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Eric Sprott's Double Barreled Silver Issue
Just released from Eric Sprott, Sprott Asset Management
Regular Markets at a Glance readers may have wondered why we remained so silent on the subject of silver over the last several months. Considering the significant exposure we have to silver as a firm, we can assure you that it wasn’t for lack of desire to share our views, but rather due to strict solicitation restrictions imposed on us by the cross-border listing of Sprott Physical Silver Trust (PSLV) this past October. It therefore gives us great pleasure to finally share our views on silver with you.
We have included two separate articles in this issue of Markets at a Glance: the first was written back in June 2010, and contains the information we used in the prospectus for the PSLV. The second is an update article written this past month that discusses new developments in the silver market and confirms our views on the metal. We urge you to read them both in order to understand our investment thesis for silver, and we hope they compel you to take a much closer look at silver as a long-term investment. Silver’s dramatic rise over the last two months is no fluke - it’s the result of a compelling supply/demand dynamic within a unique market structure. We hope the following articles convey our enthusiasm for "the other shiny metal" as an exceptional investment opportunity.
The Silver Lining, (June 2010)
By: Eric Sprott & David Franklin
No matter how complex our financial system becomes, the economic axiom of supply and demand will still apply. If the demand for an asset outstrips supply, the price of that asset will appreciate. The challenge in finding supply and demand imbalances in today’s market often lies in judging the quality of market data available – it frequently isn’t even close to being accurate. If the numbers don’t show the imbalances, it’s tough for investors to determine if the market price accurately reflects the market dynamics. Nowhere is this more prevalent than in the market for silver.
While gold dominates the headlines, the silver market actually enjoys a superior fundamental supply/demand story than that for gold, although you’d never know it based on the silver demand statistics from the major reporting services. As students of the precious metals markets we monitor the numerous metals reporting services very closely. According to those services, the silver market has enjoyed a stable supply/demand balance for almost ten years now. If that’s the case, why has the price of silver appreciated from $5 to $19/oz over that same time period? Is the reporting services’ data on the silver market truly reflective of silver’s underlying fundamentals?
Although there are several reporting services for silver market information, GFMS Ltd. and The Silver Institute are the most often quoted sources for silver market data. While they provide statistics for both silver supply and demand, it is their neglect of the "investment" demand category that we find problematic. GFMS and The Silver Institute use a category called "implied net investment" to capture the demand for physical silver from institutional and retail investors. The definition for "net investment" as defined by GFMS is "the residual from combining all other GFMS data on silver supply/demand…As such, it captures the net physical impact of all transactions not covered by the other supply/demand variables."1 In other words, it is not an observed figure. GFMS’s "implied net investment" number doesn’t include any observable demand for silver by ETF’s and other reporting entities such as hedge funds - it is merely a plug used to balance the supply data for GFMS’s and the Silver Institute’s reporting purposes.2 As we delved deeper into the silver market, this realization prompted us to calculate our own investment demand statistic.
We present our findings in Table A. While GFMS and The Silver Institute use an implied number, we calculated a real investment demand number using a handful of ETF’s and two other large private investors, one of which is our own firm. Our demand metric is by no means complete or exhaustive - we only used seven sources of reported investment demand, and yet from our informal and incomplete survey we found that GFMS and The Silver Institute had underreported silver investment demand by at least 225 million ounces! This shortfall doesn’t consider any other investors that may have bought silver over the past year, so real demand for silver could be multiple times higher.
Given its seemingly evident market imbalances, you might wonder why silver hasn’t performed better over the last year. The answer, we believe, lies in the way silver is priced. The silver spot price is dictated by paper contracts that trade on the COMEX exchange in New York. Paper contracts can be purchased "long" or sold "short". If more participants sell "short" than purchase "long", the paper market price for silver will decline. Often these contracts have little to no relationship with actual physical silver, and yet they are the most influential contract in determining silver’s physical spot price. Go figure.
