Silver Will Outperform Gold as a Hedge Against Inflation- 11/07/08

"Silver will outperform gold as a hedge against inflation," investor Jim Rogers said this week.

Before today, silver was down 33 percent this year, compared with a 13 percent drop for gold.

``It's been beaten down horribly,'' Rogers, chairman of Singapore-based Rogers Holdings, said on Nov. 3. ``If you put a gun to my head and said you have to buy one, I would buy silver rather than gold.''

Silver futures may ``spike higher'' to $22 an ounce in the next six months, Carlos Sanchez, associate director of research at CPM Group, said in an interview in China's southern Haikou city.

Click here to buy American Silver Eagles now

~~~

Tracy Austin
www.Webinfusion.com

Is the silver futures market about to crack wide open? By: Peter J. Cooper 11/02/08

The silver market has been looking interesting for months, despite the price collapse. Beneath the surface of the recent spot price falls the structure of the market is changing in such a way that a powerful bull market is being set up.

Metal holdings for Barclay’s iShares Silver Trust (SLV) have so overwhelmed selling pressure that the trust has added a total of 68,921,884 ounces of silver to its holdings so far this year, reported resourceinvestor.com.

Yet late last week the COMEX futures market reportedly held 131,530,256 ounces of silver in its warehouses. This so far in 2008 the leading silver exchange traded fund SLV has added the equivalent of 52.4% of all the silver metal that the COMEX futures market has in its vaults.

That surely represents amazing buying pressure at a time when silver prices are in crashing. Something is not right clearly. False market Then as resourceinvestor.com comments: “if we consider all of the 95,873 open contracts for silver on the COMEX as of last Tuesday, then we find that the COMEX traders are trading contracts either side, long and short, of 479.4 million ounces of silver but only have 131.5 million ounces behind it.”

Why then have silver prices been falling? That brings us back to the alleged manipulation of the market by two US banks over the summer, now under investigation by the regulator. Resourceinvestor.com says:

“Exactly two U.S. banks continued to keep their thumb on the COMEX silver market as of October 7 when the silver price had already declined from $19.00 to $11.00 and change in the face of severe physical silver shortages of metal on the street. As of October 7 the two largest commercial banks still held a scandalous 23,308 net short silver contracts when the entire commercial net short position was 29,829 contracts. That’s right, two banks still dominated the small silver futures market with over 78% of all the commercial net short positioning.”

This is not only downright illegal and unfair, it is producing a false market. And in false markets things can change very rapidly. Is it any wonder that metal is now flowing out of the COMEX and into the physical market.

SLV investors sense a bargain and are effectively pulling silver stocks out of the futures market where the price is false. COMEX exit Resourceinvestors.com notes that over two million ounces of silver have fled the vaults of the COMEX in just the last five trading days alone. How long before that trickle becomes a flood and the futures market in silver is effectively shut down and the physical spot market takes over?

Expect to see silver prices head to the moon. In the late 1970s it was a bungled price manipulation by the Hunt Brothers that sent silver prices super high, and bust the market for the next two decades. Silver today is trading at around $10 an ounce compared with an average price of $24 an ounce in 1980. What else today costs a fraction of the price 28 years’ ago?

Now it will be a bungled price manipulation by US banks that releases the silver price from its artificially depressed state. Silver bugs have gotten silver hair waiting for this to happen, but it is finally upon us and nothing and nobody can stop it. An investment tip: stock up on physical silver bars which should deliver the most outstanding profits of all. These are extraordinary times in capital markets and exactly the sort of period when such extraordinary events happen.

~~~
www.WhyBuySilverCoins.com

Silver and Gold Markets: FACT VERSUS SPECULATION by Theodore Butler

Got Silver? Earn Free Silver Eagles

FACT VERSUS SPECULATION

By Theodore Butler

Mid September 2008

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

What’s happening in the silver and gold markets is, without a doubt, the most sordid scheme in the history of finance. It makes a mockery of financial regulation and the rule of law. It allows a large financial entity, or entities, to rip off the investing public and gouge them for obscene profits.

It is cronyism, back-room dealing, market fixing and inside information at its worst. I am terribly disappointed and dismayed that such a thing could happen in our great country. In the following paragraphs I will outline and explain how a major bank or banks, in likely concert with the U.S. government, pulled off financial shenanigans that will literally take your breath away. This is an outrage that should not be allowed to stand.

The recent revelations in the CFTC’s Bank Participation Report for August provided stunning proof of concentration and manipulation in the COMEX silver and gold futures markets. Two U.S. banks held a short position in COMEX silver futures, as of August 5, of 33,805 contracts, or almost 170 million ounces, an increase of 138 million ounces in one month. That increase is equal to 20% of the world mine production. If one or two entities bought or sold 20% of the annual world production of oil or wheat in a month, it would bring about a congressional feeding frenzy.

In gold, no more than 3 U.S. banks sold short in one month more than 10% of world annual mine production. This was the largest short position in gold and silver ever recorded by U.S. banks. After the massive and concentrated silver and gold short position was established by these U.S. banks, the markets experienced a historic decline in price. It all took place during the first widespread retail silver shortage in history. It is completely at odds with how the law of supply and demand works.

The facts are so clear that the CFTC should have provided an immediate explanation as to why this doesn’t constitute manipulation. They should move against the manipulators just as promptly. Silence is not an option. The U.S. banks (or bank) in question are at the top of the financial food chain when it comes to size, power and importance. They are publicly owned by millions of investors. These banks are generally open about their financial dealings, which are closely scrutinized. There is an archaic rule that prevents the CFTC from revealing the identity of these banks. But there is no rule preventing these banks acknowledging they were responsible for these silver and gold short sales and explaining the economic justification behind them. These are material transactions that should be disclosed to their shareholders. Apparently transparency does not apply to manipulative transactions.

