Stock Trouncing Is Not Much Help So Far
Silver and gold meandered today along with oil and the U.S. dollar while it was the stock markets’ turn to get trounced.
The Barclays iShares SLV added another 2.2 million ounces last Friday. If you can’t find silver or gold bullion to buy at a reasonable premium, I would at least urge you to look into this or other ETFs (GLD) for a temporary trade. As always, easy does it with dollar-cost averaging will get you the best deal should silver go down marginally from here.
Tulving ( www.tulving.com ) and some other U.S. dealers now have some limited inventory although with steep premiums in silver. For example, $3 premium on silver Eagles and 40 cent premium on junk 90% U.S. silver coins. I wouldn’t recommend doing the bulk of one’s buying at a $3 premium to spot price, so the junk bags seem like the better deal. On the other hand, the $3 premium on the silver Eagles might make sense if this is one of a series of purchases. After all, you’d be paying just over $16 per silver Eagle, which is still the lowest price of the year. On the other hand, if silver prices persist near these lows for several months due to some strange reason (such as continuation of a temporary commodities bust like the one in 1974-76), bullion supplies could build back up a bit and these high premiums could ease.
A quick note on the Bank Participation Report which is purported to be a smoking gun of manipulation in COMEX gold and silver. First, I actually think the appropriate term is “naked gun”. Second, I am finding it impossible to reconcile this report with the COT data. Note the following (numbers refer to contracts not ounces):
July 1
Open Interest: 130,495
2 “U.S. Bank” COMEX silver short position: 6,199 (4.8%)
Gross commercial short position in COMEX silver: 92,817
Gross non-commercial short position in COMEX silver: 9,925
Gross short position concentration in COMEX silver, 4 or less largest traders: 47.1% (61,463)
August 5
Open Interest: 133,255 (+2,760)
2 “U.S. Bank” COMEX silver short position: 33,805 (25.4%) (+27,606)
Gross commercial short position in COMEX silver: 90,678 (-2,139)
Gross non-commercial short position in COMEX silver: 9,649 (-276)
Gross short position concentration in COMEX silver, 4 or less largest traders: 51.0% (67,960) (+6,497)
Note that both the commercial and non-commercial short position actually shrank between July 1 and August 5 when the 2 “U.S. Banks” (note that I am putting this in parentheses since these are not just any two U.S. banks but rather U.S. banks that are not futures dealers) apparently added 27,606 short contracts. This seems impossible especially since open interest increased by only 2,760 contracts during the same time frame. Where did these 2 “U.S. Banks” get all of these short positions? Even more puzzling, the gross short position concentration ratio increased by only 6,500 contracts (4% or so) while the two “U.S. Banks” supposedly increased their short positions by 20% of open interest. Things get even further away from reality when we look at the concentration ratios of the 8 or less largest traders.
In fact, if both the Commitments of Traders and the Bank Participation reports are correct, it would mean that a huge shift in the composition of the commercial category occurred during July. In particular, the large concentrated commercial dealers seem to have handed over to a couple of non-dealer “U.S. Banks” a huge COMEX short position right before silver had its biggest and fastest drop in three decades. How likely is that? If it isn’t that likely, I suggest this “naked gun” theory may yet turn out to have a few twists and turns.
i dunno, but 27606, 2760, 276. sounds like a keying error or a spreadsheet error. afterall, it’s someone entering those numbers.
regardless, this seems to be an anomaly since silver went down with all commodities, across the board all at the same time. otherwise, wouldn’t it behave differently?
i still believe in conspiracies. i think the guvment jawed the dollar up, commodities down and then pushed at the right moment and here we are.
It’s not a conspiracy. It’s simply outright market manipulation. Ted Butler may have the details wrong — in parts — but he is absolutely on target about the main point: the price of silver is manipulated. period. The question is not how, but who and why.
It is in no ones interest to see a collapsing dollar. A controlled decline is much more favourable. Last July in a paper titled “Keeping our eyes peeled for the silver and gold basis”, Professor Fekete predicted “Should the dollar fall through 80 and approach 70, foreign central banks would see to it that their paper follow suit”. What a call that was.
As these events have unfolded these last few months, Jim Sinclair has written extensively that central banks “hit the panic button” as the dollar index approached 70.
It is also interesting to note that in foreign currencies commodities are holding up pretty well.
Call me a dunce for asking stupid questions but if there was a mass cover up to protect the dollar why would ‘they’ just not blatantly publish false figures in the COTS, saying all commercials were net long all the time.
i said i thought it likely that there is a simpler explanation for the COT discrepancy.
