Tuesday, July 20, 2010

Where There Is Smoke, There is FIRE.

"We are not living under true free market capitalism right now. Free markets require free market money. Fifty percent of every transaction involves currency. You have to allow the market to pick what money is and what interest rates are (the price of money itself).

You cannot have a group of arrogant men trying to set interest rates and manipulate the economy. You cannot have governments giving special favors to their richest friends, the corporations and special interests that can afford to do all the lobbying.

This is what tilts capitalism to the point where it really isn't capitalism. This is no longer a free market. We haven't lived under free markets in the United States since 1913, when the Federal Reserve was introduced."
-Mike Maloney

Intrigue Builds In The Comex Silver Pits
By Dave Kranzler, The Golden Truth
The July silver open interest increased by 31 contracts on Friday. Those people wouldn't be buying unless they intended to take delivery AND they couldn't buy unless their account was funded for the amount needed to take delivery. I don't scrutinize the o/i like this every month, but I have never noticed open interest increasing in a delivery month this close to to the end of the delivery cycle. Here's the open interest report for Friday: Comex Metals O/I

Why is this significant? Because right now there is over 3.5 million ounces of silver standing for delivery and silver has been leaving the "eligible" vaults (i.e. customer storage vaults) nearly every day this month. I really do not believe that the Comex has the ability to deliver that much silver without tapping into an outside source, like SLV. JPM, per Ted Butler's analysis of the COT and Bank Participation Report, is short close to 30% of the entire Comex silver open interest. Not coincidentally, JP Morgan also happens to be the custodian of SLV. If you don't believe that there is foul play going on, something is wrong with your brain.

Waiting for Silver’s Upside Breakout
By James Turk
July 18, 2010 – Two months ago I stated that silver is inching closer to an upside breakout. It turns out that “inching” was the right word because since then silver has been moving at a snail’s pace. Nevertheless, the huge accumulation pattern that silver has been building over the past three years remains intact, as can be seen on the following chart.

The accumulation pattern on the above chart is nearly complete. All silver needs now is one last push above the neckline around $20. As I noted back on April 1st, silver looks ready to soar once that key level is hurdled.

In presenting my outlook for 2010 I said: “We need to start thinking about silver hurdling above $50.” Noting that this event was only a 20% probability in my view for 2010, I went on to add that “this important event – which is unimaginable to many – will I expect happen in 2011.”

That forecast remains on track, but two events are necessary. The obvious one is that silver must first hurdle above $20, but secondly, silver needs to approach $30 this year. This $30 price target is needed to keep silver on track for challenging $50 next year.

Given that we are now in mid-July, the limited time constraint means that $20 needs to be hurdled soon if silver is going to reach $30 before the end of this year. As a consequence, the next few weeks will be critically important for silver.


Did you buy Silver yesterday, Monday July 19?

I did.

Silver was forced down to it's 200 day moving average by the CRIMEX goons. The decision to buy was simple. As long as physical Silver is available, and the crooks at JPMorgan are interested in offering up sale prices, you should be buying. Supplies of physical Silver are disappearing fast.

Ed Steer in his Gold & Silver Daily report commented on the supplies of Silver outside of the US:

While on the subject of silver, my coin guy informed me yesterday that the Royal Canadian Mint is running two to four weeks behind on virtually all of their bullion products right now... especially the 0.9999 silver Maple Leaf. And, to top that off, Chris Powell sent me an e-mail from someone that had just contacted Kitco about purchasing silver coins and rounds... and this is the reply he got... "Good afternoon Sir/Madam, Thank you for your e-mail. Unfortunately, many of the Silver products we sell, are currently out of stock for Canadians. As such, the items are 'Only Shipping to the US '. Certain products are 'Only shipping to the US ' due to our inventory at our Vaults in Canada. In other words our inventory is too low (depending on the item) to accept any new orders from Canadian or International customers. As such, we would simply have sufficient inventory to sell the items to US customer[s] as we also have Vaults located in the United States from where our products are also shipped. The product will be once again available, when we receive a new shipment of inventory. In the mean time we suggest signing up for our ‘Bullion Alert Service' which provides an e-mail notification as soon as a shipment arrives for the item(s) selected." Here's a link to Kitco's product page. Except for the 1,000 ounce good delivery bar, they are completely out of all silver inventory for Canadian and international customers. Only if you live in the USA is there anything available at all.

Last night Harvey Organ in his Daily Gold blog posted the following with regards to CRIMEX Silver supply:

Even more shocking was the revelation that ZERO contracts were served upon in the silver comex. At this late stage in the silver delivery month this is
totally unheard of.