One U.S. Bank?

While the report lists two U.S. banks in silver and three in gold, it may be that only one bank, and perhaps the same bank, held the greatest amount of the total short position in silver and gold. The published data is not specific enough, but objective analysis raises the strong probability that just one bank held 30,000 or more short silver contracts (150 million ounces), and 75,000 gold contracts in the current report. What are the odds of two or three banks suddenly deciding to short unprecedented amounts of silver and gold contracts spontaneously? If it were two or three banks it would raise the issue of collusion. If it was just one U.S. bank, it would mean that bank held 34% of the entire COMEX silver market and 30% of the gold market. Such a concentration would be manipulation to any reasonable person.

The Bank Participation Report is a monthly snapshot on a predetermined single date. Therefore, it is unlikely to capture the extreme high or low holdings of participants. Based upon the weekly Commitment of Traders Report (COT) for positions as of July 22, the 4 largest traders, including the big U.S. banks, held a record net short position of 63,740 silver contracts, or 7,779 more contracts than they held for the COT and Bank Participation Reports of 8/5. Thus, it is almost certain that the big U.S. bank(s) held a substantially larger position on 7/22 than it held in the Bank Participation Report of August 5. That would mean the true net percentage of the entire market possibly held by one U.S. bank could be even higher than 34%, and may in fact, exceed 40%. That is truly shocking.

I have a simple solution to determine if what I am suggesting is true. Let the CFTC tell us. I’m not asking them to violate the rule that they and the big traders hide behind, the one that protects the identity of the traders. I’m asking they tell us what the one largest trader held in silver and gold. That will settle the matter. Let them protect the identity, just tell us how many contracts the big U.S. bank held on July 22 and August 5.

This is a perfectly reasonable request. There is no taxpayer cost involved. It will take one employee only a few minutes to determine this. There is no valid reason why the CFTC, in the interest of monitoring concentration and preventing manipulation, should not disclose what the very largest trader in every market held. The CFTC should answer forthwith. If they don’t, we must make them, through our elected representatives. They will try to weasel out of this reasonable request. We can’t let them.

A U.S. Government Silver Intervention?

For many years, I have openly alleged an ongoing manipulation in the silver (and gold) market. As that message became more believable to growing numbers of readers, their feedback indicated that their most popular motive behind the manipulation was some type of U.S. Government involvement. I rejected these "conspiracy" theories, preferring instead my simple explanation of control by big financial firms.

There were a few things I didn’t report on in my previous article, "The Smoking Gun" (By the way, since so many have referred to that article, let me acknowledge and thank Carl Loeb for his valuable contributions to that article.) It wasn’t just that 2 U.S. banks were short almost 34,000 silver futures contracts, as of August 5. It was also that they replaced what the other big financial entities had been short. The key here is the replacement angle. The data in the weekly COTs, and in the monthly Bank Participation Report, confirm this. What does this data mean?

I am going to speculate based upon the known facts. Maybe I will be proven correct, maybe not. The nature of this speculation is so disturbing, that I hope I am wrong. But I need to state it because if I am close to the mark, the implications for the silver market are profound.

I think the data in the COT and the Bank Participation Reports indicate that the U.S. Government may have bailed out the biggest COMEX silver short by arranging for a U.S. bank to take over their position. This coincides with JP Morgan’s takeover of Bear Stearns. In fact, it would not surprise me if the bailout was JP Morgan taking over Bear Stearns‘ short silver position, at the government‘s request. While this silver bailout (if it happened) was no doubt undertaken with financial system stability in mind, it has disturbing implications of legality and equity.

JP Morgan has been mentioned as a possible big silver and gold short. If it’s not them, it is someone like them. How many big U.S. banks fit the profile? Certainly, if JP Morgan isn’t one of the big silver or gold shorts, they can instantly dismiss such talk by stating so.

Logically, there would appear to be no way that a big money center U.S. bank would choose this time and place to suddenly decide to short 150 million ounces of silver and 7 million ounces of gold voluntarily. The banks are hemorrhaging losses due to poor quality mortgages and other ill-advised bets. They’ve cut back credit and are circling the wagons. A CEO, like Jamie Dimon, is not going to risk the wrath of shareholders with a massive and dangerous impromptu bet on the short side of precious metals. No bank CEO would, as it is too reckless to contemplate. And no CEO would do it without prior approval from the regulators.

I believe the bank involved did not seek approval, but merely followed the request of the U.S. Government to sell quantities of silver and gold to bailout the former big short. If that former big short bought back this position, we would have seen $50 or $100 silver in a flash. If my speculation is correct, someone in the government wished to prevent that. Worse, the government (most likely Treasury and the Federal Reserve) allowed the new short to further rig the market to the downside with a variety of dirty tricks.

In other words, it was the U.S. Government that arranged and sanctioned the sell-off. That the government might undermine confidence in our markets and sanction manipulation and illegal market behavior for any reason is beyond my understanding. I love this country. But I certainly don’t love our government. Nor do I trust them. What to do about it?

Well, a start is to insist that the CFTC disclose how many contracts the largest trader held short in COMEX silver and gold futures on 7/22 and 8/5. Ask them and ask your elected officials to ask them. I’m including the e-mail addresses of the commissioners and the Inspector General.

