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Archive for the ‘Silver’ Category

Why gold and silver prices will more than double again even from current “expensive” levels

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by J. S. Kim
SmartknowledgeU
Posted August 4, 2011

THOSE THAT ARE  FAMILIAR WITH MY WRITINGS ABOUT GOLD AND SILVER for the last six years know that I have said gold was cheap at $500, $600, $700, $800, $1000 and $1,200 a troy ounce and know that I have said silver was cheap at $11, $12, $14, $16, $25, and $30 a troy ounce.

Today, I will reiterate that gold is still cheap in the $1500 to $1600 range and that silver is still cheap in the $40 range because the largest movements in gold and silver prices as well as gold and silver mining stocks have still not happened and will materialize over the next four to five years.

Again, this doesn’t mean that gold and silver can’t or won’t correct or consolidate again in the future because both PMs always do. I have written publicly so much about this topic over the years (and even in much greater depth to my subscribing members) because I truly believe it is insanity not to participate in one of the best ways to invest in gold and silver today – the ownership of physical gold and physical silver.

Hundreds of millions of investors worldwide, influenced by the propaganda of Western bankers, have consciously made poor decisions not to own a single ounce of physical gold and physical silver today. One of the first realities an investor must understand about the gold and silver market is that the Economics 101 concept of price being set by physical supply and physical demand is an utter lie. In today’s world of banking and financial industry lies, the price of gold and silver are NOT set by the physical demand and physical supply of either of these metals, but rather by the artificial supply and demand of paper contracts predominantly backed by no physical metal.

By now, the following facts are very well known by seasoned physical gold and physical silver buyers but likely still unknown to the average investor worldwide. A CPM Group document released in the year 2000 stated, “With the start of the London Bullion Market Association’s release of monthly trading data, the market has become aware that 100 times more gold and silver trade hands each year, just in the major markets, than is produced or used. Some market participants have wondered aloud how 10 billion ounces of gold could trade via the major markets each year, compared to 120 million ounces of total supply and demand, while roughly 100 billion ounces of silver change hands, compared to around 628 million ounces of new supply.”

Thus, one can see that the fraud perpetrated by bullion banks in the silver futures market exceeds even the fraud they commit in the gold futures markets. Take the figures provided above, and a quick calculation reveals that bankers were trading nearly 160 times of paper ounces of silver every year than the annual physical supply of silver mined from the earth.

However, break down these numbers even more and the fraud becomes even more astounding. While in 2000, about 628 million ounces of new supply of physical silver came to market, in 2010, mine production of new silver supply was slightly higher at 735.9 million ounces. Net government sales accounted for another 44.8 million ounces, old silver scrap provided an additional 215 million ounces, and producer hedging accounted for the final 61.1 million ounces. Thus a total annual supply of roughly 1 billion ounces of silver existed in 2010. However, industrial usage, photography and jewelry used up nearly 78% of the one billion ounces of physical silver supply in 2010 and left less than 100 million ounces available for minting in the form of silver coins. (Source: The Silver Institute).

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Gold and silver: We were right – they were wrong

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by Brandon Smith of Alt Market
Posted July 25, 2011

ONLY NOW, AFTER THREE YEARS OF ROLLER COASTER MARKETS, EPIC DEBATES, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway.

Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse.

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. [And he a Nobel Prize winner!] Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt ceiling debate a final warning sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”.

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma. Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+.

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions).

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

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The Fed wages its war on gold on behalf of fraudulent paper money

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by Dave in Denver
Posted June 17, 2011

http://truthingold.blogspot.com

Question:   If you were advising the Federal Reserve, what would you say are the unsolved economic problems of the day?
Milton Friedman:  One unsolved economic problem of the day is how to get rid of the Federal Reserve. –January 1996 interview on NPR

RON PAUL HAS BEEN AGGRESSIVELY SEEKING AN OFFICIAL, INDEPENDENT audit of the gold that is supposedly being held at Ft. Knox on behalf of all U.S. citizens.  Such an audit has not taken place since Eisenhower was the President? What gives there?  In the face of mounting criticism and citizen requests for this audit, why does the Treasury ignore this issue?  What does it have to hide?

At this point, anyone who looks at the Treasury financial statements is placing their “full faith” in the belief that the Government is honestly reporting its numbers. Does anyone really believe that the economic numbers the Government publishes on a weekly basis? Everyone believe that the Government is telling truth about why we’re spending trillions on wars in Iraq, Afghanistan and now Libya?

