U.S. banks shorting gold and silver

[BK]

Are some U.S. banks involved in commodity price manipulation?
For those interested in the recent crushing of gold and silver prices, I think this link is very interesting.
http://www.gata.org/node/6510

excerpt:(bolding by BK)
"As of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever.
"Between July 14 and August 15, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38 percent.

"For gold, three U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and three U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an 11-fold increase and coinciding with a gold price decline of more than $150 per ounce.

"As was the case with silver, this is the largest short position ever by U.S. banks in the data listed on the CFTC's [Internet] site. This was put on as one massive position just before the market collapsed in price."

(The full report by Ted Butler is linked within this article at GATA.)

 

[Bobo08]

I want them to short gold and silver a bit more so that I can acquire them a better price

 

[BK]

Further comments on this issue are found here:
http://www.financialsense.com/Market/kirby/2008/0825.html

Included in the conclusion:

"That such obscenities are allowed to continue – UNREPORTED by the mainstream financial press – is, in itself, a condemnation of not only how warped, twisted and connived our capital markets are, but how COMPLETELY BROKEN and complicit our system of free speech and irresponsible our media have become."

 

[Alada]

I want them to short gold and silver a bit more so that I can acquire them a better price

Might be a problem with that though, here's a snip from the latest Signs Economic Commentary for 25 August 2008:

It's very interesting to witness supply-demand dueling with market price in the metals complex. Friday, I decided enough was enough, and went to the local dealer, intending to buy some bullion. Where in past I'd buy silver bars, now, I generally buy rounds, thinking it'd be easier to exchange for value when the spam hits the air-circulation device.

As I walked in the door, the fella was literally pulling boxes of silver out of his display cases. The place was otherwise pretty empty. We made some small talk about how clever he must have been to reduce stock at the recent high. Later it came out he, and other dealers in his network, just weren't going to sell at the depressed levels!

I have been trying to buy 2008 silver eagles (for gifts) since spot was at $18. He, the dealer, further explained if someone wanted to buy so the dealer was "right side up" trades might happen, otherwise no. I reminded about wanting the eagles for gifts, and would pay what was needed to get them. No joy.

Out of curiosity I checked eBay, same-same, no eagles. Non numismatics are also being pulled. When I saw the red announcement on Kitco the scene cleared. No one is selling. Sure, Kitco needs to keep taking orders, but metals dealers, like a gas station owner who filled tanks when oil was 147, won't sell at prices that lose money.

So, what's an ounce of silver worth? Is it $12? $13? Or, is it whatever it takes to get someone to sell? Might metals markets freeze up like credit markets? In past I'd have said no. Right now, evidence says yes.

 

[mamadrama]

"That such obscenities are allowed to continue – UNREPORTED by the mainstream financial press – is, in itself, a condemnation of not only how warped, twisted and connived our capital markets are, but how COMPLETELY BROKEN and complicit our system of free speech and irresponsible our media have become."

Washington Post Staff Writer David Cho, who last week reported about the negligence of the U.S. Commodity Futures Trading Commission in regulating the oil futures market (_http://www.gata.org/node/6517), cordially advises us of his receipt of many appeals from GATA supporters for him to look into the CFTC's similar negligence in the gold and silver markets, adding that he is indeed interested in the story we're pitching, hopes to pursue it soon, and would like you to know.

Maybe that's going to change soon?

 

[Nienna]

I want them to short gold and silver a bit more so that I can acquire them a better price

Might be a problem with that though, here's a snip from the latest Signs Economic Commentary for 25 August 2008:

It's very interesting to witness supply-demand dueling with market price in the metals complex. Friday, I decided enough was enough, and went to the local dealer, intending to buy some bullion. Where in past I'd buy silver bars, now, I generally buy rounds, thinking it'd be easier to exchange for value when the spam hits the air-circulation device.

As I walked in the door, the fella was literally pulling boxes of silver out of his display cases. The place was otherwise pretty empty. We made some small talk about how clever he must have been to reduce stock at the recent high. Later it came out he, and other dealers in his network, just weren't going to sell at the depressed levels!

I have been trying to buy 2008 silver eagles (for gifts) since spot was at $18. He, the dealer, further explained if someone wanted to buy so the dealer was "right side up" trades might happen, otherwise no. I reminded about wanting the eagles for gifts, and would pay what was needed to get them. No joy.

Out of curiosity I checked eBay, same-same, no eagles. Non numismatics are also being pulled. When I saw the red announcement on Kitco the scene cleared. No one is selling. Sure, Kitco needs to keep taking orders, but metals dealers, like a gas station owner who filled tanks when oil was 147, won't sell at prices that lose money.

So, what's an ounce of silver worth? Is it $12? $13? Or, is it whatever it takes to get someone to sell? Might metals markets freeze up like credit markets? In past I'd have said no. Right now, evidence says yes.

What I was wondering after reading the SOTT article is if the metals traders know that soon paper money is going to be worthless and why should they be left with worthless money when they have the real deal sitting right there. Gold and silver may just end up being the currency of the future, so why should they trade for worthless paper?

Is this a possible scenario?

 

[Pierre]

What I was wondering after reading the SOTT article is if the metals traders know that soon paper money is going to be worthless and why should they be left with worthless money when they have the real deal sitting right there. Gold and silver may just end up being the currency of the future, so why should they trade for worthless paper?

Maybe they are doing both.

It's a mere hypothesis but a trader might speculate on precious metal prices variations throught different paper instruments (futures, EFTs, warrants) and invest fully or partially his profits on real metal.

