Thursday, September 23, 2010

As Demand Trumps Supply

Despite early morning efforts of the CRIMEX hoodlums to drag down the Precious Metals with their collusive bid rigging, Gold and Silver flipped the Rat Bastids the finger and rose in price again anyways. Gold did not make another new high today, but did set a new closing high. Silver reached ever closer to the 21.34 high set in march 2008 today, and closed at yet another new 30 year high.

Open interest levels are now above 600,000 in Gold and 145,000 in Silver. Options expiration at the CRIMEX is coming up early next week on the 29th of September. The goons are poised to raid, but can they successfully? Gold hit my target of $1296, and Silver $21.08 yesterday. A take down could occur at anytime over the next three trading days. The difficulty for these CRIMEX Rat Bastids, however, is the simple fact that demand for the Precious Metals remains robust, and dips are being bought hard in India and the rest of Asia. Global demand for the Precious Metals is rising swiftly.

Metals Action Leaves The Ignorant Scratching Their Head...
By Dave Kranzler, The Golden Truth
UBS has an important comment: “When gold pulled back to $1270.75 on Tuesday, Indian buying interest returned: flows noted by our Swiss sales desk were the strongest since late July, and twice the year-to-date average. Given current lofty prices, demand is understandably inconsistent - but the Indian market has sent a clear signal that it is prepared to raise its price threshold…Importantly for gold, scrap supply has not risen to significant levels, ensuring that this potential rally dampener is not playing a major role right now.”
That tells a big part of the story. India has become a lot less price sensitive than in the past and is aggressively buying gold on every pullback. That we know of, and the caveat is that we have no idea what China is really doing other than buying hand-over-fist, India is the largest importer/consumer of gold in the world. Turkey has resumed its importing in the last several months. Russia accumulates several tonnes every month. And the southeast Asian countries are voraciously accumulating (Bangladesh just bought 10 tonnes from the IMF).

JB's report also references that India's second largest gold importer sees the Oct-Dec imports potentially being 37% above that of last year's levels. Not only are the Indians hoovering up gold, they have acquired an avaricious desire for silver. Here's the article, worth reading India's Gold/Silver Vaccum

Also note that another aspect that distinguishes this year's market from the past is the dearth of scrap gold/silver flowing into the market as the price rises. JB has reported on this several times over the course of the last 6 months.

Another indicator which is followed closely by my friend and colleague, "Ranting" Andy, is the premiums being paid on Ebay for rolls of 1 oz silver eagles. Yesterday he commented on the fact that there are very few sell listings on Ebay right now compared to the past. And just today he reported that silver eagle rolls were being sold for $25-28/oz. That's a $4-7 premium over spot. Premiums like this on Ebay are indicative of growing scarcity of supply in the small-lot/retail market and the coin dealer network. This market is defined as the buyers who can only afford to buy silver in small amounts.

The point of all of this is that it would appear that the demand globally for physical gold and silver is such that, at this current moment, the price manipulators are struggling to keep the metals from grinding higher. Technically this is readily apparent in the action on the "tape." Every sell-off is met with buying and a subsequent high-volumn move higher. Higher lows and higher highs. Classic indication of a market that wants to go higher.

The charts of both Silver and Gold offer the telltale signs of a major short squeeze in progress. The constant dip buying and the continuous rise in price in an "overbought market" indicate that weak handed bears are cutting their loses and running on any dip in price that becomes available. This was VERY evident in Silver well as on the 17th and 15th of September as prices continue to grind higher despite the charts signal that these metal are overbought.

Short squeezes can reverse quickly. And with the open interest in these metals now approaching previous record highs traders must be on their guard for the usual collusive CRIMEX bid rigging that occurs monthly near options expiration... October is a Gold delivery month, and the Goons are far underwater. We can expect monumental efforts to "pull all bids" to force a price retreat.

Fundamentals are however making these bid rigging's by the CRIMEX goons much more difficult to pull off, let alone be successful. Supply is drying up fast in both Metals. The Dollar is flirting with disaster at the 80 level on the US Dollar Index. And investors are finally waking up to the need to have Precious Metals in the portfolios to protect their wealth.

The stresses now building in the CRIMEX, and the LBMA in London, are going to lead to one helluva an explosion upwards in Precious Metals prices. It is inevitable. When that is going to actually occur is antibody's guess, but there is no more "if" related to the possibility is going to happen.