The Fed has been spending millions to fight all of the recent Freedom Of Information Act requests, which have been filed so that we can see what the Fed is doing secretly with our money – especially now that most of what Fed does has a guarantee on it by the Treasury. Most notably for me is the GATA request that we get to see what kinds of transactions the Fed has been in engaging in with OUR gold. It is highly likely that the 8100 tonne book entry on the Treasury balance sheet is just another electronic entry on a piece of paper. How about we get to take a look at the actual physical gold that is supposedly represented by that electronic entry? How about we get to see if that gold has any legal encrumbrances attached to it like Federal Reserve gold swaps and leasing transactions?

An audit needs to be done and it needs to be done under the full, transparent scrutiny of all U.S. citizens who would like to watch it happen. And of even more immediate concern, at least to me, is the drain on physical gold and silver occurring at the Comex. It’s kind of spooky the way unencumbered physical silver is being, and has been, “sucked” out of the system (Comex, SLV) over the past couple months. As much as I want to see Ron Paul force an open audit of Ft. Knox, I’d love to see an open audit of the Comex. I believe the Comex problem is the Achilles Heel of this whole mess.

It wouldn’t take much to stage a run on the Comex. And when that occurs, if it turns out that the Comex is unable to make deliveries of actual physical metal and instead changes its rules and defers to cash settlement of contracts, that’s when all hell will break loose. I would then expect that GLD and SLV will head south quickly in price while the global spot price of gold and silver head for the moon. The slight inversion in silver futures will go nearly verticle and the dollar index will go into a serious tail-spin. But how about we just start with a simple audit of Ft. Knox?

Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: ‘Account overdrawn.’  (famous speech by Francisco D’Anconia in “Atlas Shrugged”)

Green Shoots, Exit Strategy, No QE3

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by Jim Willie, CB
Posted originally May 25, 2011

www.GoldenJackass.com

An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold.

IT IS NOT CLEAR WHETHER THE AMERICAN FINANCIAL COMMUNITY HAS THE ABILITY to observe and conclude that the US Federal Reserve is adrift and relies upon deception as policy in revealing its directions. Its position is to hold steady, inflate to oblivion, support financial markets in heavy volume secretly, and lie about leaving its trapped policy corner. The USFed is a propaganda machine that deals with ruses as a substitute for transparent policy discussion in the public forum. Two years ago the ruse disseminated widely was the Green Shoots of an economic recovery that had no basis at all. The scorched earth showed more evidence of ruin than fresh business creation, at a time when the grotesque insolvency was spreading like a disease throughout the entire US financial system.

On one hand the USFed was busy operating numerous credit and liquidity facilities in order to prevent systemic seizure, busily redeeming the Wall Street toxic bonds at the highest possible prices. On the other hand they were talking about Green Shoots, as insolvency spread across the big banks to the household equity. They lost their credibility in the process. They have lost it completely after two full years of 0% rates, the ultimate in central bank shame. The Jackass dismissed the Green Shoots ploy quickly, regularly, and correctly, as whatever little shoots showing were probably mistaken for some toxic green runoff from a nearby financial office of a corporation.

One year ago the ruse disseminated widely was the Exit Strategy from the 0% monetary corner that had no basis at all. The USFed was well aware that 0% as an official rate was untenable, dangerous, and would produce different maladies. They promoted a phony story of a Jobless Recovery, an utter contradiction and bad joke played upon the American workers. To make the cost of money free encourages speculation in the most general systemic sense. The primary gold market fuel is the price of money being far below the current price inflation rate. Anyone who believes the CPI is actually 2% to 3% is braindead. Even USGovt statistics list the numerous categories with strong price increases, yet the overall CPI is lower than all components. Power to adjustments.

My description has been that the USFed is stuck in the 0% policy corner. The corner has been described since the start of 2009 when it was instituted. If the USFed raises rates, they torpedo the housing market left as derelict adrift at sea, listing badly, taking on more water, weighed down by the inventory burden. Given that the USEconomy was so dependent upon housing for three or four years, and that dependence has turned to deep vulnerability, they cannot hike interest rates and exit the policy corner without sending home prices into a fast acceleration downward. They will bottom out 20% to 30% below construction costs.

