Tuesday, January 11, 2011

Demand Trumps Supply As Paper Goes Up In Smoke

Last night Harvey Organ, in his Daily Gold & Silver Report, posted and commented on an open letter to Blythe Masters, the commandant of JPMorgan's commodity barracks at the CRIMEX. It would appear that the tables are being turned on JPMorgan's CRIMEX criminals to the benefit of those possessing physical Silver:

Many of you have commented to me on an open letter to Blythe Masters, the commander of commodities for JPMorgan.

It seems that hedge funds are now understanding what is going on in silver and they are buying the March contracts and they will stand for delivery plucking down the millions of dollars for those silver contracts. They intend to wait until the CME offers them 30% premium for cash settlement and then they will purchase the May contract with their proceeds. They will continue until the comex defaults.

They will let the sovereign wealth guy take the real physical to their shores. This is the background to the silver bears and here is the open letter to Bylthe Masters of JPMorgan:


This is what I am hearing from your former traders (who made "very interesting career decisions"). Well it seem that they are on to a new scheme to corner the Comex and drive the price of silver up $10 to $15 dollars in a matter of weeks.

The strategy is as follows. We know that Comex only has 105 million ounces of silver of which only 50 million ounces are availabe for delivery. (I personally don't believe the Comex numbers are anywhere near that high, but that is neither here nor there for now.) Well, all it would take is 10,000 contracts on the Comex to buy up all the "available silver" at the Comex and 20,000 contracts to deplete it completely. The current front month March OI is north of 78,000.

Watch the OI closely. Blythe's former traders are advising major hedgefunds and billionaire investors to buy up as many contracts as possible as March 1 approaches and deposit the cash needed to stand for delivery for the month of March. The purpose is not necessarily to bust the Comex but to force the Comex to pay a premium (some as much as 30 percent) for cash settlement. Think about it. If a group of hedgefund gets together and bankroll $1 billion, they can buy more than 30 million ounces of silver. Of course, the contract sellers like The Morgue cant deliver the silver so a cash settlement is the only recourse. So what's wrong with $200 million in profit on a $1 billion investment that takes less than 4 weeks total?

Guess what Blythe? Your former traders are advising everyone they know to put on this trade come the first week of February. Is this what happened in the Decemeber contracts? Is this why silver went from $22 on September 30 to $29 by December 1? How much do you think silver will spike in February as we approach March 1? The traders think silver will be north of $45. Heck it went over $9 as we approached December and everyone who got a pay off in terms of a premium cash settlement will be back for more. And they are all gonna be bringing friends to partake in the bounty.

Your former traders are telling everyone who would listen that all they need to do is purchase a huge amount of March contracts near the end of February and stand for delivery and they will all make 20 percent in a matter of days. Is this what you are hearing Blythe? If so, shouldnt you let the price of silver move up so that you can get some physical to deliver before March 1?

Couple this "notion" with reports that demand for the Precious Metals in Asia are beginning to overwhelm supply, and we may have the makings for the explosion in prices I alluded to here yesterday:

Physical Gold Demand Exceeds Current Availability -Perth Mint
SINGAPORE, Jan 11, 2011 (Dow Jones Commodities News via Comtex) -- Demand for gold bullion from Australia's Perth Mint has been unrelenting since gold's price dropped below $1,400 an ounce, a senior Mint official said Tuesday.

"At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, Treasurer of the Perth Mint, one of the world's largest gold refiners and distributors.

"Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires.

One-kilogram bars are the most popular trading instrument in Asia's physical market.

Demand doesn't appear to be directly related to the upcoming Chinese Lunar New Year, with buying also coming from in from India, Moffatt said.

"The way I see it at this point, it is because of the current correction in the price rather than anything else," he said.


Premiums for gold bars jump to 2-year high, Chinese buy
By Lewa Pardomuan and Rujun Shen
(Reuters) - Premiums for gold bars jumped to their highest in two years on Tuesday as worries about inflation drove investors in China, the second-largest consumer of the precious metal after India, to bullion ahead of the Lunar New Year.

China's inflation raced to a 28-month high of 5.1 percent in November, and it's not clear whether policy steps the government is taking will calm prices, benefiting gold which is traditionally seen as a store of value in times of uncertainty.

Gold bars were offered at premiums of $3 an ounce to the spot London price in Hong Kong, physical dealers said, matching a similar level seen in late 2008. Refiners were running out of stocks and some even quoted premiums as high as $6.

"I don't have any gold," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. "Premiums are very high. Some say they have no stocks on hand."

In Singapore, premiums for gold bars were at their highest in nearly 10 months at between 70 and 80 cents as stocks tightened and dealers struggled to meet inquiries not only from China but also from Thailand and India.

"There's a sudden surge in demand. Demand from China is very good and they are paying very high premiums. Refiners can't meet the demand," said a dealer in Singapore.


James Turk notes that the "game has changed" at the CRIMEX:

When asked about the fact that trading in the silver market has changed in recent months Turk commented, “One other indicator that the game has changed is that Comex open interest actually increased on Wednesday’s big takedown. What this means is that all of the silver shorts that are being put on are being met by new buyers.”

