Gold and Silver Snips

October 21, 2009

One need look no further than the Silver futures to see just how strange the markets are right now.
October Bank Report - 2 US Banks are short 38,375 Silver Contracts. This is 29.1% of all Commercial Short Positions (91,723). Total Contracts: 131,801. Why does this matter?

1. Traders are supposed to be limited to 6,000 total positions in the futures market. Even if you divide the contracts evenly, both banks (which of course remain unnamed by COMEX) would be short 19,000+ or more than 3 times the position that "normal" traders can possess. That gives these two banks three times the clout that you or I could possibly possess.
2. Short position is 191 Moz of Silver sold short. That is almost a third of the entire YEARLY world production of silver sold short by two US banks. You decide what kind of an effect that would have on prices.
3. Total Contracts cover 659 Moz of Silver. World Production last year was 670 Moz.
4. Commercial Short Position of 91,723 is 458 Moz. Commercial Shorts were 82.4% of all short positions in the COMEX. If that doesn't represent manipulation, I'm not sure what does.
5. The Bank Participation Report is an increase of 8500 contracts short in just 30 days. That's 42 Moz of Silver sold short at a time when Silver went from $16/oz to 17.63. I think that would qualify as applying the brakes on prices.

In other Silver news, the gap between what the COMEX can actually cover on its contracts, compared to what it counts, is continuing to widen. A couple of months ago the balance between Registered (what the COMEX actually controls to honor redemptions) and Eligible (What could be used, but is owned by others, yet counted to COMEX) shifted past the 50/50 mark to the deficit. It has since widened to more than 5 Million ounces of silver. Registered Stocks have fallen to 55 Moz while the Eligible is now close to 61 Moz.
The Registered stocks took a major hit on Monday when COMEX admitted to a major error in Silver added to HSBC Bank, USA (New York). Apparently COMEX originally counted 1.8 Moz of silver as Registered when it is actually owned by someone else.(Eligible). Even so, COMEX is leveraging the Silver it actually owns by a factor of 12 (55 Moz to cover 659 Moz in contracts).
One final note for now. Those same two US banks who are short 38,375 contracts in silver also have some long positions. Those long positions total 38 contracts (no joke). But hey, that's an increase from the 13 reported in September!