Worse, a rate hike would trigger a credit derivative series of explosions from the Interest Rate Swaps. These queer devices hold down long-term rates far below the prevailing price inflation level. That is why the USFed Chairman Bernanke insists on an undying focus of the inflation expectations, the USTreasury Bond yields and TIPS yields (both of which they purchase in monetization operations). They control them using IRSwaps. If the USFed holds steady, as they must, they generate significant rising costs for everything from food to energy to metals to cotton. Even scraps (paper, metal, plastics) are rising in price. Even the toys sector must contend with fast rising prices in time for the Christmas season. See the Li & Fund effect, also called Foxconn in China. They also make i-Pods.

The current path lifts the cost structure to such a level that both businesses and households are experiencing a pinch. The fast collapse of the Philly Fed index is testament to the pinch. Shelves at major retail chains are experiencing a slow decline in volume. It is called the profit squeeze. Business profit margins are shrinking, even as household discretionary spending funds are shrinking. The Jackass dismissed the Exit Strategy ploy quickly, regularly, and correctly, as the monetary policy corner was described consistently and clearly. It was a bluff, but a very bad one. The savvy analysts did not fall for it, since the consequences of ending the 0% rate would be like turning the lights off for the entire USEconomy.

THE BIG RUSE & THE BIG BIND

The USFed is caught in a gigantic bind, cannot raise rates, and must endure the global price inflation problem that festers on the cost side of the equation. They busily deny their role in producing price inflation from debt monetization coupled with 0% rates. They lost more credibility in the process. They are the object of global anger and ridicule. They must hope that the eventual rate hike will keep the speculative juices from overflowing. Gold & Silver do not rest, as they brush aside such a plain ruse of a threatened rate hike. The sovereign bond situation in the entire Western World (with Japan adopted into the fold) is horrendous and worsening. The government deficits are out of control. Few analysts prefer to point out how the foundation for the global monetary system is supported by the gaggle of crippled sovereign bonds. To be sure, the Southern Europe debt is in a ruined state. But the debt of the United States is no better and the same for England, when viewed as annual debt ratio to total budget, when viewed as cumulative debt ratio to GDP (economic size). The graph below shows those two dimensions, and how the United States and United Kingdom are positioned among Spain, Ireland, and Greece, apart from the mass of nations. In the full year since this graph was produced, the US debt situation has grown worse. The reckless socialists seem prudent.

The extended PIIGS pen of nations, fully ruined and recognized widely as ruined, do not have the tools to prevent rising bond yields. They uniformly rise versus the German Bund benchmark. Their differentiation actually permits the Euro currency to trade more freely, even to rise. The Chinese were responsible for much of the Euro rise from 130 to 150, as they dumped USTBonds in favor of discounted PIGS debt, later to be converted into shopping malls, commercial buildings, and factories. Somehow, that factor did not appear on the US news networks. The USGovt has tools, wondrous electronic tools, which enable them at zero cost to fight off the barbarians at the gate. It is the Printing Pre$$. Unfortunately, its backfire is a powerful rising cost structure that has shown visibly in the high food & gasoline costs. So hardly at zero cost!! A year ago, the USFed folded like a cheap lawn chair. Instead of exiting their 0% corner, and implementing the advertised Exit Strategy, they went one step deeper down the rathole. That was exactly the Jackass forecast, QE to follow 0% stuck. They combined the ZIRP with the QE. They added the debt monetization scourge of Quantitative Easing to the already reckless no cost money of the Zero Interest Rate Policy.

PURE QE3 DECEPTION

The current ruse disseminated widely is the End of QE2 and no continuation of Quantitative Easing (aka debt monetization). The ruse has no basis at all in reality. The USFed would have to find buyers for the USTreasury Bonds. They have been buying 75% to 80% of USTBonds since the end of 2010. They have been supporting the US housing market by purchasing mortgage bonds. In other words, they have been preventing the more complete implosion of the mortgage market. It is one thing for the USTBond to go No Bid. The USFed has the direct responsibility to cover that up quickly and proclaim every USTreasury auction a rip-roaring success with great 2.3 bid to cover ratio. But it is another matter altogether to permit the mortgage rates to fly upward from lack of bids. If mortgage rates move to 7% or the adjustable ARM mortgages reset 3% to 4% higher suddenly, then housing prices will descend by another 10% to 15% quickly, as in with lightning speed.

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May 2011: Prices of silver and other commodities herald a new crisis

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by Maurizio d’Orlando
from AsiaNews.It
Posted May 9th, 2011

AFTER RISING FOR YEARS, THE PRICE OF SILVER, oil and other commodities has collapsed. This is not a good sign. A new crisis is in the making. In addition to its financial aspects, it involved public debt and an endless depression or hyperinflation. All this is connected to the price of gold and silver, which has been controlled for centuries by various groups, today by Goldman Sachs and JP Morgan.

