Some Commentary On The Metals And Coffee With Jesse

I am sensing a lot of "nervousness" in the precious metals and mining stock investing community which is connected with the recent volatility in the metals.  I must say that some type of correction/pullback should be expected given the run in gold and silver since early August (silver was on a double since August 1, at one point).  It's only natural that traders and investors will take some profits after a run like that and preserve some profits with the hope of reloading positions at a lower level.  To an extent, that action makes price correction a self-fulfilling prophesy.  Having said that, the geopolitical, economic and natural disasters ("disaster" is pluralized because I consider the growing food shortages globally to be a natural disaster) are serving to make the arguments for owning gold and silver even more compelling.  We have yet to see large institutions and the public pile into this sector, which means some of the most thrilling gains are yet to happen.  Of course, none of us will be thrilled with the associated systemic problems that will accompany the move in the metals...

I wanted to highlight some brief comments by John Embry posted on Eric King's blog.  Here is the LINK  I'll add to that my view that the fact that the banks who are manipulating the metals can't engineer a more substantial sell-off in the metals given the technical condition is testament to the voracious demand for physical gold and silver globally.  In the past, a big move in silver has always been followed with 20-40% price correction (even bigger in July 2008).  As I watch the metals trade all day, every day, it is becoming apparent to me that the entities manipulating the market - CFTC be damned - are losing their ability to do so.  Currently there are 1054 open silver contracts for this March delivery period.  This is a very large number of open contracts at this point in the month.  What's even more remarkable is the fact that the aggressive attempts to push the metals lower have not caused the liquidation of a large portion of the open March contracts.  I'm sure JP Morgan is stunned by this unexpected development.  I do not believe that the Comex will default on deliveries this month.  In fact, I have a big bet with a colleague who does think the Comex will default on silver this month.  While I'm not worried that I will lose the bet,  the inability of JPM to force liquidation - plus the fact that those contracts have not been closed out by deliveries - is raising my eyebrows.

Finally, for anyone reading this who does not stop by Jesse's Cafe Americain on a regular basis, I highly recommend reading this interview with Jesse:  LINK  "Jesse" offers some very well-articulated insight into why our system is, well, screwed.

LATE ADDITION:  HSBC makes it more difficult to take delivery and remove the silver from their Comex vault.  Our fund is taking delivery of silver from Comex, with HSBC as the counterparty.  In the past, we were always able to make arrangements to have our depository representative swing by the HSBC vault and pick up the metal on our behalf after we received notice.  NOW, my partner has to fill out some forms and send those plus a copy of his driver's license to HSBC's compliance department and, best case, we will be approved in 5 days to make arrangements for pick-up.  This will cost us time and money.  My view is that the Comex counterparties are making every attempt to discourage investors from not only standing for delivery of silver but removing those bars from Comex depositories..."Houston, we have a problem in the silver pits at the Comex."