22/12/2010 by Philinje.

Ted Butler is the world’s foremost expert on silver. Period. We just got very lucky because he posted an article for his paid subscribers for free public consumption, here:

http://investmentrarities.com/ted_butler_comentary12-21-10.shtml

This article explains the background of what happened at the CFTC meeting on Dec. 16, including its abrupt ending which seemed to indicate a lack of a conclusion. But as I said, the meeting on the whole represented a positive development, and Ted’s article explains why.

Note also that he explains exactly how this manipulation has been allowed to happen for so long, and why that already has changed. Interestingly, he think Chinese traders are the culprits.

The CFTC will now examine the OTC swap book of anyone with a supposed hedge exemption. He was amazed to learn that the CFTC never did that previously, because apparently the CME had that responsibility. It looks like that responsibility just shifted to the CFTC. And so, soon enough, we will know who is on the short side of JP Morgan’s swap book.

Regardless of who that is, the fact remains that the short side is running out of places to hide, and mostly because the blatant manipulation has caused a flight to physical metal. As Ted says, the real crime is that the supply and demand dynamics have been distorted, and now physical supply is running out. That means without a doubt that the silver shorts are toast, and the end result will be ugly for them.

This situation is evolving quickly and it’s likely there will be plenty of action in January.

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17/12/2010 by Philinje.

It looks like the CFTC has punted on a final proposal and they did not vote on putting the rules up for public comment like they were suppoed to on Thursday. Funny thing is, if they agreed to the public comment period of 60 days, how would they make a deadline that is one month away? So either way, the deadline was in question.

http://uk.finance.yahoo.com/news/UPDATE-3-CFTC-holds-releasing-targetukfocus-666291698.html?x=0

This piece is pretty detailed and reasonably balanced. Politics are involved. But spot month position limits can be implemented right away, it seems. Maybe not the best news but still, it seems like something is really happening.

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16/12/2010 by Philinje.

In this Reuters article it looks like there is a clear indication from Gensler that the mid-Jan deadline won’t be met. Interestingly, there seems to be a lot of noise about taking time to review the limits and taking action after a public hearing period of 60 days.

http://www.reuters.com/article/idUSN1515374920101215?pageNumber=1

This GATA article is interesting because it shows how little the world understands about what Central Banks are really up to. The Russian bank official cited in this article and the speech he gave is eye-opening stuff. What a world we live in!

http://www.gata.org/node/9428

Finally, here is the standard argument for hyper-inflation, with a non-standard reason - the incredible shrinking of money supply that started in 2009. John Williams of Shadowstats is the guy who tracks real inflation vs. government fictions. The point is that this indicator - shrinking money supply - is a sure sign of the second dip now being revealed. We’ll see, but this guy is highly respected. Also note the inflation-adjusted peak numbers for gold and silver, using both current CPI inflation and real inflation.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/15_John_Williams_-_Massive_Selling_of_US_Currency_Lies_Ahead.html

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15/12/2010 by Philinje.

Here’s a great piece in the mainstream press about the position limits that will be imposed by the CFTC. You might recall I posted a letter based on a campaign by Ted Butler during the public hearing part of the discussion process at the CFTC earlier this year.

The funny thing about this article is the headline is wrong, and very misleading. Bart Chilton has been a vocal proponent of doing the right thing, ie imposing limits and ending the blatant manipulation by a very small number of big banks, especially in silver. So - ignore the headline.

http://www.bloomberg.com/news/2010-12-14/cftc-should-resist-lobbying-on-speculation-limits-chilton-says.html

You will note the mention of Gary Gensler, the CFTC Chairman, who is now memorialized in public thanks to this article as a proponent of the changes. And you will notice the timing - mid-January for energy and metals. There has been speculation that the dates would slip but the slant of this article seems to say that won’t happen.

JP Morgan went on record this week to say they would reduce their short position in silver, and it’s true their short position has gradually been reduced over recent weeks. But there’s still a long way to go. The meeting at the CFTC tomorrow will be significant, and one outcome is the mid-Jan deadline being upheld. That would mean a lot of short covering in the next few weeks.

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12/12/2010 by Philinje.

What a strange week. Prices got to new all-time highs in gold and silver then got whacked, and instead of a quick relief rally, got whacked again on Friday, probably because of the news that China asked its banks to boost reserves for a third time. This had little effect on equities, which rallied because of the Obama tax cut deal, but it seemed to be enough of an excuse for the big boys to pounce on gold and silver again.

The funny thing is, prices declined and then rose almost exactly as they did on Wednesday, though silver acted a bit stronger than it did two days earlier. Gold had a spike low to just above $1370 and finished the week at $1385, while silver had a rounded bottom at just above $28 and finished the week at $28.68.

