Covering For Fun and Profit
The commercial shorts in COMEX silver are now covering in a big way, and they are able to do it while silver prices remain near their correction lows. In the latest COT report as of August 26, the gross commercial short position was reduced by more than 10,000 contracts from the prior week while the gross commercial long position was also reduced by 6,500 contracts. The large speculators also reduced their gross long positions by 3,000 contracts but added 1,000 contracts to the short side. Small speculators reduced both long and short positions by a marginal amount. The net result is that open interest fell by almost 10,000 contracts from the prior week (August 19).
Since the August 26 COT report, open interest has fallen by?another 10,000 contracts or so to around 115,000 contracts. I’m willing to bet a pig that the cause was more commercial short covering. The present 115,000 contract level is a stone’s throw from 100,000, a level which COMEX open interest has rarely gone much below since the beginning of 2005.
In my opinion, the above?means that speculative hot money?has most likely been completely sidelined in COMEX silver at this point. If true, any further substantial decline in silver would have to come from long-term players giving up on the silver bull market. Since such players likely have both paper and physical positions (I include the ETFs in physical and COMEX in paper),?I think?such a fundamental change in market sentiment would?essentially mean there would be?significant physical selling to go along with the paper selling.?I’m not seeing that so far (in fact, quite the opposite)?and therefore such dire?prospects remain only a risk for now. If the physical?selling does appear, however, it would have very serious implications for the price of silver?and?could very well mean sub-$10 silver prices. Thus, it is important to keep an eye out for any sign that it is starting to happen.
The above is particularly important given the news that a hedge fund with big bets in commodities, the Ospraie Fund,?has collapsed (more on this later). No doubt there are others on the brink. Perhaps this very fund had to sell COMEX silver due to a margin call during August, although the speculation is that it was mostly into natural gas and copper (if so, what dopes).?In any case, we have all heard that gold and silver are among the most liquid of?”commodity” investments and now we have?a confirmed and?plausible source for part of the violence in silver and gold prices in August.
Speaking of which, the conspiracy talk that silver and gold were cratered by the?”naked” short selling?of commercials, including the U.S. banks that appeared on the CFTC Bank Participation report, continues to gather steam. This?is despite?the fact that the COT reports prove that the commercials were actually buying during the entire decline. The data can be summarized as follows:
Gross long and gross short positions held by commercials:
July 1: 27,495 and 92,817
July 15: 30,013 and 101,164 (top)
August 5: 35,217 and 90,678
August 19: 43,891 and 90,759 (bottom)
August 26: 37,361 and 80,469
From top to bottom, the commercials?added 13,878 contracts and covered 10,405, which means they bought on a net basis 24,283 contracts. I?included?a few other COT dates?so I wouldn’t be accused of?being selective with the data. Now,?does?this prove there was no manipulation during the price decline? Absolutely not. As I have?discussed in excruciating detail, someone like the?Hung Brothers could have?played a major role.?My allegation, as crazy as?it might be, has at least one thing going for?it:?consistency with?the COT data. By contrast, the allegation that “naked” commercials pounded the silver price down by excessive selling is not supported by COT data or anything else.
I see?Ted Butler has now come around to the idea that?the big short position of the 2 U.S. Banks in COMEX silver (being JPMorgan and HSBC as I revealed last week) needs to be reconciled to the COT reports. ?I have already provided two theories that attempted to do that: (1) JPMorgan took over the Bear Stearns silver position when it acquired the troubled investment bank in June*; and (2) The large COMEX short position was already held by JPMorgan at the dealer level (JPMorgan Futures) but was moved to the bank level (JPMorgan Chase Bank, National Association) for some reason such as regulatory capital ratios. Mr. Butler went with theory #1 but he also went ahead and threw another wrench into the works by somehow tying in the U.S. government. Now that’s a true conspiracy! Alas, I don’t see how the U.S. government had to be involved. JPMorgan acquired Bear Stearns for a few bucks per share while about $30 billion of the riskiest Bear assets and?related liabilities were put into Maiden Lane LLC, an entity that is?fully backed by a Federal Reserve credit extension and?guarantee. If Bear Stearns had really toxic silver short positions, why not just put them into Maiden Lane LLC or a similar outfit? I think the more reasonable, though less entertaining, answer is that Bear Stearns may have had some COMEX silver short positions?held against some forward (over-the-counter)?booked silver long positions. In other words, Bear Stearns was not “naked” short in silver but rather hedging OTC paper with COMEX paper. Just a theory, but at least it’s one that doesn’t rely on?a massive conspiracy.
