(George Washington Blog) The Feds are launching criminal and civil investigations into manipulation of the silver market by JP Morgan.
As the New York Post points out:
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.
JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.
Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.
The probes stem from testimony from whistleblower Andrew Maguire - a London metals trader formerly of Goldman Sachs - saying that gold and silver bullion markets are rigged that (and see this). One of his specific allegations is that JP Morgan has been fraudulently suppressing the price of silver.
Omnis' Jim Rickards, GATA's Adrian Douglas and others have also demonstrated that the big bullion dealers and ETFs don't have nearly as much as physical bullion as they claim.
This could cause a rise in the price of silver (and gold) if either one of the following occurs:
(1) The investigations cause the price suppression schemes to stop, as the price manipulators know that someone is watching. If the suppression stops, the prices will naturally rise.
or
(2) The investigations cause enough investors to lose confidence and demand physical delivery of silver (or gold). Because there is less physical metals than claimed (and more paper derivatives), enough demand for physical delivery would reveal the game of musical chairs for what it is, driving the price of physical metals higher.
Of course, if enough investors hear about the investigations, that alone could cause more people to buy silver (and gold), thus driving up prices.
Showing posts with label Silver. Show all posts
Showing posts with label Silver. Show all posts
Monday, May 10, 2010
Will Silver (And Gold) Prices Rise Now that the Feds Are Launching Criminal and Civil Investigations Into Manipulation of the Silver Market?
Monday, May 3, 2010
If Gold Poised for Take-Off Then Silver Should Do Even Better Better
The current gold: silver ratio of 63:1 suggests there could be some good catch up for silver ahead
Author: Lawrence Williams
LONDON -
(MineWeb)Investors are beginning to move back into silver as there is a perception that the metal's more volatile price patterns will lead to better returns if gold also continues to improve.
If last week's surge in the gold price indicates that momentum is truly building to push the yellow metal into testing its December high point (in dollar terms) of $1226 an ounce, then an investment in silver looks a pretty good gamble.
Silver prices move pretty well in line with gold, but there tends to be much more volatility on both the downside and the upside, so if gold is in an upwards trend, as many observers think, then a parallel rise in the silver price could be much greater in percentage terms. Gold is currently only around 2% off its high, while silver is some 7.5% off its 2008 peak, suggesting that a run up in precious metals prices in general would likely see silver dominate in its rate of increase - and this could benefit silver holders even more should some of the other gold forecasts - say of $1500 by the year-end - be achieved.
Consider also the gold silver ratio. At the current price levels for each the ratio is around 63:1. Historically this price ratio has mostly been between 45 and 50 in recent years, again suggesting there could be a good catch up from silver ahead. Even at the current gold price level a ratio of 50:1 would put silver at over $23 an ounce which would represent a very sharp percentage increase from current values - although this is not a change which would likely happen quickly.
Silver also has a strong industrial element in its consumption pattern - much more so than gold - so the state of the global economy, and the apparent lack of growth outside Asia, has partly held it back. In particular its growing usage as a biocide in wound treatment, water purification, general hospital usage etc. could eventually replace declining photographic usage as a key element in silver demand - and is far less subject to recycling than the latter.
Read Entire Article
Author: Lawrence Williams
LONDON -
(MineWeb)Investors are beginning to move back into silver as there is a perception that the metal's more volatile price patterns will lead to better returns if gold also continues to improve.
If last week's surge in the gold price indicates that momentum is truly building to push the yellow metal into testing its December high point (in dollar terms) of $1226 an ounce, then an investment in silver looks a pretty good gamble.
Silver prices move pretty well in line with gold, but there tends to be much more volatility on both the downside and the upside, so if gold is in an upwards trend, as many observers think, then a parallel rise in the silver price could be much greater in percentage terms. Gold is currently only around 2% off its high, while silver is some 7.5% off its 2008 peak, suggesting that a run up in precious metals prices in general would likely see silver dominate in its rate of increase - and this could benefit silver holders even more should some of the other gold forecasts - say of $1500 by the year-end - be achieved.
Consider also the gold silver ratio. At the current price levels for each the ratio is around 63:1. Historically this price ratio has mostly been between 45 and 50 in recent years, again suggesting there could be a good catch up from silver ahead. Even at the current gold price level a ratio of 50:1 would put silver at over $23 an ounce which would represent a very sharp percentage increase from current values - although this is not a change which would likely happen quickly.
Silver also has a strong industrial element in its consumption pattern - much more so than gold - so the state of the global economy, and the apparent lack of growth outside Asia, has partly held it back. In particular its growing usage as a biocide in wound treatment, water purification, general hospital usage etc. could eventually replace declining photographic usage as a key element in silver demand - and is far less subject to recycling than the latter.
Read Entire Article
Monday, April 12, 2010
Silver Sales Are Soaring
Tyler Durden
ZeroHedge
Submitted By Jeff Clark, Senior Editor, Casey's Gold & Resource Report
The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.
While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.
Yikes.
This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals.
To be sure, mine production is not the only source of silver. In 2009, approximately 52.9 million ounces were recovered from various sources of scrap. Further, the U.S. imported a net of about 112.5 million ounces last year. (Dependence on foreign oil? How about dependence on foreign silver!) So it’s not like there’s a worry there won’t be enough silver to produce the Eagle you want next month.
Still, why so much buying? The silver price ended the quarter up 15.5% from its February 4 low – but it was basically flat for the quarter, up a measly 1.9%. We tend to see buyers clamoring for product when the price takes off, so the jump in demand wasn’t due to screaming headlines about soaring prices.
I have a theory.
For some time, silver has been known as the “poor man’s gold.” Meaning, silver demand tends to increase when gold gets too “expensive.” The gold price has stubbornly stayed above $1,000 for over six months now and spent much of that time above $1,100. You’d be lucky to pay less than $1,200 right now for a one-ounce coin (after premiums), an amount most workers can’t pluck out of their back pocket. But Joe Sixpack just might grab a “twelve-pack” of silver.
What would perhaps lend evidence to my theory is if gold sales were down in the face of these higher silver sales.
The U.S. Mint reported a decline in gold bullion sales of 20.8% this past quarter vs. the same quarter in 2009. Further, other world mints have seen sharp declines in gold bullion coin sales as well: the Austrian Mint reported an 80% drop in sales for the first two months of the year and the Royal British Mint a 50% decline in gold coin production for the first quarter.
What’s even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped $10,263,500 from a year earlier – but silver sales increased by $61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790.
Is the rush into “poor man’s gold” underway?
Why the answer to that question is significant is that a shift toward silver for this reason could signal we’re inching closer to the greater masses getting involved in the precious metals arena. And that – for those of us who’ve been invested for awhile now – would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it’s game on.
I’m not saying the mania is starting, and I actually think we could see another sell-off before things take off for good. Gold could dip to $1,000 and maybe even $950, with silver going to the $14-$15 range. But as clues like these begin to build up, we’ll know we’re getting closer. (And any drop to those ranges would clearly be a major buying opportunity.)
Everyone talks about gold, myself included, but a meaningful portion of one’s precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the ‘70s bull market gold advanced over 700%, but silver soared over 1,400%.
Don’t be a “poor man” by ignoring gold’s shiny cousin.
ZeroHedge
Submitted By Jeff Clark, Senior Editor, Casey's Gold & Resource Report
The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.
While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.
Yikes.
This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals.
To be sure, mine production is not the only source of silver. In 2009, approximately 52.9 million ounces were recovered from various sources of scrap. Further, the U.S. imported a net of about 112.5 million ounces last year. (Dependence on foreign oil? How about dependence on foreign silver!) So it’s not like there’s a worry there won’t be enough silver to produce the Eagle you want next month.
Still, why so much buying? The silver price ended the quarter up 15.5% from its February 4 low – but it was basically flat for the quarter, up a measly 1.9%. We tend to see buyers clamoring for product when the price takes off, so the jump in demand wasn’t due to screaming headlines about soaring prices.
I have a theory.
For some time, silver has been known as the “poor man’s gold.” Meaning, silver demand tends to increase when gold gets too “expensive.” The gold price has stubbornly stayed above $1,000 for over six months now and spent much of that time above $1,100. You’d be lucky to pay less than $1,200 right now for a one-ounce coin (after premiums), an amount most workers can’t pluck out of their back pocket. But Joe Sixpack just might grab a “twelve-pack” of silver.
What would perhaps lend evidence to my theory is if gold sales were down in the face of these higher silver sales.
The U.S. Mint reported a decline in gold bullion sales of 20.8% this past quarter vs. the same quarter in 2009. Further, other world mints have seen sharp declines in gold bullion coin sales as well: the Austrian Mint reported an 80% drop in sales for the first two months of the year and the Royal British Mint a 50% decline in gold coin production for the first quarter.
What’s even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped $10,263,500 from a year earlier – but silver sales increased by $61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790.
Is the rush into “poor man’s gold” underway?
Why the answer to that question is significant is that a shift toward silver for this reason could signal we’re inching closer to the greater masses getting involved in the precious metals arena. And that – for those of us who’ve been invested for awhile now – would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it’s game on.
I’m not saying the mania is starting, and I actually think we could see another sell-off before things take off for good. Gold could dip to $1,000 and maybe even $950, with silver going to the $14-$15 range. But as clues like these begin to build up, we’ll know we’re getting closer. (And any drop to those ranges would clearly be a major buying opportunity.)
Everyone talks about gold, myself included, but a meaningful portion of one’s precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the ‘70s bull market gold advanced over 700%, but silver soared over 1,400%.
Don’t be a “poor man” by ignoring gold’s shiny cousin.
Monday, April 5, 2010
National Inflation Association: "Silver Short Squeeze Could Be Imminent"
Tyler Durden
ZeroHedge
A press release from the NIA finally picks up where everyone else has been for about two weeks. It is too bad, that those who brought the story to the foreground are getting exactly zero acknowledgement, but such is the media world.
Silver Short Squeeze Could Be Imminent
LEE, N.J., April 3 /PRNewswire/ -- The National Inflation Association today issued a silver update to its http://inflation.us members:
On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn't a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position."
JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.
On February 5th, we witnessed another sharp decline in silver prices, which NIA described on February 7th as being "just a temporary wash out, before a huge surge in silver prices later in 2010." Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who came out this week exposing the fraud that is taking place in the paper silver market.
On February 3rd, Andrew Maguire wrote Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th. He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th. Andrew said that the takedown would happen regardless of if employment was better or worse than expected and the price of silver would be flushed to below $15 per ounce. During the next couple of days, silver was crushed from $16.17 per ounce down to a low of $14.62 per ounce.
Despite all of the evidence given by Andrew Maguire to the CFTC of gold and silver manipulation, Andrew wasn't allowed to speak at last week's CFTC hearing on limiting gold and silver positions held by banks like JP Morgan. Bill Murphy of the Gold Anti-Trust Action Committee (GATA) was allowed to speak (within a five-minute time constraint) and present some of Andrew Maguire's evidence, but right when his presentation began there was a technical failure of the live television broadcast, which was mysteriously fixed as soon as he was done speaking. Bill Murphy was scheduled for several mainstream media television interviews after the CFTC hearings, but they were all abruptly cancelled at once.
A couple of days after the CFTC meeting, Andrew Maguire and his wife were involved in a bizarre hit-and-run car accident in London where a second car coming out of a side street struck their vehicle, which resulted in a police chase using helicopters and patrol cars before the suspect was nabbed. Andrew and his wife were released from the hospital with minor injuries. (NIA does not believe in conspiracy theories but when you consider that this is a potential multi-trillion dollar fraud that could bring down the world's financial system, it really makes you think.)
The silver market provides a window into what is happening in the gold market. Because the silver market is very small and its short position is so concentrated, its price is easier to manipulate than gold, but the same manipulation is taking place in gold on a much larger but less noticeable scale. In our opinion, the CFTC is under pressure not to do anything about the manipulation because the lower gold and silver prices are, the stronger the U.S. dollar appears to be. If we saw an explosion to the upside in gold and silver prices, it would result in a complete loss of confidence in the U.S. dollar.
NIA believes the precious metals markets are currently being artificially suppressed by paper gold and silver that doesn't physically exist. At last week's CFTC hearings, Jeffrey Christian of the CPM Group admitted that banks have leveraged their physical bullion by 100 to 1. This means for every 100 ounces of paper gold/silver that trade, there could be as little as 1 ounce of physical gold/silver in the vaults backing it. However, Mr. Christian sees no problem with this because he says "it has been persistently that way for decades" and there are "any number of mechanisms allowing for cash settlements."
What Mr. Christian fails to realize is, most investors around the world holding paper gold/silver believe they own physical gold/silver. There will come a time when these investors don't want cash settlements in U.S. dollars, but they will want the physical precious metals themselves. When investors around the globe eventually call for physical delivery of their precious metals, NIA believes it will result in the biggest short squeeze in the history of all commodities.
The physical silver market is now more tight than ever before. In the first quarter of 2010, the U.S. mint sold 9,023,500 American Silver Eagles, the most since the coin debuted in 1986 and up from 8,299,000 sold in the fourth quarter of 2009. All U.S. silver mines combined are currently producing only 40 million ounces of silver annually. This means the U.S. needs to use almost all of its silver production just to keep up with the demand for American Silver Eagle coins.
Silver closed this week at a 10-week high of $17.89 per ounce and a major short squeeze to the upside could be imminent. With the spotlight now on JP Morgan, NIA believes they will be less likely to naked short silver at these levels and manipulate the price down like in February. With the mainstream media blackout, it is important for NIA members to work harder than ever to spread the word and help expose what could be the largest fraud in the history of the world.
ZeroHedge
A press release from the NIA finally picks up where everyone else has been for about two weeks. It is too bad, that those who brought the story to the foreground are getting exactly zero acknowledgement, but such is the media world.
Silver Short Squeeze Could Be Imminent
LEE, N.J., April 3 /PRNewswire/ -- The National Inflation Association today issued a silver update to its http://inflation.us members:
On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn't a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position."
JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.
On February 5th, we witnessed another sharp decline in silver prices, which NIA described on February 7th as being "just a temporary wash out, before a huge surge in silver prices later in 2010." Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who came out this week exposing the fraud that is taking place in the paper silver market.
On February 3rd, Andrew Maguire wrote Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th. He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th. Andrew said that the takedown would happen regardless of if employment was better or worse than expected and the price of silver would be flushed to below $15 per ounce. During the next couple of days, silver was crushed from $16.17 per ounce down to a low of $14.62 per ounce.
Despite all of the evidence given by Andrew Maguire to the CFTC of gold and silver manipulation, Andrew wasn't allowed to speak at last week's CFTC hearing on limiting gold and silver positions held by banks like JP Morgan. Bill Murphy of the Gold Anti-Trust Action Committee (GATA) was allowed to speak (within a five-minute time constraint) and present some of Andrew Maguire's evidence, but right when his presentation began there was a technical failure of the live television broadcast, which was mysteriously fixed as soon as he was done speaking. Bill Murphy was scheduled for several mainstream media television interviews after the CFTC hearings, but they were all abruptly cancelled at once.
A couple of days after the CFTC meeting, Andrew Maguire and his wife were involved in a bizarre hit-and-run car accident in London where a second car coming out of a side street struck their vehicle, which resulted in a police chase using helicopters and patrol cars before the suspect was nabbed. Andrew and his wife were released from the hospital with minor injuries. (NIA does not believe in conspiracy theories but when you consider that this is a potential multi-trillion dollar fraud that could bring down the world's financial system, it really makes you think.)
The silver market provides a window into what is happening in the gold market. Because the silver market is very small and its short position is so concentrated, its price is easier to manipulate than gold, but the same manipulation is taking place in gold on a much larger but less noticeable scale. In our opinion, the CFTC is under pressure not to do anything about the manipulation because the lower gold and silver prices are, the stronger the U.S. dollar appears to be. If we saw an explosion to the upside in gold and silver prices, it would result in a complete loss of confidence in the U.S. dollar.
NIA believes the precious metals markets are currently being artificially suppressed by paper gold and silver that doesn't physically exist. At last week's CFTC hearings, Jeffrey Christian of the CPM Group admitted that banks have leveraged their physical bullion by 100 to 1. This means for every 100 ounces of paper gold/silver that trade, there could be as little as 1 ounce of physical gold/silver in the vaults backing it. However, Mr. Christian sees no problem with this because he says "it has been persistently that way for decades" and there are "any number of mechanisms allowing for cash settlements."
What Mr. Christian fails to realize is, most investors around the world holding paper gold/silver believe they own physical gold/silver. There will come a time when these investors don't want cash settlements in U.S. dollars, but they will want the physical precious metals themselves. When investors around the globe eventually call for physical delivery of their precious metals, NIA believes it will result in the biggest short squeeze in the history of all commodities.
The physical silver market is now more tight than ever before. In the first quarter of 2010, the U.S. mint sold 9,023,500 American Silver Eagles, the most since the coin debuted in 1986 and up from 8,299,000 sold in the fourth quarter of 2009. All U.S. silver mines combined are currently producing only 40 million ounces of silver annually. This means the U.S. needs to use almost all of its silver production just to keep up with the demand for American Silver Eagle coins.
Silver closed this week at a 10-week high of $17.89 per ounce and a major short squeeze to the upside could be imminent. With the spotlight now on JP Morgan, NIA believes they will be less likely to naked short silver at these levels and manipulate the price down like in February. With the mainstream media blackout, it is important for NIA members to work harder than ever to spread the word and help expose what could be the largest fraud in the history of the world.
Tuesday, October 27, 2009
Is Your Safety Deposit Box Safe?
More than 500 officers smashed their way into thousands of safety-deposit boxes to retrieve guns, drugs and millions of pounds of criminal assets. At least, that's what was supposed to happen. Adrian Levy and Cathy Scott-Clark investigate
The Finchley Road is one of the busiest thoroughfares heading out of London. It leads traffic north past Lord's Cricket Ground and the multimillion-pound houses of some of the country's richest hedge-fund managers all the way to the M1. At three in the afternoon it's always pretty slow going, but on this particular summer Monday the traffic was almost at a standstill.
This was partly because the normal three lanes going north had been cut down to one. But it was also because of drivers slowing down to a crawl so they could gawp at the massive police operation unfolding on a busy corner of the road.
Police vehicles - both cars and menacing armoured trucks - jammed up two lanes. Dozens of armed officers in bulletproof vests were standing ready, waiting to be called inside an anonymous-looking building. From the sheer manpower and weapons on display it looked like the capital was under another terrorist attack.
But while this was the Metropolitan Police's most ambitious operation in its 180-year history, it had nothing to do with national security. Only hours before, at a special briefing, teams from SCD6 (the Economic And Specialist Crime unit) and C019 (Specialist Firearms Command) hunkered down with technicians armed with angle grinders and drills. Also present were dog handlers, their animals trained to sniff out guns, drugs and explosives.
In all, more than 500 officers had gathered to receive orders to raid smart addresses in well-heeled parts of the capital. The locations included three of Britain's largest and most well-established safety-deposit box depositories in Edgware, Hampstead and Park Lane as well as an office and the homes of the three directors of Safe Deposit Centres Ltd, which owned the vaults - two in Hampstead and one in Barnet.
For most of those at the briefing, arriving just before 3pm on June 2 last year, this was the first they had heard of the operation. Secrecy had been paramount and, with so many involved, keeping the operation 'airtight' had been one of the largest headaches in the pre-planning for what was codenamed 'Rize'.
The police rolled through London in a convoy: scores of patrol cars, armed-response vehicles, outriders on their bikes, vans with their windows shielded by metal cages. With a Met film unit recording everything, detectives forced their way past startled security guards, demanding receptionists open the secure doors that led to the normally hushed strong rooms, which in the three centres housed 6,717 safety deposit boxes.
Cash found in deposit boxes
Cash found in deposit boxes. More than £53 million in cash was impounded, some of it stuffed into supermarket bags
Over the next few hours, the three depositories were transformed into makeshift evidence-sorting centres, decked out with tables to bear the contents of the safety-deposit boxes that were soon to be forced open. Within a day, the first stage of the operation was finished but it would take over ten more to complete the next intricate and prolonged phase.
Investigators wearing gas masks and blue overhauls used power tools to chop away at the locked doors that protected the boxes themselves. They had rehearsed this bit for many hours, on mockups, trying numerous methods to get quickly and safely at the deposit boxes.
Forged passports found in deposit boxes
Forged passports found in deposit boxes
Diamond drill bits forced down into the locks proved disastrous, potentially damaging evidence inside. Instead, they settled on Makita angle grinders, with which they now effortlessly hacked at the hinges, allowing them to slide out the individual strong boxes, some as small as an A4 pad. Larger ones required a more bullish approach - strong-arm tactics that the police maintained were essential as key-holders would have been unlikely to co-operate.
As the first of the boxes was opened, detectives began probing the contents. Many were spilling over with bank notes and jewellery. Each was given a rough designation - for instance, 'cash' or 'gun' - and the words scribbled onto labels before they were placed in sealed evidence bags that were loaded into vans and given an armed escort to their final and secret destination, a secure counting house.
Here, every one of the thousands of boxes was to be intimately scrutinised. Not only did detectives have to itemise what they had found but match the contents to a person.
A few of the box-holders' identities had been acquired through months of police surveillance. Others were revealed in vault registers seized by police during the raid. Some used aliases and would be hard to track down; more still would be identified by scrutinising the vaults' CCTV cameras. Sixty officers would sift, analyse and count until November 2008 and beyond, racking up £1.4 million in overtime bills alone.
There was a lot at stake. Never before had the British police been granted a warrant as broad as this. The raids had been made possible under a controversial law, the Proceeds Of Crime Act (POCA), which came into being in 2002 and introduced an array of wide-ranging new powers to seek out and confiscate dirty money - the houses, cars and boats bought by criminals.
However, lawyers watching the police operation unfold were quick to warn that the strong-arming of these vaults and the crashing into each and every box was tantamount to the police having obtained permission to smash down the doors of an entire housing estate.
David Sonn, of Sonn Macmillan Walker, one of the largest criminal defence practices in London, says, 'POCA was never intended for this. No one objects when criminals are caught and their assets seized - but shaking down everyone to get to them is specifically not what lawmakers wanted.'
A handgun belonging to a suspected drug dealer
Items seized include police riot gear, guns and swords
A handgun belonging to a suspected drug dealer(left) and items seized include police riot gear, guns and swords (right)
Aware of the controversy, Scotland Yard went on a charm offensive, with Assistant Commissioner John Yates giving a series of briefings.
'This is a huge operation to tackle criminal networks who we believe are using safe deposit facilities to hide assets,' he reassured the media.
The raids had come after 18 months of scrupulous intelligence gathering that had led detectives to suspect the vault owners were turning a blind eye to the worst kinds of criminality, enabling major villains to conceal, transport and launder their ill-gotten gains, said Yates. Brushing aside concerns about the invasion of privacy, he asserted that 'the majority' of the boxes seized belonged to criminals.
Evidence was soon put on show that seemed to underscore his position. More than £53 million in cash was impounded, some of it stuffed into supermarket bags. Most of the money, said the Met, was 'the proceeds of armed robberies and international drug trafficking'.
Unnamed Yard sources speculated that some had come from the 2006 Securitas depot robbery in Tonbridge, Kent, and that a mysterious haul of gold grains wrapped in plastic and squashed inside suitcases could be linked to the Brinks Matt heist of 1983. There were sufficient diamonds and pearls to string up as bunting for a street party.
CCTV footage of Gavin Leon
CCTV footage of Gavin Leon, whose box held a Glock handgun
In one box in Edgware, bags of white powder when tested turned out to be 140g of 81 per cent pure cocaine. Lying next to it was £62,500 in cash. Another box, crammed with notes, was identified as belonging to a Russian woman whose boyfriend was the son of a convicted major-league drugs dealer.
A semi-automatic Glock 9mm, the weapon of choice for British gangsters, was lodged in Box 1653 at the Hampstead depository, rented by 44-year-old Gavin Leon, who was jailed for five years last March. A Brocock firearm and nine rounds of ammunition, together with £20,000 in cash, some heroin and weighing scales had been deposited in a box belonging to John Derriviere, a 47-year-old who is now wanted by police.
A £100,000 stash left in a box in Edgware turned out to belong to convicted drug dealer David Wilson, 38, from Dagenham, a nest egg he intended to collect after completing a 24-month sentence. Scrutinising the vault's CCTV, police also identified drug trafficker Yaset Berhane, 27, whose box contained £122,000 in cash, some of it marked by Sussex Police in an earlier drugs sting, leading to Berhane's jailing in March 2009 for drug trafficking and money laundering.
When vice-squad detectives raided five premises connected to a southeast Asian businesswoman who had more than £100,000 in cash in one box, they found brothels worked by girls who had all potentially been trafficked to the UK, as well as a string of foreign bank transactions showing £800,000 flowing out of the UK. In the months after Rize there were more than 40 arrests and 11 prosecutions.
However, by talking to scores of box-holders, none of whom have spoken before, Live has uncovered a different version of Operation Rize, one that shows how the vast majority of those caught up in the raids were innocent. They have had their lives turned upside down over the past 17 months. Many have struggled to recoup their money and possessions, been forced into legal trench warfare with police lawyers and told they must prove how they came by the contents of their boxes.
This is also a story told through secret legal papers, including confidentiality agreements struck with some vault depositors whose cases threatened to topple the entire operation. Although the police told a judge that 'nine out of ten' of all of the thousands of box-holders were probably criminally minded, criminally connected or felons, the paper trail reveals that perhaps only as few as ten per cent of the boxes have any connection to serious crime.
More worryingly, according to eminent lawyers and barristers, Operation Rize has seen the Yard employ unethical tactics, driving a coach and horses through the new POCA legislation, leaving the Met facing a raft of legal actions that could potentially cost taxpayers millions of pounds.
Police raid at Hampstead
The police raid at Hampstead. Never before had the British police been granted a warrant as broad as this
'Rize is a juggernaut veering out of control,' said one barrister who helped advise on POCA during its passage through Parliament, 'and now a sharp tool that we badly needed to drain criminal cash has been tarnished, potentially damaging it and inhibiting its use'.
Within days of the raids, the police set up a helpline to deal with potential inquiries. They were overwhelmed by the response. One detective told Live: 'Everyone presumed we had bagged a load of villains who would not dare claim their iffy property. But thousands of the box-holders complained.'
Some of the box-holders contacted lawyers. These were people far removed from the criminal underworld. Many had been with the company from the beginning, drawn to the likeable Jewish businessman who ran it. Leslie Sieff founded the company in 1986, although by the time Operation Rize unfurled he'd been bought out by developer Milton Woolf.
In one box there was 140g and cocaine and £62,500 in cash beside it... In another, a Glock 9mm, the weapon of choice for British gangsters
Many of the clientele were families who had fled turmoil, pogroms, coups and wars and long had a cultural preference for locking away money and jewels, building up a vehement distrust for the integrity of traditional banks. Here, stepping down the spiral staircase at the back to the darkened boxes below, they felt reassured that their most important possessions were safe.
One survivor of Nazi Germany in his seventies told us how he had placed a bag of diamonds there - security if ever he or his descendents needed to run again.
'My wife and I had escaped from Germany with nothing but these gems,' he said. 'She sewed them into our clothing before we crossed occupied Europe, reaching Britain by ship when the jewels were snipped out and locked up.'
There was a rabbi too, Yitzchak Schochet, of Mill Hill Synagogue, who said: 'Safety deposit boxes are supposed to be confidential. The whole situation was very unsettling and an intrusion of privacy.'