And to boot, the number of contracts left to be served increased in number to 743 or 3.7 million oz from 3.5 million oz. Anybody that buys silver comex for the july month must pluck all his money down. He no longer is allowed 10% down. It is the entire amount. So if you see the number of oz to be served rises you can bet the farm that they are standing for delivery and they are jumping queque (correct spelling anyone on queque?).

The total number of oz of silver standing so far remains at 1869 or 9.3 million oz.

The total number of oz standing for this delivery month of July is 9.3million + 3.7 million + .2 million = 13.2 million oz, a gain of 200,000 oz of silver.

As I have repeated many times there is a lot of smoke and fire at the silver comex.


Since the end of may 2010 over 18 million ounces of Silver have left the Silver ETF, SLV. This occurred while the price of Silver rose over $2 an ounce. Why would Silver be leaving the SLV if the price of bullion was rising? Is this where the CRIMEX is getting the bullion to meet physical demand in the futures pits? If so the supply side of Silver is Far, Far tighter than anybody can imagine. Now we see buyers stepping in line and buying Silver paid in full going into the close of the July delivery period. People want physical Silver, and the WANT IT NOW.

Gene Arensberg in his Got Gold Report commented over the weekend that both Gold and Silver, despite Friday's CRIMEX assult, closed last week in Backwardation:

Just as we saw two weeks ago, both gold and silver finished this harsh sell-down week with
the cash price (the price for immediate delivery metal) well above the near-active COMEX
futures. When the cash price is higher than the near futures market traders term that
condition “backwardation.” Backwardation is the opposite of the normal condition, called

As regular readers already know, backwardation in precious metals is unusual and it hints
that demand for physical metal is strong at the prevailing price. Most traders view precious
metals backwardation, even the most minor of examples, as more bullish than bearish.

Backwardation, especially if it persists for more than a day or two, is indicative of stronger,
not weaker precious metals markets. Backwardation argues that there is more demand for
metal than the amount being immediately liquidated.

For gold the cash price was higher than both the August and October contracts. For silver
the spot price was higher than September and December. In addition to suggesting strong
physical demand, backwardation also suggests that physical buyers are unwilling to wait
even for the nearest of future delivery months even though they are cheaper.


Mr. Arensberg's entire Got Gold Report is always well worth the read.

It is becoming ever clearer that the CRIMEX goons are becoming ever more desperate in their search for metal to meet the escalating demands for physical deliver out of the futures markets. The BIS gold swaps story is just the tip of the iceberg as the physical bullion market for both Gold and Silver moves closer to overwhelming and eventually crushing the phony paper market for Precious Metals that has taken root at the CRIMEX.

Recall that JPMorgan assumed control of the Silver market manipulation in March of 2008 when the Fed handed them the assets of Bear Stearns as they went belly up. This was because Bear Stearns at the time held the largest short position in Silver in the world. JPMorgan, who just happened to be the custodian of the Silver ETF, SLV, was called into "take control" of Bear Stearns assets, and this gigantic Silver short position that was threatening to unwind in a hurry as the the World Financial Sytem was on the brink of collapse. Silver promptly fell from a multi decade high of $21 to under $9 an ounce. As the price of Silver was falling, the Treasury Secretary and the Fed were claiming victory in averting a crash in the global financial system. It made one wonder how important Silver is to the World Financial System.

Today Silver sits poised to breakout above $20. JPMorgan however, after having months to unwind this huge short position in Silver has instead not only maintained it, but increased it in an effort to HALT a further rise in Silver and prevent the breakout at $20.

Why is it so important that the price of Silver be kept below $20 an ounce? Is sub-$20 Silver the key to holding together the World Financial System? The price of Gold long ago vaulted past it's 1980 high of $880 an ounce, yet Silver remains bottled up at less that one half of it's 1980 high of $50 an ounce. This is particularly peculiar, if not down right shocking, when you consider that there is less physical Silver in ounces available than there is Gold today. Yes you heard that right: THERE IS LESS SILVER IN THE WORLD TODAY THAN THERE IS GOLD. And the price of Silver is just 1.5% of the price of Gold. How can that be? And more import to ask, WHY is the price of Silver ONLY 1.5% that of Gold?

Will a breakout above $20 and ounce in Silver be a signal that the World Financial System is on the brink of collapse once again? Only time will tell, and judging by the quickly evaporating physical supply of Silver globally, time may be running out a lot faster that the global financial authorities would like.

Double-Dip Recession Does Not Mean Deflation
The National Inflation Association
In NIA's May 26th article entitled, "Don't Doubt Bernanke's Ability to Create Inflation", we said, "The U.S. Dollar Index has rallied only because it is heavily weighted against the Euro. The Euro is now overdue for a huge bounce". NIA was right, the Euro was $1.22 at the time and it has since bounced to $1.30. Meanwhile, the U.S. dollar index has declined from a high of 88 down to 82.50.