Wlukken@cftc.gov Mdunn@cftc,gov
Bchilton@cftc.gov Jsommers@cftc.gov
Alavik@cftc.gov

Now that the Chicago Mercantile Exchange Group is the new owner of the NYMEX/COMEX, they should be notified of the alleged manipulation and also asked to provide the number of contracts held net short by the largest short position holder on 7/22 and 8/5. I’m including the e-mail address of the Chief Regulatory Officer. Dean.payton@cmegroup.com

If my speculation is close to the mark that the U.S. Government is now involved in the silver manipulation, does this mean the manipulation can be extended indefinitely? In my opinion, the answer is no. In the end, what will terminate the manipulation will be a lack of adequate wholesale supplies of silver to the industrial users. It’s similar to what is now happening in the retail market. Uncle Sam does not have any silver, and is powerless to secretly subsidize the users. Additionally, the government is more subject to scrutiny than others. The single inevitable solution to this manipulation is higher prices; sharply higher prices.

What I’ve explained here, if true, cannot be condoned for any reason. It’s illegal and contrary to everything that America stands for.

~~~

Got Silver? Earn Free Silver Eagles

Gold and silver dealer reports an ‘unprecedented’ shortage of metals PT II

I hope you're buying all of the silver and gold that you can! I am not currently able to buy gold, so I'm thankful for Silver Snowball.

Some of the largest wholesalers in the world are out of all bullion product except for exchange bullion product - 100 ozt and 400 ozt gold bars and 1,000 ozt silver bars. They cannot supply South African Krugerrands, American Eagles and Buffaloes, Canadian Maples, Austrian Philharmonics, Chinese Pandas, Australian Nuggets (all 1 ozt).

They cannot supply 1 oz or 10 oz gold bars or 1, 10 and 100 oz silver bars. And I have confirmed they cannot sell any European or world gold coins such as British sovereigns, francs, marcs, Mexican pesos etc. etc. They have confirmed that there is no physical supply at all from the primary marketplace - large refiners and government mints.

Worryingly they are being informed that this is not a temporary problem and there are no supply side commitments and there is little in the pipeline for the foreseeable future due to excessive and unprecedented demand. Secondary supply from the public and retailers is nearly non existent as there are nearly no sellers and nearly all buyers. Bullion shortages and the confluence of unprecedented supply and limited demand in conjunction with macroeconomic, inflation and systemic factors is leading to extremely bullish conditions for the gold market - probably even more bullish than in the 1970s when gold rose some 3,000% from $35 to over $850 in just 9 years.

Buy Silver Coins

~~~

Outstanding Work at home Opportunity
Recorded overview: 1-212-990-6973
Call Tracy for more information: 1-413-773-0779

Gold and silver dealer reports an ‘unprecedented’ shortage of metals

Another article on precious metals scarcity. Buy silver coins here.

Gold and silver dealer reports an ‘unprecedented’ shortage of metals 28 September 2008
By David Clerkin, Markets Correspondent

A surge for demand in gold and silver has resulted in an unprecedented shortage of the metals for retail investors in recent days, according to Gold and Silver Investments, a Dublin-based firm that allows retail investors to speculate on movements in the value of precious metals.

Gold and Silver Investments director Mark O’Byrne said the supply of gold and silver available for small retail investors suffered a dramatic deterioration within hours on Friday, as wholesalers reported that government mints and refiners, the primary suppliers of the metals, had stopped offering new supplies. ‘‘It’s absolutely unprecedented,” said O’Byrne, who said the shortages were likely to drive up the costs of gold and silver in the secondary market. ‘‘This did not happen even in the 1930s and the 1970s, and will result in markedly higher prices in the coming months.”

According to O’Byrne, gold and silver were now only easily accessible in the primary market, which consisted of central banks and other major traders of the precious metals. However, he said that minimum transaction sizes in this market were out of reach for most retail investors - at approximately $350,000 for gold and $135,000 for silver.

End

Why buy Silver Coins?

Why Silver; Why Silver Eagles, written by Israel Friedman in December of 2007

An excellent article on why you would want to buy silver coins. enjoy!

Why Silver; Why Silver Eagles

I'm going to tell you why silver is the best
investment available today. The first question you
have to ask yourself is why silver should be good
for the future. Here's what determines that;

Is silver a necessary metal?
Are world stocks of silver lower than 5 years ago?
Are world stocks of silver likely to be lower in 5 years?
Is there a chance, at some point, to have a shortage in silver?

If the answers will be yes on those 4 questions,
the probabilities are that owning silver will
enrich you in the future.

Based upon this formula, the answers for gold are
"no" for all the 4 questions, so in the future,
we could see devastation for gold prices. And if
gold prices hold, or move higher, the comparisons
will even be better for silver. Take into
consideration this point ­ silver is a rare and
strategic metal and industry cannot do without
silver. Today we are left with a minimal supply and
this can produce a worldwide shortage of silver.

Money cannot solve a shortage of material, only
material can. When the industrial users come into
the market for real material, the shorts will be
destroyed. At that time we will have a bigger
scandal than the subprime mortgage crisis of
today. In my opinion, we need a shortage to put
silver in a free market. When this occurs the
real value will come and no one can predict what the
price will be.

Mr. Butler has a modest view on future prices,
and my opinion is more extreme. I can see very high
prices. If I tell you the price you will need a
seatbelt, not to fall from your chair. With this kind of
opinion on future silver prices, what is the best
single form for buying and holding real silver?
Looking at my crystal ball, considering that a
silver shortage is likely, and that silver prices
will then reach or exceed the price of gold; I
think silver Eagles are the best way to own
silver. Why?