Another client, an Indian millionaire entrepreneur with connections to the House of Lords, described how he was 'treated like a convicted man just because I had wealth in cash'.
A Hindu priest described to Live how his family's valuables had been carried in the Sixties from Madhya Pradesh, India, to London 'in a gunny sack'.
Among the possessions seized by the police were elaborate handcrafted bracelets, gold rings set with uncut stones, and a bejewelled wedding tikka ornament to be draped on the forehead of a new bride. 'These items had always been in our family,' the priest said, 'We had cash in there too. But now we had to prove how we bought them and where that money, saved over the years, had come from.'
Officers painstakingly record the contents of the safety-deposit boxes
Officers painstakingly record the contents of the safety-deposit boxes
Under POCA, the burden of proof lay with the box-holders. Finding evidence for wartime treks across Europe, or charting migration stories from the Partition of India and beyond, would cost many of the box-holders tens of thousands of pounds.
Mark Richardson, a former military intelligence officer and now a forensic accountant, who has been employed by several box-holders to explain their wealth, told us: 'We had to get one family's diamonds carbon-dated at great expense to demonstrate to the police that they had been cut in the Thirties, which tallied with their story of fleeing Germany before World War II.'
Lawyer Sara Teasdale, of City practice Roiter Zucker, whose client had kept more than £900,000 in his box at the vaults in Edgware as cash flow for his business leasing black cabs, said: 'The police are "deep-pocketing" - hauling people through a protracted legal process that they know is so costly that most will roll over.'
One angry box-holder rented Box 73 at the Park Lane depository. Alexander Temerko, formerly a vice president of Russian oil giant Yukos, whose billionaire boss Mikhail Khodorkovsky had fallen foul of President Putin, had fled to London as Khodorkovsky was jailed for eight years in Russia.
When I got my box back, £9,000 cash and some smaller items of jewellery were missing - a gold baby's bracelet and a gold ring
On his arrival in the UK, Temerko had locked five crates of legal documents into his safety-deposit box. However, as a result of Rize, the papers were now in the hands of the Met, which claimed they were evidence of an alleged criminal conspiracy whose participants were British, obliging the police to investigate. Incandescent, Temerko hired an expensive lawyer, Ian Burton, of BCL Burton Copeland. Burton recommended Clare Montgomery, a barrister from Cherie Blaire's chambers, Matrix.
Within weeks of Operation Rize, Temerko's team set about applying for a Judicial Review of the judge's decision to grant the controversial Rize warrant and demanded the return of Temerko's files, which they claimed had been taken unlawfully.
Montgomery and Burton highlighted case law that specifically stipulated 'fishing expeditions' were barred to the police, even under POCA. In other words, the police were not allowed to seize property in the hope that it would later prove to be criminal. The legal team also demanded sight of the police evidence that had convinced the judge to issue the warrant in the first place.
Across town, in Camden, some less high-profile but equally infuriated welltodo box-holders did the same. John and Estelle Selt, aged 62 and 73, wealthy retired shopkeepers, had rented a box for 15 years. Inside it was £150,000 and three valuable bracelets. Determined to clear their names, the Selts put up the £50,000 needed to launch their own Judicial Review that also focused on the lawfulness of the original warrant.
Following seven months of legal fencing, with the police guarding its Rize file, the twin Judicial Reviews finally succeeded in prising from the Yard a startling 32-page 'skeleton discussion'. This document - which we were able to obtain after being given a case number by a senior source in Customs and then trawling through court records at the Royal Court building - provides an extraordinary insight into how the police managed to obtain a warrant for Rize.
The document provides a summary of two confidential meetings between the Met, its legal advisors and the judge who signed the Rize warrant in May 2008. The document revealed the Met had begun targeting Safe Deposit Centres Ltd in January 2007, in an operation led by DCI Mark Ponting.
Read Entire Article
The Finchley Road is one of the busiest thoroughfares heading out of London. It leads traffic north past Lord's Cricket Ground and the multimillion-pound houses of some of the country's richest hedge-fund managers all the way to the M1. At three in the afternoon it's always pretty slow going, but on this particular summer Monday the traffic was almost at a standstill.
This was partly because the normal three lanes going north had been cut down to one. But it was also because of drivers slowing down to a crawl so they could gawp at the massive police operation unfolding on a busy corner of the road.
Police vehicles - both cars and menacing armoured trucks - jammed up two lanes. Dozens of armed officers in bulletproof vests were standing ready, waiting to be called inside an anonymous-looking building. From the sheer manpower and weapons on display it looked like the capital was under another terrorist attack.
But while this was the Metropolitan Police's most ambitious operation in its 180-year history, it had nothing to do with national security. Only hours before, at a special briefing, teams from SCD6 (the Economic And Specialist Crime unit) and C019 (Specialist Firearms Command) hunkered down with technicians armed with angle grinders and drills. Also present were dog handlers, their animals trained to sniff out guns, drugs and explosives.
In all, more than 500 officers had gathered to receive orders to raid smart addresses in well-heeled parts of the capital. The locations included three of Britain's largest and most well-established safety-deposit box depositories in Edgware, Hampstead and Park Lane as well as an office and the homes of the three directors of Safe Deposit Centres Ltd, which owned the vaults - two in Hampstead and one in Barnet.
For most of those at the briefing, arriving just before 3pm on June 2 last year, this was the first they had heard of the operation. Secrecy had been paramount and, with so many involved, keeping the operation 'airtight' had been one of the largest headaches in the pre-planning for what was codenamed 'Rize'.
The police rolled through London in a convoy: scores of patrol cars, armed-response vehicles, outriders on their bikes, vans with their windows shielded by metal cages. With a Met film unit recording everything, detectives forced their way past startled security guards, demanding receptionists open the secure doors that led to the normally hushed strong rooms, which in the three centres housed 6,717 safety deposit boxes.
Cash found in deposit boxes
Cash found in deposit boxes. More than £53 million in cash was impounded, some of it stuffed into supermarket bags
Over the next few hours, the three depositories were transformed into makeshift evidence-sorting centres, decked out with tables to bear the contents of the safety-deposit boxes that were soon to be forced open. Within a day, the first stage of the operation was finished but it would take over ten more to complete the next intricate and prolonged phase.
Investigators wearing gas masks and blue overhauls used power tools to chop away at the locked doors that protected the boxes themselves. They had rehearsed this bit for many hours, on mockups, trying numerous methods to get quickly and safely at the deposit boxes.
Forged passports found in deposit boxes
Forged passports found in deposit boxes
Diamond drill bits forced down into the locks proved disastrous, potentially damaging evidence inside. Instead, they settled on Makita angle grinders, with which they now effortlessly hacked at the hinges, allowing them to slide out the individual strong boxes, some as small as an A4 pad. Larger ones required a more bullish approach - strong-arm tactics that the police maintained were essential as key-holders would have been unlikely to co-operate.
As the first of the boxes was opened, detectives began probing the contents. Many were spilling over with bank notes and jewellery. Each was given a rough designation - for instance, 'cash' or 'gun' - and the words scribbled onto labels before they were placed in sealed evidence bags that were loaded into vans and given an armed escort to their final and secret destination, a secure counting house.
Here, every one of the thousands of boxes was to be intimately scrutinised. Not only did detectives have to itemise what they had found but match the contents to a person.
A few of the box-holders' identities had been acquired through months of police surveillance. Others were revealed in vault registers seized by police during the raid. Some used aliases and would be hard to track down; more still would be identified by scrutinising the vaults' CCTV cameras. Sixty officers would sift, analyse and count until November 2008 and beyond, racking up £1.4 million in overtime bills alone.
There was a lot at stake. Never before had the British police been granted a warrant as broad as this. The raids had been made possible under a controversial law, the Proceeds Of Crime Act (POCA), which came into being in 2002 and introduced an array of wide-ranging new powers to seek out and confiscate dirty money - the houses, cars and boats bought by criminals.
However, lawyers watching the police operation unfold were quick to warn that the strong-arming of these vaults and the crashing into each and every box was tantamount to the police having obtained permission to smash down the doors of an entire housing estate.
David Sonn, of Sonn Macmillan Walker, one of the largest criminal defence practices in London, says, 'POCA was never intended for this. No one objects when criminals are caught and their assets seized - but shaking down everyone to get to them is specifically not what lawmakers wanted.'
A handgun belonging to a suspected drug dealer
Items seized include police riot gear, guns and swords
A handgun belonging to a suspected drug dealer(left) and items seized include police riot gear, guns and swords (right)
Aware of the controversy, Scotland Yard went on a charm offensive, with Assistant Commissioner John Yates giving a series of briefings.
'This is a huge operation to tackle criminal networks who we believe are using safe deposit facilities to hide assets,' he reassured the media.
The raids had come after 18 months of scrupulous intelligence gathering that had led detectives to suspect the vault owners were turning a blind eye to the worst kinds of criminality, enabling major villains to conceal, transport and launder their ill-gotten gains, said Yates. Brushing aside concerns about the invasion of privacy, he asserted that 'the majority' of the boxes seized belonged to criminals.
Evidence was soon put on show that seemed to underscore his position. More than £53 million in cash was impounded, some of it stuffed into supermarket bags. Most of the money, said the Met, was 'the proceeds of armed robberies and international drug trafficking'.
Unnamed Yard sources speculated that some had come from the 2006 Securitas depot robbery in Tonbridge, Kent, and that a mysterious haul of gold grains wrapped in plastic and squashed inside suitcases could be linked to the Brinks Matt heist of 1983. There were sufficient diamonds and pearls to string up as bunting for a street party.
CCTV footage of Gavin Leon
CCTV footage of Gavin Leon, whose box held a Glock handgun
In one box in Edgware, bags of white powder when tested turned out to be 140g of 81 per cent pure cocaine. Lying next to it was £62,500 in cash. Another box, crammed with notes, was identified as belonging to a Russian woman whose boyfriend was the son of a convicted major-league drugs dealer.
A semi-automatic Glock 9mm, the weapon of choice for British gangsters, was lodged in Box 1653 at the Hampstead depository, rented by 44-year-old Gavin Leon, who was jailed for five years last March. A Brocock firearm and nine rounds of ammunition, together with £20,000 in cash, some heroin and weighing scales had been deposited in a box belonging to John Derriviere, a 47-year-old who is now wanted by police.
A £100,000 stash left in a box in Edgware turned out to belong to convicted drug dealer David Wilson, 38, from Dagenham, a nest egg he intended to collect after completing a 24-month sentence. Scrutinising the vault's CCTV, police also identified drug trafficker Yaset Berhane, 27, whose box contained £122,000 in cash, some of it marked by Sussex Police in an earlier drugs sting, leading to Berhane's jailing in March 2009 for drug trafficking and money laundering.
When vice-squad detectives raided five premises connected to a southeast Asian businesswoman who had more than £100,000 in cash in one box, they found brothels worked by girls who had all potentially been trafficked to the UK, as well as a string of foreign bank transactions showing £800,000 flowing out of the UK. In the months after Rize there were more than 40 arrests and 11 prosecutions.
However, by talking to scores of box-holders, none of whom have spoken before, Live has uncovered a different version of Operation Rize, one that shows how the vast majority of those caught up in the raids were innocent. They have had their lives turned upside down over the past 17 months. Many have struggled to recoup their money and possessions, been forced into legal trench warfare with police lawyers and told they must prove how they came by the contents of their boxes.
This is also a story told through secret legal papers, including confidentiality agreements struck with some vault depositors whose cases threatened to topple the entire operation. Although the police told a judge that 'nine out of ten' of all of the thousands of box-holders were probably criminally minded, criminally connected or felons, the paper trail reveals that perhaps only as few as ten per cent of the boxes have any connection to serious crime.
More worryingly, according to eminent lawyers and barristers, Operation Rize has seen the Yard employ unethical tactics, driving a coach and horses through the new POCA legislation, leaving the Met facing a raft of legal actions that could potentially cost taxpayers millions of pounds.
Police raid at Hampstead
The police raid at Hampstead. Never before had the British police been granted a warrant as broad as this
'Rize is a juggernaut veering out of control,' said one barrister who helped advise on POCA during its passage through Parliament, 'and now a sharp tool that we badly needed to drain criminal cash has been tarnished, potentially damaging it and inhibiting its use'.
Within days of the raids, the police set up a helpline to deal with potential inquiries. They were overwhelmed by the response. One detective told Live: 'Everyone presumed we had bagged a load of villains who would not dare claim their iffy property. But thousands of the box-holders complained.'
Some of the box-holders contacted lawyers. These were people far removed from the criminal underworld. Many had been with the company from the beginning, drawn to the likeable Jewish businessman who ran it. Leslie Sieff founded the company in 1986, although by the time Operation Rize unfurled he'd been bought out by developer Milton Woolf.
In one box there was 140g and cocaine and £62,500 in cash beside it... In another, a Glock 9mm, the weapon of choice for British gangsters
Many of the clientele were families who had fled turmoil, pogroms, coups and wars and long had a cultural preference for locking away money and jewels, building up a vehement distrust for the integrity of traditional banks. Here, stepping down the spiral staircase at the back to the darkened boxes below, they felt reassured that their most important possessions were safe.
One survivor of Nazi Germany in his seventies told us how he had placed a bag of diamonds there - security if ever he or his descendents needed to run again.
'My wife and I had escaped from Germany with nothing but these gems,' he said. 'She sewed them into our clothing before we crossed occupied Europe, reaching Britain by ship when the jewels were snipped out and locked up.'
There was a rabbi too, Yitzchak Schochet, of Mill Hill Synagogue, who said: 'Safety deposit boxes are supposed to be confidential. The whole situation was very unsettling and an intrusion of privacy.'
Another client, an Indian millionaire entrepreneur with connections to the House of Lords, described how he was 'treated like a convicted man just because I had wealth in cash'.
A Hindu priest described to Live how his family's valuables had been carried in the Sixties from Madhya Pradesh, India, to London 'in a gunny sack'.
