Last Updated :
23 November 2010 at 17:05 IST
Silver shortage, a sign of manipulation?
LONDON (Commodity Online): Why there is rationing of silver coins in the bullion market? According to reports, US Mint is rationing silver Eagles sales. The same goes for the Perth Mint in Australia and other mints throughout the world.
Bullion and coin dealers by the droves have, in the past, and are now, again, quoting customers weeks, maybe months, for deliveries of silver bullion, in any quantity. This indicates a shortage of silver in the market. But the truth is different.
Actually, there’s no shortage of physical silver at all. There’s plenty of silver, in fact, as in hundreds of millions of ounces of above-ground stock, with a lot of this stock stored in secured warehouses, bank vaults, home safes and, even, hidden in the ground in backyards across the world.
Availability of silver for sale, however, is another matter all together. You can be assured of procuring as much silver as you want if the offer to buy is raised to $100 per ounce (.999).
But at $26 per ounce, the world has an acute problem at the moment in the silver market. So why aren’t the economic fundamentals of supply/demand equilibrium working in the silver market?
The silver market has endured massive price suppression for decades, while underscored most recently by the continuation of the silver suppression scheme perpetrated by the COMEX, LBMA and the bullion dealers associated with these two entities.
The two dealers under suspicion, but not forthrightly accused of suppressing the silver market, are JP Morgan and HSBC, according to a Commodities Futures Trading commission (CFTC) announcement of October 26.
“I believe that there have been repeated attempts to influence prices in the silver markets,” said CFTC’s Bart Chilton. “There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public, and reviewing in publicly available documents, I believe violations to the Commodity Exchange Act (ACT) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.”
But two weeks later, the week ending November 12, the cartel was, again, involved in a silver “take-down” scheme, which further strained available supplies. This time, through the COMEX, the banks were able to take down the silver price by raising futures margins requirements for speculators in the silver market, which, in and of itself is normal as prices in the commodity rise.
It’s the timing of the margin requirement change that’s suspect to many skilled observers, however. By not incrementally adding to margin requirements in any market, a slew of highly-margin longs could be herded for slaughter, which must sell en mass to square positions with the clearing house when the margin requirement is finally raised.
“As the price of silver almost continuously rose from $17.98 on August 23 to $29.36 mid-day on November 9 (a 63% increase), the COMEX had not changed its minimum requirements for leveraged accounts,” explained Patrick Heller of Liberty Coin Service. “It would be a normal process to periodically bump us the minimum amounts for margin accounts as prices rise, but this was not done until November 9, when the margin requirement was increased from $5,000 per contract to $6,500.”
By delaying a raising of margin requirements as the price of silver shot up, a larger amount of speculative longs accumulated for the COMEX to “stop out” as these longs needed to sell, creating a dramatic and rather quick plunge in the price.
But it appears the scheme is faltering. Open interest remains strong and new orders keep flooding in for silver, according to Turk. Arguably, prices are still too low for silver to clear. Silver has since rallied to more than $27 per ounce in Asia on Monday.
While speaking to Eric King of King World News on a November 12 broadcast about the sudden reversal down in silver during that week, renowned precious metals expert, James Turk, said, “They are not dislodging physical silver by running the paper market down. In fact the silver market is getting tighter and tighter. That’s why I am perplexed at why they are trying to run this paper market lower. If they want to get physical silver they are going to have to take the price higher, not lower.”
For now, anyway, it appears the bank cartel is on the ropes in the silver market.
(Source: Beaconequity)
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