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The short squeeze in silver is fairly remarkable and obvious to all but the most pig-headed or willfully misdirecting. Looking at the Comex warehouse, SUPPLY is consistently and smoothly decreasing even while PRICES are increasing sharply.
Silver does appear to have hit a bit of a 'high note' here perhaps, and has once again come far and fast. A consolidation or a pullback might not be unexpected, depending on what US equities might do. For now many things are riding on the dollar liquidity bubble, including those who are merely fleeing it and seeking safer stores of wealth, particularly in Asia. Silver is outperforming gold as demonstrated by the decreasing gold to silver price ratio, no doubt influenced by the fact that the central bankers have access to gold in their national treasuries, but few have any silver. Silver is in a short squeeze, and so volatility and upside surprises are to be expected.
Intraday comments on the Comex Silver market were given here.
As for gold, the Financial Times notes that the world demand for gold is doing better than you might have gathered from the mainstream media.
"Unbelievable. Explosive. Insatiable. These are some of the words bankers are using to describe the gold market. That may come as a surprise, as the gold price has had an uncharacteristically quiet start to the year, for the most part trading either side of $1,350 an ounce.
The dramatic language is being applied to the strength of Chinese demand. Many have been truly shocked by the level of Chinese buying in the first few weeks of the year. As one senior banker (who is not prone to hyperbole) put it: “The demand in China is vast. It’s unbelievable. Whatever you think the demand is it’s much bigger… I’m really staggered.”
Perhaps the Federal Reserve and Wall Street Banks can send some one of their missionaries to China to educate them on what constitutes real wealth. Timmy may be ready to give it another go.
Isn't American crony capitalism marvelous?
Third bubble in eleven years.
Here is a chart of registered silver ounces available for delivery in the Comex warehouse. Nine out of ten Americans may notice a trend.
If it seems somewhat counter-intuitive that the available supply continuously declines even as the price soars, you may begin to obtain some sense of the true nature of the management, regulation, and character of this market.
Comex has two categories of silver in its warehouse.
The eligible category merely means that the silver is in a condition to conform to the standards of delivery. Size and quality of the bar in other words. It is being stored at the Comex warehouse, but is not offered for delivery into contracts.
Registered means that the silver is available for delivery to those who demand bullion.
Eligible silver can become registered and deliverable if the owner of the silver declares it saleable at some price. And of course if it is there, and otherwise unemcumbered by senior obligations or conspicuous absence. There are a little over 60 million ounces of eligible silver being stored by customers at the Comex, in addition to the registered dealer inventory.
The registered inventory of silver at the Comex, 42 million ounces, is worth about 1.34 billion dollars at today's prices.
The entire silver inventory at the Comex warehouse, roughly one hundred million ounces of silver, is worth about 3.2 billion dollars at today's prices.
There are some rules passed a few years ago, delivery limits sanctioned by the CFTC, that prevent a large entity from taking too much physical bullion in a single month, and enforcing a paper settlement. I think that is why the inventory is undergoing a slow but very steady drain.
In other words, THEY can SELL as much as they wish, but YOU can only TAKE as much as they allow you to take at the current prices. That might sound like a con by any other name, but it is certainly no definition of market pricing of a physical commodity when you can sell what you wish at whatever prices you set, but then refuse delivery at those prices.
When and if this market leverage breaks, the silver on the periphery, the non-eligible supply of smaller bars and coins, is going to evaporate given the large amount of leverage in the unallocated silver bullion that people believe that they own, and the realization that the confidence which investors have had in the integrity of US markets has been abused. The silver on the periphery is a relative drop in the bucket compared to the growing demand from millions of buyers, however relatively smaller than the bullion banks which each individual buyer may be.