I can see silver prices so high, that the risk of
imitation or phony silver coming to market will
be great. Great price increases always bring out
frauds and crooks. People will want to be sure
they are buying the real thing. Coins are more
difficult to counterfeit than paper instruments. At
current silver prices, there has been no big
incentive to counterfeit silver Eagles or other forms
of silver. Because the US Mint produces silver
Eagles, an added level of protection against
counterfeiting is present. The US Government does
not sit still on counterfeiting.

Because Silver Eagles are sold at a premium to
the price of silver from the Mint to wholesalers,
few if any of the 160 million regular silver
Eagles minted and sold since 1986 have been, or will
ever be melted for their silver content. The same
with millions of more expensive Proof Eagles and
commemorative silver coins issued by the Mint.
Silver Eagles that are sold by investors are bought
by other coin investors. Therefore, the silver
used in Eagle production is taken off the market,
in my opinion, forever.

But the premium on Silver Eagles will explode
someday, because the Mint will stop making them in
the future. When the silver shortage comes, and
prices start to escalate wildly, the US Government
will not wish to aggravate the shortage by
continuing to take silver off the market. By then, the
users will be screaming for relief from high
silver prices and the mint will see this.

According to Mr. Butler, before the gold and
silver Eagle program began in 1986, it was decided
that, in order not to hurt domestic miners, only
metal purchased from domestic miners would be
used in the Eagle program, so government owned
metal wasn't dumped on the market.

But the Silver Users Association, fearing higher
silver prices because of demand for Silver
Eagles, lobbied behind the scene to change things
to their advantage. They couldn't kill the
program completely, but the silver users were
still successful. Gold was left unchanged in that
domestic production was to be used, but silver
was changed so that only silver from the Strategic
Defense Stockpile was to be used for Eagles,
until it ran out, which it did in 2001. Since then,
the US Mint has had to buy more than 50 million
ounces of silver to produce silver Eagles.

It will not take much convincing by the silver
users to get the US Mint to cease production of
Silver Eagles, when the silver shortage hits. So
a premium could develop, if and when that
happens. The same kind of premium that develops
when an artist dies and it becomes known there
will be no more new works of art from him. Now
some may say, what kind of numismatic premium could
develop on a modern bullion coin with a total
amount in existence of more than 160 million? I say,
a very big premium. The Silver Eagle is no
ordinary coin. It is the world's leading silver bullion
coin. The US Government guarantees its purity and
weight. It is recognized everywhere. In the
years to come, people from all over, including
India and China, will want to buy them. It is, in
my opinion, the most beautiful coin in the world.

At any point in time, very few old Silver Eagles
are available for sale in any large quantities.
That's because Silver Eagles are widely held by
many small investors and coin collectors.
Many are given as gifts and hold sentimental
value. Grandparents, like me, set them aside for
their grandchildren. Silver Eagles are not a
trading vehicle, they are mostly held for the long term.
The market relies on the fact that new coins from
the Mint will always be available for sale, in
order to satisfy new demand. But always isn't forever.

When the shortage comes and silver explodes, the
price will be so high that most people won't be
able to afford even a 100 ounce bar. Then, there
will be much more demand for silver in one-ounce
denominations, just like there is for gold today.
That extra demand will put a bigger premium on
the smaller pieces compared to bigger bars. The
best small piece is the Silver Eagle and it will
have the biggest premium of any other one-ounce
choice. Also, it will be easier to sell in one-
ounce pieces when prices are sky-high.

I think the premium on Silver Eagles will go to
such crazy levels, that out of respect for Mr.
Butler, I will not say a number, because he
thinks it will sound too extreme. Instead, I will be
very conservative and just say that in the
future, when the silver shortage comes, the premium on
Silver Eagles to the price of silver will be much
greater than the total cost of an Eagle today.
If that comes true, it's like buying silver at today's price for free.

To those who are inclined to own silver, buy
Silver Eagles. To the gold investors, please change
some gold into Silver Eagles. If anyone is lucky
enough to buy, say, 1000 Silver Eagles or more,
in 15 years it will be worth a sum that will
shock you. Don't think for one minute that I have a
financial interest in selling Eagles. I don't
work for the Mint or for commissions. I write for
love of silver and my friend Ted Butler.

Taken from Ted Butler's archive http://www.investmentrarities.com/12-03-07.html

* * *


Silver Eagles - Get 'em while you can :-)
www.WhyBuySilverCoins.com

While Rest Of World Waits Silver Snowball Members Continue To Receive Silver Eagles

Although many members have heard about the current silver shortage (and sent me articles, thank you), in case you haven't heard, or don't really know if it's true, I'm sending out this issue of Silver Snowball News to say . . . . . yup, there really is a shortage of silver out there. How can the price of something be down when there is none around?

Jason Hommel of the Silver Stock Report confirms, "None of my trusted, major, regular dealers have any silver to sell.

And oh yes, what about that current low price?

There's a short story that goes something like this. A lady wants to buy sausage. There are two butcher shops next to each other, one advertises $1.99/lb., the other advertises $2.99/lb. She goes to the $1.99/lb. shop first. But there's no sausage, they are out. So, she goes across the street, and sees sausage for $2.99/lb., and promptly complains about the price. "Why don't you sell it for $1.99/lb like the other guy?" Butcher answers, "Lady, when I'm out, mine is $1.99/lb, too!"

Price means nothing if you can't get the product"

It should be pointed out that many believe the current "spot price" for silver and gold is pure fiction since just about every major coin dealer is currently SOLD OUT of most silver, especially American Eagle Silver coins. It's been reported the US Mint, which has been severely rationing silver coins the past 5 months has now stopped shipping gold coins. and I just saw at one dealer site that they aren't taking orders for silver until they catch up. And obviously none have been shipped out recently or coins dealers would have some. Why? A good guess is because they can't find enough to buy - at least at the "fictional" spot price.

