Friday, June 18, 2010

Silver Bull Rising

This item comes from a broker and should cautiously be interpreted since we are pushing product.  However, the technicals are completely different from several years ago when the balance of the photo industry surplus was been worked off.

The mining industry should have been unloading inventories over the past two years and will find it much harder to sell into a rising market.  They are also unlikely to expand hedging operations.

Thus a move through $50 is not far fetched at all and will bring plenty of silver properties into the market.

Both Hecla (HL) and Cour D’alene (CDE) are both fairly priced at present and will respond well to a rising silver market.

It will take time for the mining industry to make up production short falls, though $50 silver will draw huge above ground silver out of India.  It will make any silver deposit profitable to mine also.  A $35 to $50 trading range is not unreasonable at all over the next decade.

Could Silver be the Most Financially Profitable of All Precious Metals?

Consider the following: The Federal Reserve arranged the bailout of Bear Sterns a few days just after silver hit a multi-decade high of approximately $21 an ounce.

Most people are not aware that Bear Sterns was about to have to cover an extremely large short position in silver. Bear Stearns had been betting that silver would go down, and their bet had gone "south". In turn right before the bailout, Bear Sterns was put in the situation of having to go into the public markets and buy "huge" quantities of silver to make up for this large short position.

The precious metals markets are relatively small when compared to other markets. Having to go into these markets and cover their huge short position in silver Bear Stearns would have caused silver to shoot up to $50+ per ounce . . . in addition to causing a complete loss of confidence in the U.S. dollar which would have led to substantial inflation.

Today, . . . JPMorgan still holds the short silver position which they inherited from Bear Stearns in the Fed arranged bailout.

It is common belief that JPMorgan is artificially holding silver prices down through what’s called "naked short selling"; which is the selling of “paper silver” that is not backed-up by “physical silver.”

The best evidence that JPMorgan's short position in silver is naked is by looking at the difference between what silver actually trades for on the exchanges and what people are paying for physical silver. At this point, there is approximately a 20 percent disparity.

When one looks at the percentage of its market size, the naked short position in silver today is perhaps the largest short position in any precious metal in the history of all commodities.

If this is not enough to convince you, then look at the physical silver market which is tighter today than ever. The U.S. mint is planning to sell nearly 40 million (1oz)American Silver Eagles this year. If one considers the production from all of the U.S. silver mines, he/she will see that we are currently producing only 40 million ounces of silver annually.

This means that the U.S. needs to use almost all of its silver production just to keep up with the demand for American Silver Eagle coins; since, the mint is required by law to use silver produced in the US for the production of all US silver coinage.

What is this saying? ........... JPMorgan will be eventually forced into cover its huge naked short position and it won’t be pleasant . . . unless you own silver, or assets that will appreciate when silver goes up like silver mining stocks.

Kevin McKnight

1 comment:

RealEstateGuy said...

spot price 19.18 Physical metal price 20.20 This is a 20% difference only for someone who managed to recently graduate from a government school, and a poor one at that.