“In other words there has been no net long liquidation, which one would expect on a big price drop. The bottom line is that it looks like new buyers are willing to take on the silver shorts, which is very bullish.

Every which way you look. Gold and Silver are now at a crossroads: Paper versus physical. As it each day passes it is becoming clearer that the paper promises on the CRIMEX are worthless, and the fractional scheme used to "determine the price" of the Precious Metals has been exposed as an empty promise to be covered up with a "premium payment" in lieu of physical delivery of metal that does not exist.

The price of all the precious Metals will only rise going forward from here.

Bullion Management Group CEO Nick Barisheff's outlook for gold in the new year cites three key factors: central bank purchases, movement away from the U.S. dollar, and demand from China. His commentary below is exceptional reading:

Gold Outlook 2011: Irreversible Upward Pressures And The China Effect
Nick Barisheff, Bullion Management Group
As safe haven demand accelerates, there will be a transition from the $200 trillion of financial assets to about the $3 trillion of above ground gold bullion. Of the $3 trillion of above ground gold bullion about half is owned by central banks and half is privately held. The privately held gold is largely held by the world’s richest families and is not for sale at any price. The central banks are now net buyers. If the world’s pension funds and hedge funds moved only five percent of their assets into gold, which these days seems quite conservative, gold would trade above $5,000.

So in conclusion, I will say that both mid-term and long term trends are in place to ensure gold and silver will continue rising through 2011 and well beyond. For those of you who are looking for a prediction...last year at the Empire Club, I forecast that the price of gold to be between $1300 and $1500 at the end of 2010. We ended up right in the middle at $1405. For 2011, I recently forecast it may climb to $1,700 to $2000 per ounce based on the last five years performance and the factors I have presented today.

I encourage you to follow the example of those who know how devastating a currency crisis can be and buy gold to protect wealth and not treat it as speculation. I’d like to close with a quotation that seems to put all of this into perspective. It comes from Norm Franz’s appropriately titled book, Money and Wealth in the New Millennium. He said, "Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves."


Obama says economy moving in right direction
Erica Werner, Associated Press
WASHINGTON (AP) -- President Barack Obama sees a clear and encouraging trend on the economy, citing fresh reports showing private-sector job growth and lower unemployment.

He used his weekly radio and Internet address Saturday to discuss the latest economic news and press for bipartisan action in the newly divided Congress on measures to spur growth. Obama presented the December jobs report in a positive light even though it fell short of what economists had been looking for and even though the drop in unemployment came partly because some people stopped looking for work.

The private sector added 103,000 new jobs in December and the unemployment rate fell from 9.8 percent to 9.4 percent.

"Now, we know that these numbers can bounce around from month to month. But the trend is clear," said the president, whose 2012 re-election prospects may well hinge on the condition of the economy.

"We saw 12 straight months of private sector job growth -- the first time that's been true since 2006," he said. The economy added 1.3 million jobs last year. And each quarter was stronger than the last, which means the pace of hiring is picking up, he said.

Obama attributed increasingly optimistic economic forecasts in part to the tax cut deal he negotiated last month with Republicans to extend Bush-era tax rates for all, along with unemployment benefits, a payroll tax cut and other tax breaks.


U.S. Propaganda Ministers Pumping Out Jobs Recovery Propaganda
By: James_Quinn
The storyline being sold to the American public by the White House and the corporate mainstream media is that the economy is growing, jobs are being created, corporations are generating record profits, consumers are spending and all will be well in 2011. The 2% payroll tax cut, stolen from future generations to be spent in 2011, will jumpstart a sound economic recovery. Joseph Goebbels would be proud.

It was another wise old man named Ben Franklin who captured the essence of what those in control are peddling:

“Half a truth is often a great lie.”

You can keep kicking the can down the road, ...but what if the road is a Dead End? Gold and Silver represent the TRUTH. And that truth is a simple one: America, it's the End Of The Road.

Geithner Says U.S. Insolvent
By: Michael S. Rozeff
The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury.

Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt. In his words:

Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States."

He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.

After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.

One fine day, there will be a discontinuity. There will be a many-sigma event. There will be a fiscal earthquake or a market earthquake or some combination of both. This will not be a pleasant experience for Americans, but those in government have little reason to fear it. They can label it a crisis, as if we do not already have a crisis. They can use such a "crisis" as the excuse for more radical government action. The government can demand even more power or simply exercise it, even if the results are to make matters worse for Americans.

For governments, crises are opportunities, a fact well known among analysts of government. This fact is one reason why governments postpone taking actions to remedy what appear to the rest of us to be bad situations.

Unfortunately, the fact that governments batten on crises and see them as opportunities is not well known among the general population which still looks to government to handle crises.

Since the insolvency of the U.S. is a fact and a fact that implies hard times ahead for anyone who depends on government, it is prudent to take measures to make oneself as independent of government as one possibly can.

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