Friday, January 22, 2010

All Manipulations End

An excellent article below. $17 is the lower band for the channel silver has been in. Anything under $17 is a steal and won't be around long.

The biggest danger to silver right now is a market crash. If that happens it's anyone's guess what silver will do. I predict the COMEX prices will crash and you will again see physical shortages of silver with big premiums.

Therefore, waiting for the prices to drop to buy silver will be a moot point because where will you buy it? I started buying silver at $18 just off of $21 and I promise you there was difficulty in even finding the stuff. Most places were sold out. The US Mint even suspended the production of certain coins and ELIMINATED the production of others...

Read on....

Silver: The Race Is On
Ed Zimmer

What do the following items tell you? Price of silver falls by nearly 5% in one day. In less than 11 days the available stock of silver to cover paper shorts falls by nearly 15%. In the first few minutes of oveseas trade, silver begins to recover it's losses.

The answer is that the race to own silver is on. From the US Government saying that it can't get enough blanks to make the silver eagle to the fact that silver stocks are continuing to decline rapidly since the first of the year, the signs are all pointing to an increase in the future. Allow me to point out what I am seeing and you can make up your own mind.

On Wednesday, January 20th, prices in New York for silver plummeted 4.7%, down 89 cents on the day. Yet the World Spot price not only stops the crash, but turns slightly positive in the first few minutes of trade. It would appear that traders outside the US have a different view of the value of the silver metal.

Tuesday, January 19th. the COMEX totals of silver on deposit shows 113 Moz of silver combined on deposit. While that is up slightly from the 112.6Moz in December, the numbers are seriously misleading. On the 8th of January, total stocks were at 111.5 Moz of which 54 Moz were registered to cover contract positions, 57 Moz was eligible to cover contracts, but were actually owned by someone who had them on deposit at a COMEX depository.

Just 11 days later, the stocks of registered silver have fallen to 47.4 Moz while the eligible stocks rose to 65 Moz. As of the 15th, over 128,000 silver contracts were open, amounting to a trade of more than 640 Moz with just 47 Moz available to cover demands for delivery. That's right, there is only physical silver to cover slightly more than 7% of the open silver contracts on the COMEX. Do the math -- 93% of the COMEX contracts can only be covered if the short side can find someone to sell them silver or the long is willing to settle in paper money for a paper silver contract.

Basically, nearly 15% of what was the available COMEX silver is now owned by someone. It only took 11 days for that much silver to disappear into personal hands. Only 47 Moz remains, at which point the shorts develope a new term for "naked short selling", because the only way they can then satisfiy the counterparties is to settle 1) Buy Silver on the open market to settle the demand for delivery or 2) force a settlement in cash, which is the same thing as a default.

I would expect the registered stocks to rise slightly in the near term, as the drop in prices allows some recovery, IF there is silver to be purchased on the open market at levels needed by COMEX. Otherwise, the race to own silver is heating up. Joe Sixpack may not yet be waking up to the facts of silver, but it would appear that savvy traders have laid definative claim on 7 million ounces in just 11 days, you might want to consider your position before the checkered flag waves.

Disclosure: Long GLD, SLV, Physical Metal, retirement accounts

Ed Zimmer is a graduate of The School of the Ozarks (now known as College of the Ozarks) in Southwest Missouri. He spent 14 years in broadcast news in the Midwest covering, among other things, commodities. He is currently manager of a healthcare support facility doing over two million dollars a year in sales.

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