Milan (AsiaNews) – The recent instability in world markets, especially the commodity markets that are so important for Chinese and Indian manufacturing, appears contradictory, even incomprehensible, given in its scope. Suddenly, the world economy appears to have completely changed. Fear of inflation now looks almost out of place. In one day, crude oil dropped by 10 per cent. Rubber, minerals and other raw materials declined from their historic highs. Stocks across Asia are starting to show signs of weakness and the yen lost ground. Silver also took a nosedive, plunging from US$ 50 an ounce to US$ 35 (later bouncing back a bit). What is behind this sudden volatility?

The end of the War on Terror

True, Bin Laden is dead and so is the so-called War on Terror. A collective sigh of relief could be heard across the globe as a clash of civilisation between secularists and Islamists appeared to be averted. One might suppose that this would be an element of economic normalisation and a change in direction for markets.

In fact, concern over international politics seems to have shot up, not gone down. Tensions in Arab nations continue, as does the War in Libya (despite rumours about an imminent truce), which Syria and other Arab autocracies and monarchies, Gulf included, are likely to follow soon. In other words, political factors at best cancel each other out.

From an economic point of view, no single factor seems to have changed for the better to justify a rosier picture, at least in terms of dreaded higher interest rates, and the possible collapse of financial (the bond and partially the stock) markets.

Despite all the efforts, economic data do not suggest any drastic change in the picture; the same is true for the public debt in Europe, United States and Japan. No real improvement seems to be forthcoming from China as far as real inflation and the strength of the financial system are concerned. Unemployment remains high in the West and so on.

The slight dip in US unemployment is certainly no major breakthrough since it is partly a function of the number of people who are so discouraged about finding a job that they have actually stopped looking for work. Economic growth is at best anaemic, at least in Western nations.

Despite the huge rescue package for the US banking system undertaken in the last few months of the Bush administration, which Obama continued and boosted (at an estimated cost of US$ 24 trillion) and which was imitated by almost everyone else (China, Great Britain, Germany, France, Belgium, Netherlands, Ireland, etc.), despite the Obama “stimulus” plan in the first months of the new US administration (also imitated by China), and despite the Quantitative Easing 2 (QE2) of October 2010 by the chairman of the Federal Reserve, Ben Bernanke, good results are scarce.

What is clear is that fears over a new global crisis have not decreased but actually increased. As in 2008, the crux of the matter is financial. What is even more worrisome is the fact that the problem is no longer at the level of the banking system, but rather at that of the public debt. The derivative bubble, by far the greatest systemic danger, is also far from being resolved.

Whether the worldwide economic crisis is starting to find a solution or not is not the issue. In fact, there are many fears that we are the verge of a collapse. The main topic of discussion among the most attentive economists or those not compromised with a specific political project is whether we are moving towards a phase of deflation and a Great Depression (with lower prices for raw materials) or towards the type of hyperinflation that devastated Weimar Germany, Zimbabwe and Serbia. Such a dilemma would require a long analysis, and it is probable that the world economy might have to deal with both evils.

Beyond the dollar

Still, the diatribe between those who believe in the Great Depression scenario and those who think hyperinflation is the real threat does not go beyond a short-term analysis. It fails to see that the essence of the disaster is the pending systemic crisis, which will soon become apparent to everyone. As noted in the last paragraph of a previous article on the War in Libya, we are on the eve of an epoch-changing turning point, at the end of an era that began with the Treaty of Westphalia in 1648. The issue, however strange it might seem, is closely related to the value of silver.

Money, the value of the reserve currency, the dollar, but even more so the relationship between paper money and the gold and silver standards continue to generate heated discussions. Money underlies all economic activity—it is at the heart of the imperial system of modernity. It is thus hard to understand today’s economic vicissitudes without looking back at historical events.

In 1648, the universality of the Holy Roman Empire and Western Christianity ended after surviving the conflict between Catholics and Protestants. The Holy Roman Empire ceased to exist 250 years later, in 1918, but the centuries-old monetary uniformity based on the silver standard began to crumble right after the Treaty of Westphalia. Forty years later, in 1688, another invasion took place in England, after William the Conqueror in 1066. It was funded by a group of anti-Catholic conspirators who brought to power another William, of Orange this time (who is still celebrated in Northern Ireland by local Orangemen for his victory over Catholics).

