Tuesday, March 6, 2012

More Paper to Move Less Gold


There has been much comment on the non-mainstream internet about the knock-down in the silver and gold prices last Wednesday.

Who did the selling into the market at such huge volumes and why? Was the takedown a manipulative attempt to suppress the gold and silver prices from indicating that something was about to occur. Something big.

Jim Sinclair is of the opinion that the take down coincided with Ben Bernake's monetary statement and the simultaneous LTRO issuance by the ECB. In order to keep the attention away from the large amount of liquidity being injected into the market by the ECB, Central Banks needed to keep the heat off the gold price. So they used their bullion bank proxies to hammer the price selling paper gold and silver contracts on the COMEX. The jawboning from Mr Bernanke about QE3 not being needed just yet also managed to help help the process.

Seems like a good theory.

Another way to look at last Wednesday is this. And I hope I have these details correct. If not, they are close.

David Morgan is of the opinion that the take downs, while really frustrating and not being dealt with by the authorities, are inherently getting more difficult to achieve results. The physical market is beginning to take over the ability for the paper selling and buying to have effect.

And what's more, the bullion banks are realising it. For example, he states that Sprott PSLV physical silver fund moved the silver price around $2 an ounce when they went to the market for around 40 million ounces of physical silver. However, it took 45,000 paper contracts (equaling 225 million ounces of silver) to move the spot price of silver down by $2.50 an ounce.

Nearly six times more paper silver required to move the market down than it took to move the market up with physical silver.

The paper shenanigens are ending, as all paper is ultimately worthless when not backed by anything. Don' play in the paper market, get physical if you can.


Gold in New Zealand dollars: $2075.37 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $41.42 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)
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