Among the possessions seized by the police were elaborate handcrafted bracelets, gold rings set with uncut stones, and a bejewelled wedding tikka ornament to be draped on the forehead of a new bride. 'These items had always been in our family,' the priest said, 'We had cash in there too. But now we had to prove how we bought them and where that money, saved over the years, had come from.'
Officers painstakingly record the contents of the safety-deposit boxes
Officers painstakingly record the contents of the safety-deposit boxes
Under POCA, the burden of proof lay with the box-holders. Finding evidence for wartime treks across Europe, or charting migration stories from the Partition of India and beyond, would cost many of the box-holders tens of thousands of pounds.
Mark Richardson, a former military intelligence officer and now a forensic accountant, who has been employed by several box-holders to explain their wealth, told us: 'We had to get one family's diamonds carbon-dated at great expense to demonstrate to the police that they had been cut in the Thirties, which tallied with their story of fleeing Germany before World War II.'
Lawyer Sara Teasdale, of City practice Roiter Zucker, whose client had kept more than £900,000 in his box at the vaults in Edgware as cash flow for his business leasing black cabs, said: 'The police are "deep-pocketing" - hauling people through a protracted legal process that they know is so costly that most will roll over.'
One angry box-holder rented Box 73 at the Park Lane depository. Alexander Temerko, formerly a vice president of Russian oil giant Yukos, whose billionaire boss Mikhail Khodorkovsky had fallen foul of President Putin, had fled to London as Khodorkovsky was jailed for eight years in Russia.
When I got my box back, £9,000 cash and some smaller items of jewellery were missing - a gold baby's bracelet and a gold ring
On his arrival in the UK, Temerko had locked five crates of legal documents into his safety-deposit box. However, as a result of Rize, the papers were now in the hands of the Met, which claimed they were evidence of an alleged criminal conspiracy whose participants were British, obliging the police to investigate. Incandescent, Temerko hired an expensive lawyer, Ian Burton, of BCL Burton Copeland. Burton recommended Clare Montgomery, a barrister from Cherie Blaire's chambers, Matrix.
Within weeks of Operation Rize, Temerko's team set about applying for a Judicial Review of the judge's decision to grant the controversial Rize warrant and demanded the return of Temerko's files, which they claimed had been taken unlawfully.
Montgomery and Burton highlighted case law that specifically stipulated 'fishing expeditions' were barred to the police, even under POCA. In other words, the police were not allowed to seize property in the hope that it would later prove to be criminal. The legal team also demanded sight of the police evidence that had convinced the judge to issue the warrant in the first place.
Across town, in Camden, some less high-profile but equally infuriated welltodo box-holders did the same. John and Estelle Selt, aged 62 and 73, wealthy retired shopkeepers, had rented a box for 15 years. Inside it was £150,000 and three valuable bracelets. Determined to clear their names, the Selts put up the £50,000 needed to launch their own Judicial Review that also focused on the lawfulness of the original warrant.
Following seven months of legal fencing, with the police guarding its Rize file, the twin Judicial Reviews finally succeeded in prising from the Yard a startling 32-page 'skeleton discussion'. This document - which we were able to obtain after being given a case number by a senior source in Customs and then trawling through court records at the Royal Court building - provides an extraordinary insight into how the police managed to obtain a warrant for Rize.
The document provides a summary of two confidential meetings between the Met, its legal advisors and the judge who signed the Rize warrant in May 2008. The document revealed the Met had begun targeting Safe Deposit Centres Ltd in January 2007, in an operation led by DCI Mark Ponting.
Read Entire Article
Thursday, October 15, 2009
The Federal Reserve Is Openly Telling You to Buy Gold and Silver
(DailyWealth)At the end of last year, I began writing about what I saw happening as the Federal Reserve started assuming the liabilities of the investment banks and the federal government began deficit spending at an unprecedented pace.
I've been calling these changes the "End of America" because I believe the fiscal policies of the U.S. will result in a massive devaluation of the dollar and the end of the U.S. dollar as the world's reserve currency.
To get an idea of why I'm concerned, have a look at a chart James Bullard, president of the Federal Reserve Bank of St. Louis, included in a recent presentation to the National Association for Business Economics.
What you see here is Bullard's estimate of the future growth of Federal Reserve assets.
A lot of people seem to have forgotten something that is very much on Bullard's mind: The growth of the Fed's balance sheet isn't nearly finished. In fact, the Fed has only completed purchasing about half of the $1.75 trillion worth of assets it has promised to buy. The assets are mostly mortgages and mortgage-related securities.
Even though these direct purchases are unprecedented, that's only about 10% of the story. Since the beginning of the crisis, the Fed has lent, spent, or guaranteed $11.6 trillion.
That includes providing a backstop on the entire system of mortgage finance in the United States, a system that currently shows nearly a $1 trillion loss.
Since the expansion of its balance sheet got started in earnest last fall, the trade-weighed value of the dollar has fallen 15%. Keep in mind, the Fed's assets form the base of our monetary system. The more it grows, the more money and credit become available to the banking system. And the faster the money supply grows, the more likely the value of the dollar will continue to fall.
As Bullard points out, a doubling of the monetary base won't necessarily cause an immediate doubling of inflation... But suppose it takes 10 years? The average inflation rate would still be 7% a year. If inflation does grow to this average level, at least a few of those years will see inflation running at or near double digits.
Nothing in our financial markets is prepared for this kind of inflation. Inflation at these rates would cause the average multiple of earnings for equities to fall by at least 50%. Likewise, we would see high-yield corporate bonds yielding at least 20% – double what they are now. And U.S. Treasuries would probably see their yields triple. The destruction of wealth in the bond markets would be unprecedented in modern finance.
It's going to happen. I guarantee it.
By: Porter Stansbury
Read Entire Article
I've been calling these changes the "End of America" because I believe the fiscal policies of the U.S. will result in a massive devaluation of the dollar and the end of the U.S. dollar as the world's reserve currency.
To get an idea of why I'm concerned, have a look at a chart James Bullard, president of the Federal Reserve Bank of St. Louis, included in a recent presentation to the National Association for Business Economics.
What you see here is Bullard's estimate of the future growth of Federal Reserve assets.
A lot of people seem to have forgotten something that is very much on Bullard's mind: The growth of the Fed's balance sheet isn't nearly finished. In fact, the Fed has only completed purchasing about half of the $1.75 trillion worth of assets it has promised to buy. The assets are mostly mortgages and mortgage-related securities.
Even though these direct purchases are unprecedented, that's only about 10% of the story. Since the beginning of the crisis, the Fed has lent, spent, or guaranteed $11.6 trillion.
That includes providing a backstop on the entire system of mortgage finance in the United States, a system that currently shows nearly a $1 trillion loss.
Since the expansion of its balance sheet got started in earnest last fall, the trade-weighed value of the dollar has fallen 15%. Keep in mind, the Fed's assets form the base of our monetary system. The more it grows, the more money and credit become available to the banking system. And the faster the money supply grows, the more likely the value of the dollar will continue to fall.
As Bullard points out, a doubling of the monetary base won't necessarily cause an immediate doubling of inflation... But suppose it takes 10 years? The average inflation rate would still be 7% a year. If inflation does grow to this average level, at least a few of those years will see inflation running at or near double digits.
Nothing in our financial markets is prepared for this kind of inflation. Inflation at these rates would cause the average multiple of earnings for equities to fall by at least 50%. Likewise, we would see high-yield corporate bonds yielding at least 20% – double what they are now. And U.S. Treasuries would probably see their yields triple. The destruction of wealth in the bond markets would be unprecedented in modern finance.
It's going to happen. I guarantee it.
By: Porter Stansbury
Read Entire Article
Friday, September 25, 2009
Another Dire Warning on ETF's Like GLD, SLV
Sprott's Embry warns investors to make sure ETFs backed by precious metals
Investors should confine their exposure to actual physical metal or only to paper products with regular audits that support precious metals backing.
(Mineweb) As precious metals investment demand "is exploding on a worldwide basis," Sprott Asset Management Chief Investment Strategist John Embry urged investors to make sure "your exposure to gold and silver is what it is represented to be..."
"Very simply there are far too many proxies for the real thing," he warned retail and institutional investors at the Silver Summit in Spokane Thursday. "Thus I would confine my exposure to actual physical or only those paper products where a regular audit is conducted to irrefutably support the precious metals backing."
Nevertheless, Embry feels "gold and silver have presented remarkable refugees" during the current global economic crisis.
"The gold price to date represents just the tip of the iceberg," he stressed. "What is truly important at this moment is to have a good position in gold and silver and their respective shares."
"I'll stick to a target of $1,500 in the next six months but I am comfortable with the notion of it trading at several multiples of the current price before the bull market runs its course."
Meanwhile, Embry asserted, "I cannot over emphasize the magnitude of the impact that is going to be felt in the gold market when central banks can no longer supply the gold needed to meet burgeoning demand." The decision of central banks to accumulate 14 tonnes of gold during the second quarter of this year is evidence of the possibility, he added.
"Most observers do not realize how much central banks...fill the huge and growing gap between true demand and mine and scrap supply," he noted. Embry estimated the size of demand-supply gap exceeds 1,000 tonnes of gold per annum, which represents 25% of the physical gold supply.
The gap "virtually guarantees that the western central banks are getting dangerously short of available reserves...to continue dumping gold on the market," he suggested. In the meantime, a number of eastern central banks-who are awash in U.S. dollars-"are accumulating and will continue to accumulate gold as one avenue to diversify their resources away from the U.S. dollar."
Meanwhile, Embry forecasts that the gold-silver ratio, which is currently just under 60, to decline precipitously as the bull market in precious metals gathers steam."
Author: Dorothy Kosich wwww.mineweb.com
Read Entire Article
Investors should confine their exposure to actual physical metal or only to paper products with regular audits that support precious metals backing.
(Mineweb) As precious metals investment demand "is exploding on a worldwide basis," Sprott Asset Management Chief Investment Strategist John Embry urged investors to make sure "your exposure to gold and silver is what it is represented to be..."
"Very simply there are far too many proxies for the real thing," he warned retail and institutional investors at the Silver Summit in Spokane Thursday. "Thus I would confine my exposure to actual physical or only those paper products where a regular audit is conducted to irrefutably support the precious metals backing."
Nevertheless, Embry feels "gold and silver have presented remarkable refugees" during the current global economic crisis.
"The gold price to date represents just the tip of the iceberg," he stressed. "What is truly important at this moment is to have a good position in gold and silver and their respective shares."
"I'll stick to a target of $1,500 in the next six months but I am comfortable with the notion of it trading at several multiples of the current price before the bull market runs its course."
Meanwhile, Embry asserted, "I cannot over emphasize the magnitude of the impact that is going to be felt in the gold market when central banks can no longer supply the gold needed to meet burgeoning demand." The decision of central banks to accumulate 14 tonnes of gold during the second quarter of this year is evidence of the possibility, he added.
"Most observers do not realize how much central banks...fill the huge and growing gap between true demand and mine and scrap supply," he noted. Embry estimated the size of demand-supply gap exceeds 1,000 tonnes of gold per annum, which represents 25% of the physical gold supply.
The gap "virtually guarantees that the western central banks are getting dangerously short of available reserves...to continue dumping gold on the market," he suggested. In the meantime, a number of eastern central banks-who are awash in U.S. dollars-"are accumulating and will continue to accumulate gold as one avenue to diversify their resources away from the U.S. dollar."
Meanwhile, Embry forecasts that the gold-silver ratio, which is currently just under 60, to decline precipitously as the bull market in precious metals gathers steam."
Author: Dorothy Kosich wwww.mineweb.com
Read Entire Article
Monday, September 21, 2009
A Market Rally in Monopoly Money
(Seeking Alpha) When priced in US dollars, the US stock market appears to have rallied significantly since the beginning of the year - it's now up 18.31% since January 1st. However, since the dollar has fallen 5.82% since the beginning of the year, if we subtract the dollar decline during this same time period, the 18.31% gain drops to a 12.49% gain. This is a more honest means of interpreting this rise, for as we all know, a gain in real wealth is not determined by solely having a greater amount of a certain currency but also by adjusting for the increase or decrease of that currency’s purchasing power.
Looking at the below graph, since gold has been considered a currency for thousands of years, if we price the behavior of the S&P 500 in terms of gold, the gain in the S&P 500 since the beginning of the year shrivels to a 3.92% rise.
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Finally, I’ve produced one chart above where I’ve superimposed the the US dollar (daily) over the chart of the S&P 500 (daily) since the beginning of the year. I haven’t taken the time to adjust the scales of both graphs to accurately represent percent moves for comparative purposes because I only wish point out that the chart patterns of the S&P 500 and the US dollar have been near perfect inverse images of each other for this entire year.
By: J.S. Kim, Seeking Alpha
Read Entire Article
Looking at the below graph, since gold has been considered a currency for thousands of years, if we price the behavior of the S&P 500 in terms of gold, the gain in the S&P 500 since the beginning of the year shrivels to a 3.92% rise.
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Finally, I’ve produced one chart above where I’ve superimposed the the US dollar (daily) over the chart of the S&P 500 (daily) since the beginning of the year. I haven’t taken the time to adjust the scales of both graphs to accurately represent percent moves for comparative purposes because I only wish point out that the chart patterns of the S&P 500 and the US dollar have been near perfect inverse images of each other for this entire year.
By: J.S. Kim, Seeking Alpha
Read Entire Article
Tuesday, August 25, 2009
Gold's Fall Has a Silver Lining
(WSJ)Silver has enjoyed greater price gains than gold so far in 2009, and that was the case again Monday as it benefited from hopes an economic recovery will jump-start industrial demand.
Nearby August silver gained 3.1 cents to $14.191 an ounce on the Comex division of the New York Mercantile Exchange, while most-active December gained 3.2 cents to $14.231. By contrast, most-active December gold lost $10.90 to $942.30 an ounce.
