Rhody on silver:

Although face values on bullion coins are meaningless, the ratio of gold to silver is interesting here. It is 16.66:1 which is very close to the old ratio used back in the early 20th century before the Federal Reserve perverted the financial system. You might be interested to know that for that ratio to exist on COMEX spot, the present spot silver would have to be $34/oz CAD or about US$26/oz. This displays how undervalued silver still is relative to gold.

rumors ....

 

nice educational piece ...

 

GATA’s Ed Steer sent the following to a Café member on January 11. It may clear up some questions about the gold/silver inventories:

Hi Ed,
Bill Murphy asked me to take this bull by the horns because it was my quote re: the COMEX/NYMEX that was in his MIDAS commentary tonight (Friday).

One of the most confusing (but ultimately most simple) things to understand is these two categories.

It took me years to figure this out, and the one who ultimately explained it to me was the silver master himself, Ted Butler. The main reason I didn't ask sooner was that I didn't want to admit to anyone how ignorant I was. My ego got in the way of common sense. Don't feel bad Ed, you are part of the majority out there! Once Ted started to explain it to me, it took less than five minutes to understand. And by the time you are through reading this, you will understand too.

Right off the bat, all the silver on the COMEX is owned by someone, and it is not the COMEX itself, they are simply the storage facility. They used to have more than a dozen storage facilities, and now they only have four left.

As you know, silver on the COMEX is in two categories....registered and eligible

First of all Ed, you have your categories reversed. It's natural to fall into this trap, because that's where I was. So are many others. It's actually the other way around. Silver MUST be in the registered category in order for it to be in a position to be sold by its owner (whoever that may be). Any silver in the eligible category is not in a position to be sold. It has a Registered Warehouse Receipt attached to it...right down to the bar number, weight and owner...and is paid for in full. Don't let the "Registered" part of that fool you. If you have a registered warehouse receipt and you are storing it at the COMEX and it is NOT for sale, it is in the 'eligible' category...no matter how counter-intuitive that might seem!

Even the silver that is owned in the "Registered" category has a Registered Warehouse Receipt attached to it, the only difference is that the owner (whoever that might be) has advised the COMEX that he is willing to sell...at the price of his chosing...which may not be anywhere near spot...but it IS for sale if someone is prepared to pay their asking price.

Every bar in the COMEX is in one of these two positions.

How do these silver bars get switched from eligible to registered...and back again? It's probably very simple. First of all, these bars do not go anywhere...they never physically move off their pallets...probably not even between warehouses. Every bar and/or pallet of silver has a UBC sticker on it (like everything does you buy at the grocery store), and it's location (which warehouse has title to it at that time...no matter which warehouse it's in), weight, serial number and owner, is kept in a computer at the COMEX...probably very similar (if not identical) to the ones that you and I use.

Let's take what happened on the COMEX on Thursday as a "for instance". There were several movements. Two were exchanges between eligible and registered and one was a shipment from the eligible category off the COMEX to whoever owned it...i.e. the owner of the Registered Warehouse Receipt in the 'eligible' category took physical delivery of his metal. I believe it was a shade over 5,000 ounces. This is five 'good delivery' bars, and that equals one silver contract.

But the biggie of the day was the 13.4 million ounces that shifted from 'registered' to 'eligible'. What happened was one of either two things:

1) Someone who owned the silver that they had up for sale (at whatever price) decided that they didn't want to sell it anymore, so they picked up the phone, faxed, e-mailed whatever instructions were necessary for someone on the COMEX to sit down at their computer and with a few key strokes, changed 13.4 million ounces from the registered category to the eligible category.

2) Someone had 13.4 million ounces stored and for sale (in the 'registered' category) at whatever price, and someone else bought it. Upon receipt of payment, the old owner transferred title of the 13.4 million ounces of silver to the new owner. The new owner then picked up the phone, faxed, e-mailed whatever instructions were necessary for someone on the COMEX to sit down at their computer and with a few key strokes, changed 13.4 million ounces from the registered category to the eligible category.

Silver that is received by the COMEX is also owned by someone...who is sending it there for storage. And whether it goes into the registered or eligible category when it arrives, depends upon the instructions of the owner when the "big rig" backs into the (un)loading dock.

Silver delivered on or after 'first day of notice' always comes out of registered because the eligible category is NOT for sale.