[*Here is my comment from August 22: For example, if we really wanted to play connect-the-dots, we might observe that Bear Stearns was acquired by JPMorgan in this same timeframe and it is very possible that if BS held large COMEX silver and gold short positions, those might have been transferred to one of the 2 ?U.S. banks? so as to keep the positions off JPMorgan?s own books. What I?m saying is that one or both of the ?U.S. banks? might actually be a subsidiary of JPMorgan and could have received an intercompany guarantee to offset any exposure to loss. Of course this is all rank speculation, but I would consider any explanation deficient if it ignores how these ?U.S. banks? managed to put on such large short positions without leaving a footprint in open interest.]
Back to the markets. From a technical perspective, both silver and gold are now facing some very heavy headwinds as the charts look like quite a mess. It is very possible this condition alone accounts for the lack of any significant bounce so far from what otherwise might have been exhaustion lows such as yesterday’s price action?(which is no longer one based on today’s price action). What I’m saying is that there might be some technical selling into rallies by pure and disciplined technicians. I suppose the good news is that the truly disciplined technicians?are?rare birds and?their selling could be over pretty quickly.
Some more good and bad news.
Bad news: At this point we are unlikely to get a sustained short-covering rally?in silver because most of the covering?has already taken place. Unfortunately, that covering hasn’t meant squat for the silver price. As a result, I’d be careful with buying near-dated call options for now.
Good?news:?Those who are now covering in COMEX silver?have just made a pile of money. Assuming most of them were not “naked” short (I am joined in having such crazy thoughts by intellectual lightweights such as Prof. Antal Fekete and Jim Sinclair), they?are in a position to?comfortably maintain their physical holdings.?It could be very?important to have such strong hands in the market?should the current malaise in the monetary metals last for a significant period of time. Indeed, something like this could mean silver prices holding up pretty well going forward even if the commodity sector keeps getting pounded.
Just a few questions that perhaps someone can help me understand…
If there manipulation of the silver price (and gold) and so many “agencies” are in on it (i.e. CFTC, Banks, maybe even US Government), how will the story unfold to end this manipulation? (As a new silver investor, it is somewhat discouraging to feel this manipulation could continue indefinitely).
If it is happening now, why not in a year, or two or five or ten?
How will the real silver price ever be caught by the “paper price”?
And, if there are massive shortages now, what will happen if and when supply actually “catches up” to demand? It would seem on the surface that if the price is not going up (and way up) right now, how/when will it? It seems all the stars are aligned right now for huge price gains, yet we have 40% losses from the $21 high. What could possibly be any better for the silver market than what is right now?
Thanks for any info anyone can provide.
@ sideshow….. This entire market is rigged. In my opinion….I feel that the prices for gold and silver will continue to fall or go sideways until the election is over. After that…it is game on…..it could crash, or it could explode….who knows? After following the silver and gold market for years, I have given up on EVERY BODIES predictions. Of course if you go to gold and silver sites..they are going to tell you the “Bull” market is intact. If you go to other sites, they say the gold and silver market is in deflation. Who knows…and who cares……I bought silver and gold…..and I think it will be way higher 10 years from now. If you watch it everyday….like I did….it can drive you insane.
If silver goes lower than it is now….well….I will buy more….It will not go to ZERO. Right?