Silver often follows gold, although sometimes with greater moves since it is a less-active market and thus more prone to volatile price swings. But so far in 2009, December silver has risen 26%, while December gold is up 6%. "Silver sort of has a dual personality," said Bart Melek, global commodity strategist with BMO Capital Markets.
It has a role as a precious metal and is sometimes referred to as "poor man's gold," often bought with gold as a hedge or safe haven against factors such as dollar weakness, inflation fears and geopolitical disturbances, and conversely selling off with gold when these supportive influences abate.
But silver has a more significant role as an industrial metal because of such uses as in electronics and batteries. Thus, silver also sometimes tracks base metals like copper, which rose Monday, Mr. Melek said. Copper prices have more than doubled since their December lows mainly because of strong Chinese demand but also amid expectations of economic recovery elsewhere.
[Silver Futures]
"It's the risk-appetite theme, based on the expectation that the economy is going to recover," said Tom Pawlicki, analyst with MF Global. "Silver, having more industrial applications, is benefitting from that."
Also, Mr. Melek pointed out, any production cutbacks in base-metals output following last year's declines in commodities prices mean less supply of silver. Most silver is mined as a by-product of other metals, such as lead, zinc and copper.
By Allan Sykora
Read Entire Article
Nearby August silver gained 3.1 cents to $14.191 an ounce on the Comex division of the New York Mercantile Exchange, while most-active December gained 3.2 cents to $14.231. By contrast, most-active December gold lost $10.90 to $942.30 an ounce.
Silver often follows gold, although sometimes with greater moves since it is a less-active market and thus more prone to volatile price swings. But so far in 2009, December silver has risen 26%, while December gold is up 6%. "Silver sort of has a dual personality," said Bart Melek, global commodity strategist with BMO Capital Markets.
It has a role as a precious metal and is sometimes referred to as "poor man's gold," often bought with gold as a hedge or safe haven against factors such as dollar weakness, inflation fears and geopolitical disturbances, and conversely selling off with gold when these supportive influences abate.
But silver has a more significant role as an industrial metal because of such uses as in electronics and batteries. Thus, silver also sometimes tracks base metals like copper, which rose Monday, Mr. Melek said. Copper prices have more than doubled since their December lows mainly because of strong Chinese demand but also amid expectations of economic recovery elsewhere.
[Silver Futures]
"It's the risk-appetite theme, based on the expectation that the economy is going to recover," said Tom Pawlicki, analyst with MF Global. "Silver, having more industrial applications, is benefitting from that."
Also, Mr. Melek pointed out, any production cutbacks in base-metals output following last year's declines in commodities prices mean less supply of silver. Most silver is mined as a by-product of other metals, such as lead, zinc and copper.
By Allan Sykora
Read Entire Article
Monday, July 20, 2009
Morgan Stanley to Settle Class-Action Lawsuit
NEW YORK, June 12 (Reuters) - Morgan Stanley (MS.N: Quote, Profile, Research) will pay $4.4 million to settle a class-action lawsuit with brokerage clients who bought precious metals and paid storage fees, according to a court filing.
The proposed settlement, which must be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to a court filing on Monday.
The suit, filed in August 2005, alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store.
But Morgan Stanley either made no investment specifically on behalf of those clients, or it made entirely different investments of lesser value and security, according to the complaint.
"While we deny the allegations, we settled the case to avoid the cost and distraction of continued litigation," Morgan Stanley said in a statement.
According to the filing, Morgan Stanley argued there were no violations of law and no default or failure to perform or deliver precious metals.
Read Entire Article
The proposed settlement, which must be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to a court filing on Monday.
The suit, filed in August 2005, alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store.
But Morgan Stanley either made no investment specifically on behalf of those clients, or it made entirely different investments of lesser value and security, according to the complaint.
"While we deny the allegations, we settled the case to avoid the cost and distraction of continued litigation," Morgan Stanley said in a statement.
According to the filing, Morgan Stanley argued there were no violations of law and no default or failure to perform or deliver precious metals.
Read Entire Article
Thursday, July 16, 2009
Are GLD and SLV Legitimate Investment Vehicles?
(Seeking Alpha) - First, let me preface this article by stating that it contains my opinions and speculation based upon no concrete evidence, but primarily upon information contained within the SLV and GLD prospectuses, and secondarily upon instincts cultivated over a decade of research into gold and silver markets. While there is no smoking gun regarding some of the issues I raise in this article, there is plenty of smoke.
Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles as a proxy for physical gold and physical silver. Though all evidence against investing in these two trusts has been entirely circumstantial, plenty of red flags exist in both the GLD and SLV prospectuses that should steer any logical, rational human being that wishes to own gold and silver away from these two investment vehicles.
Conflicts of Interest
Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)?
Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs’s (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm’s own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.
Alice in Wonderland Prospectuses
I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. Of course, investment advisers that sell their clients the SLV and GLD depend upon their customers not reading the prospectuses, or perhaps even reading them, but not understanding them. Some may say that the word delusional is a harsh term, but a mere glance at the GLD and SLV prospectuses explains my use of this term. Both the GLD and the SLV prospectus contain the following two statements:
“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense” (emphasis mine); and
“The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor.
Furthermore, the SLV prospectus additionally states, “As an owner of iShares, you will not have the protections normally associated with ownership of shares in an investment company (emphasis mine) registered under the Investment Company Act of 1940, or the protections afforded by the Commodity Exchange Act of 1936.”
Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete, and that in fact, any claims that the prospectus is truthful and complete is a “criminal offense”? So with nothing in the marketing materials of how these trusts operate or what exactly they buy on behalf of shareholders vetted by an independent third party, how is it that both of these respective trusts are still allowed to cumulatively sell tens of billions of dollars worth of shares to shareholders based upon a prospectus that could possibly be a complete fabrication?
Would you buy a house if you were handed a report that stated the house was structurally sound, there were no harmful gases leaking from the ground, the water source was safe, and no murders were committed inside or on the house grounds within the past year, but were then subsequently handed a disclaimer that stated: “No one has determined whether the information contained in these reports is truthful or complete. Any representation to the contrary is a criminal offense”? If you answered no to this question, then there is absolutely no way that you should believe that buying the gold ETF and the silver ETF is the same as buying physical gold and silver, or even a proxy for buying physical gold or silver.
Multiple Claims on the Physical Gold and Physical Silver Held on Behalf of GLD and SLV Shareholders?
The appointed custodians of the SLV and the GLD, responsible for safekeeping the silver and gold bars owned by the trusts, respectively are JP Morgan and HSBC Bank USA. The GLD prospectus states, “Gold held in the Trust’s unallocated gold account and any Authorized Participant’s unallocated gold account will not be segregated from the Custodian’s assets.” Only Authorized Participants, and no shareholders, have the right to redeem shares for actual gold.
In my opinion, there are several potential huge problems with this arrangement. Physical gold held by the GLD should be held in allocated accounts specifically for the trust. The fact that physical gold held for the GLD may be held in unallocated gold accounts where gold is not segregated from the Custodian’s assets may mean that multiple entities have claims on the same gold bars. In theory, the gold held in the Custodian’s vaults may be used for delivery against shorts they hold in the futures markets if necessary even though GLD shareholders have a claim on this gold.
A mechanism to apply the fractional reserve banking system to physical gold, an action that many thought impossible to execute with physical gold, may actually be occurring through the gold ETFs. While the prospectus states that “Authorized Participants Unallocated Accounts may only be used for transactions within the trust”, it does not specify how the custodian may use this gold.
In analyzing the SLV prospectus, the following statement can be found: “The trust does not trade in silver futures contracts on COMEX or on any other futures exchange. The trust takes delivery of physical silver that complies with the LBMA silver delivery rules. Because the trust does not trade in silver futures contracts on any futures exchange, the trust is not regulated by the CFTC under the Commodity Exchange Act as a ‘commodity pool’, and is not operated by a CFTC-regulated commodity pool operator.”
Elsewhere in the SLV prospectus, the following claim is also made: “Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.” If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the “remainder”? Clearly, the SLV prospectus states that there is a “remainder”. If you read this statement carefully, the statement clearly refers to the “trust’s silver holdings.” Thus, this statement implies that some of the SLV’s funds are allocated to something else other than physical silver. So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?
But even were the bulk of the SLV’s holdings physical silver, remember that this claim could be false and still contained in the prospectus due to their qualifying statement at the beginning of the prospectus that:
“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.”
Perhaps this is the reason why the prospectus warns: “Investors in the trust do not receive the regulatory protections afforded to investors in regulated commodity pools, nor may COMEX or any futures exchange enforce its rules with respect to the trust’s activities. In addition, investors in the trust do not benefit from the protections afforded to investors in silver futures contracts on regulated futures exchanges.”
The very structure of the GLD and SLV ETFs has always bothered me as the structures of these trusts are reminiscent of Vatican City, a completely sovereign entity subject only to its own laws and rules that operates in relative secrecy. I have always believed that the opacity of the operations of the GLD and the SLV would allow the custodians of these trusts, if they so desired, to execute manipulative schemes harmful to the trusts’ shareholders in much the manner that Goldman Sachs shorted subprime mortgages at the same time it was selling CDOs backed by subprime mortgages to its clients.
Where is the Gold?
Furthermore, more suspicion should be raised by the prospectus description of where the gold that is purchased on behalf of GLD shareholders is held. The prospectus states that “the Custodian has agreed that it will hold all of the Trust’s gold bars in its own London vault premises except when the gold bars have been allocated in a vault other than the Custodian’s London vault premises” (emphasis mine). This stuff is too good even for a skeptic like myself to make up. The prospectus then goes on to explain that other vaults allowed may reside at the Bank of England, Brinks Ltd., Via Mat International, and LBMA (London Bullion Market Association) market making members, and that in turn, these sub-custodians may appoint further sub-custodians to hold the trust’s gold if they so desire.
In regard to ensuring that the gold actually exists, the prospectus then states that “the Trustee may have no right to visit the premises of any sub-custodian for the purposes of examining the Trust’s gold bars or any records maintained by the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such sub-custodian.” In other words, the gold reputedly held by the GLD on behalf of shareholders may be held on the moon and no one would have a right to know this but the custodian.
In fact, given the entirely suspicious elements of these prospectuses, were every investor to liquidate their positions in the GLD and SLV and take their cash and buy physical gold and silver instead, I would speculate that the price of gold and silver would rise substantially, though according to the prospectuses, this is an event that should not happen under any circumstance. Now, according to a GATA report by Adrian Douglas, it appears that there may actually be grounds for my past speculations regarding the fact that the GLD and SLV funds may actually be used to help suppress the price of gold and silver on the futures markets.
Alchemy: Turning Physical Gold into Paper
According to a July 11, 2009 article titled “The Alchemists”, Douglas states: “delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the “flow” of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?”
In an attempt to reconcile this discrepancy, Douglas asks the all important question of what qualifies as “physical gold” according to COMEX guidelines. Douglas believes he has found a loophole in Exchange Rule 104.36, which governs exchange of futures for physicals (’EFP’) transactions on the COMEX Division. Exchange Rule 104.36 “refers to a ‘physical commodity’ as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.”
Exchange Rule 104.36 further states, “The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds (’ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.”
An EFP transaction is an Exchange of Futures for Physicals [EFP] whereby the buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position. Thus, quite incredulously, Douglas has discovered that COMEX allows for paper ETF gold shares to pass as “physical gold” in EFP transactions that are allowed to close out futures positions.
Again, if I understand Douglas’s assertion correctly, this could conceivably allow a firm like JP Morgan to open up massive shorts against gold in the COMEX markets and to close out their own short positions by delivering shares of a gold ETF in an EFP transaction. If this has indeed occurred in the past, then this loophole would easily explain why, in the past, gold ETF inventories have curiously risen or remained virtually steady during periods when the price of gold futures contracts on the COMEX was plummeting. As Douglas stated in his paper, this would indeed be the ultimate alchemy of regulating gold prices by turning physical gold into paper. Instead of purchasing a long futures contract to cancel out a short futures contract, gold ETF shares could be purchased to achieve the same effect.
The CFTC Should Investigate the GLD and the SLV, Audit their Holdings, and Report Their Findings to the Public
Thus, if the new CFTC Chairman Gary Gensler is truly sincere in his public comments about increasing transparency in the commodity markets, I suggest he begin with an investigation of the unregulated SLV and GLD ETFs to
(1) Determine the exact composition of the holdings within these trusts; and
(2) Determine if the custodians of these ETFs are engaging in activities outside of those stated in their prospectuses to unduly influence and / or manipulate the price of gold and silver markets.
It is entirely ludicrous to allow the custodians of these two ETFs to operate with zero outside regulatory oversight given the numerous troubling statements in both of their prospectuses, the tip of which I’ve explored within the realm of this article. If these trusts are operating according to the statements made within their respective prospectuses, then they should have nothing to hide and therefore should welcome an independent audit of their vaults to dispel all naysayers. Of course, since there is a complex web of custodians, sub-custodians, and sub-custodians of the sub-custodians, perhaps it would be impossible to conduct such an audit.
The latest data reported on July 8, 2009 by the SPDR Gold Trust, the GLD, states that 1,109.81 metric tons of gold are being held on behalf of GLD shareholders. In some manner, an independent auditor should be allowed to confirm that the custodian of the GLD holds 1,109.81 metric tons of gold that have no claims on it other than the GLD shareholders. If this happens, then all speculation regarding the GLD ETF will disappear into the sunset.
Until then recall this 2005 story about silver custodian Morgan Stanley:
NEW YORK, June 12 (Reuters) – Morgan Stanley plans to settle a class-action lawsuit, brought by clients over the purchase and storage of precious metals, in a deal worth $4.4 million, according to a court filing. The proposed settlement, which still needs to be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to the filing on Monday.
The lawsuit, filed in August 2005, alleged that Morgan Stanley had told clients it was selling them precious metals that they would own in full and that the company would store. But Morgan Stanley was actually making either no investment specifically on behalf of those clients or making an entirely different investment of lesser value and security, according to the complaint (emphasis mine).