Traders be prepared to act quickly. Any take down forthcoming will be swift, and possibly brutal. But the buying opportunity that will result will be glorious. My take down targets, should they occur:

Gold $1245

Silver $19.50

Investors, sit tight and be right...add to your portfolios.

More Forensic Evidence of Gold & Silver Price Manipulation[EXCELLENT]
By: Adrian Douglas
This is simply an outrage. The bad news is that for the last seven years those who have been expecting silver to outperform gold or to march to its own drum have been sorely disappointed and it was hard wired into the trading that they were not going to see a freely traded silver market. The good news is that from the way silver has traded in recent days it is decoupling from gold. It is breaking the algorithmic shackles placed on it by the manipulators. There is not enough data to see this definitively in the cross-plots yet but it should be evident very soon. The artificially low price that has resulted from the creation of false supply through the sale of paper silver via unallocated accounts as a substitute for real bullion has led to a growing shortage. This monumental scam is in the process of becoming unraveled as investors insist on taking delivery of real silver.

Forward sales of silver through the LBMA OTC London market are approximately 8.5 Billion ozs. This is almost all the entire global reserves of silver that are yet to be mined! But the silver miners who own the remaining reserves are unhedged, so who ever has sold 8.5 billion ozs of silver forward by inference does not own 8.5 billion ozs of silver. It is a naked short position of 11 years of global production.

The interesting question is what will the free market price of silver be? Gold itself is suppressed by many multiples of the current price and the false silver price is just a derivative of a false gold price. I have previously estimated that there is only one ounce of gold for every 45 ozs that have been sold. If a similar relationship exists in silver than the eventual long term free market price target could be more than $900/oz. This is just a wild estimate but I think it is safe to say it will be many multiples of the current outrageously suppressed price of $20.9/oz.

The Real Reason Behind Japan's Yen Intervention
Erwan Mahe
What is really behind Japan's decision to prop up the yen? This is the most important question now, which, for some strange reason, no one seems to be asking!

Some question whether or not the Japanese intervention was successful, whether it's the amount needed to prevent the yen from appreciating again, what the euro will do in this context and the consequences for the different asset classes. But no one has proposed a serious analysis of the reasons that pushed Japan to defend the ceiling of Y82/USD.

And yet, that is precisely the most important question because, as I will try to show, this intervention is no more than a monetary sock-puppet which aims to attack, without necessarily being conscious of it, the deflationary plague that has infected the Land of the Rising Sun for over a decade now.

[In conclusion, Japan's intervention on the dollar market will have one major consequence: it will increase the probability that the Fed will launch a QE2.]

Foreign Currency Wars Fuel Gold’s Rally to $1,300
Gary Dorsch
Speculation that the Fed would unleash QE-2 has already spearheaded a new round of currency wars across the globe. Central bankers in Brazil, China, Chile, Japan, Russia, South Korea, and Thailand have all stepped up their interventions by injecting large sums of paper into the currency markets while trying to prevent a precipitous decline in the value of the US-dollar versus their own currencies.

Anyone Notice Gold's Record?
By Patrick A. Heller, Numismatic News
On Sept. 20, the price of gold closed on the U.S. COMEX at $1,279 a troy ounce. Ignoring inflation, this is the highest gold close ever, as measured in U.S. dollars. Silver reached a 30-year high late last week.

Yet, if you were to conduct a poll on the street asking adults if they were aware that gold and silver recently traded at record prices, I would be surprised if more than 1 percent admitted knowing this information.

Gold and silver have been among the top performing financial assets over the past decade. Both have more than quadrupled in value during that time. If precious metals had been the stock of a major corporation, you can be sure that this news would be known far and wide.

Now, the relative lack of coverage of record gold and silver prices is a strong indicator that neither metal is anywhere near to reaching a peak. I don’t know the actual prices where gold and silver may someday top out, but I can give you a clue to the public behavior when this occurs. If the day comes when almost everyone you meet wants to talk about rising precious metals prices and people like taxi drivers, barbers and hairdressers, shoe shiners and strangers standing next to you in lines say that it’s a good time to buy gold and silver, that is when it will be time to sell. This is exactly the gold frenzy we saw in the January 1980 peak, and it signaled the top of that market cycle.

So, even though gold and silver are at record prices (if you ignore inflation) the public is not behaving anywhere close to a frenzy over precious metals. That is a sign that prices will shoot much higher before they hit their peak. It also means that, even though gold and silver prices have more than quadrupled in the past decade, it is not yet too late to jump into the market.

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