Thursday, March 17, 2011

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."


  1. I give up. I'll come quietly. It's me that did it. I'm guilty. I give in.

    All I've heard for the last two years is that there is NO Silver and the market is collapsing. The World is ending.

    Silver is going to be $6000 tomorrow morning. IT DOESN"T HAPPEN.

    Where are we $35 an ounce.

    Give me a break. Stop panicking and take your Valium.

  2. Thanks for the Jesse interview link. If the last large correction is any indication (not last summer, the 2009 one) the metals may pull back quite a bit from these levels before moving. The environment now (Japan getting set to issue big debt, US to follow and QE 3 as well) is much more explosive for metals going forward. Just my 2 cents.

  3. "Where are we $35 a ounce"

    I recall silver @ $5 an ounce, I still have some silver i bought at that price, I made my profits, have you?

    I was at my coin dealer on Saturday and his stock of silver was wayyy down from normal, much less junk silver, bullion rounds and bars.

    It is just as well silver and gold are Not going up every day, or else there would be a mad rush by the Johnny come latelys to buy up all things precious metals leaving little if anything for prudent patient buyers of PM.

    Correct me if I am wrong, but in the realm of investing0-

    First is the smart money
    Last are the dumb bunnies.

    The first investors see value and invest accordingly and make the most profit.

    When an investment reaches bubble stage the dumb bunnies hop in causing the bubble to go parabolic (Dot com and Real estate spring to mind.)

    We are not at the bubble stage for gold and silver, not with the dumb bunnies selling, not buying of PM.

  4. George, you are experiencing whats known as Normalcy Bias. Please pass and review.

  5. When trolls like George need to appear, you know the end for the Morgue is near.

  6. Hi Dave,

    It has been Long time since I am commenting here but I have been visiting you and Jess almost everyday.

    By the way Silver delivery came up and now sitting in a allocated form at one of the Brink's vault. They also informed me about Manufacturer and Srl #'s of the bar.

    little news which I have heard from locals here. There are many private parties in Mumbai/Delhi/Ahmadabad who have sold 10000-15000 Kg Silver SHORT in the market and now scurrying for the supply once Silver touched 36. It looks like "Market" has turned on them.

    Till 15 days back talk of the town was that of Silver is abundantly available and news about happenings at Comex is all nonsense by the Gold-bugs.

    From India

  7. The Marty Armstrong view is that it would be much better for the metals to either move down or sideways into mid June. I have serious doubts that PMs will continue to consolidate for anything like another three months.

  8. George, phew what a name, sounds like a pet bulldog doesn't it? Like Gorgeous George. Anyway.

    Dear George,

    Large commercial undertakings take a long time to collapse. There is an old adge in investing which runs what can't continue will not continue. People used to say the International Tin Council (ITC) would never go down and the buffer stock would continue for ever. Why because it was guaranteed by 86 countries including the United States and Japan. The US would not let the ITC go down because it would harm the credibility of the IMF and the World Bank. If the ITC was allowed to go down it would be much more expensive because the countries could not claim sovereign immunity as this would impune all all US debt based transactions by all countries which could claim sovereign immunity for all their state borrowing. In effect an ITC collapse would jepardise the world financial system. These arguements slowed up the ITC collapse by probably at least 18 months.

    Like good old Continental Illinois the Fed must be reviewing JPM's exposures and one day, one day soon, the decision will be to pull the plug. Say it can't happen, say it ain't so, all you like but the same things were all said over good old Conti and unfortunately it did last. Why, because what can't continue won't. It is as simple as that.

  9. Ok all you "experts" give me a date when my Silver will be worth $500 within a week will be OK.

    If you can't handle that then give me a date when Comex and LBMA will run out of Silver. Nearest week will be OK.

    If you can't do that give me a date for the collapse of JP Morgan within a month will do this time.

    If you can't do that then stop pontificating and hyping up the fear and drool factor.

    Hey you at the back stop dribbling!

  10. A further point for all of you "internet" gurus. I want to sell my house. The problem is in France the minimum time to action a sale (advertising and legal system) is 4 months. With all the fear and hype that the Gold and Silver "experts are putting out you would think that the Euro, Pound and Dollar will be worthless next week.
    So come on you "pie in the sky" wonder-boys will I have time to sell my house and buy Silver at less than $500 an ounce?

  11. @ Jack
    I presume "troll" is meant to be an insult........

    So shove it up your arse.

  12. Dear Georgeous George,

    I don't know where you get the figure fo $500 an oz.

    Nobody give you a date on JPM's demise anymore than they could have given you a date on which the markets no longer believed that the Fed and Bank of Japan would dishonour their joint and several guarantess on the ITC.

    What people can say is that at $50 an oz JPM will have lost more than $41 billion or the total of it's cash reserves. Now at this point which s likely to occur prior to June according to many chartisits the Fed has options. The Lehman collapse happened because the Fed couldn't get the winners and losers to agree to a resolution trust for the OTC derivatives the big holdout was JPM according to many sources. When JPM goes into the collapse zone the Fed can start again with a resolution trust over JPM's dead body. Nobody is talking about silver going to $500 an they are more likely talking about round two of 2008 to complete unfinished business.

  13. "Round two of 2008 to complete unfinished business."

    I think you mean all bad debt must be extinguised and let the dead bodies fall where they may so we can finally go about the business of restart and recovery.

    The problem is Ben will not let go so we are very likely to get a worthless USD faster than any debt resolution.

    Joe M.