-
- Here's an update from my last piece, "No Way
Out", in which I postulated that the leasing scam in gold and
silver would soon come apart and we would have a market event similar to
what occurred in the stock market in Oct 1987, which was triggered by
"portfolio
insurance". Less than two weeks after my article
appeared, the gold
market was jolted with news that a consortium of
European central banks
announced that they would cap further gold sales
and restrict lending of
the metal. Whether you would agree that the
explosion in gold prices from
the day of the last Bank of England
auction qualifies as a market event,
the roughly 25% move in gold
eerily parallels the 25% move that portfolio
insurance caused in the
stock market. But that's not the important point
- which is that the
initial jolt out of the box for gold represents a beginning,
rather
than the end that portfolio insurance represented. OK, now what?
-
- Before trying to
figure what's ahead, I'd like to speculate
on what that CB
announcement was really all about. If you look at the
amounts quoted to
be sold and the impromptu unprecedented cooperation
of the 15
entities, you can't help but be suspicious of the real motive
for the
announcement. Of the 2,000 tons pledged to be sold over 5 years,
the
vast majority was the 1300 ton planned Swiss sale and the 400 tons
scheduled to be sold by England. Informed opinion doubts the Swiss sale
will ever take place and public opinion may yet cause England to
terminated
further auctions. So what was the announcement about? It
was about leasing
- the prime component in the price of gold and
silver. More specifically,
it was about the unwillingness or inability
of the CBs to throw more good
metal down the leasing rat hole. This is
truly a momentous development.
What it was also about was the CBs
refusal to believe my contention that
there was no way out - only, as I
claim, disorderly market conditions and
massive collective default.
This prospect is unpalatable to the CBs who
desire a world of stability
and status quo. So, they did what they do best
- they tried and are
trying to manage an unmanageable situation. Rather
than come out and
admit their private feelings about the true sad state
that leasing has
created in the gold and silver markets, they have chosen
to pretend
that the situation is not that extreme. Rather than admit that
the
metal supply left to lease is gone, they tried to put themselves ahead
of the market event by making it appear it was their choice to terminate
leasing. I don't blame them; it's their job.
-
- But it's not your job to accept
anything someone says
(including me), when the facts and anecdotal
evidence point towards more
plausible explanations. My bet is that the
CBs are going to curtail lending
because they are at the bottom of the
barrel for new lending supplies.
If that's the case, you can take this
to the bank - with no new leasing
supplies, it is game over. That the
leasing con may be ending here should
not be a surprise, the real
surprise is how it's lasted as long as it has.
-
- Let's take a minute and view
the current landscape after
the opening volley of the post-lease
environment. In gold, we have endless
rumors of hedge funds and other
shorts in extreme difficulty. Trading is
more chaotic and disorderly in
gold than at any other time in history.
The rapidity of the increase in
gold in the days since the announcement
has left the natural short
sellers in the mining and professional investment
community dazed and
wounded - some surely mortally. Because this selling
of years of
production short by miners was not true hedging, as I have
contended,
but a fatal manipulative experiment - we are experiencing a
phenomenon
never witnessed in the world before. That phenomenon is the
collective
mourning and sadness in the mining community over the price
rise.
Producers not ecstatic over a price rise of their product? Maybe
the
non-hedgers are jumping for joy, but there is no joy in the short selling
miner world. This should be proof positive of the distortions that
leasing/forward
sales have created. It should show you that leasing is
rotten to the core.
-
- But I'm not writing this piece to recap the past week's
events. It's time to look forward. There should be no doubt (except by
the sleeping watchdogs at the CFTC) that gold had been kept down by short
selling. Just the smallest amount of pressure on the shorts has resulted
in outsized gains. This is just the start. But no matter how explosive
the action gets in gold (and I think it will come to take your breath
away)
- this will pale in comparison to the mega atomic explosion we
will soon
witness in silver. What we are about to see in silver will
dominate market
history and folklore that will be referenced for
decades to come. That
there is still time to take advantage of it is
the unintended and unavoidable
consequence of this century's greatest
manipulation. But the time is very
short until the truth becomes
obvious in silver. And as quickly as the
$260 per ounce opportunity in
gold vanished, the world will soon know in
a flash that the 5 or 6
dollar silver available for decades will never
exist again. I say this
clearly - it is now or never for you to complete
your silver purchase
plans.
-
- How
can I be so sure? Because of what is happening in
gold. Because it has
to happen - there is no other way. Think of how crazy
this lease
business has become. Here we are at $300 gold, and the gold
world is
coming apart at the seams. What would happen at 400 or 600 or
800? I'll
tell you what happens, as I've been telling you in every single
article
I've ever written - massive default. But silver - oh silver - that
scares even me. It's almost too extreme to analyze in a non-emotional
manner. I find my mind shuts off and wanders when I let my natural logical
thought patterns flow - much like a computer crashes when there are too
many applications running. I find myself (me - the bull of all bulls)
pulling
back from the certain ending I see dead ahead, because it is
extreme beyond
experience. But when I see the trouble that $300 gold
has caused, I know
it can't be long before silver starts the nuclear
fission price process.
