Sprott Adds 6.5 Million Ounces of Silver to Its Trust at Approximately 25.82 Per Ounce

It is my understanding that the Sprott Trust 'books' the silver when it makes the deal to acquire it, but the actual silver will not be obtained and delivered to their vaults for some weeks as the market gathers the bullion together and ships it to them.

This was a very large purchase, and it will be interesting to see if we can determine where it is coming from as inventories draw down. Many analysts watch the reports from the Comex each day for example, and how the various levels of supply fluctuate. Then again, in this paper driven world of fractional reserve inventories at the LBMA and the unallocated accounts of certain holdings it may not show up at all, at least for now. The paper game is pervasive.

Our estimate based on the available data is that they purchased 6.5 million ounces of silver at an average price of 25.82 US dollars per ounce. This is a 1.2% premium over today's spot price of 25.51, and a much larger premium over yesterday's paper prices that went as low as 24.10 intraday.

It is interesting that even on very large purchases it appears there is a premium to be paid to acquire actual unemcumbered bullion versus fractional reserve paper claims. Handling charges? lol.

Some might consider the price that Sprott paid to be a 'leading indicator' of where silver will be going. I think when the paper Ponzi scheme actually collapses silver will be much higher than that. After all, "he who sells what isn't his'n must buy it back or go to prison." Unless, that is, they are running the game. Then they just pay a fine and admit no guilt.

By the way, I have heard that it was J Aron (Goldman) leading the bear raid on gold with a 'monster short' in the futures pits yesterday. I wonder who they were acting for and whose money they lost? The CFTC could always pull the tickets and inquire, but it might very well be one of their colleagues down the street. As you may have heard, it is said that Goldman itself is accumulating bullion. I have heard of this for quite some time, and you may recall that I said when the time is right a big player like the squid will slither out of their lair and strangle the metals shorts,  and perhaps ruthlessly so.

As an aside, I get a few 'sour grapes' emails almost every day out of the many hundreds I receive. I try to read and respond to each one, with a few exceptions for the spam filter. Some think I am too liberal, some think I am too conservative. Some think I am even guilty of the crime of being French! I am not but would gladly claim that prize. If you can offer me dual citizenship please do. lol. Some believe I speak about spiritual matters too much, or mention personal matters even obliquely, or don't invite them to my restaurant for 'free meals when they are in town.' Sometimes the self-centered and self-righteous indignation is remarkably funny. How dare anyone exist who does not do so for their personal and immediate convenience! Well, we see these types on the highway almost every day, so I imagine they must be on the internet as well.

But by far the greatest complaint I am getting is that I "write about gold and silver too much."

I write about the things that I love and that interest me: good food, good people, beautiful ideas and things, the vagaries of human nature, the Spirit.

I can think of no more interesting or important phenomenon than the decline and replacement of the US dollar as the world's reserve currency. And if you are in any way influenced or affected by the world of money, believe me when I say that it is of importance to you as well. And there is no more certain sign right now of what is happening than the bull market in gold and silver, and certain other commodities.

It is time to get your affairs in order. There are times ahead that will try men's souls.

Gold Daily Chart and the Fed's Monetization Plan

Volatile day in the metals with bear raids abounding from the New York open.

Gold and silver would not be denied.

Here is a nice summary of what the Fed announced from Everbank World Markets.

"The Federal Open Market Committee announced they would be purchasing $600 billion of treasury securities over a time period ending in June of 2011. These security purchases will be concentrated in the 3 to 7 year area with an average duration of 5-7 years. The official statement said the purpose of these purchases was to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

The FOMC also directed the NY Fed to continue to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities. Based on current estimates, the NY Fed expects to reinvest another $250 to $300 billion over the same period. This brings the total of the stimulus package to just under $1 trillion dollars."

SP 500 December Futures and US Long Bond Daily Charts

Benny and the Fed delivered a 600 Billion dollar in new monetization program today, not including rollover purchasing which should take the total purchasing for 2011 a bit closer to a trillion.

The program will be for 8 months, rather than the expected 6, and will not include MBS or the 30 year Bond, which was particularly hard on Big Daddy today which you can see from the second chart below of the 30 year bond.

