse supplies shipped to China and other growing exchanges in the East, WHAT KIND OF EXCHANGE DOES THE COMEX BECOME?? Cash settlement in devaluing Dollars will not appear very appealing to traders when the Dollar really hits the skids, and commodity USERS attempting to accumulate the precious metals will no longer trade on the Comex, but probably the Shanghai Gold Exchange. Money goes where it is treated best, AND THAT WILL NO LONGER BE THE UNITED STATES IN THE FUTURE. Greed and corruption eventually fowl the soil in which it has grown.
very good David.