I have lost a fortune in this correction….or have I? You only lose when you sell……I am not selling. I am holding(100% physical no ETF’s).
So I just use a price average strategy…if Silver goes to $9 an ounce or lower…I will buy all the way down…..do you get it?
Manipulation and conspiracy stories are pointless. Let’s move on. If markets are controlled, we can’t do anything about it (apart from nimble trading on the same side as the big guys - hey even I was short at $17).
As any experienced silver investor will tell you, buy physical as cheap as you can and forget about it for a long time. You’re not really ‘buying’ of course, just turning in your casino chips at x ratio for real money.
I started buying silver at $7, and was underwater for years. Then in 2006, I remember getting really excited when silver burst through 10, 11, 12 topping out at 15. So I bought loads more on the first pullback to 12, completely over committed, and was in real trouble by the time silver hit $9.50.
Lesson learned, don’t get greedy. Price can be pushed to extremes, make sure you have always have ’spare’ cash no matter how low it goes.
Lots of things happening out there. Jason Hommel’s last article titled, “Nadler, Kitco, Perth, Matthey; Sold Out!”, is worth a read http://silverstockreport.com/2008/nadler.html.
Looks as if AGR MATTHEY in Australia has CLOSED ITS DOORS. The Perth Mint owns 40% of AGR Matthey. According to HOMMEL:
“AGR Matthey supposedly has all this gold and silver on loan from Perth Mint’s certificate program with which to operate and conduct operations, to enable them to have metal for use in refining operations, so that they can take those abundant 1000 oz. bars, and make them into 100 oz. bars, and sell metal to the public, and now, during a time of record demand from the public, when little old me can sell 25 bars at a $4.01 premium to the spot price, when AGR Matthey should be well funded, with plenty of metal, and capable of making a killing on manufacturing bars with their own top industry and famous and desired trademark, they decide to close up shop?”
Hommel believes this is the FIRST HIDDEN DEFAULT or EMERGING DEFAULT. He also goes on to say this:
“The closing of AGR Matthey calls into question the validity of the entire Perth Mint certificate program, and Kitco, and Nadler.
I think Perth Mint certificate holders should either be investigating, or redeeming their certificates for real physical metal, while they still can.”
Looks like FIREWORKS are beginning to take place….furthermore….GET A LOAD OF THIS from HOMMEL’s article:
“Johnson Matthey’s primary distributor is AMARK. Amark is the largest bullion trader in the U.S. Amark is out of all silver products, so they are essentially “out of business” with a “shut down” silver division too, until they get silver.
Most other major dealers deal direct with Johnson Matthey, or Amark.
Here is another major shocker that I just heard today. CNI Numismatics, at golddealer.com, who is one of the most trusted silver dealers of which I know, verifies and confirms this overall story with a shocker admission from Johnson Matthey.
JM told CNI that JM is “ramping down” production of 100 ounce bars!!!
What? JM is backlogged 8-10 weeks, and refusing orders to try to catch up, yet is “RAMPING DOWN production”? That confirms the AGR Matthey shut down. And that can only mean one thing. There is a shortage of 1000 oz. bars or any other form of silver to make into 100 ounce bars.”
I believe HOMMEL is onto to something here. TOM…what did I tell you about the 1,000 ounce WHOLESALE BARS being the next TARGET. Also, if you go to APMEX….they are COMPLETELY OUT of 1000 ounce bars. Just last week when they listed those AMARK 1,000 ounce bars…..they had plenty….each with its serial number….now ZILCH….NADA….LOL.
Looks like that PUTZ NADLER is going to have to EAT HIS WORDS at some point in time. Not only did NADLER work for REPUBLIC NATIONAL BANK which is now HSBC but also BANK of AMERICA which has the second largest DERIVATIVE EXPOSURE right behind that ROTTEN EGG….J.P MORGAN.