Morgan Stanley was not immediately available for comment. But it has argued that there were no violations of law and no default or failure to perform or deliver precious metals, according to the filing. The suit was filed by Selwyn Silberblatt, on behalf of himself and others, who bought precious metals — gold, silver, platinum and palladium in bullion bar or coins — from Morgan Stanley DW Inc. and its predecessors and paid fees for their storage, according to the filing.
The suit covers investors who did so between Feb. 19, 1986, through Jan. 10, 2007. Silberblatt, a resident of Maine at the time of the complaint, bought silver bars from Morgan Stanley during the period.
Owning the GLD and SLV is Not the Same as Owning Physical Gold and Physical Silver
In the end, as long as the GLD and SLV prospectuses are allowed to contain misinformation if it so desires according to the words contained within their own prospectuses, then GLD and SLV shareholders may find themselves holding nothing but a bag of hot air just like Selwyn Silverblatt. Furthermore, as long as the issues I broached in this article remain unresolved I imagine that the debate will continue onward about the legitimacy of the GLD and SLV ETFs. Undoubtedly, given the opinions I presented in this article, I would be highly curious to see the outcome and effect upon gold and silver prices were every shareholder of the GLD and SLV to exchange their shares for physical gold and physical silver instead.
There will always be vast amounts of paper gold and paper silver available to be sold, but only a limited amount of physical gold and physical silver. Perhaps this is why the real thing is becoming increasingly difficult to come by these days. On Tuesday, the US Mint once again reported that it has temporarily suspended minting of nearly all its gold uncirculated and proof coins and nearly all of its silver uncirculated coins due to very limited availability of blanks. As the saying goes, with gold and silver, “Get it while you can!” Just ensure that the gold and silver you buy clanks, not floats, when you drop it.
By J.S. Kim
Read Entire Article
Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles as a proxy for physical gold and physical silver. Though all evidence against investing in these two trusts has been entirely circumstantial, plenty of red flags exist in both the GLD and SLV prospectuses that should steer any logical, rational human being that wishes to own gold and silver away from these two investment vehicles.
Conflicts of Interest
Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)?
Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs’s (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm’s own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.
Alice in Wonderland Prospectuses
I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. Of course, investment advisers that sell their clients the SLV and GLD depend upon their customers not reading the prospectuses, or perhaps even reading them, but not understanding them. Some may say that the word delusional is a harsh term, but a mere glance at the GLD and SLV prospectuses explains my use of this term. Both the GLD and the SLV prospectus contain the following two statements:
“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense” (emphasis mine); and
“The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor.
Furthermore, the SLV prospectus additionally states, “As an owner of iShares, you will not have the protections normally associated with ownership of shares in an investment company (emphasis mine) registered under the Investment Company Act of 1940, or the protections afforded by the Commodity Exchange Act of 1936.”
Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete, and that in fact, any claims that the prospectus is truthful and complete is a “criminal offense”? So with nothing in the marketing materials of how these trusts operate or what exactly they buy on behalf of shareholders vetted by an independent third party, how is it that both of these respective trusts are still allowed to cumulatively sell tens of billions of dollars worth of shares to shareholders based upon a prospectus that could possibly be a complete fabrication?
Would you buy a house if you were handed a report that stated the house was structurally sound, there were no harmful gases leaking from the ground, the water source was safe, and no murders were committed inside or on the house grounds within the past year, but were then subsequently handed a disclaimer that stated: “No one has determined whether the information contained in these reports is truthful or complete. Any representation to the contrary is a criminal offense”? If you answered no to this question, then there is absolutely no way that you should believe that buying the gold ETF and the silver ETF is the same as buying physical gold and silver, or even a proxy for buying physical gold or silver.
Multiple Claims on the Physical Gold and Physical Silver Held on Behalf of GLD and SLV Shareholders?
The appointed custodians of the SLV and the GLD, responsible for safekeeping the silver and gold bars owned by the trusts, respectively are JP Morgan and HSBC Bank USA. The GLD prospectus states, “Gold held in the Trust’s unallocated gold account and any Authorized Participant’s unallocated gold account will not be segregated from the Custodian’s assets.” Only Authorized Participants, and no shareholders, have the right to redeem shares for actual gold.
In my opinion, there are several potential huge problems with this arrangement. Physical gold held by the GLD should be held in allocated accounts specifically for the trust. The fact that physical gold held for the GLD may be held in unallocated gold accounts where gold is not segregated from the Custodian’s assets may mean that multiple entities have claims on the same gold bars. In theory, the gold held in the Custodian’s vaults may be used for delivery against shorts they hold in the futures markets if necessary even though GLD shareholders have a claim on this gold.
A mechanism to apply the fractional reserve banking system to physical gold, an action that many thought impossible to execute with physical gold, may actually be occurring through the gold ETFs. While the prospectus states that “Authorized Participants Unallocated Accounts may only be used for transactions within the trust”, it does not specify how the custodian may use this gold.
In analyzing the SLV prospectus, the following statement can be found: “The trust does not trade in silver futures contracts on COMEX or on any other futures exchange. The trust takes delivery of physical silver that complies with the LBMA silver delivery rules. Because the trust does not trade in silver futures contracts on any futures exchange, the trust is not regulated by the CFTC under the Commodity Exchange Act as a ‘commodity pool’, and is not operated by a CFTC-regulated commodity pool operator.”
Elsewhere in the SLV prospectus, the following claim is also made: “Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.” If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the “remainder”? Clearly, the SLV prospectus states that there is a “remainder”. If you read this statement carefully, the statement clearly refers to the “trust’s silver holdings.” Thus, this statement implies that some of the SLV’s funds are allocated to something else other than physical silver. So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?
But even were the bulk of the SLV’s holdings physical silver, remember that this claim could be false and still contained in the prospectus due to their qualifying statement at the beginning of the prospectus that:
“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.”
Perhaps this is the reason why the prospectus warns: “Investors in the trust do not receive the regulatory protections afforded to investors in regulated commodity pools, nor may COMEX or any futures exchange enforce its rules with respect to the trust’s activities. In addition, investors in the trust do not benefit from the protections afforded to investors in silver futures contracts on regulated futures exchanges.”
The very structure of the GLD and SLV ETFs has always bothered me as the structures of these trusts are reminiscent of Vatican City, a completely sovereign entity subject only to its own laws and rules that operates in relative secrecy. I have always believed that the opacity of the operations of the GLD and the SLV would allow the custodians of these trusts, if they so desired, to execute manipulative schemes harmful to the trusts’ shareholders in much the manner that Goldman Sachs shorted subprime mortgages at the same time it was selling CDOs backed by subprime mortgages to its clients.
Where is the Gold?
Furthermore, more suspicion should be raised by the prospectus description of where the gold that is purchased on behalf of GLD shareholders is held. The prospectus states that “the Custodian has agreed that it will hold all of the Trust’s gold bars in its own London vault premises except when the gold bars have been allocated in a vault other than the Custodian’s London vault premises” (emphasis mine). This stuff is too good even for a skeptic like myself to make up. The prospectus then goes on to explain that other vaults allowed may reside at the Bank of England, Brinks Ltd., Via Mat International, and LBMA (London Bullion Market Association) market making members, and that in turn, these sub-custodians may appoint further sub-custodians to hold the trust’s gold if they so desire.
In regard to ensuring that the gold actually exists, the prospectus then states that “the Trustee may have no right to visit the premises of any sub-custodian for the purposes of examining the Trust’s gold bars or any records maintained by the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such sub-custodian.” In other words, the gold reputedly held by the GLD on behalf of shareholders may be held on the moon and no one would have a right to know this but the custodian.
In fact, given the entirely suspicious elements of these prospectuses, were every investor to liquidate their positions in the GLD and SLV and take their cash and buy physical gold and silver instead, I would speculate that the price of gold and silver would rise substantially, though according to the prospectuses, this is an event that should not happen under any circumstance. Now, according to a GATA report by Adrian Douglas, it appears that there may actually be grounds for my past speculations regarding the fact that the GLD and SLV funds may actually be used to help suppress the price of gold and silver on the futures markets.
Alchemy: Turning Physical Gold into Paper
According to a July 11, 2009 article titled “The Alchemists”, Douglas states: “delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the “flow” of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?”
In an attempt to reconcile this discrepancy, Douglas asks the all important question of what qualifies as “physical gold” according to COMEX guidelines. Douglas believes he has found a loophole in Exchange Rule 104.36, which governs exchange of futures for physicals (’EFP’) transactions on the COMEX Division. Exchange Rule 104.36 “refers to a ‘physical commodity’ as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.”
Exchange Rule 104.36 further states, “The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds (’ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.”
An EFP transaction is an Exchange of Futures for Physicals [EFP] whereby the buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position. Thus, quite incredulously, Douglas has discovered that COMEX allows for paper ETF gold shares to pass as “physical gold” in EFP transactions that are allowed to close out futures positions.
Again, if I understand Douglas’s assertion correctly, this could conceivably allow a firm like JP Morgan to open up massive shorts against gold in the COMEX markets and to close out their own short positions by delivering shares of a gold ETF in an EFP transaction. If this has indeed occurred in the past, then this loophole would easily explain why, in the past, gold ETF inventories have curiously risen or remained virtually steady during periods when the price of gold futures contracts on the COMEX was plummeting. As Douglas stated in his paper, this would indeed be the ultimate alchemy of regulating gold prices by turning physical gold into paper. Instead of purchasing a long futures contract to cancel out a short futures contract, gold ETF shares could be purchased to achieve the same effect.
The CFTC Should Investigate the GLD and the SLV, Audit their Holdings, and Report Their Findings to the Public
Thus, if the new CFTC Chairman Gary Gensler is truly sincere in his public comments about increasing transparency in the commodity markets, I suggest he begin with an investigation of the unregulated SLV and GLD ETFs to
(1) Determine the exact composition of the holdings within these trusts; and
(2) Determine if the custodians of these ETFs are engaging in activities outside of those stated in their prospectuses to unduly influence and / or manipulate the price of gold and silver markets.
It is entirely ludicrous to allow the custodians of these two ETFs to operate with zero outside regulatory oversight given the numerous troubling statements in both of their prospectuses, the tip of which I’ve explored within the realm of this article. If these trusts are operating according to the statements made within their respective prospectuses, then they should have nothing to hide and therefore should welcome an independent audit of their vaults to dispel all naysayers. Of course, since there is a complex web of custodians, sub-custodians, and sub-custodians of the sub-custodians, perhaps it would be impossible to conduct such an audit.
The latest data reported on July 8, 2009 by the SPDR Gold Trust, the GLD, states that 1,109.81 metric tons of gold are being held on behalf of GLD shareholders. In some manner, an independent auditor should be allowed to confirm that the custodian of the GLD holds 1,109.81 metric tons of gold that have no claims on it other than the GLD shareholders. If this happens, then all speculation regarding the GLD ETF will disappear into the sunset.
Until then recall this 2005 story about silver custodian Morgan Stanley:
NEW YORK, June 12 (Reuters) – Morgan Stanley plans to settle a class-action lawsuit, brought by clients over the purchase and storage of precious metals, in a deal worth $4.4 million, according to a court filing. The proposed settlement, which still needs to be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to the filing on Monday.
The lawsuit, filed in August 2005, alleged that Morgan Stanley had told clients it was selling them precious metals that they would own in full and that the company would store. But Morgan Stanley was actually making either no investment specifically on behalf of those clients or making an entirely different investment of lesser value and security, according to the complaint (emphasis mine).
Morgan Stanley was not immediately available for comment. But it has argued that there were no violations of law and no default or failure to perform or deliver precious metals, according to the filing. The suit was filed by Selwyn Silberblatt, on behalf of himself and others, who bought precious metals — gold, silver, platinum and palladium in bullion bar or coins — from Morgan Stanley DW Inc. and its predecessors and paid fees for their storage, according to the filing.
The suit covers investors who did so between Feb. 19, 1986, through Jan. 10, 2007. Silberblatt, a resident of Maine at the time of the complaint, bought silver bars from Morgan Stanley during the period.
Owning the GLD and SLV is Not the Same as Owning Physical Gold and Physical Silver
In the end, as long as the GLD and SLV prospectuses are allowed to contain misinformation if it so desires according to the words contained within their own prospectuses, then GLD and SLV shareholders may find themselves holding nothing but a bag of hot air just like Selwyn Silverblatt. Furthermore, as long as the issues I broached in this article remain unresolved I imagine that the debate will continue onward about the legitimacy of the GLD and SLV ETFs. Undoubtedly, given the opinions I presented in this article, I would be highly curious to see the outcome and effect upon gold and silver prices were every shareholder of the GLD and SLV to exchange their shares for physical gold and physical silver instead.
There will always be vast amounts of paper gold and paper silver available to be sold, but only a limited amount of physical gold and physical silver. Perhaps this is why the real thing is becoming increasingly difficult to come by these days. On Tuesday, the US Mint once again reported that it has temporarily suspended minting of nearly all its gold uncirculated and proof coins and nearly all of its silver uncirculated coins due to very limited availability of blanks. As the saying goes, with gold and silver, “Get it while you can!” Just ensure that the gold and silver you buy clanks, not floats, when you drop it.
By J.S. Kim
Read Entire Article
Monday, July 13, 2009
Significant Silver Withdrawals from COMEX
(Seeking Alpha) Ending last week with nearly 119 million ounces of silver (Moz) in the four COMEX depositories, this week the word has been get your silver while you can.
Slightly less than 2 million ounces of silver has been withdrawn from COMEX stocks in three days (July 6-8), with eligible silver dropping from 55.4 Moz to 53.5 Moz. Significant withdraws were experienced by HSBC Bank (HBC) (down 1.26 Moz) and Sottia Mocatta (down 546,000 oz). Brinks also registered a withdraw of 30,000 oz of silver.
