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This
paper is written as a response to market observers who opine, “how can
the price of precious metals be suppressed when their prices have empirically
gone up 4 fold and more over the past 10 years?”
The
following graph depicts the price performance of silver over the course of
2010, paying special attention to the change in silver derivatives positions
at both J.P. Morgue and HSBC:
 
The
U.S. Office of the Comptroller of the Currency [OCC] publishes quarterly data
showing the change in aggregate derivatives data of reporting Commercial
Banks:
When
we juxtapose Q3/2010 precious metals aggregates against Q4/2010 – we
can see that J.P. Morgue and HSBC cumulatively added roughly 4 billion in
silver derivatives. We know these institutions are “short”
because the Commitment of Traders Report [COTS] published weekly by the CFTC
have perpetually shown the “Commercials” category to be short. J.P. Morgue and HSBC are “Commercials”.
What Could Have, Should Have But
Wasn’t Allowed to Happen [thank you CFTC]:
While
the price of silver did rise in Q4/2010 – in the absence of J.P. Morgue
and HSBC piling on suppressive, paper, future short sales – the price
rise would have undoubtedly been much steeper.
Conclusions: The price rise of silver in Q4/2010
would have been much steeper had J.P. Morgue and HSBC not
“shellacked” the market with an additional, cumulative 4 billion
in price-suppressive, paper short sales. Had these agents of the U.S. Federal
Reserve not undertaken this market manipulation – the price of silver
would have soared much higher, making the already weak U.S. Dollar look even
more unattractive as a prudent vehicle for countries seeking
diversification/safety of their reserve positions.
The
CFTC is “owned” by the banks they are supposed to regulate.
Instead of ensuring the sanctity of our capital markets, enforcing meaningful
position limits, they aid-and-abet the banks in their price rigging
[undoubtedly in the name of fiat preservation / National Security].
What
is really occurring in precious metals-ville is
that DEMAND for physical metal is now increasingly trumping the fraudulent,
unlimited supply of paper metal [futures]. This is why
“BEAT-DOWNS” in price – like the buck and half swoon
depicted below [circled] on March 11, 2011 – no longer cause MASSIVE,
LASTING breakdowns. A couple of years ago an engineered sell-off like the one
depicted below would have decimated the silver market for months:
The
real reason for the growing resilience in the metals markets is this: despite
shills claiming that physical supply is no problem – institutional
investors and national mints are having increasing difficulty sourcing
physical metal.
In
the past – smack downs in the price made investors wary and blunted
demand. Today, investors are better informed and realize that smack downs in
price when physical supplies are tight - are not only counter-intuitive,
they’re a sign of desperation – and this brings buyers of physical
metal “out of the woodwork”.
The
game has fundamentally changed – but don’t tell the chartists
– they’re still married to their Fibonacci retracements and
buggy-whip, Bollinger bands.
With
Central Banks continuing to increase the rate at which they create money out
of thin air – we can logically expect this increased demand for
physical precious metal to keep the price vectoring upward, to the right.
Got
physical yet?
Rob Kirby
KirbyAnalytics.com
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