Silver Demand Unprecedented, Price will go Wild!
"Precious metal market manipulation coming home to roost."
From the desk of Paul Stramer:
Reporting on the mining aspects of the precious metals markets is the specialty of Greg McCoach. He is very good at what he does. Don't take my word for anything about precious metals.
The following article explains why you should get all the Silver you can, even at $20 or more per ounce, and why all the garbage you hear from Wall Street about the precious metals market is hype to convince you to keep dealing in fiat paper and credit. Don't do it. Look at the reality of Silver and Gold and forget what the controlled media is reporting.
I highly recommend you subscribe to Greg's blog at http://www.gregmccoach.com/ and look at his mining articles at: http://www.miningspeculator.com/
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- Tuesday October 21st, 2008 - Denver, CO
MSP Hotline for 10/21/2008
Hi, this is Greg McCoach with a Mining Speculator Hotline for Tuesday, October 21, 2008.
Canary in the Coal Mine.
As year end approaches, we continue to see the same kind of price action in the precious metals and mining stocks that has devastated our portfolio values throughout the year. It has been a gut wrenching 2008 to say the least.
This activity is mainly due to the ongoing deleveraging from speculative players (hedge funds and commodity index funds) who need to raise cash to meet a flood of redemption requests from their clients. These hedge and commodity funds were long gold, silver, platinum, palladium, oil, natural gas etc. They were also long the mining stocks and short the dollar. Many of these positions have been unwound to raise the necessary cash to meet those redemption requests.
The clients of these funds have been forced to move to cash instead of keeping safe haven positions for a variety of reasons, including massive losses associated with derivatives. This has been very unfortunate for the commodities and precious metals sectors in the short run.
We also continue to see ongoing interventions in the market on the part of the powers that be (PTB) to keep the illusion of dollar strength and weak precious metals. I don't want to get into this too deeply other than to say that it is in the interest of the PTB that precious metals not rise at this point. Ultimately, they will have no say in what price level the precious metals go to, but for now are doing everything in their power to maintain the grand illusion that things will be just fine, despite what the public is beginning to learn and understand.
The best analogy to describe the situation regarding this intervention is the canary in the coal mine scenario. Miners kept caged canaries in the mines as an "early warning device." If the air was bad enough to kill the canary, it would soon be bad enough to kill people. The canaries were more sensitive to the deadly fumes, so their dying would warn the miners to get out.
Rising gold and silver prices serve as a "canary in the coal mine" for concerned citizens who don't want to see their savings and investments destroyed by the deadly fumes of deflation, inflation or a market meltdown. The PTB at this point simply cannot have rising gold and silver prices as they deal with the financial crisis and the upcoming elections, so they intervene as they said they would. On this matter I take them on their word.
But in the end, their interventions will completely and utterly fail.
For the citizens of the country, not only has the canary died at this point warning you to get out, unfortunately the coal mine has already collapsed trapping many. Further collapses within the mine are imminent!
The Paper Market versus the Physical Market.
It is important for you to understand at this point the differences between paper representations of gold and silver and the actual physical metals themselves.
There are two sides to the precious metals market. One is the paper side, which encompasses all transactions denominated in terms of gold and silver for which the metals never change hands. The other is the physical side, meaning that a transaction actually involves a change in ownership of gold or silver bullion, i.e., physical metal.
These two sides are fundamentally very different. Most notably, the number of paper transactions each and every day always totally overwhelms the number of transactions in which physical metal is traded.
While the amount of paper traded gold and silver compared to the exchange of physical metal is staggering, don't draw the wrong conclusion about their relative importance. It is easy to assume that paper is far more important than physical metal, but in fact, the opposite is the case. The physical market is by far the more important of the two, and the reason is simple.
Paper transactions are based on physical metal. Whether futures contracts, forward contracts, options or any other form, paper contracts are derived from physical metal, and are traded as substitutes for physical metal. Consequently, as a derivative of a physical, tangible commodity, a paper trade can always be turned into physical metal.