The reduction is only 2% of total stocks that COMEX claims, however it is nearly 5% of eligible stocks that can be used for futures redemption. The remainder is registered, but is already allocated (owned) by other investors who are storing it in the vaults.
For leverage fans, that is 10 oz of silver under contract for every ounce of silver available. If you count the fact that COMEX allows you to purchase a contract with 10%, then actual leverage vs physical metal held by COMEX is closer to 100 to 1.
That should answer the question as to why someone would refer to it as "paper" silver. It should also generate a question as to why so much silver is starting to flow out of the COMEX.
By Ed Zimmer
Read Entire Article
Slightly less than 2 million ounces of silver has been withdrawn from COMEX stocks in three days (July 6-8), with eligible silver dropping from 55.4 Moz to 53.5 Moz. Significant withdraws were experienced by HSBC Bank (HBC) (down 1.26 Moz) and Sottia Mocatta (down 546,000 oz). Brinks also registered a withdraw of 30,000 oz of silver.
The reduction is only 2% of total stocks that COMEX claims, however it is nearly 5% of eligible stocks that can be used for futures redemption. The remainder is registered, but is already allocated (owned) by other investors who are storing it in the vaults.
For leverage fans, that is 10 oz of silver under contract for every ounce of silver available. If you count the fact that COMEX allows you to purchase a contract with 10%, then actual leverage vs physical metal held by COMEX is closer to 100 to 1.
That should answer the question as to why someone would refer to it as "paper" silver. It should also generate a question as to why so much silver is starting to flow out of the COMEX.
By Ed Zimmer
Read Entire Article
Thursday, June 4, 2009
Hi-ho Silver!
White metal looks to outpace gold again, thanks to its industrial uses
NEW YORK (MarketWatch) -- Silver, which has topped gold and platinum to become the fastest rising precious metal this year, has a chance to keep outperforming thanks to its double use as both an inflation hedge and industrial material, analysts are forecasting.
But with higher returns come greater risks. Silver has proved much more volatile than gold, partly because fewer people trade the white metal than gold.
If "prices of precious metals turn higher across the board, silver will tend to move up faster," said Neil Meader, research director at London-based precious metals consultancy GFMS.
"If all the prices come off, you will see silver prices collapse much faster," he said.
The London fixing, a global benchmark for silver's spot trading, has rallied nearly 50% this year to near $16 an ounce, the highest level in 10 months, as investors piled into coins, bars, and silver exchange-traded funds such as iShare Silver Trust. Holdings in iShare Silver /quotes/comstock/13*!slv/quotes/nls/slv (SLV 15.65, +0.51, +3.37%) hit a record high this week.
The year-to-date gain in silver easily outpaced gold's 12% advance and has also outrun platinum's 30% increase
Read Entire Article
NEW YORK (MarketWatch) -- Silver, which has topped gold and platinum to become the fastest rising precious metal this year, has a chance to keep outperforming thanks to its double use as both an inflation hedge and industrial material, analysts are forecasting.
But with higher returns come greater risks. Silver has proved much more volatile than gold, partly because fewer people trade the white metal than gold.
If "prices of precious metals turn higher across the board, silver will tend to move up faster," said Neil Meader, research director at London-based precious metals consultancy GFMS.
"If all the prices come off, you will see silver prices collapse much faster," he said.
The London fixing, a global benchmark for silver's spot trading, has rallied nearly 50% this year to near $16 an ounce, the highest level in 10 months, as investors piled into coins, bars, and silver exchange-traded funds such as iShare Silver Trust. Holdings in iShare Silver /quotes/comstock/13*!slv/quotes/nls/slv (SLV 15.65, +0.51, +3.37%) hit a record high this week.
The year-to-date gain in silver easily outpaced gold's 12% advance and has also outrun platinum's 30% increase
Read Entire Article
Friday, May 29, 2009
Silver Heads for Best Month Since ‘87; Gold at Three-Month High
May 29 (Bloomberg) -- Silver headed for its biggest monthly gain in 22 years and gold rose to a three-month high in New York and London as a weaker dollar increased demand for precious metals as an alternative investment.
The U.S. Dollar Index, heading for its biggest monthly drop this year, fell today on speculation gains in equities spurred demand for higher-yielding assets. Precious metals typically move inversely to the U.S. currency. Gold is set for its best month since November.
“Extreme dollar weakness is adding to the momentum,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said today in a note. “Ascending oil prices, concerns of inflation and fears of massive U.S. debt have certainly been supporting” both metals, he said.
Silver futures for July delivery climbed 2 percent to $15.46 an ounce on the New York Mercantile Exchange’s Comex division as of 8:32 a.m. in New York. The contract has rallied 25 percent this month. Silver for immediate delivery climbed 2 percent to $15.445 an ounce in London.
Gold futures for August delivery advanced as much as $15.30, or 1.6 percent, to $978.50 in New York, the highest since Feb. 25, and are up 9 percent this month. Gold for immediate delivery rose $13.45, or 1.4 percent, to $972.90 in London.
The metal rose to $972 in the morning “fixing” in London, used by some mining companies to sell production, from $957.75 at yesterday’s afternoon fixing.
Economic Outlook
European and Asian equities climbed today. The MSCI World Index is set for a third consecutive monthly increase, the first such gain since the credit crisis began in August 2007, as investors speculated the $12.8 trillion pledged by the U.S. government and the Federal Reserve will end the first global recession since World War II.
Silver “is very correlated to gold, but silver does have industrial application that gold doesn’t,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said today by phone. “The ‘green shoots’ story is more positive for silver. It’s a very small market compared to gold. Even small amounts of money coming in can move up the price a lot.”
An ounce of spot gold in London now buys about 63 ounces of silver, the lowest ratio since September, according to data compiled by Bloomberg. That compares with 84 in October, the highest level since March 1995.
By Nicholas Larkin and Glenys Sim
Read Entire Article
The U.S. Dollar Index, heading for its biggest monthly drop this year, fell today on speculation gains in equities spurred demand for higher-yielding assets. Precious metals typically move inversely to the U.S. currency. Gold is set for its best month since November.
“Extreme dollar weakness is adding to the momentum,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said today in a note. “Ascending oil prices, concerns of inflation and fears of massive U.S. debt have certainly been supporting” both metals, he said.
Silver futures for July delivery climbed 2 percent to $15.46 an ounce on the New York Mercantile Exchange’s Comex division as of 8:32 a.m. in New York. The contract has rallied 25 percent this month. Silver for immediate delivery climbed 2 percent to $15.445 an ounce in London.
Gold futures for August delivery advanced as much as $15.30, or 1.6 percent, to $978.50 in New York, the highest since Feb. 25, and are up 9 percent this month. Gold for immediate delivery rose $13.45, or 1.4 percent, to $972.90 in London.
The metal rose to $972 in the morning “fixing” in London, used by some mining companies to sell production, from $957.75 at yesterday’s afternoon fixing.
Economic Outlook
European and Asian equities climbed today. The MSCI World Index is set for a third consecutive monthly increase, the first such gain since the credit crisis began in August 2007, as investors speculated the $12.8 trillion pledged by the U.S. government and the Federal Reserve will end the first global recession since World War II.
Silver “is very correlated to gold, but silver does have industrial application that gold doesn’t,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said today by phone. “The ‘green shoots’ story is more positive for silver. It’s a very small market compared to gold. Even small amounts of money coming in can move up the price a lot.”
An ounce of spot gold in London now buys about 63 ounces of silver, the lowest ratio since September, according to data compiled by Bloomberg. That compares with 84 in October, the highest level since March 1995.
By Nicholas Larkin and Glenys Sim
Read Entire Article
Thursday, May 28, 2009
Gold vs. Silver: There Is No Debate
It is mildly amusing that when the precious metals markets are in confirmed uptrends, the perennial debate of whether it is best to own gold or silver always comes to the fore.
Both gold and silver, historically, have been money (merely utility in exchange). Gold in nature is approximately 15 times as scarce as silver. All the gold mined since the dawn of man, if molded into a cube, is said to fit inside a baseball diamond.
Silver would nearly fill the stadium. China, now the world's largest gold producer, had a silver standard as gold was more plentiful in China than silver, a bias that the west took full advantage of up through the 1870s. Silver imports by the Spanish Empire from their New World holdings were so large that it collapsed the European silver market. England, then on a bi-metalic standard, quickly switched to a pure gold standard. The Spanish Empire never recovered from the experience.
In the United States, the debate raged incessantly as to how the ratio would be "fixed" after the discovery of the Comstock Lode with western mining interests' best known champion, Senator William Jennings Bryan, being the foremost proponent of a lower ratio. Seems it is an old debate. The good news is, you can own both. If/when the world returns to honest, stable money, you will need both: gold for the larger acquisitions and silver to make change.
While we await such an event, ratio trade the two metals to increase your holdings of precious metals.The ratio fluctuates wildly over time. In the 1970s and 1980s I used 28:1 and 40:1 as points that I would switch. At 40:1, I would be in silver. When the ratio dropped down to 28:1, I would exchange silver holdings for gold. Each time I switched, my stack of precious metals would increase in size even after dealing with the spread.
Find a precious metals dealer who will work with you on that. You maybe able to locate one that will only charge the spread on one of the metals and not both when you switch. Since then, the ratio has moved up. At one point it was even at 100:1. I now use 45:1 and 70:1 as switch points. See your tax accountant as to the benefits of such a program. Think 1031 Tax Deferred Exchange.
For those who do not want to break the rear axle of your automobile moving your silver when it comes time to switch, think about using ETFs that only reflect the price of the two metals. There are a variety of ways to accomplish this, from being in just one or the other to being long one and short the other. IF your objective is to accumulate the actual physical metals, do not use ETFs as a substitute for physical ownership. Rather, take profits from your switching trades and purchase the actual metals themselves. Gold vs. silver? No debate. Accumulate both.
By Market Sniper
Read Entire Article
Both gold and silver, historically, have been money (merely utility in exchange). Gold in nature is approximately 15 times as scarce as silver. All the gold mined since the dawn of man, if molded into a cube, is said to fit inside a baseball diamond.
Silver would nearly fill the stadium. China, now the world's largest gold producer, had a silver standard as gold was more plentiful in China than silver, a bias that the west took full advantage of up through the 1870s. Silver imports by the Spanish Empire from their New World holdings were so large that it collapsed the European silver market. England, then on a bi-metalic standard, quickly switched to a pure gold standard. The Spanish Empire never recovered from the experience.
In the United States, the debate raged incessantly as to how the ratio would be "fixed" after the discovery of the Comstock Lode with western mining interests' best known champion, Senator William Jennings Bryan, being the foremost proponent of a lower ratio. Seems it is an old debate. The good news is, you can own both. If/when the world returns to honest, stable money, you will need both: gold for the larger acquisitions and silver to make change.
While we await such an event, ratio trade the two metals to increase your holdings of precious metals.The ratio fluctuates wildly over time. In the 1970s and 1980s I used 28:1 and 40:1 as points that I would switch. At 40:1, I would be in silver. When the ratio dropped down to 28:1, I would exchange silver holdings for gold. Each time I switched, my stack of precious metals would increase in size even after dealing with the spread.
Find a precious metals dealer who will work with you on that. You maybe able to locate one that will only charge the spread on one of the metals and not both when you switch. Since then, the ratio has moved up. At one point it was even at 100:1. I now use 45:1 and 70:1 as switch points. See your tax accountant as to the benefits of such a program. Think 1031 Tax Deferred Exchange.
For those who do not want to break the rear axle of your automobile moving your silver when it comes time to switch, think about using ETFs that only reflect the price of the two metals. There are a variety of ways to accomplish this, from being in just one or the other to being long one and short the other. IF your objective is to accumulate the actual physical metals, do not use ETFs as a substitute for physical ownership. Rather, take profits from your switching trades and purchase the actual metals themselves. Gold vs. silver? No debate. Accumulate both.
By Market Sniper
Read Entire Article
Wednesday, May 27, 2009
What Is Even More Enticing than Gold? Silver.
The dollar is out. The U.S. dollar index has fallen 5% last week.
Treasury bonds are quickly falling out of favor. The yield on 10-year Treasury bonds has climbed from 2.5% to almost 3.5% since March signaling inflation fears and an unwillingness to fund ballooning government borrowing.
Is this a sign of things to come?
Well, if you take a look at the mainstream headlines, you’d think so.
An editorial headline on Bloomberg proclaims, “Dollar is dirt, Treasuries are toast, and AAA is gone.”
Even CBS News is warning, “Inflation could be coming to a U.S. dollar near you.”
To me, it seems just like a typical overreaction in the short-term.
Yes, the long-run trend for the dollar is down as the Fed keeps printing more and more of them and monetizing government debt. And yes, the prospects for gold get brighter and brighter with each passing week.
But there’s no reason to lose your head here. It’s going to take a few years for all this to play out. And the window of opportunity is still wide open to buy precious metals, real assets, and assets not denominated in the dollar (like ADRs).
That’s why, despite the strong interest in gold at the moment, I encourage you to continue to look for value in the sector. Right now, there seems to be some exceptional value in an asset which is so undervalued, it could outpace gold by 400% or more.
I’m talking about Silver.
When Gold Climbs, Silver Soars
In the past few weeks gold has been getting a lot of attention. With all the big money finally taking a liking to gold, the attention is justified. Remember, a turn in the big money’s attitude towards gold must happen before gold can break through the $1,000 mark and stay there.
The excitement surrounding gold’s surge has only pushed silver further onto the back burner. (You don’t hear about any major hedge funds loading up on silver do you?) And that’s the point. Gold is hot and silver is – in a relative sense - not.
So if you want to find an investment which isn’t so hot but still has a lot of potential in an inflationary environment, you’d want to look at silver. When you do, it won’t take long to realize silver – at current levels – could easily trounce gold in the months and years ahead.
That’s right. Silver has a much brighter future than gold. All you have to do is look at the silver / gold ratio to see how potentially lucrative the situation has become.
