Expert observations of today... | Strong Indications of Gold & Silver Shortages
By: Adrian Douglas |
| -- Posted Sunday, 16 January, 2011 Source: GoldSeek.com |
SILVER:
“…as the price increases the open interest contracts! This means that in general existing shorts are covering their positions as the price rises. This is indicative of a looming chronic shortage. The owners of a commodity should be happy to sell at higher prices but that is not the case in silver. This shows that those who have committed to sell and don’t have the silver are buying back their commitments and those that have silver no longer want to sell it. There is no other way to interpret this change in relationship between open interest and price that has been developing over the last ten years. We have reached the tipping point where physical shortages are going to become more and more apparent.
John Embry in a recent interview with KWN explained how difficult it was to source physical silver for the Sprott Physical Silver Fund. In daily updates in the Midas column of www.lemetropolecafe.com I have shown how Comex silver inventories are shrinking and are not far from ten year lows. The Financial Times just reported on acute shortages of gold bars for investment in Asia.
“…The clear trend in the data clusters that has developed over the last ten years indicates that the gold open interest will soon be declining with a rising price as is the case for silver. Taken together the data shows that in both gold and silver there is a growing reluctance of the traditional short sellers to meet rising demand even at elevated prices. This is strongly indicative of looming physical shortages. This conclusion is corroborated by many other market observations and anecdotal evidence. We are likely very close to the “tipping point” where shortages become exposed and a stampede of investors into precious metals to benefit from the accelerating prices will give rise to a feeding frenzy that will exacerbate the shortages.
Perversely the more the market becomes close to the tipping point the more we can expect the cartel of bullion banks to make bear raids as we have seen this last week because they desperately need to cover their short positions. However, in the case of silver and soon to be the case with gold a negatively correlated open interest to price relationship means that lower prices lead to higher open interest; in other words there is no way to cover at lower prices; the only way to cover is at higher prices. As this becomes increasingly obvious to the cartel the severity of the bear raids will decrease, particularly when the premiums in the physical market are showing that the bear raids are stimulating massive physical offtake making the predicament of the cartel ever more precarious.
This makes the brouhaha about the CFTC imposing position limits on the Comex a complete joke because, as always, the regulators are going to be too late.
Just like all the other nefarious financial engineering schemes that are falling like houses of cards, the scam of selling precious metals that do not exist is fast approaching a rendezvous with its day of reckoning.
Note: when will the point be tipped?...
Tid bits on gold and silver from LeMetropole Café today.
Even with U.S. closed, the same suffocating pattern of non-stop attack continues.
As usual, gold up in Asia last night. In fact, gold has gone up after the 4:00 NYSE close essentially every day for the past month, yet every day falls at 3 am now, as it did today…
With gold now up a buck and silver down a dime, SLW is down 1.4% on a whopping 130,000 shares (average daily volume, U.S. + Canada, is roughly 20 million shares), and SVM is down 1.8% on an even more incredible 70,000 shares (average daily volume, U.S. + Canada, is roughly 5 million shares)…
It is hard to know what is what, but because of the quality of the sources, it is well worth bringing to your attention … such as the French led G-8 bit about them wanting to lead a charge on gold and silver…
US Mint Reports Unprecedented Buying Spree Of Physical Silver
JANUARY 16, 2011
Three days ago we noted that in just the first week of January, the US Mint had sold 2,221,000 ounces of silver "a number which if run-rated would be an absolutely all time monthly record," A quick glance at the tally today, shows that something very scary is going on. In the subsequent three days, the number has surged by 50% and has hit 3,407,000 ounces of silver! In just the first 12 days of the month we have already surpassed the total monthly sales of 9 separate months of 2010…
"Mike Krieger presents the following disturbing observation on this trend: "In the first 12 days of January 3.4 million silver eagles have been sold. I have never seen anything like this. The amount of physical being taken off the market on this paper sell off is EXTRAORDINARY. We must be VERY close to the end." Whoever has adopted JPM's legacy paper silver short position is in for some very troubling days ahead.
Aside from the fact that PM fundamentals have only INCREASED in the past two weeks (and CERTAINLY not decreased), nearly all technical indicators point to the fact that an important sector bottom is imminent. For one, the Relative Strength Indices (RSIs) on many Precious Metals stocks, such as GG, NEM, SLW, and SVM have not only fallen to the same levels seen in last year’s market bottom (February 2010, to the DAY of the January employment report massacre predicted by Andrew McGuire), but also to levels seen at the ultimate market crash bottom in late 2008!
Additionally, despite the fact that gold has only declined by 4% from its ALL-TIME HIGH, set just weeks ago, the Hulbert Gold Sentiment Index has plummeted down to just 33% bullish. Actually, I take that back, as that reading was taken after Wednesday’s trading, not incorporating the big gold and HUI price drops on both Thursday and Friday. In other words, particularly once Barron’s, the Wall Street Journal and the other Western weekend propaganda complete their weekly misinformation campaign, I’d expect this index to be closer to 25% bullish, or even lower, about as low as sentiment in this sector can get, a particularly aberrational reading in light of the fact that gold just completed its tenth straight up year, once again outperforming essentially all market asset classes and reaching an all-time high in essentially every global currency.
Don’t take your eye off the ball in this violently manipulated sector, the goal is to PROTECT YOURSELF and your family from hyperinflation, something TPTB DO NOT want you to do!
latest COT stats for last Tuesday,..
Most encouraging, as ratio (gold) of Commercial Shorts to Longs is back down to 2.11,..
Given the hammering the pm's took in the last 3 days of the week, I think there's reasonable odds that that ratio might have slipped close to the screaming buy level of 2,.. That has always proved to be my most acreate indicator yet of a suitable buy point,..
Will hope to graph up in further detail for you tomorrow,..
But strongly suggests we're close to a bottom,..
“…In the end, it will be the offtake of physical bullion that will end the scam. Thereafter the regulators will come forward, and the criminal charges will be laid. The barn door is always closed long after the horses have fled in our system. If so much of the worldwide inventory of gold and silver is now already gone with only such a small chunk of the market understanding what we know, how bullish is that for the future?... Every ounce of bullion that finds its way to committed strong hands is one less ounce on the shelves of the COMEX to back paper. This is why the news of the day is so bullish, despite the silly commentary and spot market price volatility for the metals. When I see reports of record demand for silver eagles I am strongly encouraged since I know those buyers are not playing a trade, and those ounces are collectively making a difference in net demand. So too when I hear of tons of bullion sales in Asia, for there again we know it is not a bunch of guys in suits that are juggling hot money….When the sector is most bullish is usually the time when the Cartel is prompted to strike and shake out the tourists. It is during the corrections like we have ongoing today that I get excited, and I am buyer, and feeling like there is a meaningful advance in the battle with the Cartel. Lower spot prices draw in the strong buyers.