Nearly 40 million ounces of paper silver were launched at the Comex yesterday in the space of seven minutes, which triggered a 92 cent waterfall in the price of silver; over 118 million ounces of paper silver were dumped on the Comex today (April 22) between 11 a.m. and noon EST. This market intervention typically occurs after the bona fide physical precious metals in the eastern hemisphere have shut down for the day.
The baseline assumption of modern financial theory is that fiat money is sound and markets are efficient. Neither of those suppositions are valid. The markets have been completely stripped of any legitimate price discovery function. You can’t tell me with a straight face that Tesla (NASDAQ:TSLA), which is now burning cash at a rate of half a billion a year is worth $33 billion – or 8x revenues – any more than you can tell me that a junior mining stock with $500 million in proved gold/silver resource in the ground is worth only $24 million.
Gold and silver have been “climbing a wall of worry” for several weeks now. The traditional signs of an imminent manipulative attack on the metals (open interest of shorts vs. longs on the Comex, chart formations, etc) have defied the behavioral patterns of the past 15 years. Several “chartists” and Wall Street analysts, notwithstanding their boorish market prediction revisionism, have been been humiliated by the price-action in gold/silver since mid-January.
Several of us who have researched, traded and invested in the precious metals markets since the inception of the precious metals bull market believe that the bullion banks may have a bigger problem with sourcing physical silver for deliveries right now than with gold. The Comex bullion banks have been hitting the price of silver hard with paper contracts the last two days, in a desperate effort to beat down the price appreciation of silver during the overnight physical market activities of the eastern hemisphere bullion markets.
Currently there are are 56,863 open May silver future contracts representing 284.3 million theoretical ounces of physical silver on the Comex. Against this is 31.9 million reported ounces of physical silver in Comex vaults that have been designated as available for delivery against these open contracts. In other words, the bullion banks have thrown nearly nine ounces of theoretical paper silver at the market for every ounce of alleged physical silver that could be delivered into these contracts.
Tuesday is options expiration day for May Comex gold/silver options. Typically, options expiry is one of the triggers for a heavy onslaught of bank manipulation on the Comex. With a brief glance as the put/call open interest in May silver options, it looks like the bullion banks – i.e. the entities that are short May silver options – are motivated to push silver below $17 (based on the amount of open calls vs puts at $17) by the close of silver trading on Tuesday.
Similarly, “first delivery notices” for Comex gold/silver contracts go out after the close next Thursday. With the paper open interest in silver as of today 900% greater than the amount of physical silver designated as available for delivery, the Comex bullion banks will make every effort to shock and awe the hedge funds into liquidating their long paper silver positions. We saw this yesterday with the 92-cent silver smash going into the Comex open. Silver open interest dropped over 14k contracts yesterday. This is one of the many manipulation games the bullion banks have been playing with the hedge funds over the last 15 years.
Because the CFTC and the Justice Department look the other way when it comes to enforcing market regulations as they should apply to the Comex – because those same regulations are actively applied to every other CME commodity product – true price discovery in the gold and silver markets has become an impossibility. But we have 5,000 years of historical evidence which suggests that market interventions always fail. And when they ultimately fail, they fail spectacularly.
India’s jewelry industry is re-opening after a strike since March 1st that shut down India’s gold import machinery. A sleeping elephant is waking up starved for metal, as India heads into its second largest seasonal buying period of the year. This will make it more difficult for the banks to manipulate gold/silver prices using paper, which means the illegal trading activity of the next few days may be the banks’ last opportunity to cap the metals until India goes back into hibernation in the summer.
I added to high octane junior mining stock positions in the fund I co-manage today, and I will be presenting an insanely cheap junior mining stock with 5 million ounces of proved gold, half of which is in the form of gold-equivalent silver ounces, in my next issue of the Mining Stock Journal next week.