NIA has consistently said that the U.S. economic recovery is phony. With recently released Fed minutes indicating that our phony economic recovery is fading, the focus on Wall Street has shifted from the debt crisis in Europe to the risk of a double-dip recession and possible deflation in the U.S. However, NIA believes the threat of a double-dip recession and worries of deflation actually increase the risk of hyperinflation arriving a lot sooner than anybody thinks is possible.

There has been a severe plunge in stock market trading volume during the past month, but this is the calm before the storm. NIA believes the Federal Reserve is quietly getting ready to implement "The Mother of All Quantitative Easing". After all, the Federal Reserve's quantitative easing in 2009 was "successful" in causing the Dow Jones to bounce by 74% from its low of 6,469.95 in March of 2009 to a high of 11,257.93 in April of 2010. Sure, the broadest measure of unemployment also rose during this time period from 19.8% to 22%, but according to the Federal Reserve, unemployment is a lagging indicator and meaningless.

NIA believes there is no chance in hell that Time Magazine's Person of the Year Ben Bernanke is going to admit his destructive policies of artificially low interest rates aren't working. In fact, with the CPI showing a year-over-year U.S. price inflation rate in June of only 1.05%, the coast is now clear for Bernanke to raise his dosage of quantitative easing. NIA fears that come this October, Bernanke is likely to shoot up his largest ever dose of quantitative easing. If our fears come true, NIA will be forced to change our projection as to when U.S. hyperinflation will occur from the years 2014-2015 to as soon as year 2012.

NIA considers the number one catalyst to the upcoming hyperinflationary crisis to be our nation's out of control budget deficits and the Federal Reserve's need to monetize them. The White House is not projecting the U.S. to have a balanced budget ever again. In order to reduce our budget deficit from $1.56 trillion this year to $752 billion in 2015, the White House is projecting an average GDP (gross domestic product) growth rate of 5.58% over the next five years.

The Bureau of Economic Analysis (BEA) recently reported that revised 1Q 2010 GDP was up 2.42% on a year-over-year basis, compared to the previous estimate of 2.5% and an initial estimate of 2.55%. With consumer spending making up 71% of GDP and the mainstream media now focused on the risk of a double-dip recession, it will be impossible for our economy to grow at 5.58% per year in real terms.

If Bernanke decides not to implement massive quantitative easing and the U.S. government refuses to dramatically reduce spending in the short-term, by year 2015 the U.S. will likely be looking at an annual budget deficit of at least $2.2 trillion, but possibly $3 trillion or more once you take into account the likelihood of substantially higher interest rates. By that time, the Federal Reserve will be the only buyer of U.S. treasuries and all of our deficit spending will be paid for through outright money printing.

In our opinion, the Federal Reserve is likely to pull out all the stops to stimulate expansion of the money supply until the U.S. has a real annual price inflation rate of between 15% and 20%. Their hope is that with this rate of price inflation, our deficits and debts will be slowly eaten away without a complete loss of confidence in the U.S. dollar. NIA knows this is impossible. A price inflation rate of just 15-20% for five years in a row would cause the world to dump their U.S. dollar reserves and wipe out a huge part of America's remaining savings, leaving us with no way to rebuild our manufacturing base and improve the underlying fundamentals of the U.S. economy.

Americans can feel the purchasing power of their earnings and savings decline. They know that the real rate of price inflation is a lot higher than 1.05%. As long as we have a fiat currency system and Ben Bernanke as the Chairman of the Federal Reserve, there is zero risk of the U.S. experiencing deflation. If the Federal Reserve is forced to they will print up enough fiat U.S. dollars for President Obama to mail out a $1 million stimulus check to every single American.


The National Inflation Association [NIA] is an outstanding organization. They go to great lengths in an effort to warn Americans about the impending perils of hyperinflation. The are experts on the subject. I urge everyone reading this to visit there web site http://www.inflation.us/ and become a member.

The NIA released a video last month entitled Meltup: The beginning of a U.S. currency crisis and hyperinflation. This 55 minute video presentation is a must see, and I urge you to view it at your earliest convenience. [There is an exceptional mention of the Silver manipulation at around the 24 minute mark.] The TRUTH of hyperinflation in the USA could not be more simply stated than it is in this video. If, after watching this video, you are not convinced that Gold and Silver are your best protection from the Global Financial Catastrophe that is looming just over the horizon...you never will be. [It wouldn't hurt to have a stash of food, a gun, and plenty of ammo either.] Please try and find an hour to watch this video. You will be glad you did, and you will want to immediately share it with friends and family. I did.

1 comment:

  1. Question if you mind me asking: What vehicles do you use for silver? You just buy coins/bars? CEF? SBT?

    Really enjoy your blog! Very insightful. Thanks.