The conspiracy, i say in jest, is the blatant and overt manipulation of all governments everywhere. If they have the power to interfere, do you think they won’t use it?
And there isn’t a mass cover up to protect the dollar, only jostling back and forth between governments and CB’s on how to protect the whole financial system. This includes an orderly as possible devaluation of the dollar and eventually all currencies. They just don’t want a run and will do what they can to ensure one doesn’t start.
This is no TYPING ERROR…why because the same MORONS had to make mistakes in both the SILVER and GOLD CMX postions. Because Silver had a 5 FOLD increase, whereas Gold had an 11 FOLD increase. Strange things are happening as Strange things happens to the body in the last stages of DEATH.
This system will go through EXTREME VOLATILITY as it becomes weaker and weaker…..much like a ship in a huge storm that has lost its ballast (that which gives it stability) and is rocking over from side all the way over to the other. This will continue especially as the QUADRILLION DOLLARS worth of DERIVATIVES starts to unravel.
We also have to remember CDS- Credit Default Swaps have doubled their spread in just a month….this signals defaults. CDS are larger than the Entire US Market Equities ($21.50 Trillion), US Bond Market ($.4 Trillion) and the US Mortgage Market ($7.1 Trillion) combined. This is most certainly SERIOUS STUFF.
It will be interesting to see how BUTLERS article spreads throughout the financial media as it has begun.
That’s what I call a nice intraday reversal
Was too slow to take advantage but it was nice to watch.
If people from Europe are reading here, it would be great to see some field reports from your local dealers. I know that North America and Germany are the main markets for silver bullion, but I have no idea whether people from other european countries invest in silver at all.
Here in Germany bullion coins are sold at a premium of 4.5$. Since we have a nasty 7% sales tax that fits almost to the 3$ premium in the US. If available all bullion coins (Maple, Eagle, Philharmoniker and Libertad) cost the same, but Maples and Eagles are almost sold out. No shortage of the Austrian Philharmoniker so far, the Austrian Mint has announced that they will produce another 5 million coins.
my mistake. i forgot that gold had the same short interest explosion. but i still think it’s the guvment. and someone still hasn’t explained how this ties into the fact that all commodities went down in unison. it’s not just gold and silver hammered.
Hello Torsten,
Here in Switzerland, pretty the same (7.6% sale tax). Except that the market is very small. You can buy 1 oz at http://www.silbermine.ch at 23.54$(USD/CHF 1.10), 1 kilo for 532$.(hard to resell).
I passed an order to buy in the US, Philharmoniker at spot+1.85$ premium+0.85$ for freight+2% dealer com + the sales tax in Switzerland.
Sometimes I can some kg of swiss silver coins (pre 1969, 0.835) at spot without tax.
Every thing in bullion under 500 gr is very expensive and the premium is disgusting so i prefer “silberm?nze”
Thank you Tom for all you are doing freely. The new format is great, it is interactive and connet silver fan from all over the world, we are very fortunate and I can’t imagine how it was in the 70’s !
Just to push the conspiracy lever a little harder - what if the commercial shorts were looking to push their short position onto a couple of banks they expected to fail? If you have insiders expecting a bank failure - and are looking to get out of a short position - if they are able to move that short to a bank that ultimately fails (BR) - what happens to their short position?
Perhaps there is a time lag between these two data reports? COT closes on Wednesday and always lags.
G’Day,
With an affirmative declaration by Richard Russell that Deflation seems to have created a bottom in the PM Sector and a serious ongoing decline in the global MM Sectors, I conclude;
With the beginnings to show up in the unwinding of the Yen Carry Trade [Euro/Yen Cross declining];
With the long term credit banks of China stealthfully supporting the USD and raising it’s Banks credit/loan ratios [reduction of credit/liquidity];
With the ScotiaMocatta PDF posting potential bottoms:
Gold Silver Platinum Palladium
Pivot 825.52 13.49 14.40 290.42
Pri Sup 812.93 13.03 13.98 282.3
Base 823.75 13.46 14.27 288.00 [Handy Harman (Base)];
With the drastic bounce before the USA open after the London midday bottom and the COT showing a decline in OI as a signal that there is a potential real covering of “naked shorts” and shorts of all sorts, peaking midday USA [11:00AM];
With a high probability, rarely seen, of a running flat correction in the HUI, at a highly probable set of EW/Delta turning points, Monday;
are the PM bottoms in place that will continue to support a ongoing and gradual and accelerating lift off with minimal retracements, finally?