If you remember the FAMOUS INTERVIEW that JIM CRAMER gave LIVE about CNBC and the FINANCIAL NEWS MEDIA…and how it works…basically he said that “THIS IS THE WAY IT IS IN THIS BUSINESS…..News stories are released to BENEFIT or to HURT the stock and stock PRICE.”
I can TELL you NADLER in my book has been a PAPER BOY PUTZ for quite some time. He always has a BEARISH SPIN about SILVER and GOLD. And this is supposed to be a BULLION SPOKESMEN? Come on….give me a break……I can SMELL A RAT a thousand miles away….especially NADLER. He had an email exchange between one of HOMMELS readers and he was quite SARCASTIC and in the end he wrote:
“Just wait….the next LEG DOWN will be in two Weeks”
How does a BULLION EXPERT know this kind of information and reveals this in an email and not on one of his ARTICLES?? Also, why is a person of this CALIBER writing sarcastically to the public and BRAGGING how silver is going to head down again in two weeks? I can answer that….he is a BANKER SILVER PAPER BOY PUTZ….simple as that.
Regardless…..I believe HOMMEL is onto something here…..looks like the TIGHTNESS in the WHOLESALE SILVER MARKET is taking place and refiners won’t be able to rely on the RETAIL MARKET for supply.
Lastly….I started buying silver at $4.62 an ounce. And yes I bought it at $8.00 only to see it go to $6 range. But now we have an OPPORTUNITY to get in at another LOW. At some point in time….PAPER SILVER TRADING will no longer be VALID as PREMIUMS now for SILVER 100 ounce bars are much higher. I believe PHYSICAL PREMIUMS over spot will increase and at some point in time……the COMEX will DEFAULT.
These are interesting times.
I remember Jason ‘the shorts are running scared’ Hommel calling the top in silver twice. Both times he said silver was ready to go to the moon both times silver collapsed within the week. He is the last of the silver gurus I pay any attention to because he is always so melodramatic.
He has done alot of good at researching silver shortages or bottlenecks at the retail level but despite so called fundamentals these shortages have done nothing to increase the price. Whether the price is manipulated or not the fact is the price has fallen pretty much like Nadler has said.
Personally I cannot stand Nadler and dont think he should even be writing for Kitco however reading his thoughts always keeps my feet on the ground while most of the other gurus are well too bullish for their own good.
Over at goldprice.org they have an article about Goldman Saks covering their Gold short book. They are now at their lowest level in 2 years on TOCOM.
I think this portends a big move up in the PM complex as they are insiders. I also think we are headed into a major league financial crash over the 4th quarter and the big money players will leap into our camp.
Look at the Gold Dec call options. There are almost 30,000 contracts sitting at a $1200 strike price. Additionally, there are huge numbers of calls all the way down to $900.
It would not take me by surprize to see Gold at $2000 and Silver at $50 by the end of this year.
There seems to be quite a bit of concern about the price action in the monetary metals and commodities of late. Some reflection may be appropriate.
Since the US dollar has risen recently against other currencies the downturn in these assets is not as severe when priced in other currencies. It also must be noted that the rise in these assets this decade has not been so large when priced in non US currencies. The latest action in the US dollar has best been sumarised when Tom Szabo and James Turk among others pointed out the recent increase in foreign central bank holdings of US treasuries. Personally I can hear a large “printing press” like sound coming out of Japan. Antal Fekete alluded to the current intervention in the US dollar one year ago, and has written extensively how “check kiting” may extend the life of the dollar for a few years.
In my opinion, most people are merely fretting about the relative value of their respective paper currency. My Australian dollar has crashed from 98.5c in mid July to 82.3c yesterday. I do concede that paper money is a requirement for day to day living. However in no way is it a storehouse of value or an appropriate measuring stick of value. Todays paper money is merely a medium of exchange. Additionally, no other asset other than the monetary metals carry no counter party risk.
