Thursday, February 24, 2011

Magically Delicious!

So, at 2:14PM the thinness of Globex electronic trading mind you...the bottom suddenly falls out from under the Silver and Gold markets. WTF? Gold and Silver tank at 2:14PM, but Platinum and Palladium...both of which have been horse whipped the past two trading days...remain relatively flat.

Oh, Muammar Gaddafi has been shot. No wait, he hasn't...just a rumor. Priceless!

"Hey, let's tell anybody who'll listen that Gaddafi has been shot...that'll save the equity markets, and spook the Precious Metals investors at the same time."

Sadly, many weak handed longs fell for this claptrap from the all too gullible news media, and ran from the Precious Metals markets with their tails between their legs. Has ANYTHING changed? NO!

Why is there no light shining on the falling US Dollar as the geopolitical top in the middle east spins out of control? Isn't the US Dollar the go to safe haven in times of world crisis? NOT ANYMORE apparently. The Dollar was down today, treasuries were down today. Unrest in the middle east was up today. And the Precious Metals get taken to the woodshed? Does this make a damn bit of sense?

Oh, options expiration...that's right. Open Interest in the March Silver futures is a bit too high for our naked CRIMEX bullion bankers. Bahavioral Finance 101. Isn't America great!

So $37 Silver now looks unlikely by March 1st. Not too worry. A weekly close above 32.64 tomorrow will put silver at yet another 30 year weekly high close.

It continues to amuse me, the financial news media's sudden obsession with Inflation because of the rapid rise in the price of Oil. As if high Oil prices are the sole reason Inflation is a threat to the global economy. Inflation is not a is a fact, a reality that has far less to do with the recent rapid rise in the price of Oil and a whole lot to do with the smoking hot printing presses in the basement of the US Federal Reserve.

The Federal Reserve Is Causing Turmoil Abroad
In accounts of the political unrest sweeping through the Middle East, one factor, inflation, deserves more attention. Nothing can be more demoralizing to people at the low end of the income scale—where great masses in that region reside—than increases in the cost of basic necessities like food and fuel. It brings them out into the streets to protest government policies, especially in places where mass protests are the only means available to shake the existing power structure.

The consumer-price index in Egypt rose to more than 18% annually in 2009 from 5% in 2006, a more normal year. In Iran, the rate went to 25% in 2009 from 13% in 2006. In both cases the rate subsided in 2010 but remained in double digits.

Egyptians were able to overthrow the dictatorial Hosni Mubarak. Their efforts to fashion a more responsive regime may or may not succeed. Iranians are taking far greater risks in tackling the vicious Revolutionary Guards to try to unseat the ruling ayatollahs.

Probably few of the protesters in the streets connect their economic travail to Washington. But central bankers do. They complain, most recently at last week's G-20 meeting in Paris, that the U.S. is exporting inflation.

China and India blame the U.S. Federal Reserve for their difficulties in maintaining stable prices. The International Monetary Fund and the United Nations, always responsive to the complaints of developing nations, are suggesting alternatives to the dollar as the pre-eminent international currency. The IMF managing director, Dominique Strauss-Kahn, has proposed replacement of the dollar with IMF special drawing rights, or SDRs, a unit of account fashioned from a basket of currencies that is made available to the foreign currency reserves of central banks.

The turmoil in Iran is reminiscent of another period when the Fed was on an inflationary binge, the late 1970s.

About the only one failing to acknowledge a problem seems to be the man most responsible, Federal Reserve Chairman Ben Bernanke. In a recent question-and-answer session at the National Press Club in Washington, the chairman said it was "unfair" to accuse the Fed of exporting inflation. Other nations, he said, have the same tools the Fed has for controlling inflation.

Well, not quite. Consider, for example, that much of world trade, particularly in basic commodities like food grains and oil, is denominated in U.S. dollars. When the Fed floods the world with dollars, the dollar price of commodities goes up, and this affects market prices generally, particularly in poor countries that are heavily import-dependent. Export-dependent nations like China try to maintain exchange-rate stability by inflating their own currencies to buy up dollars.

Yes, put two and two together, and it's clear that the US Federal Reserve is at the root of the present turmoil in the mid-east. They can deny it all they want, but actions speak louder than words. The US is exporting inflation, and it is only a matter of time before it begins to import that inflation as the flood of US Dollars that has been unleashed upon the globe begin to find there way home to roost.