Why has the USD held up so well during the last 30 days and continues to hold firm despite all the inflationary news, the deflationary news [Russell has finally decided on deflation]?
Who’s got the most too loose in a Sinclair call for USD at .62 and thereafter down to .52?
China.
What is China doing in the background with the Bank of China and it’s long term credit providing banks?
A very good read:
Beijing swells dollar reserves through stealth
Rule changes for commercial banks are acting as cover for exchange rate intervention, writes Ambrose Evans-Pritchard
http://tinyurl.com/6dlcqw
Dollar Up, Global Stocks Down, Gold/Silver Up?
FWIW,
Pitufo and Torsten: I bought some silver maples on Aug 19 in Calgary, Alberta from Scotiabank. Their selling price was US$16.20 while the spot that day was about $3 less. After the exchange rate was added in I ended up paying C$18.02 all in (CADUSD = 1.0826). Availability was not a problem. While I was there someone else was buying a substantial amount of gold (approx 50 oz) and again availability did not seem to be an issue.
such discrepancies indicate market manipulation. One cockroach is enough. there must be colony underneath.
There is other clear evidence of market manipulation in favour of the shorts. Why are there delivery limits on long positions? They want that the contracts should be settled without any “delivery hassles”. they wanted to overwhelm the market with paper - they succeeded. They fear corners like the Hunt episode of the 70s. A truly free market should be fair to both sides - longs & shorts, regardless of the outcome.
Under this environment, shorts can act fearlessly as they proceed in murdering those gold bugs. they can break the back of the believers untill there are none left. this is the reason why gold “fails to be inflation hedge” or is “a lousy investment” or a “disaster insurance” or a “gloom boom doom thing” etc. These are blatant lies. Gold is nothing but all the above. Just you allow a free gold market and see how reliable the gold price would be in controlling the vermin.
Under the present environment, gold price would be low & volatile for long periods of time - this rattles the nerves of most investors. And then in one swift move gold would break all the bonds. buy and wait till then.
How about a conspiracy theory so outta whack that it makes sense. What IFF the commercials were allowed to write a derivative contract with these banks to switch out of their shorts since the fundamentals are screaming long. What IFF the next big shoe to drop might be a major bank which just acquired these shorts so as not to unwind them to help in keeping the price down when they go under. Maybe they made a deal. Who knows?
>>>
Call me a dunce for asking stupid questions but if there was a mass cover up to protect the dollar why would ?they? just not blatantly publish false figures in the COTS, saying all commercials were net long all the time.
<<<<<
Because “they” need the public to believe it’s not all a lie.
Since the public has gotten used to the knee jerk response “he’s a comspiracy theorist, ignore him”, “they” can get away with a lot, but “they” still need to not be TOO obvious, such as issuing completely fake data.
Will the truth ever be revealed/ Maybe we should offer a prize to whoever guesses what really happenned with the sudden appearance of the huge bank short position in silver/gold.
Here’s my thought of the moment. Since it appears it was mostly a transfer of positions from one commercial to another is it due to the one commercial needing to get this off their books onto someone else’s? Since it was a profitable position perhaps we’re looking at a reclassification situation similar to what happenned with Vikorn in the oil market. Maybe this big short was about to be reclassified as a large spec and had to transfer it to a proxy that would retain it as a commercial short?
I’m assuming all banks qualify as commercial traders but I don’t know that for sure. If it was due to a reclassification moving the position would help keep a lid on the reaction of the market seeing the big decrease in commercdial shorts and triggering god forbid a rally. And/or again I’m not sure, but are there position limits for large spec shorts like there are for longs? If so they would have had no choice but to move those large short positions.
Just my humble thought. Great mystery though.
Is it possible that the explanation for the explosion in the short position held by 2 U.S. Banks could be attributed simply to the CFTC examining the commercials and reclassifying one of them in the month of July, after determining that it was not really a commercial hedger?
The Washington Post recently reported on the CFTC examining oil futures positions and found that Vitol was not actually a commercial player. http://www.washingtonpost.com/wp-dyn/content/article/2008/08/20/AR2008082003898.html
Similar thing has happened in Feb-March 2008, but there is also no correlation between the “U.S. bank” short position and the change in both commercial & non-commercial short position. “Even more puzzling”, the gross short position concentration of the 4 or less largest traders has decreased. Thus, it cannot be explained by a “misprint” or other glitch in July-Aug report. My guess, it might remain “hidden” in the COT data because of a redistribution of short positions between the traders.