Other than day to day living expenditures, one needs to have liabilities covered in paper money terms. This is one reason why Jim Sinclair is against margin and debt. In 2001 the was 48c. This July it hit 98.5c. The value of paper money has become unstable and is fast becoming irelevant.
Yes there is manipulation. The material at the Golden Sextant is the best account that I have seen regarding this topic. Yes there is short selling in the monetary metals in order to earn an income. Antal Fekete has written the best account regarding this topic.
Are you worried about the price of gold?
Or are you worried about the price of paper?
Maybe you are worried about the price of your paper liabilties.
well put….likewise in the land of sterling (are you dollars in disguise)….gold is down less than 10% from it’s all time closing high
these paper currencies are just taking turns at leading in the marathon devaluation race towards zero
Only in manipulated, naked sorted stocks, can a tremendous amount of covering occur, along with a simultaneous large DROP in price. Also notice, more shares are being bought than sold, as the price drops.
Unless you require written notice in the mail, there is more than enough evidence to come to the conclusion, the Fed has handed JP Morgan a shotgun, and told them to shoot the Au/Ag rally, and kill it if possible. This was part of the Fed practically giving them Bear Sterns for nothing.
The only question is, what is the end game? Can they hold down PM’s until the demand goes away, or does it blow up in their faces? I have no idea. It would be interesting to see what would happen if and when we get a new Fed chairman. Will he continue down the same path as Ben?
Any idea on why the PM stocks are so weak lately? Xau dropped 8% or so in the past 2 days, while gold and silver are more or less flat.
Are they sniffing breakdown to below 12.20 / 775?
Maciek.
Exactly my point Mark…which nobody seems to be able to answer…what IS the end game? Now this manipulation has made the charts look bearish and the cycle continues. What stops this and turns things back to fundamentals? And does a reversal only mean we now regain the levels we saw earlier this year but no more because that rally would have taken us to $1200 gold and $25 silver? How do we get “unstuck”?
Can someone PINCH me cause this is just the best dern dream I’ve ever been in. ((Well, other than getting in on the pre-stock offering of Priceline.com))
But this is sooo much better to be involved with.
We got it all: Drama, intrigue, political scandal, billions of dollars at stake, a maelstrom of world events. I don?t know about you all, but I?m not the sort that likes to watch the grass grow. Hehehe, well, maybe when I was in college, but I never picked it
And the best part is, I have NO dept other than my primary mortgage ((bought a new house a few months ago on a hell of a deal)) which I can pay off if needs be. Renting the other small house that has no mortgage. No auto loans, no CC?s, nothing. I have every penny of my investments in PM?s, and that includes my IRA. Not one paper ANYTHING. Was thinking of taking a loan on the small house to buy PM?s. But as I sit, no one can touch me so that?s the way I?m keeping it. And I am loving it. I am loving this whole movie ? you just can?t make this stuff up, no one would believe it. Please, please let silver and gold drop another few dollars, I need to get my average down, came to the party a bit late ? but I do like to dance!
My father was an investment banker for 20+ years. One thing he has always said ? Debt makes the world go round, don?t be apart of that world. We talk about the S&L scandal, the Bear Stern sitch ((one of the top five guys went to school with him)) and how Master Card came about ((He also knew him but could not get the bank to sign on until years later)). He cannot fathom the loan ratios they now consider normal. Everything he has shown me has really sunk in ? especially of late.
They take your money cause you GIVE IT TO THEM for a promise ? how stupid is that LOL.
It?s easy, you win by not playing the game.
Last night I was pondering whetther the shortages could be being used to cap the prices. Imagine my surprise to read this on financial sense today.