As a side note, coming into today's FOMC meeting, Bloomberg says that Goldman Sachs was advising traders to 'buy the long end of the curve.' Surprise, surprise, surprise. LOL.

New COMEX Related Silver Manipulation Lawsuit Includes Charges of 'Racketeering'

Self-regulation and efficient markets hypothesis. Feh!

It will be interesting to see if this makes it into the discovery process and if any government officials will assist in the investigation process. This looks like a job for hairy knuckled prosecutors armed with subpoenas and wiretaps.

The mainstream media will most likely ignore this and the usual suspects from the demimonde of the financial media will dismiss it as nonsense.

One has to wonder if this is what CFTC commissioner Bart Chilton was alluding to in his recent statement.

NEW YORK, Nov. 3, 2010 /PRNewswire/ -- JP Morgan Chase & Co. (NYSE: JPM) and HSBC Securities Inc. (NYSE: HBC) face charges of manipulating the market for silver futures and options in violation of federal commodities and racketeering laws, according to a new lawsuit filed Tuesday in the U.S. District Court for the Southern District of New York

The suit – which alleges violation of the Commmodity Exchange Act and the Racketeering Influenced and Corrupt Organizations (RICO) Act – alleges that the two banks colluded to manipulate thhe market for silver futures starting in the first half of 2008 by amassing huge short positions in silver futures contracts they had no intent to fill, but did so to force silver prices down to their benefit.

The suit was filed on behalf of Carl Loeb, an independent investor in silver futures and options, by Seattle-based Hagens Berman Sobol Shapiro LLP, a class-action and complex litigation firm. "The practice of naked short selling has long been a serious issue on Wall Street," said Steve Berman, co-counsel and managing partner at Hagens Berman. "What we know about the scope and intent of JP Morgan and HSBC's actions in this short-selling scheme dwarfs any other similar attempt to manipulate a commodities market."

According to the complaint, JP Morgan amassed a sizeable short position in silver futures and options in part through its March 2008 acquisition of investment bank Bear Stearns. By August 2008, JP Morgan and London-based HSBC controlled more than 85 percent of the commercial net short position in silver futures contracts.

The suit alleges that, starting in early 2008, the two banks began manipulating the silver futures market by accumulating unusually large "short" positions and then secretly coordinating enormous sales of silver futures contracts on the Commodity Exchange, which is known as "COMEX" and is part of the New York Mercantile Exchange.

According to the lawsuit, JP Morgan and HSBC used a variety of methods to coordinate their manipulation of the market for silver futures contracts, signaling when to flood the COMEX market with short positions, which caused the price of silver futures and options contracts to crash.

The suit describes two "crash" events that were set in motion by JP Morgan and HSBC, one in March 2008, and the other in February 2010, after defendants had amassed large short positions. In the wake of both events, the suit alleges, COMEX silver futures prices collapsed.

"We believe that JP Morgan and HSBC's scheme was carefully conceived and coordinated to maximize their profits at the expense of innocent investors who believed that they were trading in a market free from manipulation," Berman said.

The complaint also contains allegations that in September 2008, the U.S. Commodity Futures Trading Commission launched an investigation that would eventually consider allegations made by a London-based independent metals trader named Andrew Maguire that the silver futures market was being manipulated.

The complaint alleges that Maguire disclosed to the CFTC on Feb. 3, 2010 that he received a signal from the two banks of their intent to drive down the prices of silver futures two days later, on Feb. 5, 2010. Maguire's information was correct and the price of silver dropped dramatically between Feb. 3, 2010 and Feb. 5, 2010.

In addition, the lawsuit states that both JP Morgan and HSBC still maintain highly concentrated holdings in short positions in silver futures and options, giving both banks the ability to continue manipulating the price of silver.

Plaintiffs' attorneys have asked the court to certify the case as a class action and enjoin JP Morgan and HSBC from continuing their alleged conspiracy and manipulation of the silver futures and options contracts market.

Attorneys also ask the court to award damages and attorneys' fees to the class.

Just remember that Blythe said Don't Panic. She's got your backs. Or is busy cutting a deal. You will have to decide which is more likely.

I also hear that high flyer Steve Black, who was promoted up at the beginning of the year, will be leaving JP Morgan.