In studying the silver market we owe a great debt to the work of silver analyst, Ted Butler. Mr. Butler has been writing about the silver market for fifteen years and has done much to inform investors about the reality of silver’s physical fundamentals. Butler provides some insight into the "short" positions that exist in silver today, highlighting the fact that the eight largest silver traders currently hold a net short position of over 66,000 contracts, representing more than 330 million ounces of silver.11 This means that the eight largest COMEX traders are net short the equivalent of 48.5% of the world’s total annual silver mine production of 680.9 million ounces. None of these traders are in the silver business by the way – they’re all financial institutions. In addition, the COMEX silver short position held by the eight largest traders on May 3, 2010, represented 33% of total world silver bullion inventory, estimated by Butler to be approximately one billion ounces. There is no real comparison with gold, as the 24.5 million ounce concentrated net short position held by the eight largest traders represents a mere 1.2% of the 2 billion+ ounces of world gold bullion inventory as reported by the World Gold Council.12 So in comparison to total world bullion inventories, the concentrated short position in silver is 27 times larger than that for gold. In every comparison possible, the short position in COMEX silver contracts is off the charts, and if you think the short positions sound potentially disruptive, you’re not alone. In September 2008 the CFTC confirmed that its Division of Enforcement has been investigating complaints of misconduct in the silver market. This investigation is ongoing and we look forward to its resolution.13
Because we believe the demand for precious metals will continue to increase in this environment, we’re always interested to know the total supply available in today’s physical bullion market. According to the best estimates from the USGS and current mining statistics, approximately 46 billion ounces of silver have been mined since the dawn of civilization.14 In comparison, approximately 5 billion ounces of gold have been mined throughout history.15 Reading this, a casual observer might conclude that gold is currently justified in being worth more than silver based on its relative scarcity. But the current price discrepancy ($1,250/oz gold vs $19/oz silver) is misleading.
As mentioned above, there are only 1 billion ounces of silver left above ground in bullion form today. That is a surprisingly small number in relation to the 46 billion ounces mined throughout history. The reason is due to silver’s consumption in manufacturing. Just like other industrial minerals, silver has been consumed in various processes over the course of history. Silver’s superiority in heat transfer, conductivity and light reflectivity make it unique, and it boasts anti-microbial properties that make it ideal for surgical instruments, clothing materials and certain medical applications. The key point to remember with all these applications is that once the silver is consumed it is typically never recycled. Many of its industrial applications require such small amounts in each surgical tool, electronic device or clothing item that it isn’t economic to recover from garbage dumps. For comparison, there are currently approximately two billion ounces of gold above ground in bullion form compared with the 5 billion ounces of gold mined throughout history.16 So despite being more heavily mined over time, silver bullion is now the more scarce "precious" metal than gold bullion is from an investment supply perspective.
This is where the silver story gets interesting for us. At today’s prices you have $19 billion dollars of silver ($19 x 1 billion ounces) and $2.5 trillion dollars of gold ($1250 x 2 billion ounces) above ground in bullion form. The size of the investment market for gold is therefore 131 times larger than that for silver. And yet, on a market relative dollar basis, investors are actually buying more silver than they are gold today. At today’s metals prices, in dollar terms, the US mint has sold approximately three times more value in gold than in silver thus far in 2010 coin sales. But there should be 131 times more gold sold than silver for the market to stay in balance. None of the largest gold and silver investment vehicles reflect the 131:1 ratio, suggesting that investors have a disproportionately large interest in owning physical silver.
For example, the largest gold ETF today, the SPDR Gold Trust ("GLD"), is currently ten times the dollar value of the largest silver ETF, the iShares Silver Trust (SLV). Since the SLV began trading in April 2006, the GLD has increased by $8 for every $1 increase in SLV’s NAV. Again, given the choice, investors are voting with their dollars and putting disproportionately more dollars into silver than gold from a relative market size perspective. It appears that no investors are anywhere close to buying 131 times more gold than silver, which market metrics would suggest if the demand for gold and silver were relatively equal – all of which brings us to silver’s ‘supply conundrum’: If on the supply side, as Ted Butler calculates, there are only one billion ounces of silver left in bullion form available for investment; and if, on the demand side, we were able to identify the holders of 500 million ounces spread across a mere seven investors - it implies that there is only 500 million ounces of silver left for everyone else to invest in! As large holders of silver bullion ourselves, we can tell you that 500 million ounces is not that much from a global perspective, and certainly won’t be enough to satiate the world’s investment demand for silver going forward. Also let us not forget the large silver short position on the COMEX that will almost undoubtedly require the purchase of 330 million ounces of silver to eventually cover. Assuming that happens, most of the silver available for investment will essentially already have been spoken for.
It also serves to mention that there will be no government silver stocks capable of covering this impending supply shortfall. According to the latest audit, the US treasury currently has 7,075,171 oz of silver in storage, which is about enough to handle two months of silver eagle coin production. If the COMEX silver short sellers are ever forced to cover, they won’t be able to lean on the government for a physical bailout.17
Judging by the numbers above, if hedge funds or any other large investor ever decided to invest in the physical silver market with the same voracity as they did with gold, the silver price could potentially explode. The existing silver inventory at COMEX is currently worth a little more than $2 billion at today’s silver price. We already know that high-profile hedge fund managers like Soros, Paulson and Einhorn have gold holdings with a total value of over $5 billion.18 If that same purchasing power was ever applied to the silver market, we could potentially witness a dramatic rise in the silver price and an effective clearing of all the physical silver in the COMEX inventory. It deserves mention that the SPDR Gold Trust ("GLD") added almost $5 billion dollars worth of gold in the last month alone, and it would take less than half of that GLD gold investment to wipe out the entire silver COMEX inventory.
