Wednesday, September 8, 2010

"Resistance Is Futile"

I now understand why the people I read do not post up or submit essays while they are on vacation...this is difficult at best. Finding the time just to read, and stay on top of the gyrations in the markets is near impossible. Ah, but it sure is relaxing...

The bullion banking goons are obviously making EVERY effort to stall Gold here near it's all time "intraday" high of 1265 back in mid June. As the Borg would say, "Resistance is futile." Gold is going higher, and the likelihood of the these goons blocking that move with any great effect is slim.

Silver has clearly broken resistance at 19.44, and has set it's sights on the March 2008 highs set just hours before Bear Stearns was wed to JPMorgan with the US Fed presiding over the ceremony. The fat round number of 20 will act as "normal resistance" as round numbers always do.

This "normal resistance", however, could prove futile as well because the goons have run out of Silver to meet demand. Physical Silver demand from India, China, and Russia has created a reservoir of fuel to push Silver up and through the price barrier at $20, and just ahead at $21.34.
To understand the lack of supply in the hands of the CRIMEX goons, Harvey Organ in his Daily Gold and Silver Report posted this explanation of metals delivery upon expiration of a CRIMEX futures contract:

A detailed account on how the silver and gold notices are sent out as explained by Adrain Douglas:

We talk of longs and shorts but when it comes to the current front month contract we should talk of buyers and sellers because at that point there must be a delivery process instigated. The current front month contract is SEP. Anybody who held contracts long going into what is known as "First Notice Day" (August 31 for SEP) is now OBLIGATED to take delivery and anybody holding contracts short is OBLIGATED to make delivery to the longs. (There can always be agreements to settle in cash but only if both parties agree but the obligation is for delivery). If you don't want to take delivery or you don't want to make delivery you have to roll or sell or cover your position BEFORE First Notice day.

The process is that if you are still holding a long contract on First Notice day you are "standing for delivery". You have to pay in full for your contract to your broker. The sellers (the shorts) must now issue "delivery notices" to inform the buyers that they will deliver bullion to them. Let's take SEP. On first notice day there were 3,002 contracts long and the same number short. But those holding the longs don't know who the holders of the 3002 short contracts are. So the delivery notice process is to match up the buyers with the sellers. Let's say you are holding 100 contracts. You need some one to tell you where your silver is going to come from. So the sellers of the 3,002 contracts have to issue a delivery notice to the clearing house to let them know they are a seller and they are ready to hand over the appropriate amount of silver. The sellers have 30 days to issue these notices. In theory the holders of 3,002 should ALL have received a delivery notice by the end of the 30 day notice period (Last Notice Day). These are assigned by the clearing house to the longs who are said to have "stopped" the notice while the seller has "issued" the notice. The delivery notice is sent by the clearing house to your broker. The clearing house assigns them in proportion to the holding. Once you have the delivery notice your broker will then transfer the money you have paid in full for your contract to the account of the seller at his broker. Now that he has confirmed his readiness to deliver and the money has been transferred you will then receive a "Warehouse receipt" with specific bar numbers and weights and with that you can collect your metal and take it away from the designated Comex depository. You can not take delivery with a "delivery notice" you have to pay the money and get the warehouse receipt.

Until the warehouse receipt has been issued the silver storage and insurance is paid by the seller. So they should want to start the process as soon as possible and issue delivery notices on the first notice day. Delaying issuing delivery notices indicates that the sellers don't have metal in the "registered inventory" of the Comex. If a delivery notice is issued and money is transferred the Warehouse receipt MUST be issued but if the seller doesn't have registered metal he can not enter specific weights and serial numbers on the warehouse receipt because he doesn't have any warehouse metal. So the seller delays issuing the delivery notice (which he can do because he has 30 days to issue). He then has to find some metal to put on the exchange or see if he can lease metal from an investor who has metal on the exchange or see if he can offer cash to buy a delivery notice from a long who has already received one. So a "dearth of delivery notices" means that the sellers don't have the bullion available because if they did the notices would be instantly issued on First Notice day. For example if we had seen 2600 delivery notices issued on first notice day this would have been bearish because it would mean there is plenty of bullion to meet deliveries and a large proportion is being offloaded to the buyers at the first opportunity.

Taken to the limit, if the seller FAILS to issue a delivery notice by last notice day then that is a "default". The seller is obligated to deliver and he has failed in his obligation to start the transfer of metal from him to a buyer.