As of Friday night, there were 123 million ounces of silver sitting on the COMEX; 72 million in the eligible category that is NOT for sale, and 51 million in the registered category that IS for sale. But on Wednesday, there were 63 million in the registered category and 60 million in the eligible category. That is the 20% swing in both categories that I was talking about in Bill Murphy's MIDAS commentary on Friday night. This is a BIG move, and if it stays that way, will have huge implications for the price (and availability of silver) in the future.

The day after all this happened, silver was up 25 cents....need I say more.

So even though all that silver is sitting there (on the COMEX), most of it (including all of the eligible category) is just 'window dressing'. Even a lot of the silver in the registered category, although for sale, is only for sale at a much higher price over spot. That price is unknown to us. So what is actually for sale at current prices is only a small fraction (very small actually) of the total of 123million ounces that we can currently see.

So it is easy to understand just how close we actually are to a short squeeze of biblical proportions on virtually every 'first notice' date. One of these days someone, or a group of someones, is going to make it happen. Then look out!

And that...in the broad strokes...is all there is to it.

Ted Butler has written a couple of essays about this. Here are the URLs.

http://www.investmentrarities.com/06-10-03.html
http://www.investmentrarities.com/06-02-03.html

Hey i posted this before you did

Great minds think alike

anyone have a take on this market ...

 

I wanted to write a few words about what I've been saying for months now is the sleeper metal: palladium. It's the one nobody's been watching—until lately, that is. Our mutual friend, advisor to the gold community and trader extraordinaire, Dan Norcini, and I have been talking back and forth about palladium for several weeks now. Dan tells me this morning that I've finally badgered him into taking on a position in palladium, and he was kind enough to work up the following chart:

Palladium1-21-2004.jpg

Notice that Dan's initial price target is $350, a 40% increase from current levels. Palladium is trading this morning around $253, up $15 right now.

Here are the monthly, weekly and daily charts (courtesy of
http://www.tfccharts.com):

MONTHLY - http://futures.tradingcharts.com/chart/PA/MWEEKLY - http://futures.tradingcharts.com/chart/PA/W

DAILY - see above

Notice that the moving averages and internals on the weekly and daily charts have turned positive (and probably on the monthly too, once it's updated) and both charts show a bullish reverse head and shoulders pattern.

Also note that palladium fell from $1100/ounce to below $200/ounce. The metal could quadruple from current levels and still not be back at its old high. The 50% retracement move back up would take it to well above the $600 mark. That's a 140% increase from here! No doubt the stocks of the producers would leverage that move at some multiples. Two companies that come quickly to mind are Stillwater Mining (SWC) and North American Palladium (PAL). There are several others. One could simply purchase the futures, of course. But for those of us who don't have Trader Dan's expertise (and nerves of steel), perhaps the stocks would be a better way to go. Personally, I own a few of the June $10 calls on PAL, but that's just a disclosure, not a recommendation.

One more thing: Dan urged me to caution folks that the palladium futures are very thinly traded at the moment, so make sure you know what you're doing if you decide to utilize the futures on this trade. Watch those entry positions, because the metal has had a decent runup in the last few days.

Anyway, just a heads up for your readers who may be interested in participating in what could be another Cinderella metal in the weeks and months ahead.

Houston’s Dan Norcini:

I do not know if you have access to the Open interest and commitments data on the road there. Very interesting stuff going on in gold.

Today's commitments data as of this Tuesday 1-20-2004, confirms what we all know has been taking place in gold. Liquidation has been taking place with both funds and small specs selling out on this recent bout of weakness and commercial shorts, [a.k.a. - the gold cartel] covering shorts and taking money off the table from those shorts put on at the $425-$430 region. What is absolutely fascinating to me however is the release of both yesterday's and the previous day's open interest totals. Open interest is dropping in February as that month will soon be in the delivery period so we have spec rolling taking place. The absolutely astounding thing taking place however is that yesterday's release showed a huge INCREASE in open interest totals. We had a net gain of some 8,255 contracts overall with a whopping 15,889 new longs added in April more than offsetting the decrease in February. Since my perspective on gold is bullish I am reading this in a bullish light. We are seeing a consolidation taking place in gold, a chop with a slight downward bias but instead of the spec positions bleeding off like many had expected, we are seeing accumulation taking place down here. The weak handed longs who are selling are being quickly replaced by new buying or by entities already long adding to their positions. Not only are they rolling , they are adding to the roll. That is astounding.

