Net Asset Value of Precious Metals Trusts and Funds: Sprott Silver Trust Cash Position

With the addition of 7.5 million units, presumably from the allotments to the underwriters, the cash position of the Sprott Physical Silver Trust has risen to over 180 million US dollars according to their data and our calculations.

According to the terms of this trust, the monies must be applied to the purchase of silver bullion. Sprott may have already arranged for the delivery and price of the bullion, but has not yet booked it. Or perhaps they must still secure supply.

Gold and silver received some fairly stiff and obvious bear raids this morning, at least by recent standards, no doubt in anticipation of the FOMC announcement of Quantitative Easing II this afternoon. Market manipulation will continue until public confidence is restored. lol.

Today I am still running light positions in a well balanced pair of long bullion and short stocks, particularly in the financial sector. I expect I might make some changes around 2:45 New York time this afternoon.

The Working Class

Gold and SP 500 December Futures Daily Charts

Net Asset Value of Certain Precious Metal Trusts and Funds

We had some very unexpected news today.

One tries to prepare for anything, hope for the best and prepare for the worst, but sometimes when we least expect it, are completely surprised by joy.

Thanks be to God and thank you for your good encouragement and especially your prayers.

Gold Daily and Silver Weekly Charts

SP Daily Chart: US Equity Rally Reverses on SEC Probe of JPM and Magnetar CDO Issuance

The US equity market reversed its rally with the better than expected ISM number on news that JPM is under SEC investigation as reported by Bloomberg.

It appears as though JPM put together a CDO with Magnetar, which helped to select some of the components. While Magnetar bought some of the CDO, it also invested a significant amount in CDS that bet on the failure of the CDO.

The implication is that JPM and Magnetar did some of the same things that Goldman and Paulson had done.

This reversed the rally and took the financials down.

Personally I think US equities are still in their trading range with 1168 as a lower bound and 1194 as the upper bound. The wiseguys are doing a daily wash and rinse on the specs. Volumes are thin and positions are almost without any substantial foundation with the average holding time of most positions under a minute. This is a market that seems primed and ready for a flash crash, but it requires some 'trigger event' to materialize. So timing a trading decline is a bit of a fool's game in the short time.

There are three events that could affect US equities this week.

First is the national midterm election tomorrow, in which the Republicans are widely expected to take control of the House of Representatives. The Senate is a much less certain outcome. Most likely there will be 'gridlock' in the US for the next two years with power more evenly balanced between Republicans and Democrats. Any divergence from expectations in the elections results could provide some momentum out of this trading range.

The next event will be the FOMC decision on Wednesday with wide expectations of a $500 billion commitment to quantitative easing. A significant deviations from this number could provoke a market reaction.

And finally back to the real economy there will be a Non-Farm Payrolls report on Friday that will be closely watched. Consensus is for 60,000 jobs to be added.

In the background there is the 'cargo cult' of new terrorist threats permeating the news with the revelation of disguised bomb packages originating in Yemen.

This market is so artificial that it is difficult to forecast just what it will do that is out of trend.

Chart added at 4:20 PM NY Time

Sprott Physical Silver Trust

Here is a link for the Sprott Physical Silver Trust

I will be tracking the progress of their silver accumulation and will be working them into my Net Asset Valuation calculations as time permits this week.

I do own some shares which I bought in the IPO. I may add later if the markets indicate this. I would like to build a long term position but will  'make haste slowly' as the Romans said (Festina lente).

This is a busy week for me in a non-market related matter. For those of you who have offered their prayerful support and encouragement I thank you from the bottom of my heart.

Things can be replaced. People can't.

Gold Daily and Silver Weekly Charts

The charts seem to be fairly obvious. Gold hit the pivot point for a 'significant decline' and rallied sharply. Silver is just a juggernaut, using the top of the old trend channel now as support.

Unless and until US equities crash, I would expect both gold and silver to continue to rally. The reasons are obvious to anyone who is following the markets and has even a basic understanding of money and economics. These are not charts so much as economic IQ tests.

People who lost money trading silver futures or options on the New York Commodity Exchange since 2008 are eligible to join the class-action price-manipulation lawsuit brought this week against J.P. Morgan Chase & Co. and HSBC Bank in U.S. District Court for the Southern District of New York. To express interest in becoming a member of the class of plaintiffs, contact:

Kellie Lerner
Labaton Sucharow LLP
140 Broadway
New York, NY 10005
Telephone: 212-907-0700
Fax: 212-818-0477
KLerner@labaton.com

SP 500 December Futures Daily Chart

If a close look at this chart suggests to you that someone is inflating US financial asset prices you might very well be right.