It doesn't mean we will see a default this month but it suggests that the sellers are in trouble and scrambling for supply as signaled by the reluctance to issue delivery notices and the price action.

I have been predicting a Silver default on the CRIMEX in September for several weeks. This explanation by Adrian certainly supports my speculation that such a default may occur, but we also see that it will take some work on the part of those seeking delivery to push these Rat Bastids into default.

Also, while speculating on a possible Silver default on the CRIMEX in September, I made claim that based on the fall in the price of Silver following Bear Stearn's shotgun wedding to JPMorgan in March of 2008, Silver was at the crux of the world's financial system...or rather, an explosion in the price of Silver would signal an implosion in the world's financial system. That implosion was averted when JPMorgan obtained the massive short position Bear Stearn's had in Silver that was unwinding as the bottom was falling out from beneath the banking system here and in the UK in the Spring of 2008. By "capping" the gushing Silver well, so to speak, at 21 and forcing the price far below true value, JPMorgan and the Fed averted the implosion of the world financial system "temporarily" in the Spring of 2008.

Today, with Silver having clawed it's way back to within a whisper of that 2008 peak, could the world financial system once again be on the verge of collapse because of an explosion in the price of Silver?

Gold & Silver Trading Biggest Scam in History Financial Armageddon Could Result[MUST READ]
By Tom Pappalardo their infinite wisdom the commodities watchdog the CFTC decides to have a meeting with most of the key players in commodities trading but exclude Maguire from attending. At this meeting a secret is revealed that could easily tear apart the fabric of our barely functional financial system. The secret is that for every 100 ounces of gold and for every 100 ounces of silver traded on paper there is only one actual ounce of gold and one actual once of silver to back up these trades. Given that yearly there is trillions of gold and silver traded on paper this is the literally biggest scam in the history of scams. Now the guy who let this cat out of the bag didn't think it was a big deal using the logic that as long as the buyer was paid the value of his purchase at the time he wants to sell it doesn't matter if his purchase was backed up by an actual commodity. This cavalier attitude does seem to reflect the mind set of people working in our financial system that everything is smoke and mirrors except the money being exchanged.

It is quite possible and even probable that someone with enough financial resources and the will to do it could turn our financial system upside down and make an enormous profit from it. This person would have to have no loyalty to western currency and the financial well being of western countries. So let's assume a very wealthy Asian wants to take a shot at getting into Bill Gates's wealth status. From what I gather the game plan would be a simple one. That is buy enormous amounts of what I like to call the paper version of silver and gold and buy even more actual silver and gold. Then start a run on Comex by demanding to replace your paper with actual gold and silver. The next part is for me admittedly a bit fuzzy so my play by play of this could be off a bit but I believe the general idea fits the situation. Given that commodities' trading is a relatively small community, if the player of this scenario has purchased enough of these metals and starts demanding their paper be replaced with the real thing, their demands should cut fairly deep into Comex reserves and then the rumor mill will kick in big time. It shouldn't take long for the word to get out that there is more paper of gold and silver out than actual gold and silver exists to back it up. Once this gets on the street it should not take long for the Comex reserves to get wiped out. Then financial chaos is right around the corner. However as chaos swirls around them those that possess actual silver and gold will see their investment shoot up perhaps skyrocket in value. I believe a conservative estimate would be to rise anywhere from 2 to 4 times in value. However given the volatility of anything financial these days I fully expect it to zoom to 5 to 10 times in value.

That's the good news if you are sitting on actual gold and silver but the bad news is really really really bad because the basis for all valuation including the stock market, the dollar the euro etc. etc. is gold and silver. Remove silver and gold from the valuation process and as one financial analyst recently told me the stock market probably drops to 25 percent of its value the dollar probably loses 30 percent of its value and so on. These figures are guesswork and possibly conservative but what is not a guess is that the value of stocks, the dollar, the euro and more will lose big chunks of their value enough to throw our fragile financial system into chaos. The value of silver and gold are bedrocks for building the valuation of currencies the stock market and other financial entities. Remove a bedrock and the house comes tumbling down or at least a good part of it probably most of it.

Trading Silver is always a risky business...and it gets riskier by the day if you are trying to short the dips going forward from here. Dips in the price of Silver should now be bought aggressively into support. Investors ...continue to "sit tight, and be right".

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