[blockquote]How is it that after months of reported shortages, new supplies of retail products are not forthcoming? Some have said that it is merely a manufacturing problem, that increased production levels take time. But really, how much time does it take to melt down 1,000 ounce bars and recast them into 100 oz. bars, or stamp them into coin blanks? Free markets are remarkably adept at detecting and meeting demand, provided that prices are allowed to rise. Are the existing production facilities working overtime to supply the demand? Are 1,000 oz. bars being melted to make retail product? Is newly refined silver being cast into 10 and 100 oz. bars to meet retail demand? The answer to these questions is clearly NO. Instead, we have seen recent reports that retail silver dealers and manufacturing operations are actually closing down. In my view, when a Perth Mint employee reports that ?wholesale bars are available but only in wholesale quantities, i.e. 20 TONS of silver or 1 TON of gold?, that is telling me that retail customers, even large ones, are being locked out in the cold. ?Yes, we have beef for sale, but only by the herd.?
One answer might be that nobody wants to sell silver at the current low prices. This has a certain logic, in that few current owners of retail form silver want to sell at $13/oz. Of course not! These are the very people who want to buy more silver at bargain prices. But industrial users are buying silver every day in bulk, at whatever price the CRIMEX determines. So it would be only to retail buyers that nobody wants to sell silver at these low prices. And remember, supplies have been drying up all year, even when prices touched $21/oz. There is no evidence that any serious efforts have been made to increase supplies of retail silver.
Surely what we are seeing are de facto price controls an unacknowledged allocation of a scarce resource to larger, more favored (wholesale)customers. Because sustained high prices are a requirement for increasing supplies, this shortage is unlikely to be corrected soon, certainly not while prices are held below the cost of primary production by the permanent short interest at the CRIMEX. [/blockquote]
I am not a conspiracy buff, but what is happening in the retail silver market smacks of demand suppression. There could be a logical explanation that I haven’t thought of, but for now I am concerned.
sideshow: The answer is Patience. It doesn’t matter if there is massive manipulation or not (I vote for not). As the big money moves into physical silver on the wholesale side the price will go bananas. If the big money doesn’t move into physical silver, the price will not go bananas. Retail demand has very little impact on the price measured in weeks, but will probably have a big impact measured in years. In other words, if retail silver demand remains as strong as it is today, in a few years the silver price will go bananas. Manipulation is irrelevant in the long term or when a lot of money is involved.
SRSrocco: Hommel is covering too many topics to try to address in these comments, I will probably have to write a full post on it. I think he is right in some ways but wrong in many others.
John: It appears Hommel and many others just don’t understand how small the retail gold and silver bullion markets are compared to the wholesale market.
Joe M: Goldman Sachs has been closing their TOCOM gold book for 2 years. This was an arbitrage and not an outright position so the fact they are now at a low level at TOCOM is largely meaningless in terms of immediate future gold prices.
Lone Ranger: Great points. Gold and silver in many currencies have not fallen by that much. This takes some of the sail out of the manipulation argument since a portion of the drop in the gold and silver price is the result of a rise in the price of the dollar. Note that the kind of short selling Prof. Fekete talks about is not “naked” short selling but covered short selling. That is not manipulation. It is using the market to hedge a physical position.
Maciek: I believe some hedge or investment funds are in big trouble and need to raise some cash even after selling commodity positions, so now they have to sell the stocks. Or, it’s as you say and they are sniffing another downdraft.
sideshow: Patience. The market will eventually return to fundamentals. It always does.
Mr. Zetetic: A plausible explanation is that the retail bullion market is really small. Thus, production facilities set up for retail bullion manufacturing operations are also really small. There are only a certain number of extruding, stamping, etc. machines out there that can produce bullion and coin blanks. It is not a simple matter of switching around a production line. When the retail supply has been locked up by forward orders for several months as it is today, it may not make sense to keep sales offices open like the Matthey branch in Melbourne. I think people are jumping to conclusions that the refiners are closing down retail bullion production.
Mark asks, ?what is the end game??
I?ve been wondering as well. In my opinion, we are witnessing the next logical step in the process to maintain bank control over money.
Historically, silver was a widespread and critical monetary metal. It complimented monetary gold and facilitated the DISPERSION of monetary metals among the population - where it BELONGS.