The bottom line for us is that silver appears to be a fantastic investment today. Limited supply, strong demand and a potential buyer of almost half of one year’s global mining silver output make a great case for owning silver in physical form. Based on our calculations, it appears that the silver investment demand statistics published by GFMS and The Silver Institute are highly misleading at best. We believe the investment demand for silver is multiple times higher than that published, and given the outrageous short position in silver on the COMEX, coupled with the unsustainable buying ratios relative to gold, the case for physical silver is simply outstanding. As the expression goes, "every cloud has a silver lining". Notice it isn’t a gold lining or a platinum lining. In the silver market, the cloud has been duly represented by poor estimations of investment demand coupled with large outstanding short positions. That cloud will soon lift, revealing a "silver lining" that is far more valuable than it is today.
All that Glitters is Silver (November 2010)
By Eric Sprott & David Franklin:
In the four months since we filed the prospectus for the Sprott Physical Silver Trust on July 9, 2010, the silver price has rocketed up 54%, bringing its year-to-date return up to a stunning 68% (!!). Silver has now outperformed all of the other eighteen commodity components that comprise the CRB Commodity Price Index on a year-to-date basis. Silver has been the indisputable star of 2010, and we have been very long the physical metal in many of our mutual funds and hedge funds.
Silver’s performance since June has been influenced by a number of factors. The first and arguably most significant development took place on October 26, 2010 when comments were released by Bart Chilton of the Commodity Futures and Trading Commission (CFTC). The CFTC is the US government agency that supposedly regulates the US futures and options markets. While the CFTC has technically been "investigating" the silver market since 2008, it had revealed nothing about its findings for over two years. Everything suddenly changed when Mr. Chilton, a CFTC Commissioner no less, publicly stated that, "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 (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted (emphasis ours)."1 These comments quickly triggered a flurry of lawsuits against the purported manipulators and set the silver market on fire. There are now no less than four lawsuits seeking class action status. They all allege that JP Morgan Chase & Co. and HSBC Securities Inc. colluded to manipulate the silver futures market beginning in the first half of 2008. The suits claim that the two banks amassed massive short positions in silver futures contracts that they had no intent to fill in order to force silver prices down for their furtive benefit.
The suits also describe two ‘crash’ events that were set in motion by JP Morgan and HSBC, one in March 2008, and the other in February 2010, after the defendants had amassed large short positions. The suits allege that COMEX silver futures prices subsequently collapsed to the benefit of both banks in the wake of these events.2 The fallout from these accusations has undoubtedly increased the investment demand for silver, and it serves to remember, as we highlighted in the previous article, that investment demand was already understated by at least half by the major silver reporting agencies. It will be hard for them to downplay the recent demand increase, as the volume of silver contracts traded on the COMEX market on November 10th set a new record, surpassing the previous record set in December 1976 by 57%!3 This increase actually forced the CME Group to increase the margin requirements for COMEX silver futures twice in one week in order to maintain some semblance of market order.4
Silver coin sales as reported by the world’s major mints have also been exploding since Chilton’s comments were made. The US Mint, The Royal Canadian Mint, The Austrian Mint and The Perth Mint are all reporting record or near record sales of silver coins.5 The silver Eagle produced by the US Mint set three new records at various points in November: best annual sales, best silver Eagle mintage, and best ever month.6 Money is pouring into silver in all forms, and due to silver’s relatively small market size, this capital inflow is having a huge impact on the silver spot price.
As we outlined in our Sprott Physical Silver Trust prospectus and our June MAAG article, the physical silver market is surprisingly small in US dollar terms. The CPM Group estimates that above ground stocks of physical silver total 1.184 billion ounces in bar and coin form, implying a total silver market size of a mere US$33.15 billion dollars.7 At the end of 2009, approximately 500 million ounces of that 1.184 billion were already accounted for by the silver ETF’s and other large holders. This left approximately 684 million ounces of silver available for sale in 2010. That is hardly enough, in our opinion, to satiate demand.
The money flows into silver in November 2010 have been staggering. Consider the investment demand generated from only two sources: the iShares Silver Trust ETF (SLV) and US Mint coin sales. The SLV added approximately 18 million ounces of silver in November alone; the US Mint sold 4.2 million ounces of silver coins. If you multiply these amounts against today’s silver price of $28, money is flowing into the silver market at an annualized rate of $7.5 billion dollars! At that rate of demand, it won’t take long before all the remaining above ground silver is spoken for.
