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Silver Shortages

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KingWorldNews did an interview with a London trader on the shortage of physical silver. The help with filling orders the SLV has been tapped.The trader was quoted as saying

“It is so tight, the silver market is so tight that we’ve been waiting three weeks plus, before this takedown, for deliveries of size to arrive.  I’m talking about tonnage orders.  This is also key, most of the silver being delivered was refined after the orders had been placed, and again, that was before the takedown.  You can just imagine how long the wait times will be going forward.”

There is nobody in COMEX silver contracts anymore, other than casino players.  The only way they have been able to keep silver depressed is by borrowing silver from SLV to meet immediate demand.  That’s the only reason silver isn’t trading $10 to $15 higher right now.

There isn’t enough silver for investors to buy (in large amounts) so they have been using SLV as a flywheel.  SLV is over 20 million ounces short on the silver they are supposed to have in the vaults to back the shares which have been issued.  The silver isn’t there.  So there are people who purchased SLV to own physical silver, but all they have is shares that aren’t backed by the physical silver.

… on manipulating prices…

Part of managing the price of silver recently has been for the central banks to attack the gold market.  But what is interesting is how this manipulation of the gold price was effected.  Obviously, the bullion banks, which are working with the central banks, have inside knowledge as to the timing and just how much gold is going to be available to them. 

So, in order for the bullion banks to maximize the effect of the physical gold they get from leasing, they add high scale paper leverage.  They then short-sell just enough tranches of COMEX contracts to surgically take out three important support pivots….

What tactics are used to suppress physical demand?

“Each of those important support pivots that everyone is watching, like the 50 day moving average and so on, each one of those are taken out in the access market in the quiet trading, overnight, on three successive days.  In other words, they take out these three important pivots, which turns the momentum buyers into sellers.  It also gets a bunch of funds to start selling as well.

So using as little ammunition (physical gold) as possible, and in thinly traded markets, they take out these pivots.  They smash the price, but leave just enough physical gold for going into the fixes because the smart buyers are saying, ‘I’ll take it at this price.’  So, as we go into the fix, they’ve provided just enough physical to satisfy as many of those buyers as they can.  They then smash it right after the fix, again, with paper. 

That’s what’s happened with gold and it’s the reason it has been manipulated down to these levels.  It’s the only way they could do it, and it’s a sign of absolute desperation when central banks are willing to risk giving bullion banks gold they will never, ever receive back. 

..and of course China is taking advantage of cheap prices and taking delivery as should YOU.

These central banks had to be in desperation to allow this borrowed gold to be absorbed by foreign entities.  They needed to raise dollars in a hurry and they are extremely afraid of gold going through the roof.  I was very, very surprised they got as far as they did (driving gold lower).  They had to use an awful lot of gold to do it.”

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Is Roubini The Genius He Thinks?

Comments Off on Is Roubini The Genius He Thinks?

Recently Gold took a bit of a battering as many speculated the sell off was from the distrust of paper gold. Indeed a lot of gold bugs would argue that the paper market is not backed up with physical gold so you are better off selling your paper and buying physical. A lot has been written of Gerald Celente and other MF Global customers losing their money and failing to gain delivery of their precious metals.

In the middle of it all Roubini scoffed

“Gold again proves it is not the safe haven many had hoped for, breaking the 200-day moving average, the first time since 2009 and signaling that prices may drop to US$1400/ounce.”

But ZeroHedge has since put it so well 🙂

Well, since then as the chart below shows gold just took out the 200-DMA, this time in the opposite direction upside, having proven the recent drop was nothing but a buying opportunity as was suggested by the non-Ph.D. community, we assume that using the author’s logic, gold has proven that it is in fact a safe haven, and that since it is not going to $1400 it can only go to infinity…. Or is that us taking liberties with our lack of an economics Ph.D. a little too far?

ECB’s LTRO Trick To Bend The Rules

Comments Off on ECB’s LTRO Trick To Bend The Rules

As the ECB introduces cheap capital for 3 years via its LTRO, its nothing more than a trick to fund sovereign debt by the back door. While it is currently restrained in its capacity to just simply print money and under pressure by the Germans to not do so this method enables Draghi to indirectly fund eurozone foreign debt.

The proof of this is Spanish yields last month on its three month notes had hit 5.11%, but on Tuesday went as low as 1.74%. Banks will be able to borrow cheap at 1% and buy Italian, Spainish bonds at 5 and 6%.  

Mark Schofield of Citigroup had this to say about it.

“This may help sovereign debt a bit bu t we don’t think it is a game-changer,” said Mark Schofield, rates chief at Citigroup, predicting that banks will use the money to plug other holes and cover a dollar funding squeeze. “Most banks already hold too much of their own government’s debt. It may take coercion to make them buy more.”

UBS took a look at the figures and concluded that bank will still be under capitalised.

Obviously the relative take-up of the ‘bailout’ will decide just how much ‘free-money’ the banks can potentially reap (were they ‘ultimately’ all-in enough to do the carry trade) before the EBA’s capitalization deadlines, but it is clear that even in an extremely large take-up scenario (and extended deadline) – the earnings will not come close to covering bank (capitalization) needs. The Japanese rear-view mirror perspective on this is hardly supportive as the Europeans follow the same ‘short-term-solutions-and-zombification-via-capital-needs-extensions’ strategy which will inevitable require the investment (read bailout) of public funds (as it did in Japan in both 1998 and again in 2003).

Predicatably Sarkozy has only one intention for the LTRO 

French President Nicolas Sarkozy has suggested banks could use the loans to buy even more government debt.

Simon Derrick, chief currency strategist at Bank of New York Mellon Corp, said the loans amount to quantitative easing “through the backdoor.”

“What the ECB is doing is providing ultra-cheap money to banks, which in turn are going to be in there buying the sovereign debt up,” Derrick told Linzie Janis on Bloomberg Television’s “First Look” earlier today. “That’s good news in the sense that it’s clearly going to help sovereigns in the near future, but it’s also printing more money. That’s going to start to weigh on the euro over time.”

And where does Draghi and ECB get this money for funding the LTRO, why its made out of fresh air. Buckle up for inflation.

Sources: TelegraphZeroHedge, Bloomberg

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