If you want to control money you DESTROY silver, promote gold, then CONSOLIDATE both.
Great strides have already been made in the removal of silver from circulation. We?ve seen (inferred) the destruction and consolidation of inventory, disincentives to production and increased industrial consumption. What better way to destroy monetary silver than to use it up! Cap the price, encourage use, discourage production, and run down inventory. No silver ? no silver money. Silver simply becomes a precious industrial commodity ? forever removed as a monetary metal ?threat? to the fiat money cartel.
Perhaps the Silver Users Association and the money interests are not so stupid. It would not be unreasonable to suppose that they have known exactly what they?ve been doing - when you consider their interests. I would bet the ?banksters? understand the long-term effect on price from the supply/demand trend. But who cares as long as they control limited inventories, can ration supply to their friends in industry while eliminating the threat of silver money to their money racket.
I am betting silver goes up on the basis of increased rarity with this scenario in mind. Unfortunately, I fear silver might become too pricey to ever put into the hands of the population as money. As such, any gold-backed monetary system we might see to deal with this debt bust will be just flawed enough to allow for the continuance of a paper money regime.
The money interests live by fiat. So far they?ve managed to avoid dying by fiat for lack of an alternative ? in perception if not in reality.
This is how I see it to date. The following end game of course is pure gloomy speculation.
Given the concentration and control of the limited inventories of silver and gold and the general gold/silver (money) impoverishment of the public, the elite need not lose control. They will simply change the game and the tokens in their favor. New ?hope? and ?opportunity? will be marketed to the public. The ongoing (and profitable) attacks on gold/silver will demonstrate to the public the ?unreliability? and ?risk? of these ?relics.? Long term benefits of holding gold/silver will elude the consciousness of most people as relatively brief periods of ?new? currency stability interrupt the longer-term picture of volatile paper currencies. Sadly, that volatility will probably be attributed to the precious metals and not the currencies.
I welcome critique here. I would really like to flesh out this ?end game? thing.
Endgame was a play by Samuel Beckett, first performed in English in New York in 1958. From the Cambridge Guide to Literature in English:
In a room, evidently isolated from all external contact, sits Hamm, immobile and dependant on his servant Clov for everything from painkillers to conversation. He aspires to an end of which the prospect constantly eludes him. Master and servant are locked in resentful symbiosis–if Hamm cannot stand, Clov cannot sit. Towards the end of the play, Clov tells Hamm that he can see a boy in the wasteland outside the room. Before his last exit he asserts to Hamm that he is leaving forever, but we have not sufficient confidence in an ending to believe him.
I don’t understand why anybody would want to liquidate physical silver, as opposed to paper silver, as Mr. Fekete says is done by bulls in bear skin. A point to be noted is that while gold ETfs lose holdings during every selloff, silver ETFs hardly ever budge. Perhaps, this is because the big players are using Gold ETfs for speculative purposes, while the real investors hold physical gold, whereas silver being a bulky item, even long term investors hold in ETF form. If that is so, there is hardly any danger of Silver ETF selling, and if that is so, with nearly all the paper shorts having covered, we might as well call $11.5-$12 silver as bottom for all times to come. However, could someone enlighten me what would happen to silver during stagflation, which we are sure of now?
Tarun: The “bulls in bear skin” do not liquidate physical positions. What they do is go short paper at peak points, with the presumption being that they sell a lot of call options. I refer to my commentary from last month pointing out the huge number of September GLD call options (if I remember right) at 95. Those were “bulls in bear skin” selling those call options! And guess what, looks like they will be keeping their GLD positions! With respect to silver during stagflation, the example I’d look at is the 1970’s. There was a period between 1974 and 1976 when silver went down about 45% (as it has now) but it then went on to rise 1000%. And the only thing that stopped it was Volcker raising short term Fed rates to almost 20%. Impossible now with the debt load. So, I don’t think silver is a bad bet during stagflation. Others are free to add more eloquent explanations, which I’m sure they will.