Tuesday, March 8, 2011

Hi Ho Silver!

If you think the price of oil is skyrocketing.. just look at what silver is doing these days!

The white precious metal just broke through the technical psychological barrier of $35 per ounce! topping $36.5 Monday morning!

$50 dollar silver is well under way.

US dollar inflation coupled with short supplies and rising demand is making this commodity shoot up. They cannot mine it fast enough.

This from Zerohedge:
The US Mint recorded selling 4.6 million Silver Eagles in January 2011 – a one-month record – while the website King World News recently reported shortages at the Royal Canadian Mint, producers of the popular Maple Leaf.

... and as the price of silver soars, those that are holding short positions are getting beaten up.
Futures markets are becoming increasingly important in the commodity pricing and silver is no exception; indeed, trends in silver futures are largely responsible for the price rise over the past few months. This is due to the gigantic short positions retained by some major (American) banks. The four largest traders are short an impressive 104 days of global silver production on the COMEX. The eight largest traders are short for almost 140 days of silver production. Herewith, silver is the highest in advance sold metal within the entire commodities complex.
The largest short position is held by JP Morgan. JPM’s short position was vastly increased by its acquisition of the bankrupt Bear Stearns in 2008, which prior to bankruptcy held an impressive commodity-trading desk.

Because of the negative press surrounding several banks trading on their own accounts, JP Morgan decided to shut down its proprietary trading department at the end of August 2010. JPM’s “prop desk” was one of the largest active short players on the silver futures market. It is no accident that the price has risen dramatically since then.In technical terms this is called a short squeeze, whereby the upward price spiral – caused by the settlement (or resale) of short contracts – ensures that more and more shorts have to cover: the snowball effect. Nobody can tell when a short squeeze will end. It is a phenomenon that usually originates from a small inducement and could end as suddenly as it began. They can last just a couple of days, or a couple of months or even years!

Given the still gigantic short positions on the silver futures market, this short squeeze could persist for some time. Increasing price volatility as the squeeze continues is likely. But the all-time high of just under $50 per ounce could, if the current pace of appreciation persists, be broken this year. Astute investors make sure they get some of this action!

That is what happens when you sell more silver than you actually hold physically.
Look for an upcoming bailout for JP Morgan.
I'll bet they intended on defaulting on their deliveries of silver just the same.

FYI - According to one commenter on Zerohedge...During the years 1942-1945, nickel ( a strategic metal ) was removed from the composition of US nickels, and replaced with silver. You might be interested to know that based on Monday's (3/7/11) market value of silver that with a silver content of 35% that the total melt value for those 1942-1945 silver nickels would be $2.0577411022 for each nickel.

Better have a look at grandpa's coin collection!

- NOTE: Nothing in this post - or in this blog - should be construed as investment advice. Please do your own thorough research when it comes to making decisions on any investments.