Thursday, February 17, 2011

He Who Panics First, Panics Best

With only 6 days to go in February trading, silver futures for delivery are at extremely high levels. Usually these contracts are settled in cash and rolled into subsequent months, but this time there appears to be a little panic.

If you have been shorting and manipulating silver, like the banks habitually do, you got a problem. If option contract holders stand for delivery- you are going to have to come up with the actual physical metal. Now in a normal functioning market, this would not be a problem. But in this market, there are far more option contracts trading than there is underlying actual-physical silver.

That's a problem. You've been making a bet that your ass can't cash. The fundamentals for silver are very strong. In fact, silver is the most efficient conduit for energy. It is used in a wide variety of industrial applications but most notably, solar panels. That and inflation is literally eating peoples' lunch. The Chinese and India are getting their asses kicked. Working for slave wages means you don't have a bunch of extra dough to buy food. The Chinese can only hedge that loss with precious metals. This is something they've been doing for centuries. There are 3 billion potential buyers in that area of the world.

I have been steadily buying strictly for inflation reasons. Today, silver is hitting a 30 year high. Held artificially low by bankers for three decades, it appears the dam is about to burst. Of the total outstanding contracts remaining for March delivery, about 60,000, if just 9000 or so are left standing in six days, I'm not sure how banks are going to fulfill their obligations. It will completely wipe out what reserves they allegedly have.

Yesterday, I added some gold and silver. I told the guy that I couldn't believe they were still exchanging precious metal for paper. I thanked him. He just smiled.

Sticking it to JP Morgan, the United States Governments' personal hedge fund, is reason enough to buy. I'd do it on that reason alone even if it meant silver becoming worthless was a possibility. I'll leave you with a snip from one of my favorite blogs...

The total silver open interest remained relatively stable today losing only 352 contracts from yesterday's reading.  Today's OI came in at 147,113 and yesterday the level was 147,465.  This high OI is of great concern to our bankers.  The February options expiry month saw its OI drop from 121 to 88 for a loss of 33 contracts.  We had 37 deliveries yesterday so all of the decline was in the deliveries with a few more standing for delivery.  The whole world has eyes on this next data: the front month of March.  The open interest for the front month of March saw the OI move marginally down from 61,720 to 59,851 for a loss of 1869 contracts.
With the front month of March going off the board, I believe next Wednesday along with the options to buy a futures contract, this is certainly not good news for the bankers.  They need a much higher fall or rollover of the March silver in May.  Get a load of this next data: the estimated volume today was a monstrous 93,144 contracts with no evidence of rolling.  The confirmed volume yesterday was pretty good at 57,703.
It looks like some of the bankers decided to lighten up on their shorts.  JPMorgan et al still decided to provide the massive un-backed paper silver.


davecydell said...

another question, FG:

my silver dealer is selling 10oz bars at 4.8% over melt and Roos Dime bags at 3.5% , I am awash in dime bags. Am I missing something?

Brian said...

I pay 90 cents per oz over spot on a 10 oz bar.

Now when I hear, "dime bag", I am not thinking of silver. So I am just a tad lost here although by Roos I am guessing Australian silver. Can u help me out a little here??

davecydell said...

Sorry, Roosevelt Dimes. But I do love telling people I bought a dime bag. I buy 100 dime bags, as well as others.

But when it comes to the price of silver, what is happening in Wisconsin may do wonders to the price.

Brian said...

Dave...I can't find one single reason not to own silver. After today, and watching the futures, like most everyone right now...the greedy side of me wishes I had more.

They call that "junk silver" (purity) however I am thinking of adding "junk silver" because that is a very trade able amount and size. Easily recognized. I truly expect silver to breach 75 dollar levels and small denoms of silver would be a nice thing to have for smaller purchases..In fact, I am gonna ask one of the PM dealers about that manyana..