InvestingAdvicebyGeorge – I have been writing for some time that I could not get my hands around the silver trade. I had a feeling when the market went up 202 points on Tuesday that gold and silver would sell off into a healthy pullback and they both did. Today I was very surprised to see gold and silver put in very strong showings and was totally confused by this. As I wrote yesterday I expected them to continue to sell off to about $35.00 in SLV and $141.50 in GLD. They did not act as scripted. What was I missing?
Well yesterday I spoke to Christian from GoldSilver.com and he pointed me to a link on YouTube by someone using the nom de plume Brother John F. I watched this video in stunned disbelief. This man had a live streaming video from the Commercial Mercantile Exchange (COMEX) for the minute by minute trades. Silver contracts were selling higher and at about 1:40PM they started to sell off for no reason. Then at 2:03PM there was a trade for 50,000 contracts of silver sold. (This would lead anyone to conclude that the sale was known 23 minutes before it occurred.) This is not a typo. That is 50,000 contracts in one minute! If you are not aware each contract is for 5,000 ounces of silver. So if we do the math 50,000 contacts X 5,000 ounces per contract equals 250,000,000 ounces of paper silver contracts. If you’re getting dizzy reading all of those zeros I will spell it out for you. That is Two Hundred Fifty Million ounces of paper silver traded in one minute. If we do some further math and we multiply two hundred fifty million contracts by the proxy price of silver yesterday which was $40.00 per ounce. That trade was for 10 billion dollars in one minute.
I just want to take this one step further. According to Jason Hommel writing on behalf of the US Mint, the amount of silver produced per year in the entire world is roughly around 680 million ounces of silver and the amount mined in the united state last year was 50 million ounces. The amount that was traded on the CME yesterday was approximately one third of all of the silver mined in the world. It was 5 times the amount mined in America. So how can this be?
So you may ask why this is so troubling. The reason is that I have been writing for some time now that there are rumors that the silver ETF (SLV) is rumored to not have the silver that the paper purports to represent. There are reports that if SLV was ever called upon to produce the underlying asset it represents it would be unable to do so. Is there any wonder why this commodity is so volatile?
The fact is that the silver market is being incredibly manipulated. Well that is about to change. On Friday July 22nd the Hong Kong Mercantile Exchange will start trading dollar denominated silver futures contacts with the hopes of tapping into the growing demand for the metal in China and India. The new contact will enable buyers and sellers in China to trade effectively with their counterparts across the world, while at the same time allow investors to gain exposure to silver price movements and broaden their investment portfolio. The exchange also plans to roll out a Yuan-priced gold and silver futures to capitalize on growing investor demand for China’s strengthening currency. They also have ambitions for products in base metals, energy and agriculture.
This was the missing piece of the puzzle I could not find. Starting tomorrow Friday July 22nd the Anglo American monopoly on silver is over. This will be the first time that Asians can buy and take future delivery of silver in Asia. No longer can the CME raise margins close to 100% in eight days. The silver shorts are and should be afraid of the hundreds of millions of Asians that will be entering this small market. China alone has trillions of dollars and they could drop 0.01% of that money into silver and explode silver beyond the control of the American elite.
The one that has the most to fear is the Comex. Yesterday’s manipulation twenty three minutes before the trade of 50,000 contracts was consummated only proves that the COMEX has been manipulating the market. There has never been true price discovery as this manipulation of the COMEX has kept the true price of silver hidden. Well, I see dark days ahead for the COMEX. There will be investigations, there will be discoveries, there will be trials and there will be jail sentences handed out. Market manipulation is not something the Feds take lightly.
The real reason for this post is to tell all of my readers to buy as much physical as they can. Until I am convinced that the markets have established a transparent state where true price discovery is possible I will stay away from these vehicles. I do exclude PSLV (silver) and PHYS (gold) from this list as their paper is really backed up by the physical it purports to represent.
“Physical Silver is the bullet that slays the financial vampires. Physical Silver is the stake in the hearts of the Wall Street werewolves”
About the Author – George has been an investor for 30+ years. When he retired in 2004, he took over the control of his investments full time. In March of 2009 he committed a sizable stake to the market and doubled his money. he sold half about a year ago and what he started with is in drips dividend reinvesting. The other half he have been a bit more speculative with, but he recently bought SLV at $26.00 in January and sold it all on April 29th for a 66% realized gain. He spends my time reading every financial classic he can get his hands on and has become a fairly good chartist.