Except for hedges and scalps I would not even consider shorting this market until it breaks the obvious trendline. I'd be willing to miss the first 10 percent of a down move to catch the meat of it, and not exhaust myself trying to anticipate a correction. Only amateurs make calls and chase 'bragging rights.'

At the same time the 200 week moving average has proven to be formidable resistance in the last rally, and so I would not feel comfortable taking determined longs here either. The average holding time of a position in this market is literally less than a minute, so the potential for another 'flash crash' seems rather high.

Sprott Physical Silver Trust: PSLV To Debut at 500 Million Dollars

Keep an eye on the Sprott Physical Silver Trust which will begin trading this week as symbol PSLV.

Reuters
Sprott silver trust IPO to raise $500 million
Fri Oct 29, 2010 8:34am EDT

TORONTO Oct 29 (Reuters) - Sprott Inc, the Canadian fund manager specializing in resource investments, said on Friday that it planned to raise $500 million in the initial public offering of the Sprott Physical Silver Trust.

The offering will consist of 50 million units priced at $10 each.

The trust, which will be managed by Sprott Asset Management, will invest and hold nearly all its assets in silver bullion.

It will be listed on the NYSE Arca and the Toronto Stock Exchange under the symbols "PSLV" and "PHS.U," respectively.

The offering was made simultaneously in the United States and Canada through a syndicate of underwriters led by Morgan Stanley (MS.N) and RBC Capital Markets (RY.TO).

As part of the offering, the underwriters have been granted an overallotment option to purchase up to an additional 7,500,000 units at $10 each.

The Canadian syndicate includes TD Securities Inc (TD.TO), Canaccord Genuity Corp, National Bank Financial Inc (NA.TO), BMO Capital Markets (BMO.TO), HSBC Securities (Canada) Inc, GMP Securities LP, Wellington West Capital Markets Inc, and Mackie Research Capital Corp.

Sprott did an initial public offering of the Sprott Physical Gold Trust in March, which raised $400 million. The value of that trust crossed the $1 billion mark at the end of last month as gold prices soared.

JPM and HSBC Sued for Silver Market Manipulation

As I recall when Blanchard sued Barrick and JPM for manipulating the gold market one of the first motions to dismiss came from Barrick who claimed that they were acting at the behest of the government and the central banks.

I believe the law firm representing this was the one who was successful in the Sumitomo copper litigation.

Reuters
JPM and HSBC Sued for Alleged Silver Market Manipulation
By Jonathan Stempel

NEW YORK, Oct 27 (Reuters) - JPMorgan Chase & Co (JPM.N) and HSBC Holdings Plc (HSBA.L) were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.

The banks, among the world's largest, were accused of manipulating the market for COMEX silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall.

"Defendants reaped hundreds of millions of dollars, if not billions of dollars in profits" from the conspiracy, one of the complaints said.

The respective plaintiffs, Brian Beatty and Peter Laskaris, each said they traded COMEX silver futures and options and contracts, and lost money because of the alleged manipulation.

Beatty lives in Connecticut and Laskaris in New York, court records showed. The lawsuits seek class-action status, damages that may be tripled and other remedies. The defendant banks are major participants in the silver market.

JPMorgan declined to comment. An HSBC spokeswoman had no immediate comment.

The lawsuits were filed one day after the Commodity Futures Trading Commission proposed regulations to give it greater power to thwart traders who try to manipulate prices.

The CFTC began probing allegations of silver price manipulation in September 2008.

"Going back to the early 1980s, silver has been an extremely volatile market," said Bill O'Neill, managing partner at Logic Advisors, an Upper Saddle River, New Jersey investment firm specializing in commodities. "I often describe it as a speculative playground. You have to be a big boy to play."

FRAUD, DEVIOUSNESS ALLEGED

Only once in its 36-year history has the CFTC successfully concluded a manipulation prosecution, in a 1998 proceeding concerning prices for electricity futures.

Speaking on Tuesday, Chairman Gary Gensler said the proposed regulations would give the regulator greater power to police "fraud-based manipulation."

Commissioner Bart Chilton added that there had been "fraudulent efforts to persuade and deviously control" silver prices.

A CFTC spokesman said the regulator does not comment on investigations, and would not discuss the investor lawsuits.

Earlier this year, the CFTC began looking into allegations by a London trader that JPMorgan was involved in manipulative silver trading, the Wall Street Journal said on Wednesday, citing a person close to the situation.

Silver prices have faced regulatory scrutiny in the past, perhaps most prominently after the Hunt brothers in Texas in 1980 attempted to corner the market, driving prices above $50 an ounce. The price later plunged.