Ratios Don’t Lie
We’ve looked at a few ratios in the past. The reason is because ratio analysis can help identify value even in volatile markets. For instance, we looked at how the gold / oil ratio was signaling oil was a buy back in January. Oil prices are up almost 50% since then.
We looked at gold / gold stocks ratio back in December. We saw that gold stocks were significantly undervalued relative to gold. Since early December, gold is up a respectable 22% while gold stocks – as a group - have rebounded 70%.
That’s the value of ratio analysis. They can quickly show you how undervalued some assets are relative to other others. And if you’re able to find them at extreme points, you can get into a trade or investment with less risk and greater upside.
Right now, the gold / silver ratio (the measure of how many ounces of silver can be bought for an ounce of gold) is at an extreme and working its way back to historical norms.
by Andrew Mickey
Read Entire Article
Treasury bonds are quickly falling out of favor. The yield on 10-year Treasury bonds has climbed from 2.5% to almost 3.5% since March signaling inflation fears and an unwillingness to fund ballooning government borrowing.
Is this a sign of things to come?
Well, if you take a look at the mainstream headlines, you’d think so.
An editorial headline on Bloomberg proclaims, “Dollar is dirt, Treasuries are toast, and AAA is gone.”
Even CBS News is warning, “Inflation could be coming to a U.S. dollar near you.”
To me, it seems just like a typical overreaction in the short-term.
Yes, the long-run trend for the dollar is down as the Fed keeps printing more and more of them and monetizing government debt. And yes, the prospects for gold get brighter and brighter with each passing week.
But there’s no reason to lose your head here. It’s going to take a few years for all this to play out. And the window of opportunity is still wide open to buy precious metals, real assets, and assets not denominated in the dollar (like ADRs).
That’s why, despite the strong interest in gold at the moment, I encourage you to continue to look for value in the sector. Right now, there seems to be some exceptional value in an asset which is so undervalued, it could outpace gold by 400% or more.
I’m talking about Silver.
When Gold Climbs, Silver Soars
In the past few weeks gold has been getting a lot of attention. With all the big money finally taking a liking to gold, the attention is justified. Remember, a turn in the big money’s attitude towards gold must happen before gold can break through the $1,000 mark and stay there.
The excitement surrounding gold’s surge has only pushed silver further onto the back burner. (You don’t hear about any major hedge funds loading up on silver do you?) And that’s the point. Gold is hot and silver is – in a relative sense - not.
So if you want to find an investment which isn’t so hot but still has a lot of potential in an inflationary environment, you’d want to look at silver. When you do, it won’t take long to realize silver – at current levels – could easily trounce gold in the months and years ahead.
That’s right. Silver has a much brighter future than gold. All you have to do is look at the silver / gold ratio to see how potentially lucrative the situation has become.
Ratios Don’t Lie
We’ve looked at a few ratios in the past. The reason is because ratio analysis can help identify value even in volatile markets. For instance, we looked at how the gold / oil ratio was signaling oil was a buy back in January. Oil prices are up almost 50% since then.
We looked at gold / gold stocks ratio back in December. We saw that gold stocks were significantly undervalued relative to gold. Since early December, gold is up a respectable 22% while gold stocks – as a group - have rebounded 70%.
That’s the value of ratio analysis. They can quickly show you how undervalued some assets are relative to other others. And if you’re able to find them at extreme points, you can get into a trade or investment with less risk and greater upside.
Right now, the gold / silver ratio (the measure of how many ounces of silver can be bought for an ounce of gold) is at an extreme and working its way back to historical norms.
by Andrew Mickey
Read Entire Article
Tuesday, May 5, 2009
Premiums Ease on Silver Eagle's
World mints have struggled to keep up with the booming demand for precious metals. The situation has been ongoing for more than a year and frustrated physical silver investors with suspensions, rationing, and delays. There are finally some signs that the shortage may be coming to an end, in particular for the American Silver Eagle bullion coin.
The Silver Eagle shortage first began in February 2008. The US Mint became so overwhelmed with orders for the popular silver bullion coin that they were forced to suspend taking new orders. The suspension was only in place until March 2009; however, sales were resumed on a rationed basis. Authorized purchasers were limited in the number of coins that they could order. Early suggestions indicated that the rationed amounts covered only a fraction of the overall demand.
More than one year later, there are some indications that the situation may finally be abating. As I mentioned in my post on the US Mint's March 2009 Bullion Sales, sales of silver and gold reached extremely high levels. Sales of silver coins were actually the highest monthly total since 1986. Since these are rationed sales, the high level was more of an indication of reduced supply constraints than increased demand.
Recently, there have been more indications at the dealer level that the shortage may be ending. One dealer has reported that delays for delivery of Silver Eagles are shortening, and premiums for the coins is declining. At the height of the shortage premiums were as high as $4.50 over the spot price of silver. Premiums have now pulled back to around $3.00 over spot.
By Michael Zielinski
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The Silver Eagle shortage first began in February 2008. The US Mint became so overwhelmed with orders for the popular silver bullion coin that they were forced to suspend taking new orders. The suspension was only in place until March 2009; however, sales were resumed on a rationed basis. Authorized purchasers were limited in the number of coins that they could order. Early suggestions indicated that the rationed amounts covered only a fraction of the overall demand.
More than one year later, there are some indications that the situation may finally be abating. As I mentioned in my post on the US Mint's March 2009 Bullion Sales, sales of silver and gold reached extremely high levels. Sales of silver coins were actually the highest monthly total since 1986. Since these are rationed sales, the high level was more of an indication of reduced supply constraints than increased demand.
Recently, there have been more indications at the dealer level that the shortage may be ending. One dealer has reported that delays for delivery of Silver Eagles are shortening, and premiums for the coins is declining. At the height of the shortage premiums were as high as $4.50 over the spot price of silver. Premiums have now pulled back to around $3.00 over spot.
By Michael Zielinski
Read Entire Article
Wednesday, April 29, 2009
2009 Silver Eagle Bullion Coins Scorching Hot
Total Silver Eagle Bullion Coin Sales, Jan-Apr (2000-2009)*
Sales of 2009 Silver Eagle Bullion Coins are blistering hot, with an incredible record-breaking pace of 9.64 million sold through Monday, April 27, according to the latest US Mint sales stats.
More silver eagles have been sold during February, March and even an unfinished April than any corresponding month since the American Eagle series was launched in 1986. What happened in January 2009? It was a great month for the eagles as well, coming in second place behind the record sales in January 2008.
Monthly Silver Eagle Bullion Coin Sales, Jan-Apr (2000-2009)*
2008 proved to be an exceptional year for the series, with historic sales at 19,583,500. At the current 2009 rate, more than half of that amount will be sold in just four months. There is a potential to shatter last year’s record.
Read Entire Article
Sales of 2009 Silver Eagle Bullion Coins are blistering hot, with an incredible record-breaking pace of 9.64 million sold through Monday, April 27, according to the latest US Mint sales stats.
More silver eagles have been sold during February, March and even an unfinished April than any corresponding month since the American Eagle series was launched in 1986. What happened in January 2009? It was a great month for the eagles as well, coming in second place behind the record sales in January 2008.
Monthly Silver Eagle Bullion Coin Sales, Jan-Apr (2000-2009)*
2008 proved to be an exceptional year for the series, with historic sales at 19,583,500. At the current 2009 rate, more than half of that amount will be sold in just four months. There is a potential to shatter last year’s record.
Read Entire Article
Thursday, April 16, 2009
Silver - The Everyday Gold
Precious metals and commodities have been all the rage lately, with talks about a reflation play being a staple to every portfolio. But with all the talks about gold and oil being a safeguard against government spending destroying the value of the dollar, it is a wonder that silver has remained hidden for so long.
Many of the sharpest minds in the investment world have retained their bullish sentiment on precious metals, including well-known names like Marc Faber and George Soros. While the recent Wells Fargo announcement surprised all of Wall Street and gave glimmers of hope on the global economy, the fact of the matter is that nothing has fundamentally changed with the global financial system and the same systemic risks plaguing analysts before remain today.
It is all but an accepted fact that governments worldwide are willing to sacrifice the threat of inflation in order to stimulate economies and boost employment rates. With both gold and silver, demand has been constantly in flux depending on the current prevailing sentiment of risk aversion/appetite. But what makes silver look far more attractive as a store of wealth and a medium of diversification are the fundamental factors solely affecting silver. With all precious metals, risk aversion sentiment is a huge factor in driving up demand, but silver has seen a significant decrease in inventories and supply pressures. COMEX Dealers Silver Inventory has fallen sharply from nearly 80 million registered ounces at the end of November 2008 to around 70 million at the end of March.
Part of the factors attributed to the supply contraction can be pointed to its production. Silver is mined as a byproduct of base metals such as copper, lead, and zinc. As the industrial production continues to suffer, demand for base metals drop and therefore miners are less willing to mine base metals. Ironically enough, silver and gold demand at these moments increase as investors look to diversify their portfolios and hedge against suffering currencies.
While we have seen that price increase in all precious metals, gold is trading at 70 times the price of silver whereas it has historically traded around a ratio of 30 to 100 over the past three decades. Yet, what is unknown to most is that while gold is priced at 70 times silver, worldwide silver supply is only five times lesser than the supply of gold.
Unlike gold, which is held in significant amounts by governments worldwide, governments hold a tenth of their gold in silver, making a sudden and big sale of silver highly unlikely. In fact, including governments and all other major players, Warren Buffet is one of the bigger holders of silver.
Also a supply/demand factor involving silver is that unlike gold, which is seen as solely a store of value, silver has a large variety of industrial applications that make it indispensible. In fact, over the long term, while the physical stock of gold circulating only increases, silver has a consumption aspect of demand that over time decreases the physical stock of circulating silver. Industrial silver applications include heat and electrical conduction, light reflection, lubricant, alloy, and in fact several biomedical uses as well. Another driver is that future industrial consumption outlook is very positive in that all the new technologies, including solar, battery, laser, and water purification require silver.
With all these factors in line, it is no wonder where there are rumors circulating among silver analysts of price manipulation within the silver market. In fact, silver analyst Ted Butler accused giant financial institutions and singled out JP Morgan (JPM) as the leader of downward price manipulation of silver. While this worked out fine when supplies of silver were still relatively large, the dwindling silver inventories have made price manipulation a huge area of concern and should the price of silver be artificially deflated, there will be a huge upward spike in the price of silver to the market equilibrium.
Regardless of the rumors surrounding silver, one thing is for certain, and that is unlike gold with its constantly growing amounts in circulation, physical amounts of silver are limited and inventories are dwindling. With that in mind, any economist can tell you that silver supply must increase (driving up the price of production and therefore price of silver) or demand must decrease, which does not seem likely given the large variety of uses of silver, industrial and financial.
by: Bullish Bankers April 16, 2009
Read Entire Article
Many of the sharpest minds in the investment world have retained their bullish sentiment on precious metals, including well-known names like Marc Faber and George Soros. While the recent Wells Fargo announcement surprised all of Wall Street and gave glimmers of hope on the global economy, the fact of the matter is that nothing has fundamentally changed with the global financial system and the same systemic risks plaguing analysts before remain today.
It is all but an accepted fact that governments worldwide are willing to sacrifice the threat of inflation in order to stimulate economies and boost employment rates. With both gold and silver, demand has been constantly in flux depending on the current prevailing sentiment of risk aversion/appetite. But what makes silver look far more attractive as a store of wealth and a medium of diversification are the fundamental factors solely affecting silver. With all precious metals, risk aversion sentiment is a huge factor in driving up demand, but silver has seen a significant decrease in inventories and supply pressures. COMEX Dealers Silver Inventory has fallen sharply from nearly 80 million registered ounces at the end of November 2008 to around 70 million at the end of March.
Part of the factors attributed to the supply contraction can be pointed to its production. Silver is mined as a byproduct of base metals such as copper, lead, and zinc. As the industrial production continues to suffer, demand for base metals drop and therefore miners are less willing to mine base metals. Ironically enough, silver and gold demand at these moments increase as investors look to diversify their portfolios and hedge against suffering currencies.
While we have seen that price increase in all precious metals, gold is trading at 70 times the price of silver whereas it has historically traded around a ratio of 30 to 100 over the past three decades. Yet, what is unknown to most is that while gold is priced at 70 times silver, worldwide silver supply is only five times lesser than the supply of gold.
Unlike gold, which is held in significant amounts by governments worldwide, governments hold a tenth of their gold in silver, making a sudden and big sale of silver highly unlikely. In fact, including governments and all other major players, Warren Buffet is one of the bigger holders of silver.
Also a supply/demand factor involving silver is that unlike gold, which is seen as solely a store of value, silver has a large variety of industrial applications that make it indispensible. In fact, over the long term, while the physical stock of gold circulating only increases, silver has a consumption aspect of demand that over time decreases the physical stock of circulating silver. Industrial silver applications include heat and electrical conduction, light reflection, lubricant, alloy, and in fact several biomedical uses as well. Another driver is that future industrial consumption outlook is very positive in that all the new technologies, including solar, battery, laser, and water purification require silver.
With all these factors in line, it is no wonder where there are rumors circulating among silver analysts of price manipulation within the silver market. In fact, silver analyst Ted Butler accused giant financial institutions and singled out JP Morgan (JPM) as the leader of downward price manipulation of silver. While this worked out fine when supplies of silver were still relatively large, the dwindling silver inventories have made price manipulation a huge area of concern and should the price of silver be artificially deflated, there will be a huge upward spike in the price of silver to the market equilibrium.
Regardless of the rumors surrounding silver, one thing is for certain, and that is unlike gold with its constantly growing amounts in circulation, physical amounts of silver are limited and inventories are dwindling. With that in mind, any economist can tell you that silver supply must increase (driving up the price of production and therefore price of silver) or demand must decrease, which does not seem likely given the large variety of uses of silver, industrial and financial.
by: Bullish Bankers April 16, 2009
Read Entire Article