The Gata Dispatch reports, "The U.S. Mint has suspended sales of American Eagle gold coins and is refusing orders from dealers, two coin and bullion dealers confirmed Thursday.

The mint's suspension of gold coin sales follows its tight rationing of sales of silver eagle coins, begun in May, when sales to the public were terminated and sales to the mint's 13 authorized dealers were tightly limited.

The suspension is overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price and that, indeed, the commodities exchanges are being used as GATA long has maintained -- as part of a massive scheme of manipulation of the precious metals, currency, and bond markets."

At Silver Snowball we currently do still have American Eagle Silver coins and there has been no disruption in our fast, reliable service. We will continue to do all we can to keep the silver coming to you.

I've received quite a few articles about the current silver shortage from members. I'm putting what seems like the most complete article below.

And if you aren't ready to settle in to a long explanation of how the volatility in the precious metals markets could be a sign that something big is about to happen then a great little distraction is to go to http://www.iousathemovie.com and watch the trailer to this movie that is coming out called I.O.U.S.A.

And last random thought - My condolences to those of you who currently can't advertise in a popular traffic exchange site that is being prevented from paying its members by those who protect us from making money. The latest news from the company looks very promising and it's a great place to advertise Silver Snowball. But it just shows how quickly "digital" money can disappear. In the blink of an eye money "you think" is somewhere such as a traffic exchange site, or perhaps a bank, or bond, ANY type of digital form of paper money, or even the value of that paper money - it can disappear just like that. Digital money and paper money are not money. They are digits and paper. Silver or gold that you own is real money. We like silver better because it's more rare than gold. The current silver shortage proves just how rare it is. And the fact that money in digital form you think is somewhere can disappear, that's all the more reason to accumulate silver and share our mission with others. Accumulate real money because someday it could be the only money you have.

Thanks,

Ed
SilverSnowball


Update: I just found out that Kitco, one of the biggest precious metals
dealers in North America, just posted the following notice:

IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the
entire industry, we are anticipating delays in supply of all bullion
products. Please note that you can continue to place orders and prices will
be guaranteed; however, cancellation fees will still be applicable
regardless of the length of the delay. Consequently once inventory is
received there may also be delays in processing and shipping by our vaults.
(italicized emphasis added)

Sounds like a severe shortage to me.

article below:

The Disconnect Between Supply and Demand in Gold & Silver Markets
by: James Conrad posted on: August 18, 2008 | about stocks: DBP / GDX / GLD/ SLV

There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver. Indian shops are empty of both silver and gold.

Even the Indian banks don't have any gold or silver. The big western bullion banks, based in New York and London, control both the gold and silver trade. Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal.

Normally, if a banker's bank knows that its customer-bank has firm orders,
it would extend the smaller bank a bigger line of credit. Not now.

By refusing to extend lines of credit, the big bullion banks are essentially
rationing a very thin supply. Most physical silver, for example, is being
reserved for industrial and fabrication use, and investors are simply not
able to get any, without waiting for months. Investor oriented shops are
bare, and the U.S. Mint has suspended coin production. All available supply
seems to be reserved for industrial users. You cannot substitute paper
claims for real silver, in industrial use, because paper doesn't have the
physical properties of silver. So, it seems that all available supply is
being diverted to industrial users, and, to a lesser extent, aside from the
squeeze on lines of credit, also to jewelry fabricators. But, investors are
left out in the cold. They can accept paper claims, or nothing. The most
interesting mistake that the manipulators have made is in not supplying the
U.S. Mint, which has run out of silver, proving that there is a severe
shortage.

Meanwhile, by refusing to extend Indian bank lines of credit, Indian jewelry
demand for both gold and silver is being stymied. India is not being
allowed to drain away precious metals, in the amounts that are warranted,
given the low prices and the numbers of unfilled orders that are sitting on
desks in India. World bullion banks, in other words, are managing
deliveries of physical gold and silver to artificially reduce the quantities
delivered, under the excuse that the "Indians have run down their credit
lines."

The happiest fact of bullion bankers' lives is that western markets are,
with the exception of some fabrication and industrial demand, almost 90%
paper based. The huge COMEX futures market almost never sees an ounce of
real silver or gold ever change hands. It is all paper, shuffled back and
forth. These paper markets are being flooded with paper based "claims"
to alleged gold and silver, supposedly being held in big bank vaults in London
and New York City. The market is overwhelmed with paper claims, and the big
bullion banks (maybe, with the Federal Reserve providing the money?) are
paying big bucks to secondary derivatives dealers to get them to lease this
artificially created "gold and silver." In a normal market, one who leases
a thing of value must pay for it. But, now, derivatives dealers are being
paid to lease both gold and silver. Then again, it may not be a thing of
value, if it is fake.

That being said, the paper claims may have a lot of value, whether or not
they are fake. Derivatives dealers can write futures contracts, options,
etc., according to CFTC rules, because paper "claims" to vault-stored
silver and gold can be used as the legally mandated "cover" for futures contracts.
To understand the nature of paper claims, we must travel back in time, for a
moment, to a class action against Morgan Stanley (MS). According to the
complaint, Morgan Stanley claimed that it bought physical silver, on behalf
of various clients, and was storing it, in safe-keeping, in its vault in New
York. Allegedly, Morgan Stanley defrauded its clients from Feb. 19, 1986,
and Jan. 10, 2007. According to the complaint, it never bought any silver,
but, all the while, continued to charge clients big fees for storing the
imaginary metal. Morgan Stanley is one of the biggest investment banks in
the world. It is one of the major players in precious metals. Yet,
according to the lawsuit, the paper claims to vaulted silver it issued to
clients was nothing more than a lie. One of Morgan Stanley's defenses,
interestingly enough, was that everything it did simply followed "standard
industry practices." For more information, see here.