Some bears could argue that an increase in open interest with falling prices is bearish since that means all the new longs will sell out in the event of any possible further downside. I do not buy that argument at all. I am of the opinion that it is the paper shorts that should be worried. The longs buying in at these levels realize that the downside is limited here and are going to be adding more long positions into any subsequent price decreases. The new shorts on the other hand have been trying to force the market down beneath $400 in the hope of running stops. It appears to me at this point that strategy is not going to work. If it was, I believe we would have seen a continued drop in open interest as the market ground slowly lower. The exact opposite is occuring. With gold getting closer to $400 the physical market is going to turn increasingly active and with the funds stepping up their buying as the market moves down, we are setting up for a period in which it is the shorts who are going to get forced out. The further the gold price drops and the more the open interest increases, the more likely the paper shorts' strategy looks to fail. The reason -Each new buyer has a successively lower gold price threshold of pain before they will dump their positions and turn sellers. As the shorts attempt to push the market lower to force these new longs out, the gold price becomes more and more attractive to additional buyers on the sideline who will step up their new buying. Before long, the shorts simply will not be able to absorb that buying and will be forced to turn tail and cover. In my opinion, we are building the base for a resumption of the uptrend and this time around, it should be very powerful.

Dan Norcini
[email protected]

I believe Dan is wrong..... but what do I know....

 

I believe the EU will drop rates next week...dollar gets strong..and gold falls below 400 ..... All these new longs will want out fast.....

and all of this is JMO.....

 

I am out of all metals now..... everything I see is gold down for a while.....

 

Bill;
What's got my head in a spin this week is Cheney's trip-not to Davos but to see the Pope. The White House is trying to spin this as him being a 'military historian'. I think he's goin to do a little bit of old fashioned confession-and beg for gold. I mentioned to you in my last note 1,700 tonnes of Bundesbank Gold (deliverable-24 carat) at West Point that I feel there is a body of documentation suggesting a swap-for SDR's. I told you I think the Germans have requested this gold shipped back-specifically due to their recently 'poisoned' relationship with the U.S. in conjunction with the untenable situation regarding deficits, maturing Washington Accord, the Blanchard Case and the Iraq war-a perfect storm. My best guess is that the Americans swapped and subsequently sold this gold (would have had to have been deliverable to sell physical on Comex) when the Tech bubble was 'deflating' post 2000 to support and prevent a run on the dollar. American reserves while plentiful are not deliverable-virtually all 22 carat. Reclassification of U.S. gold reserves at this time go a long way to explaining this-custodial gold explaining the swap and deep gold to cover their tracks and confuse. O'Neill as Treas. secretary was fired right about the time the treasury posted lies on their web site-refuting that they had swapped or directly intervened in the physical market. O'Neill is a patriot and would no doubt support clandestine ops to defend the currency (republic) but posting blatant lies under the auspices of his dept. (treasury) would not have gone over well with him at all. Read his biography-he cannot tell a lie. Interestingly, the most salient point I take from his book is that the Bush admin. is marching to their own agenda. As a result Cheney fired him-fact.

If you're with me so far there is a swap outstanding-almost assuredly backed by SDR's-explaining funny accounting in the U.S.'s IMF account. I read in one of your Midas commentaries from a European source that American sources were combing the globe trying to buy 'gold'. This would be consistent with the U.S. trying to replace German gold already sold that they need to replace. 1,700 tonnes being such a large amount-there's only a few places on earth that you would even consider looking-Germany, France, Switzerland, Italy or the Vatican. The Fed's relationship as a gold agent for the Vatican is chronicled in numerous published letters from the head of the Vatican Bank and Paul Volker Oct. 6, 1975. Go to www.vaticanbankclaims.com/iorfed.htm for the supporting signed text. These revelations only came to light as a result of sexual abuse cases involving clergy-and a sharp California law firm's research into the ability of the Vatican to pay damages. In this documentation it is clearly revealed that Chase was the Vatican's banker during the second world war and the Fed either assisted or acted as the Vatican's agent in gold transactions from the 50's onward.

My best guess is that the price of gold is being suppressed until the U.S. covers this short. I think they are suppressing the price until they conclude their purchase. If Cheney is successful in the next few days, my spider senses are tellin me the cartel isn't going to be capping the prices much longer-maybe next week the game ends? If you sit back and think about it, the pieces fit together really well. Just wanna be on the record.
Rob