The Silver market bore the brunt of this afternoon's Globex trading nonsense. This was clearly a raid by the bullion banks in an effort to shake some longs off the tree, and collapse the massive Open Interest numbers in the March Silver futures. Trader Dan Norcini summed up this raid concisely with this 4-hour chart of Silver pictured here:

It looks as though Wynter Benton's gang is going to have to put up their cash and demand delivery, or shut up, as the likelihood of a move in Silver to $37 the ounce by March 1st appears now to be remote. Hey, there is always the May delivery month to go after...

Never-the-less, a major supply squeeze in CRIMEX Silver is developing by the day. Efforts by the criminal bullion banks to hide this obvious fact from the public are ongoing. But word is spreading faster than they can sell paper Silver: "There is no more Silver!"

Huge COMEX Silver Supply Squeeze Developing
By Patrick A. Heller
February 28 is the first day of notice for delivery of the March contracts. Normally, parties not wanting delivery would have closed out their contract long before then. At the COMEX close on February 22, there were still 50,848 open March 2011 silver contracts, representing a potential liability to deliver 254.24 million ounces of silver by the end of March. The COMEX registered silver inventories available to cover deliveries totaled only 41.91 million ounces. Even including customer inventories that are stored at the COMEX, which are only eligible to deliver against COMEX contracts if the owners so choose (and most do not), the total is only 102.35 million ounces.

During COMEX trading hours on February 22, there were 124,000 March 2011 silver contracts traded—almost 2-1/2 times the number of open contracts! This is almost unprecedented volatility!

Here’s what I suspect happened to cause such a huge trading volume that day. The price of silver had been rising significantly for the past several trading days, reaching successive 31-year high price records (ignoring inflation). The US markets were closed on February 21 for Presidents’ Day. In trading in Asian and European markets early on February 22, the price of silver passed $34.00. If this price were maintained, then a large number of short sellers would get margin calls when the COMEX market opened on February 22. That could have forced leveraged short sellers to put up additional cash, physical silver, or to buy long contracts to close out their short positions. Any of these actions would likely have the effect of pushing silver prices up even higher.

It appears that a massive effort was mounted to drive drown COMEX silver prices on February 22 in order to avoid or reduce the margin calls to leveraged short sellers. This strategy was successful to a degree in that the price of silver dropped to just below $33.00 at one point on the COMEX. The temporary drop encouraged some owners of long positions to liquidate and take profits, further helping to push the price down.

However, the price suppression effort was not successful at pushing down the silver price below the February 18 COMEX close. Once it became clear that the manipulation was losing steam, buyers jumped back into the market on February 23. During COMEX trading hours, the price of silver reached as high as $33.75. Trading was extremely volatile, with 1% swings up and down occurring within a matter of minutes.

Several hedge funds, seeing how easy it was to make a short-term profit in silver squeezing COMEX short sellers last November and December, are likely to repeat the tactic with the maturing March contracts—but on a greater scale.

If the price of silver from now through the end of March were to rise by 30% again, that would put the price around $43. But, if there is a larger supply squeeze underway, the price could go much higher.

Please bear in mind that our crooked CRIMEX traders have until the end of March 2011 to make delivery on delivery "demands" posted on Monday, February 28. The further into the month those standing for March delivery must wait to be served, the more likely we are to see a powerful rise in price as these naked bankers go in search of metal to accommodate those standing for delivery. Keep a close eye on the number of ounces of Silver leaving the SLV ETF as the month of March progresses, as this could signal how dire the global supply of Silver may actually be.

Royal Canadian Mint Now Saying It’s Difficult Securing Silver
Eric King,
With continued reports of booming sales and tightness in the silver market, today King World News interviewed Dave Madge director of sales at the Royal Canadian Mint. When asked if the RCM is having trouble acquiring silver Madge responded, “Demand right now for silver is through the roof and it shows no signs of slowing at this point. Sourcing silver is becoming very difficult. We are competing with a great many players when it comes to purchasing silver and many of these players are bidding the price higher.”

The Open Interest numbers to be revealed Monday as those standing for delivery come forward will be quite revealing. It will be interesting to see where the FOAM group stands in this que. Consider this afternoon a "Blue Light Special" on Silver. Despite the drop, Silver remains above it's current uptrendline. Support rests at $32.25 / $31.75 / $31.25.

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