Actually it's possible to make money with paper position in a falling market. The short positions mentioned in the article above are some kind of "put" options. The traders speculate on the drop in gold price through a paper "put". If the gold price drops, they make paper money. And with this paper money they might buy some real gold.

Does it make sense ?

 

[BK]

The second quarter financial reports of major silver producers such as CDE, HL, and SSRI showed losses.
The price of silver during that period probably averaged $17-$18 an ounce.
If these companies cannot make money at those prices, they certainly won't make money with silver at $13 an ounce.
I wouldn't be surprised if the U.S. banks involved in the metal shorting were trying to make up for losses in the loan arena.
They short silver at 18 and buy it back at 13, they short gold at 920 and buy it back at 795, or something along those lines. They are assured the price will fall to those levels because they are involved in the manipulation of the prices.
J.P. Morgan was mentioned in the second link.
I wouldn't be the least bit surprised if all of this has the blessing of the U.S. government, which would want gold and silver prices to fall, as it makes the dollar appear stronger.
The official government response to charges of regulatory failure has been:

Move along folks, there's nothing to these accusations.

This is the same government that said the economy was strong and getting stronger and that the subprime loan debacle, which was another regulatory failure, would not seriously impact the economy and credit markets.
Ted Butler has been noting the concentrated short position in silver for years, but has been regarded as a "loon" by the regulators.
GATA is also regarded as a "wacko" conspiracy website by many so-called experts and government mouthpieces.
But the numbers are right there in the articles, staring everyone in the face.
I've placed my bets accordingly.

 

[Nienna]

Maybe they are doing both.

It's a mere hypothesis but a trader might speculate on precious metal prices variations throught different paper instruments (futures, EFTs, warrants) and invest fully or partially his profits on real metal.

Actually it's possible to make money with paper position in a falling market. The short positions mentioned in the article above are some kind of "put" options. The traders speculate on the drop in gold price through a paper "put". If the gold price drops, they make paper money. And with this paper money they might buy some real gold.

Does it make sense ?

Yes, this makes sense and I understand how the "paper money without gold to back it" works. Well, I understand it to the best of my ability. :/

I just finished deleting a rather long and involved post as I think I have figured out what was confusing me. :)

The fact that the metals industry (i.e. Kitco et al) says that they are low on stock - or completely out of stock - on items and are having to delay shipments. And the article above where it states that this fellow was seen pulling silver bullion off of his shelf and not willing to sell it - and neither are folks on e-bay.

The thing that was getting me is that it sounds to me like they are not selling the silver for any price. And I was projecting this onto the metals dealers as well, which is probably not what they are doing. Although, who knows?

Anyway, sorry for my confusion and hope I haven't been creating noise. :/

 

[Bobo08]

The fact that the metals industry (i.e. Kitco et al) says that they are low on stock - or completely out of stock - on items and are having to delay shipments. And the article above where it states that this fellow was seen pulling silver bullion off of his shelf and not willing to sell it - and neither are folks on e-bay.

The thing that was getting me is that it sounds to me like they are not selling the silver for any price. And I was projecting this onto the metals dealers as well, which is probably not what they are doing. Although, who knows?

The precious metal market in Australia is not that bad. I can get gold very near the spot price from retailers (pay and pick up right at the shop). I can also get silver coins from eBay at about 15%-20% above the spot price. So I guess the reported shortage only occurs when you try to buy large quantities.

 

[Pierre]

The fact that the metals industry (i.e. Kitco et al) says that they are low on stock - or completely out of stock - on items and are having to delay shipments. And the article above where it states that this fellow was seen pulling silver bullion off of his shelf and not willing to sell it - and neither are folks on e-bay.

The thing that was getting me is that it sounds to me like they are not selling the silver for any price. And I was projecting this onto the metals dealers as well, which is probably not what they are doing. Although, who knows?

The precious metal market in Australia is not that bad. I can get gold very near the spot price from retailers (pay and pick up right at the shop). I can also get silver coins from eBay at about 15%-20% above the spot price. So I guess the reported shortage only occurs when you try to buy large quantities.

That's the same here in France. I guess it's linked to local supply and demand balance for physical gold.

In the USA supply might be low, since the state doesn't have much gold reserve and therefore doesn't coin much eagles. Meanwhile the demand might be quite high since the crisis is well developed, the local assets (real estate, currency, shares) have already dropped more than in other countries triggering a major shift towards a "safe" asset like physical gold.

 

[Pierre]

In this video the CEO of Swiss Asia capital explains the decorrelation between physical gold where demand dramatically exceeds supply and paper gold where operator still speculate on prices.

According to this interview, once these paper gold markets (comex and gold future) collapse the price of gold should double (or more) almost immediately.

 

[Johnno]

The second quarter financial reports of major silver producers such as CDE, HL, and SSRI showed losses.
The price of silver during that period probably averaged $17-$18 an ounce.
If these companies cannot make money at those prices, they certainly won't make money with silver at $13 an ounce.
I wouldn't be surprised if the U.S. banks involved in the metal shorting were trying to make up for losses in the loan arena.
They short silver at 18 and buy it back at 13, they short gold at 920 and buy it back at 795, or something along those lines. They are assured the price will fall to those levels because they are involved in the manipulation of the prices.

Interesting to read this post a couple of months later since the house of cards is falling.

In any case it seems as if the banks succeeded. Prices dipped to around $740 in September, just as predicted. However this was on the October contract. The August contract matured on 27th August at around $850. So one wonders if they made a lot or lost a lot???