Apparently, it is standard Wall Street industry practice to send people
monthly statements promising that the firm is storing physical precious
metals in a vault, charge for the storage, but really never buy or store any
real metal. Morgan Stanley eventually settled the case for many millions of
dollars in damages, rather than going to trial. That tends to indicate that
they were guilty, as charged. I believe, with good reason, as you shall
soon see, that most of the paper claims to silver and gold, now floating
about, and collapsing prices, are cousins to the Morgan Stanley silver
claims.

Logic tells us that the so-called metal must be imaginary, and I will soon
tell you why. Yet, for some reason, in spite of class actions like the one
described above, no one demands to see it. The majority assumes that banks,
like Morgan Stanley, are honest, and would not issue fake paper claims.
But, if they did it before, they are probably doing it again. That could be
the key to precious metal market manipulation.

If you are a huge bank, with hundreds of billions of dollars worth of short
positions, and you know the price is going to explode, you can do one of two
things. You can be honest, like most individual and institutional short
sellers must be, and cover your short position by buying back at market
prices even though you may take losses to do so. Or, you can be dishonest.
The majority of banks and hedge funds don't have the option of being
dishonest, even if they want to be.

However, what if you happen to be a primary dealer of the Federal Reserve,
or the ECB, or the Bank of England, or all three? If you are, then you
happen to have overwhelming knowledge and control of the marketplace,
because your divisions are deeply enmeshed in the global financial trading
system, and your powerful computers allow you to analyze all markets in a
matter of minutes or even seconds. You have an ownership stake in all the
big markets like the New York Stock Exchange, Nasdaq, COMEX, NYMEX, and the
London Metals Exchange.

Unlike a small or medium sized institutional investor, you are in a position
to be dishonest, if you choose to be, and in a position to profit from your
dishonesty. Because all orders flow, at one point or another, through your
firm or one of a handful of other big wire houses, you will know where the
stop-loss triggers of non-affiliated long and short sellers are. With this
in hand, you are ready to manipulate any market, especially small commodity
markets like gold and silver.

The first thing you need to do is issue large numbers of false paper claims
to allegedly stored gold and silver in your vault. This gold and silver
really doesn't exist, but it doesn't matter because you are a big
prestigious bank, and no one questions you when you say it is in your vault.
You offer these claims for "lease" to any secondary dealer willing to
take you up on it. You don't want to sell them outright, because then you might
eventually be faced with a demand for the real metal, as Morgan Stanley was.
You don't actually have enough real metal to cover these claims, so, you
want to make sure that the operation takes place in a limited time frame.
That's why you "lease" the claims for a term of months. If you find
that small dealers are afraid to lease such claims, you encourage them by
subsidizing the leases with a negative interest rate. In other words, you
pay them to accept your alleged gold and silver.

This is exactly what is happening in the precious metals market, right now.
Gold and, especially, silver leases are being subsidized. As of a week ago,
if you are a dealer, and you lease gold or silver, from the bullion banks,
incredibly enough, THEY WILL PAY YOU! At the end of this article, I have
attached a chart, showing the current negative lease rates for the various
metals. Dealers who lease claims to fake metal, are able to issue futures
contracts and other derivatives. The fact that they hold contractual claims
to metal means they will have fulfilled the "cover" requirement imposed
by their federal regulator, CFTC. The CFTC has never bothered to audit a vault
to see if the gold or silver is really there, so you've got nothing to worry
about. You're a big bank! You say it is there. Everyone believes you,
just like Morgan Stanley's customers believed them. You might even be
Morgan Stanley.

At any rate, you initially issue a lot of claims to fake metal, and so many
futures contracts are written, in a very short time period, that they flood
the market on exchanges like COMEX and the London Metals Exchange, where
almost all the transactions are on paper, and real metal rarely changes
hands. Meanwhile, if you are the big bullion bank, you know what you are
doing. You issue just enough subsidized precious metal paper to
automatically trigger stop-loss orders. The price starts going down as the
sell orders are filled. That triggers yet more stop-loss orders, and the
process becomes one of dominos, falling one after another, until the price
collapses. If the operation is successful, and the collapse is big enough,
market confidence is destroyed, on a wide scale.

The destruction of market sentiment won't last forever. You can't fool
all the people all of the time. But, temporarily, having been burned badly,
investors refuse to buy. Buying may still be happening on the real market,
as it is, in both America and India, in gold shops. True physical metal
will still be in severe shortage, so the metal will disappear quickly, as
the price goes down below where true market forces should be bringing it to
reach equilibrium between supply and demand. But, real market buyers look
to the COMEX and the London Metals Exchange, because they think they are
honest exchanges, even though they may not be.

Prices on those exchanges will determine prices charged in shops, and when
the price goes down deeply, there isn't enough product to go around, because
everyone buys it. In other words, supply and demand go into disequilibrium,
there isn't enough supply to meet the demand at such low price points, so
delays in delivery, as well as outright shortages result. That is what is
happening, right now, in the physical gold and silver market. Not only to
retail investors, but, also, even to the U.S. Mint, which has suspended
production of gold coins, and is rationing silver coins.