In other words, the longs can always force the shorts to make delivery, or vice versa. It rarely happens that way, as evidenced by the relatively small amount of physical metal traded compared to paper. But the potential is always there, and sometimes it does happen. Every once in awhile, the physical market takes center stage and I believe that day is soon at hand.
In effect, the longs can, if they choose to do so, dominate the market. Again, the reason is very simple. The aggregate promise of everyone holding paper derivative contracts to deliver gold and silver far exceeds the capacity of these shorts to make good on their promise to deliver.
What the mindless PTB robots want you to believe is that they can control the gold and silver prices by massively shorting contracts of gold and silver on the COMEX. Thus far it has worked.
But the COMEX is NOT the gold or silver market. It is a paper market that has been the recipient of large speculative buys by hedge funds and commodity index funds over the past two years. As these funds have had to sell these positions because of forced liquidation on account of redemption requests, the PTB have easily been able to work their magic so to speak in shorting gold and silver. This has allowed them for the time being to keep gold and silver prices in check and the illusion that all will return to normal.
But the physical gold market where real demand remains at unprecedented levels, is telling us something very different. The recent shortages for would be buyers worldwide of the physical precious metals is beginning to tell the real story. This is what is producing the increasing dichotomy between the COMEX and the real gold market. This battle between the paper representations of gold and silver and the real thing is going to intensify in a major way.
Update on Bullion
With that being said, it should still be noted that while every single commodity futures market is in the red today on account of this forced selling mentioned above, GOLD IS STILL RELATIVELY STABLE! Even in spite of the forced liquidation, gold is hanging in there precisely because there are enough buyers to offset a great deal of this continued forced liquidation in the paper market. In the real world, physical gold is fetching $900 an ounce out there in some instances. Premiums for one ounce gold bullion coins are running anywhere from $65 - $100 above the quoted spot price and certainly above the phony and artificial price quoted on the COMEX. Last year at this time you could buy all the one ounce gold bullion coins you wanted for $20 - $30 over the spot price. That is no longer the case. Those who don't own any physical metals at this point shouldn't quibble too much about the premiums if they want to own physical metal. That is because the only way we are going to see a lower premium is with much higher spot prices.
I have been swamped with thousands of emails lately with questions regarding the precious metals. Many of the popular items that investors love to buy such as the Swiss 20 Francs and British Sovereigns are simply no longer available. The last orders we took on that material was a couple of weeks ago. The source of those coins, which comes from banks vaults in Europe are suddenly no longer being offered. I would guess these banks no longer want to sell their gold, but are now opting to keep it. That means the only way we can get this material is if existing clients are willing to sell. I can tell you at AmeriGold we have had zero clients wanting to sell gold or silver in the past two and half months. This is extremely unusual as I have never seen a day go by in the ten year history of AmeriGold when there was not at least some sellers.
This causes the dealers to get all their material from the mints or the fabricators thus driving up the premiums on the items we can still get.
I do have a new source on brand new silver rounds and 100 oz silver bars. Orders can be placed late this week with orders being shipped out within a week. This is the only source of material that I know of that has such a short delivery time. In most cases buyers of precious metals are waiting at least three to four weeks for delivery and on some items even more. Silver eagles for instance are quoted at six weeks.
Places I would NOT consider as being worthy options to holding the physical metals themselves are the gold and silver ETF's, the Perth Mint, and any program that is deemed a certificate program or pooled account. In my opinion, many investors will not benefit from these products when the upside in the precious metals happens.
The big problem for analysts and miners alike is that we are now in virtually uncharted territory. Probably the nearest the world has ever seen to this kind of carnage has been the 1929 crash. The loss in confidence in the markets and the governments' inability to control the devastation is putting the markets under huge pressures and no-one is quite sure where things will end.
That is all for now. The October newsletter will be out next week.
Greg
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Since Greg's article the disconnect between the ticker spot price and the real world price
has gone even higher. In the case of silver up to $10 plus spot. The days of buying Silver Eagles
in small quantities under 500 coins for $20 or less is about gone. Get as much Silver as you can.
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