It’s possible that gold and silver will exhibit some more weakness in the week ahead, but it also seems that attempts to take them down keep getting rebuffed at the same levels. Which is a bullish sign.

Lots of economic stats are out this week including an FOMC meeting, so the markets will be volatile. It seems quite strange that bonds are tanking badly, and volatility in equities is dropping. There seems to be a growing awareness that reflation is back on big time.

This will most likely be positive for gold and silver, but be cautious this week. Either the current decline has ended at roughly a 38.2% level, or there will be a further drop. Either way, a rally could start shortly thereafter with a top in February at possibly the $1600 level.

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07/12/2010 by Philinje.

Sharp correction in process - while equities are rallying the big boys seem to be banging hard on silver and gold. These kinds of declines used to be pretty common and have become much less so. But it’s a good reminder to keep on your toes.

My suspicion is someone really didn’t like silver above $30. There is a theory that above $31, a massive short squeeze could erupt. Anyway, this could be over as quickly as it happened, or possibly we could see some consolidation into end of year.

Mid-Feb 2011 is the target for this current peak, so we ain’t there yet. Maybe we’ll see some year-end selling in commodities, which have rallied hard in recent weeks. But that’s a pause before a blow-off top early next year. That’s my favored scenario, but it’s just one possible outcome.

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06/12/2010 by Philinje.

Gold and silver snuck even higher at end of trading on Friday. Since when does the price creep higher at the end of Friday, in the vicinity of the highest price ever? You mean, traders are desperate to own more before the weekend? That almost never happens.

This interview is the first place I have seen the term, Qualitative Easing:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/3_Ben_Davies_-_Massive_Short_Squeeze_at_Hand_in_Gold_Market.html

Note the main point of Ben Davies, CEO of Hinde Capital, is that a short squeeze in gold and silver is at hand. As we have crossed the $1400 barrier in gold thanks to the pathetic jobs report on Friday, the next stop is $1600 or $1800. Jim Sinclair thinks we will be at $1650 in January, which has been his official position for years, believe it or not. He officially made a million-dollar bet in public that the gold price would beat that level in Jan 2011.

For a more sedate and mainstream view, here is a fairly straightforward projection to $1500 or so:

http://www.investorplace.com/24372/investing-in-gold-gold-bull-run-far-from-over/

The question is, where will silver be? Near-term it has broken through a double top and exceeded its recent all-time high (gold has not quite done that yet), so $30 or $31 seems nearly certain (but remember, there is no such thing in the markets). Longer term, some project $135 or so when gold is $5000 or $6000. If we get a near-term blow-off top, maybe we’ll see an impressive spike high in silver.

In any case, buckle in for the next launch of the shuttle, USD Independence. ETA end of Feb 2011, or so.

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03/12/2010 by Philinje.

Watching the forex charts intensely just now, it was striking that there was very little spike action upon announcement of the NFP, which showed a much smaller increase in jobs and a very negative increase in the unemployment rate from 9.6 to 9.8%.

The only spikes were dollar/Yen (down big), dollar/CAD (up slightly), and gold (up). One would gather that now there is every reason to hate the dollar, much like the markets have been hating the Euro. And, instead of the traditional knee-jerk reaction into the Euro, the fleeing was into the Yen (the only less ugly currency) and gold.

This is very gold positive and so it spiked above $1400. Most likely this will launch a new uptrend after the past few days of basically resting in place. It is amazing how still gold has been, just below $1400. That was a nice consolidation, and now gold should be off to the races.

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01/12/2010 by Philinje.

Now that Thanksgiving has passed, and the end of November, we can reasonably conclude the true sentiment of the markets has reasserted itself. And that looks a lot like what I wrote about last week: risk aversion due to Europe and Korea, with the dollar and gold rising together. Equities look like they are correcting. Mining stocks are tracking gold more than general equities, as they started to do earlier this year. But still , they could suffer some weakness if equities swoon.

Today it looks like the Euro dipped below 1.3, a significant milestone in its descent from the 1.43 peak in early November. If the Euro bounces, the dollar would then drop and people are expecting that to be even more impetus than the Euro, though in all fairness, recent gold strength has been driven by Euro issues and so dollar weakness may not have the anticipated large effect, at least in the short-term. Speaking of which, the dollar got above 80 and is now above 81, while gold is getting close to $1400 again.

And silver is strong. It broke above $28 yesterday and looks like it will challenge its recent $29.35 top.

What are the chances gold and silver will correct? Fairly high. But it looks like corrections will be shallow.

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