At any rate, when market confidence is damaged sufficiently, we can move in.
We unwind our new short positions in the futures market, by buying back huge
number of long positions at very low prices on the COMEX. We also unwind an
exponentially larger number of positions inside the shadow world of "dark
pools", which are little known secretive private exchanges, controlled by
the big banks. It ended up costing us some money, but not a lot compared to
the money we've avoided losing. We've paid subsidies on the leases, but
we've never actually had to buy the gold or silver, because there isn't
any available, and none in our vault. This is the way that a group of big
bullion banks could induce a price collapse to unwind hundreds of billions
of dollars worth of potential losses, or position themselves to go long on
hundreds of billions of dollars worth of potential profits.

Contrary to the pundits at CNBC, Bloomberg, etc., the price of gold really
has nothing to do with the value of the dollar or the value of oil. It
doesn't matter what the dollar is worth, in relation to euros, pounds
sterling or Zimbabwee money. It only matters what supply and demand factors
exist for gold. Yes, the demand will fall a bit if the price goes up, for
example, in euros, because the euro has depreciated. But, what really
counts is not what the euro, yen or dollar price is, but, rather, whether or
not there is enough demand to soak up the available supply.

Gold is priced in dollars, but, so long as people holding either dollars,
euros, yen, yuan or Zimbabwean money, are willing to pay whatever price gold
is selling for, in an honest market, the price should rise. Obviously,
enough people are willing to pay for gold and silver, at the previous $978
and $19.50 per troy ounce price, because the U.S. Mint could not source
enough metal at those price, and had to suspend coin production.

This proves that people are more than willing to fork over, in whatever
currency they are using, the previous prices for gold and silver, in such
quantities, that a shortage was already existing, before the price collapse,
especially in the silver market. It is true that people in poorer countries
like India, might have back on their consumption.

But, while they were cutting back, demand and consumption of gold in North
America, including Canada and the USA, was soaring. For example, before it
suspended production of bullion coins, due to shortages, the U.S. Mint's
statistics show that it was printing 2.5 times as many gold coins, and
almost 4 times as many silver bullion coins, this year, compared to last
year. Gold and silver bullion, in bar form, was also flying off North
American retail shelves.

Bottom line: Enough people were buying, when the price was high, to exhaust
the supply. Basic economics says that, in a free market, this means the
price must rise.

But we don't live in a world of free markets. Instead, we are living in an
Orwellian 1984 double-speak world. Welcome to the world of Fed/PPT, where
2+2=5, blue is yellow, and black is white. All things are as they say they
are, rather than as they really must be. Welcome to the world of a
controlled business media, where the pundits will do anything and say
everything to convince you to forget your math, and your eyesight. No, they
tell you. It really isn't so. What you're seeing isn't the way it
is. Believe, instead, what we tell you. We can do it! We have special skills.
There is a new world order. We can make 2+2=5. Just give us your money,
and we'll show you how!

But, let's return to reality. Right now, virtually no North American
precious metals dealer can give you a firm delivery date on large quantities
of silver. They have no stock to sell. This means demand is robust. On
Friday, as the COMEX gold price was collapsing, the U.S. Mint suspended gold
bullion coin production because it cannot source enough gold bullion! That
could not happen if bullion banks were selling claims to real physical metal
into the marketplace. Indeed, the Mint began rationing silver bullion coins
two months ago, when it started having trouble sourcing silver bullion. Word
from the Perth Mint in Australia is that it is taking weeks or months to
take physical delivery of gold and silver, even though investors are already
supposed to own that metal. Supposedly, it is simply being kept in the
Mint's vault for safe storage. But, it is getting harder to take it out of
"storage". Meanwhile, as previously stated, Indian gold and silver dealers,
wholesalers and banks all have empty vaults. None of this can happen if
demand is down, and supply is abundant.

We have a disconnect between reality markets and fantasy markets. The COMEX
and London Metals Exchange are fantasy markets controlled by the big bullion
banks. They must be engaged in market manipulation, because nothing can
explain a big price collapse, in the midst of widespread shortages and
robust demand. A group of big financial institutions, deeply enmeshed in
the global trading system, and heavily involved in the gold and silver
market, must be deliberately inducing temporary panic, for their own
purposes. These malevolent characters will eventually be able to buy back
their short positions at low prices, and, possibly, also, even collect a
significant long position. The process is a continuing one, and hasn't
stopped yet. On Friday, for example, the subsidy for leasing gold and
silver was raised to very high levels.

It is obvious what they are doing. More important, however, is why? What
does it mean? Well, the PPT bank executives are generally "people in the
know" about financial events, before they actually happen, sue to close
relations with regulators like the Federal Reserve, and FDIC. They folks
are so desperate to cover short positions, that they are willing to spend a
billion or so dollars, subsidize precious metal leases, to collapse the
market, and destroy investor confidence. But, why? We know that the
Federal Reserve, like other central banks, sees gold as a rival to the
dollar. But, that's not enough, because they've never attacked precious
metals with such ferocity as now, and, if the Fed were directly involved,
they could probably supply real metal.

If something terrible is about to happen in the financial world, the losses
that big banks would take on their precious metal short positions would put
most of them into bankruptcy. Remember the words of Warren Buffett.
Derivatives are the financial world's weapons of mass destruction. Precious
metals futures short positions are highly leveraged transactions that could
cost hundreds of billions if the price of gold were to suddenly explode.

We can guess that the main players here are big powerful Wall Street and/or
High Street investment banks who work closely with the Federal Reserve, the
ECB, and the Bank of England. These people are privy to the information
needed to carry out a massive manipulation as described above. No one else
is. Since most of the collapse happens on the COMEX, we can assume that
most of the manipulation is being done by New York based investment banks.