-
- That's because the silver price has been manipulated
for way too long by leasing and the excessive short selling of paper
contracts
that have no backing whatsoever. In fact, the only thing
holding silver
back from its date with destiny is massive new short
selling by entities
that have not a prayer of fulfilling their soon to
be called on demands
for actual delivery. Just this week on the COMEX,
on the day silver rose
40 cents, 80 million more paper ounces were sold
short (futures and call
options), bringing the total short position on
the COMEX to over 700 million
ounces. This is insane and criminal. How
the CFTC and the COMEX can allow
new gasoline to be thrown on the
silver fire, when it's obvious to all
that gold is already ablaze, will
constitute great debate in the coming
great silver lawsuits in the new
century. Ask yourself this - who in their
right mind would sell massive
amounts of silver that is not owned in this
environment? There is only
one plausible answer to that question - someone
that had no choice.
Only someone who would face certain ruin if he didn't
sell. Let me be
as clear as I can be - the short sellers of silver this
week were the
NY banks and financial institutions who were already short.
They had to
sell more to protect their existing paper shorts. If silver
were a free
market, the 80 million new ounces sold this week should have
been sold
for 7 or 10 or 12 dollars per ounce, because that is what the
buyers
would have paid if they had to. The sellers in silver this week
didn't
do what free market sellers do, namely, they didn't try to get the
best
price. They did something else - they capped the market. It is the
surest sign of manipulation and criminal activity. But the manipulators
have little choice - it's either sell still more millions of ounces of
silver they know they can't come up with in ten lifetimes, or watch the
worldwide short silver position of billions of ounces get sucked into the
gold fire. It is this unbridled desperation and manipulation to the last
possible moment that is creating this last chance to nail down silver
purchases
by you.
-
- There is nothing on earth that can stop the silver
eruption
once it begins. The only hope the trapped commercial shorts
have is to
delay the start - for a day, a week, or a month. The only
thing that can
delay the inevitable is perversely, more shorting. That
the CFTC and COMEX
management is allowing this to happen brings great
shame to those institutions.
Let me offer one step to them that should
be taken immediately. An order
should be issued now that new sellers
must document ownership of actual
silver. With a current short position
above any possible amount available
in the real world, allowing new
short selling that is only intended to
suppress the price is
outrageous. While some might claim my suggestion
is self-serving, let
me answer this way - how does allowing more naked
selling help the
situation. The only cure for a manipulation is to end
it. The problem
of default is not created on the day the default becomes
visible - it
was created on the day the non-performing short sale took
place. That's
why the CFTC and COMEX must act now. We don't need them to
tell us the
shorts can't deliver - we need them to act now and stop new
manipulative short selling.
-
- Sure, these NY banks and financial companies are the
masters of the universe. But they made the wrong bet. Gold and silver
can't
be controlled forever. Their new shorts in silver may buy them
some time
- they could force technical liquidation and drive the price
of silver
lower temporarily - maybe even down to 5 or below. But so
what? Just make
sure your purchases will not be shaken from you in that
event. Don't let
them trick you with another one of their engineered
sell-offs.
-
- Gold is a multi-stage rocket that has maybe used up its
first
stage - there's a lot more to be ignited on this journey. Silver
is
different. Silver is not any rocket. Silver is the Saturn V used in
the
Apollo Mission to the moon. The biggest, baddest, most awesomely powerful
rocket ever produced. The masters of manipulation can't let this baby lift
off - it will knock them out of the game forever. But the countdown is
over, ignition has been activated, and the fuel is starting to burn. We're
in that twilight zone that only lasts a few seconds, but seems an eternity
- the time between when we see the flames and the rocket starts to move.
The engines are pouring out flames and billowing clouds of steam - yet
the rocket doesn't budge. Despite the greatest creation of thrust ever
developed, the mass of the rocket is so great it seems to defy the laws
of physics and does not move. But you know it will. That's where we are
in silver. Those few seconds of delay in the Saturn lift-off may translate
into a day, a week, a month in silver. But don't be fooled by any twilight
zone appearance of delay in lift-off. Get your ticket and pack your bags
- we're going to the moon.
-
- http://www.gold-eagle.com/gold_digest_99/butler100499.html
- http://www.gold-ea g
le.com/gold_digest_99/butler100499.html
-
- http://www.gold-eagle.com/research/butlerndx.html Also by Ted Butler http://www.gold-eagle.com/gold
_digest.html
Back to Gold Digest
-
- mailto:westerman@gold-eagle.com
- vronsky@gold-eagle.com
- Copyright
© 1997 - 1999 vronsky and westerman
|