Since the CFTC began its probe, spot silver prices XAG= have ranged between $8.42 and $24.90 an ounce, Reuters data show. They traded Wednesday at roughly $23.53. Silver futures prices SIc1 are up 39.1 percent this year.

Gold Daily Chart

SP 500 December Futures Daily Chart

The US stock market is like velveeta cheese: full of artificial content and favored by rats.

Gold and Silver Options Expiration

Those who hold in-the-money options receive long and short positions in the futures today. Sometimes they like to run the stops to test the new hands on board.

Just in case you were wondering.

The Sprott Silver Trust is pricing tonight as well I believe.

Full Text of CFTC Commissioner Bart Chilton's Statement on Market Manipulation

Has the US financial media mentioned or even discussed this? Today the Bloomberg television news people are busy discussing the World Wrestling Federation, a caricature of sport analagous to the Comex and NYSE as financial markets.

Statement of Commissioner Bart Chilton
U.S. Commodity Futures Trading Commission
Public Hearing on Anti-Manipulation and Disruptive Trading Practices
Washington, D.C.
Tuesday, October 26, 2010

I take this opportunity to comment on the precious metals markets and in particular the silver markets.

More than two years ago the agency began an investigation into silver markets. I have been urging the agency to say something on the matter for months. The public deserves some answers to their concerns that silver markets are being, and have been, manipulated.

The legal definition of manipulation under the law is a high bar to prove. It is a much different test than what the average person might consider as manipulation. Under existing law, to prove manipulation, the government is required to demonstrate not only specific intent; we also need to prove that as a result of the intent and market control, that activity caused an artificial price -- a point that can certainly be debated by economists.

Attempted manipulation is less difficult to prove -- requiring an intent to manipulate and some overt act in furtherance of that intent. There are also other violations of law that could contort markets and distort prices.

I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.

In saying this, I am fully aware of the prohibition from divulging trader names or information about their positions I am extremely careful not to violate the law in this, or any, regard. I also cannot pre-judge anything the agency may do with regard to our silver investigation, or any other matter.

The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as anti-disruptive trading rules. These new authorities, along with the implementation of thoughtful position limits in metals, will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.

Thoughtful investigations take time. The CFTC staff has worked extremely hard on the silver investigation. That said, there is a point at which it is our responsibility to say something. Within the law, I have done so. I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.

CFTC Probes JP Morgan's Silver Trading

The spectacular silver rally and current price is no bubble. HSBC and JPM stopped shorting the market so vigorously and began to actually cover some of their positions as a result of CFTC investigations.

Since the CFTC had previously investigated the market and done nothing, one might speculate that the publicity had provoked some behind the scenes discussions. JPM recently shut down its proprietary trading unit under Blythe Masters.

I will be absolutely stunned if anything except for a wristslap with no admission of wrongdoing is the result. However behind the scenes we might see a less oppressive domination of the silver market by these TBTF banks. But the profiteering will continue here and elsewhere. This is no reform administration and the Republicans were the primary authors of much of the crony capitalism so there is little relief to be found there.

What the masters of the universe seem to have not quite figured out yet is that you cannot keep skimming about 8 percent of M1 off each year as Wall Street bonuses, gimmicking and distorting the financial system to enable their control frauds, and maintain robust real economic activity. There were quiet coup d'etats in the UK and US, but the people do not yet realize it. At some point they will see the necessity of reform, and then we might have a sustained recovery. Until then, welcome to Zombieland.

CFTC scans JP Morgan's silver trading business
By Sakthi Prasad in Bangalore
Wed Oct 27, 2010 2:13am EDT

(Reuters) - The U.S. commodity futures regulator is looking into claims by a trader in London that JPMorgan Chase & Co (JPM.N) was involved in manipulative silver trading, the Wall Street Journal reported, citing a person close to the situation.

In recent months, U.S. Commodity Futures Trading Commission (CFTC) lawyers have interviewed employees of JPMorgan in its metals trading business, the newspaper said, citing a person familiar with the situation.

Along with JPMorgan, CFTC lawyers have also interviewed industry traders, commodity executives, experts and employees of other metals trading firms, WSJ said.

JPMorgan declined to comment to the Wall Street Journal on any aspect of the investigation. The firm could not immediately be reached for comment by Reuters outside regular U.S. business hours.

On Tuesday, Bart Chilton, a commissioner at the U.S. CFTC said there had been repeated attempts to influence prices in silver markets.

The Journal said JPMorgan and HSBC Holdings PLC (HSBA.L) have usually been the big players in the silver market.