Wall Street's investment banks control most of the world's gold and silver
markets. They are also entrenched in the overall mesh of all financial
markets. Making matters worse, because of the 1987 President's Executive
Order on Working Markets, they are authorized to work together, and in
conjunction with the U.S. Treasury and the Federal Reserve, to manipulate
markets without fear of criminal prosecution. They know exactly where the
stop-loss orders are, and how much flooding of paper claims for gold and
silver would be needed to trigger them. They are, therefore, perfectly
positioned to carry out the nefarious scheme I have outlines. The ultimate
aim, of course, would be to destroy investor confidence, by collapsing the
price for a few weeks. This would allow them to unload their own exposure
at a very low cost, while the majority of market participants are
temporarily shell-shocked, and in retreat.

As noted above, they are not using real gold or silver to do this. That
implies that this particular attack on gold was not authorized by the
Federal Reserve. They've never had any real silver and have used paper
claims for years to manipulate that market. But, gold has often been
supplied out of the U.S. hoards at Fort Knox, West Point, or the NY Fed. I
suspect all three have had their gold hoard so heavily loaned and swapped
out, that there is little or no physical gold left to play with. That's why
the Federal Reserve has been pushing for the IMF gold sales. The vaults are
probably already filled with IOUs from the likes of Goldman Sachs, JP
Morgan, etc. Perhaps, that is why the Treasury Department lists total U.S.
gold holdings as "gold and gold swaps", and refuses to disclose details
how much consists of real gold and how much consists of swap IOUs (loaned out
gold). But, anyway, the lack of physical gold probably implies that the
Federal Reserve is not involved directly, because they probably still have
enough to flood the market for a week or two.

But, it's not cheap to manipulate markets. It will probably cost over a
billion dollars to subsidize the negative lease rates. The only logical
reason to spend such a huge amount of money, is if you are going to get an
even bigger benefit from doing so. They must be very worried about losing
far more. Once again, that implies that some VERY bad economic news is
about to be released. Skeptical? How much worse can the economy get? It
can get much worse! So, what's in store? A series of huge bank failures,
maybe? IndyMac collapsed two weeks ago. Are we going to see the collapse
of Washington Mutual (WM)? National City Bank (NCC)? Someone else?

I don't know. But, I do know this. The FDIC will not have enough cash to
make good on its insurance pledges, if they fail. The FDIC only has $37
billion left in its trust fund, after paying off IndyMac depositors.
Between its two major divisions, WaMu has total deposits of about $204
billion. National City has about $101 billion. Could FDIC turn to the
Federal Reserve for a quick loan? Not a chance! The Fed has its own
problems. It has already polluted its balance sheet with some $450 billion
in low value and absolutely worthless mortgage paper that its client banks
wanted to get rid of.

Depositors might wait months for their money, while Congress is petitioned
to approve the sale of more Treasury bills. This delay would be likely to
cause other depositors to make a run on other banks, creating a domino
effect. Then, more banks might fail. More bank failures will require yet
more dollars, and cause more delays in making depositors whole. At the very
least, the sudden issuance of $300 billion new dollars would stimulate
massive inflation. Under such circumstances, gold could be expected to
explode to the $2 - $3,000 per troy ounce range, within a matter of a few
weeks or months.

click to enlarge



Source: Kitco

End of Day Report - Silver, Gold, Dollar, Euro, Crude Oil,

The metals complex with the exception of Silver ended the day lower but well above the intraday lows...Mixed results in the Weekly Oil Inventories caused a sharp rebound in the price of Oil helping to pull the metals off the session lows...Silver actually went positive ending the day at $17.40 up 5 cents.

Gold finished at $903.00 down $14.00....Palladium was down $10.00 at $382.00....Platinum closed $30.00 lower at $1715.00...As trading got underway the price of Oil was down a little over $1.00 per barrel until the Weekly Oil Inventories showed a slightly smaller than expected draw down in Oil supplies, but a much larger than expected 3.5 million barrel decline in Gasoline supplies. Slowly but surely the price of oil climbed on the news and is presently up $3.29 per barrel at $125.48....

Over in the currency markets the Euro managed to recover early session losses attributed to a better than expected ADP Employment Report. While the Street expected to see a loss of 60,000 private sector jobs, the report clocked in with a gain of 9,000 jobs. The Dollar rallied on the news for about an hour then began selling off as the price of Oil began to climb. Last on the Euro $1.5583 up 18/100ths of U.S. cent.

Stocks were up about 160 points in early trading on the employment picture but has since given up the bulk of the gains in light of the $3.00 gain in oil...The Dow is currently up a mere 45 points with 2 hours left in the trading day....As for tomorrow the calendar is full with the latest look at our Gross Domestic Product (GDP), the Weekly Initial Jobless Claims, and The Chicago Purchasing Managers Index of Manufacturing.

~~~

Cash Gifting Abundance
Why Buy Silver Coins?

7/30/08 Market Update - Silver, Gold, Crude Oil

The metals complex continued moving lower in overnight trading in follow up reaction to yesterday's slide in oil and the surge in the U.S. dollar. Silver is 22 cents lower at $17.14. Gold is off $9.00 changing hands at $908.00. Palladium is $386.00 down $6.00. Platinum is $3.00 lower at $1,742.00.

Our background barometers are mixed this morning with the Euro as shade stronger at $1.5592 up 27/100ths of cent versus our Dollar. On the other hand; Crude Oil continues to weaken at $121.38 down an additional 81 cents per barrel. Oil ended the trading day yesterday with a final loss of $2.55 per barrel.

~~~~~

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www.CashGiftingAbundance.com

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