Feb 5:
Open Interest: 184,677
2 ?U.S. Bank? COMEX silver short position: 5,926 (3.2%)
Gross commercial short position in COMEX silver: 113,354
Gross non-commercial short position in COMEX silver: 9,057
Gross short position concentration in COMEX silver, 4 or less largest traders: 54.9%(101,388)
March 4:
Open Interest: 166,625 (-18,052)
2 ?U.S. Bank? COMEX silver short position: 12,382 (7.4%) (+6,456)
Gross commercial short position in COMEX silver: 111,332 (-2,022)
Gross non-commercial short position in COMEX silver: 11,594 (+2,537)
Gross short position concentration in COMEX silver, 4 or less largest traders: 51.3%( 94,739) (-6,649)
Ed/Rob: It appears that a small number of “U.S. Banks” (non-dealers) are involved in the futures markets whether it be silver, gold, oil, etc. They are probably the same players in all of the futures. Since these are non-dealers yet appear to have a significant amount of exposure to exchange-traded derivatives, I don’t think it would be impossible to figure out who they are. If anybody has an idea, please post a comment here and I will look at their SEC or other public filings. It is also possible, as I’ve already speculated, that these “U.S. Banks” are subsidiaries of a larger bank or banks that are dealers. If so, these large COMEX silver and gold positions could very likely represent a reclassification for some corporate purpose as Ed/Rob suggest.
Eddy: The Bank Participation Report appears to be prepared “as of” the same date as the COT report, so it doesn’t appear that there is a lag.
Ron: Great points about China, I would note that most of the dollar strength and gold/silver weakness has taken place during Asian market hours.
keseri: There are delivery limits on all markets. A truly free market is one that is not manipulated from either the long or the short side. Removing delivery limits would allow unfettered long side manipulation. On the other hand, your point about manipulation from the short side is valid–it is possible under the current framework. However, long side manipulation is equally possible–see crude oil, copper, etc. So to be truly fair, both long and short should be addressed in any change implemented by the regulators.
Rob/Stefan: Non-commercials have a position limit of 6,000 contracts (1,500 spot month) in both COMEX silver and gold, and since the “U.S. Banks” clearly have much larger positions than this, we can assume they are being classified as commercials. However, should the CFTC look into these 2 “U.S. Banks” and discover they are in fact not acting in a commercial capacity, leading to them being reclassified as non-commercials, we could see a short squeeze of epic proportions assuming they are still holding these very large short positions at such time.
Serge: Very good observation; although the March data doesn’t stick out like a sore thumb, it does appear to follow a similar pattern. If there was a “redistribution” between July 1 and August 5, it was huge. By my calculation, it would have required 2 of the 4 dealers among the 4 largest traders to reduce their gross short positions to almost zero. Maybe these dealers were snookered and essentially covered all their shorts on the move by silver from $19.50 to $16.50? If so (I’m not convinced), that would have left relatively few traders to cover shorts and could explain the brutal slide that silver had all the way down to $12.50. For now, this is all speculation and I hope the CFTC will address the issue quickly.
Ron: Yes, these are all supportive factors (short covering, etc.) but a final washout is possible simply because U.S. dollar/oil may not be finished with their moves and gold/silver have not yet made a convincing bounce from lows with follow through. Yesterday’s chart action was beautiful and indicative that a bottom is being formed but that doesn’t mean the final bottom has been set.
For now, this is all speculation and I hope the CFTC will address the issue quickly.
Don’t make me laugh. Do you really feel the CTFC is impartial? Have they ever stepped in to help? For a long time, before they banned naked shorting of selected banks, the SEC insisted naked shorting didn’t exist. They even threatened to de-list companies who claimed they were being naked shorted.
The CTFC, not long ago, put out a statement, saying there was no manipulation in silver, They claimed even if the short couldn’t be covered, ” it doesn’t necessarily mean they are naked”. This from Chairman Cox.
I say, if they don’t already have the silver, it’s naked by definition!!! He also stated, in not so many words, flooding the market with paper doesn’t effect the price. Now you are waiting for him to come and rescue us?
The regulators have done everything in their power to support the shorts and screw shareholders. They aren’t going to come to our aid! Only politicians, under pressure from constituents, will have any desire to stop the stealing.
Hello Torsten, Pitufo and others,
Following your question about buying of silver in Europe.