However, in recent months the banks with large futures positions have sharply reduced the size of their holdings, the paper said.

(Reporting by Sakthi Prasad in Bangalore; Editing by Clarence Fernandez)

Here Is What A Significant Selloff In Gold Might Look Like With Our Active Chart Formations

If there is a severe correction in stocks a selloff in gold could ensue that would be a more severe than a simple retracement and consolidation. I am showing this not because I now think it is more likely, but rather because people write in and have asked for this type of more pessimistic scenario.

Here is what the correction might look like as a retest of the breakout trendline. From a timing standpoint the US November election looks likely as a pivotal event and a decision point in the November 2-9 timeframe.

On a nominal basis, the depth of this selloff would be approximately the same as that which happened in July and August of this year following the initial breakout in the cup and handle formation.

If there is not a severe correction in stocks, gold is more likely to stay within the short term trendlines in blue until it regains the upward momentum and follows the intermediate green trendlines higher.

Gold and SP 500 December Futures Daily Charts; SP Cash Weekly Chart

Advance Q3 GDP is out on Friday of this week.

Net Asset Values of Certain Precious Metal Trusts and Funds

The premiums are very modest indeed.

CFTC Commissioner Raises Alarm Over Silver Market Manipulation

The manipulation in the silver market with two or three banks holding enormous undeliverable short positions was obvious, for years.

The CFTC was complicit in turning a blind eye to this, stonewalling and whitewashing the corruption, as were many market commentators and participants. Ted Butler and GATA did a wonderful job of highlighting this enormous fraud but were ignored and even vilified for the past twelve years in the same vein as whistle blower Harry Markopolos was in raising concerns about Madoff's investment scheme.

Bart Chilton is speaking out as he said a few weeks ago he would if the CFTC was not making progress in correct this travesty. This is the sort of reform that the people were seeking when they swept the Democrats into office, a reform which they never received.

This obviously should be investigated by an independent body, given the regulatory capture held by the banks who manipulated the market to the detriment of the world in suppressing prices and creating an artificial shortage that will be painful to unwind.

This is not a partisan issue, but involves politicians of both parties going back twenty years or more, in both London and New York. And the corruption is pervasive and ongoing in multiple US finanical and commodity markets.  The regulators and ratings agencies have not been doing their jobs.

Some will attempt to dismiss what Mr. Chilton is saying here as inconclusive. Keep in mind that he is a high profile CFTC official, and what he says comes through a 50,000 watt megaphone, so he must choose his words with great care. But this is almost unprecedented for an official to speak out against his own administration.

The response to these sorts of revelations seem to be a blanket of media silence and whispered character assassination, which is the mark in trade of those who have no sense of duty, honor, and country. Their crime is betrayal of the public trust, and the public's fault is apathetic complicity.  'Silver did not rally on the news, it must not be significant. I did not hear about this on television, so it must not be true.'

But the dominos are starting to fall, and more revelations are to come. 

CFTC's Chilton raises alarm about silver market
WASHINGTON
Tue Oct 26, 2010 9:30am EDT

Oct 26 (Reuters) - There have been repeated attempts to influence prices in silver markets, Bart Chilton, a commissioner at the U.S. futures regulator, said on Tuesday.

"There have been fraudulent efforts to persuade and deviously control that price," Chilton said in prepared remarks before a Commodity Futures Trading Commission meeting.

Chilton said he could not pre-judge the outcome of the CFTC's ongoing investigation of the silver markets, but said public deserves some answers to their concerns.

Gold and silver are no bubbles. It is a reverse Ponzi scheme that goes back for decades, that has sold many more ounces of metal than can possibly be delivered at today's artificially low prices, that was tolerated and even promoted by those who were running a monetary control fraud, quite probably the greatest in history. The banks and insiders are trapped and desperate, trying to bluff and buy themselves out of another fraud yet again. They will never give up, but will have to be rooted out. It is unlikely that reform can come from within, since the righteous anger of the people and the will to change will be co-opted by those very forces that have manipulated the system and perpetrated the fraud.

Fortunes will be made and lost, and careers ruined, as the revelations of manipulation and corruption are made over the next ten years. And this will make for dangerous times, as an empire of deceit collapses not at once, but in stages. There will be new threats and more bailouts for the banks to be paid by 'austerity' for the common person who is caught up in their own web of petty diversions, apathetic cynicism and denial. There is little better example of this than Britain but America is not far behind.

But the tide has turned and change is in the wind.

Banks short 20,000 tonnes of gold.

Embry: Commercial Signal Failure in the Metals May Be Imminent

"A single breaker may recede; but the tide is evidently coming in."
Thomas B. Macaulay