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Why I Have A Hard Time Believing “Un-named” Silver Insiders

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Published : March 09th, 2012
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FOLLOW : Physical Silver, Silver

 

 

 

 

I read an interview with an un-named “London Trader” on Eric King’s King World News site this evening that had me scratching my head as the interview raises more doubt about the constant permabull theme and story. Who knows…maybe he does have an inside source on the trading floor in London. However, contradictions are often purely visible in the silver story if you take the time to study the information.

First let me fill you in on what this un-named “London Trader” had to say.

The Chinese are divesting out of paper right now. So we are seeing a huge uptick in euro physical silver purchases, as well as dollar silver purchases. When silver took out $33, a huge amount of physical orders were filled.”

The Chinese are doing the exact same thing in the silver market that they are doing in the gold market, massive accumulation on dips. It is also important to note that the local traders in silver are short and nervous. Everyone is short silver and so that market can move violently higher when it turns.

When silver reverses, it will be the one that leads the market higher. Also, the commercials have been covering in silver the same way they have been in gold....

The physical silver orders that were just filled have been waiting since February 16th. Those orders near the $33 level were filled in huge size on Tuesday. These long-term accumulators are buying every dip. There were some fills at $34, but some very large orders were filled near $33.

As long as we stay under $34, there is going to be constant accumulation. What does it matter if you buy silver at $32 or $38, when it is going to go multiples higher from these levels? The Chinese know this and that is why they are accumulating in size. (My own note: Exactly! If silver is going much higher, what does it matter? Why were the orders waiting from February 16th waiting for $33.00?)

What is happening here is essentially criminal, but the smart money is capitalizing on it by accumulating. They take advantage of the manipulation. Remember, a lot of this is spot indexing that will be converted to physical over the next few days.

These guys (bullion banks) are so naked short and the last thing they need is to have physical disappear at this time. This is the ammunition they have to drive the market lower and they don’t have very much ammunition.

Even in the virtual market they are running out of sellers they can cover into. There simply aren’t enough weak hands for them to cover in size and as I said, the last thing they need is for physical to be disappearing at these levels.

The real (physical) market is taking over now and the virtual (paper) market will not be as important going forward as the price of silver begins to rise again.”

I wonder how the Chinese were able to accumulate such “huge” amounts of physical silver. It was just this past December that this same “London Trader” told Eric King

There isn’t enough silver for investors to buy (in large amounts) The silver isn’t there. You can just imagine how long the wait times will be going forward.” (Apparently less than two weeks according to the story above)

Sprott’s fund as of February this year held 32,878,296 silver ounces in bullion bar form. That’s a lot of silver. In fact he was able to purchase 11 million ounces for his Trust this past January alone on relatively short notice and with an extremely low premium.

Dr. Jeffrey Lewis said in September of 2011:

In less than one week, the price of silver gave up some 9 months of gains in a move from $40 per ounce to $28. The current price for silver, which is the lowest price in 9 months, is sure to create shortages for physical silver.

It should be recommended to anyone who is currently accumulating metals that purchasing silver immediately after a correction is a poor investment decision, especially in physical metals.

One of the current themes permeating the market has been whether or not a physical silver shortage will lead to an imminent price spike. Zero Hedge certainly pumped this theme in early December. So how is this London Trader able to tell us that there was plenty of physical to be had with less than a two week wait? But wait, wasn’t last week’s smash a “paper take-down”?

Then there was Sprott himself saying that he can basically buy silver “at spot”. (3:19 of this video) in May of 2011. Buying silver at spot doesn’t imply shortage does it? He also says that he will be a net buyer going forward, “every day” … hmmm, but I thought there was a supply issue.

Dear readers … I think you are all smart enough to think for yourselves. This piece isn’t a bash on silver .. this piece is meant to open your eyes to keep you from “blindly” believing everything you read about silver, especially when the information comes from “un-named” sources and no proof to back up such claims other than the un-named person’s word. Question everything!

Names, proof and confirmation … that’s all I look for when I read these stories. Ask yourselves, if silver shortage issues have been been the main driver of silver prices since the euphoria around physical silver buying started then how are all of you able to accumulate, how can every bullion shop I call have ample supply and how can these major purchases happen with relatively no wait time for such large orders? Heck, the purchaser in the above piece had to wait less than two weeks. That doesn’t imply shortage.

It’s the same story all the time. The same stories come out of the woodwork after every major correction in the price of silver. Are you buying it for fundamental reasons (shortage, industrial output less than industrial usage) or are you buying it as a form of alternative currency?

Don’t flood my inbox with hate please … this is not a bash on silver (of which I am long term bullish) but just another piece pointing out some of the irregularities in the silver stories. These are things that anyone wanting to purchase silver should be aware of. There are two sides to every coin .. I’m just trying to show you the other one.

 

 

Companies Mentionned : Bullion |
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Dan Dontrose is the editor of The Fundamental View
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