Here in Brussels, Belgium, I buy my silver bullion at 2 dealers. Some weeks ago I wanted to buy silver bars of 1kg at the biggest gold bullion dealer of Belgium but they had no silver bars left to sell. They couldn’t tell me when there would be silver back in the stores. They said their dealers where sold out.. Now, they are offering silver again. In Belgium I always pay a tax of 21% on physical silver bars so that’s a lot. On gold, bullion or bars, there’s no tax.
Most of the time I buy silver coins at another dealer. I buy everything that’s nice, mostly french silver coins. For coins, I pay at spot, no tax. But when I want to buy these coins when the silver price just had a quick decline the dealer sometimes doesn’ t want to sell. It’s more like Bob Moriarty is reporting in the following story and I think it will become more common. (http://www.321gold.com/editorials/moriarty/moriarty082508.html )
For gold coins, I like Napoleon coins (between 1800-1850). I expect a premium on these in the future.
mark:
Yes, I feel the CFTC is impartial to BONA FIDE market participants with some important provisos. The most important being that protection of the market from default trumps all other concerns. Often, this puts the regulator at opposites with longs, especially those seeking to manipulate prices by seeking to use the exchange for delivery of the underlying commodity for non-commercial, speculative purposes. Ted Butler is very familiar with this given that he was involved in one of the only episodes prosecuted by the CFTC ( http://tinyurl.com/5n5fyt ). You bet the CFTC/futures exchange will clamp down on that! At the same time, there can be circumstances where manipulation by the shorts can put regulators at opposites. But the simple fact is that manipulative shorting is much less prevalent, and much more difficult, then it is generally believed by the public.
As for the SEC protecting “selected banks”, that was a ridiculous move! As if “naked” shorts could drive these banks under! It was a political stunt, but importantly, it was done out in the open. It amazes me how the conspiracy crowd can talk out of both sides of its mouth to use this as an example of an “admission” while at the same time claiming that there is a Plunge Protection Team that secretly intervenes in the stock markets to keep them from falling. Which is it??? Well, guess what, this SEC action WAS probably the result of the Plunge Protection Team–but critically, it was done out in the OPEN.
It doesn’t matter what you say, a FUTURES market does not require someone to have silver or other commodities TODAY in order to trade FUTURES. That is why it is called FUTURES. Yes, that means you will be buying or selling the commodity in the FUTURE and therefore it is unlikely that you have it today. Contrast that with the SPOT market where you have to have the commodity on the SPOT, otherwise you are truly “naked”.
Sorry to be so brutally direct but I’m simply returning the favor.
Interesting analysis of “U.S. Bank” short positions over 2006-2008 period, including a comparison to the commercial net short position:
http://www.resourceinvestor.com/pebble.asp?relid=45611
Tom, it is very telling of your character and the vacuity of much of your analysis of the silver market that you feel compelled to drag out a 20 year old kerfuffle Ted Butler had with the CFTC over OJ trading on behalf of a client when he was at Drexel. Have you really no substantive arguments to make that address his basic analysis, which certainly now appears to be proving correct? Are ad hominem attacks, or sly innuendo all you got? Very sad, but consistent with the muddle headed thought processes you have subjected your readers to for years.
Best of luck with your new blog, but as you are finding, when before you could pontificate (for pages and pages and pages of boring drivel) with only the pleasant echo of your own voice ringing in your ears, now others have an opportunity to call you out when you spout nonsense, or in this case, try to plump your own ego by attacking the person and not the ideas you appear either unwilling or unable to understand.
just what is butler’s basic analysis? that there would be no silver available in 2002 & beyond? that price is manipulated downward? seems that no manipulaton in history has taken as long a this one to play out its short squeeze. if the short was in the the squeeze was missed long ago.
Limpet Mine: Thanks for the input! Come back again! Would love to hear more of your “call you out” arguments as my ego is not yet plump enough.
Tom,
that means you will be buying or selling the commodity in the FUTURE
The issue I have with that statement is, where is the 400,000,000 ounces they need to buy, coming from? If we know that Broker Dealers are shorting the same shares of stock multiple times, what makes you think the same ounce of silver isn’t being shorted multiple times?
Mark, The 400 million ounces are not being all bought for delivery. There is no “need” per se other than what is normally expected to be delivered on expiring contracts. Obviously if that was the case the Futures market would not work, whether it is silver, gold, or widgets. A lot of the futures are bought by speculators. If they didn’t do that, there would be no market for the shorts to (allegedly) manipulate so violently and so often. I suggest you go read some books on the futures markets so you can gain a more complete perspective of how they work. This is an okay start but I’m sure you can find better:
http://www.cftc.gov/educationcenter/economicpurpose.html