One of the main players in the conspiracy was philosopher and politician John Locke. It included Calvinists, proto-Masons (the Rosicrucians) who backed Cromwell’s Revolution and Jewish bankers in Amsterdam (for example, the Machado and Pereira, Baron Lopes Suasso and other Dutch Sephardic Jews) who had connections with the Dutch East India Company). Other supporters include names that are still known today: John Churchill, ancestor of Winston Churchill, and Mocatta and Goldsmid of Moses Mocatta, which survives in Scotia Mocatta, a gold bullion bank that takes part in the London gold fixing.

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First Fear, then Anger

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by Theodore Butler
Originally posted 8 May, 2011 

This is an excerpt from the Weekly Review of May 7, 2011

THE HISTORIC DECLINE THIS WEEK IN SILVER CREATES STRONG EMOTION. Watching great amounts of wealth disappear, quite literally in minutes amid disorderly trading conditions is a genuine fear for any investor. Worse is seeing no obvious legitimate reason to explain the carnage. If that doesn’t scare you, nothing will. Especially if you already harbored unease about how the whole silver market operated.

But fear is an emotion that burns out fairly quickly. A human being can’t stay in an intense state of fear of financial catastrophe without selling out at some point or mentally adjusting to the new level of price. Then the conditions that led to the fear in the first place are replaced by some other emotion. If evidence exists that the sudden financial loss could and should have been prevented, the new emotion becomes one of anger. Anger at who or what might have caused the loss and who should have prevented it. I think there is compelling evidence pointing to who and what caused this silver crash as well as who should have prevented it.

The first thing we must recognize is that this was an unusually intense price smash. Silver fell 30% for the week, its biggest price loss in 31 years. The decline was highlighted by record trading volume on the COMEX and in shares of SLV. From any objective measure, the trading was disorderly, indicating little true liquidity despite the record volume. That’s because much of the trading was conducted by high frequency trading (HFT) computer bots whose clear purpose seems to be to cause disruptions to prices. These are the same disruptive traders that caused the flash crash in the stock market last year. I believe it was these traders who started the price decline with the $6 hit in 12 minutes on last Sunday evening. Their primary reason for existence seems to be causing prices to collapse.

Why these HFT cheaters are allowed to pollute our markets is beyond me. The only clear beneficiary to their trading is the exchange itself which pockets fees on every contract traded. After they crashed the stock market last year, I believe the HFT computer bots toned down their stock market activity due to regulatory pressure. That’s fine, but why were they then allowed to infect silver trading with their disruptive practices? This is just one question I have about this week’s events in the silver market and I will list them all in a moment. First I would like to get something off my chest.

I am appalled at what happened in silver this week for a very special reason. I can’t say this latest blatant take down looks out of place for a manipulated market which I have been alleging for 25 years. In fact, not that we needed additional proof that the silver market was rigged, but this intentional price smash provided that proof in spades. Admittedly, I look at silver differently than most folks, but there was something very special about this week. The special reason I am particularly appalled this time is that this is the first silver price smash for the record books that took place during the tenure of Gary Gensler as Chairman of the CFTC. There have been some multi-dollar price declines since Gensler was confirmed in May of 2009, but this week’s smash is the first mega-down move under his watch. That makes it very special to me.

As you know, I have put Gensler on a pedestal, repeatedly referring to him as the greatest chairman in CFTC history. Considering my past experiences with the agency, I still marvel at my transformation. I think he has done more than anyone ever to reform commodity regulation, including working diligently, although very quietly, to end the silver manipulation. As you also may know, I have generally come under great criticism and disagreement from many of you about my opinion of Gensler. I have respected that criticism and have used it to reflect on and test my continued belief in the chairman.

This week’s events in silver have created what may be a seminal moment. I still hold a deep belief in Gensler’s character and purpose, but it is important to judge how he and the Commission react to this week’s silver price plunge. Certainly, Gensler doesn’t answer to me, but he does answer to the public who he has sworn to serve and protect. The public was not protected this week in silver. I don’t think he had any inkling beforehand about what transpired this week in silver, but he is too smart not to grasp the significance of the silver price plunge and the circumstances that caused it. How he reacts to his first real-time case of blatant fraud and manipulation in silver will be a key test for him. I sure hope his reaction is different from the typical CFTC reaction before he arrived. You know, the three monkeys’ see, hear and speak no evil reaction.

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Part 6: The Paper Silver manipulation game at all time highs

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Once again, the Bears allow us to eavesdrop on one of their amazing conversations…
Not for the squeamish, nor for those sensitive to small bears casually emitting expletives.