Silver’s demand profile may also benefit from the outrageous short position that exists in the silver COMEX market. The current ‘open interest’ in silver COMEX contracts totals an approximate 871 million ounces (!!!).8 This means there are paper contracts for over 871 million ounces of silver that have someone betting ‘long’ and someone else betting ‘short’. In the event that the ‘longs’ choose to take physical delivery, there will not be enough silver to supply each buyer. It’s simple math - with only 684 million ounces of silver available above ground, there won’t be enough silver to go around. And considering the rate with which people have been purchasing coins and silver bars this past month, there may not even be enough physical to satiate regular spot buyers, let alone futures market participants.
Considering all the recent developments in the silver market, it seems unlikely that the silver price will stay under $30/oz for long. The large quantity of money flowing into silver from investors, combined with the potential demand from those who are ‘short’ silver that they do not own, will likely end up swamping the physical silver market entirely.
As our dear friend, Marc Faber, espouses in his book "Tomorrow’s Gold", an investor can do very well by only making a few good investment decisions over his or her career. The trick is to make one good investment decision every decade or so, based on trends that will last a number of years.9 In our view, owning physical silver and the associated stocks represents that type of investment opportunity today. If that seems too simplistic, consider that in October 2001 we wrote an article that identified the investment of the last decade. It too was just a simple metal. The article was entitled "All that Glitters is Gold", and it was written when gold was still considered a relic in financial circles. We believe silver will be this decade’s gold, and judging by the recent price action, it’s already off to a great start.
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good - happy to see an aricle finally making sense -> of course the hedge funds are ruling the game and not Keiser with his tiny retail silver frauenfurz
WARNING: If you cant HOLD it, you DONT own it. Dont buy bullion vault, etf's, or nothing of the sort. Buy the real thing, and sleep with it. When they shit hits the fan, you'll thank me. Plus these maples look so shiny, sometimes I just stare at them for like 3-4 minutes while I......
I totally agree with you... except I just can't stand to hold any government sanctioned coin, especially when they have the photo of a megalomaniac pseudo-diety on one side (the maple leaf side is wonderful).
Thus, I much prefer pamp gold and silver bars, or anything else not made or certified by government. The buffalo gold coin is gorgeous, but I just don't want anything from government.
the fund holdings of silver are interesting but does anyone really believe that they hold that much silver? i would assume that they do not and i won't be making an ass of u and me...
I wonder if Mr. Sprott would mind if some of his share holders took a tour and inspection of his silver stocks that he , I would assume has completely , one hundred percent under this control? I am not saying he is lying, but these days , if I had some of those shares, I want to see the goods.
He has hired the Brinks company to hold it for him. Also, if you own enough shares to take delivery of a 1000 oz. bar, you can do so on a monthly basis. This makes it nearly impossible for the shares to trade at significant discount to NAV. This is all in the OS.
Sprott Gold Trust has a similar operation and redemption. You can also go to the web site look at the audit report (certified) and see the publicized list of uniquely numbered bars by manufacturer.
(Note: I am long PHYS)
Forget about all the great uses silver has for a second … Gold (auric) … may not be as useless as we have been lead to believe.
At the website, "Weather Wars" ...
ORMUS, White Powder Gold, Philosopher’s Stone, Manna, The Elixir of Life ...
& / Or type “ormus” in to the "Weather Wars" search box …
Scott Stevens talks about (5278 views) ...
Youtube - An Introduction to Ormus from Blue Water Alchemy
Scott Stevens talks about (2967 views) ...
Youtube - Which Ormus is right for me?
Blue Water Alchemy
QUEST FOR THE PHILOSOPHER'S STONE
ORMUS CHEMICAL PRODUCTION TECHNIQUES
ORMUS CHEMICAL PRODUCTION TECHNIQUES CONTINUED...
... hmm, makes a person wonder why gold is (& has been) so valuable.
... maybe you can eat it after all.
The analysis misses the LBMA.
The silver traded there is likely only paper-silver but theoretically all the bullion to cover the shorts could exist there.
More likely, the COMEX shorts are 'hedged' with LBMA shorts.
Anyway, without the LBMA the analysis is incomplete.
The last published data for the LBMA are october 2010 with an average daily trading volume of 92.2 million oz silver.
If those numbers represent physical ounces, covering ~ 300 million oz should not be a big deal; If those ounces are only paper, good luck to holders of paper-silver. The run for physical might be breathtaking.
edit:
from Harvey Organs market comment:
In Israel, in the major newspaper today, commented on the massive number of shorts in silver that have been accumulated by JPMorgan. They mentioned that the total short position by the bankers is in excess of 3.3 billion oz.
Sprott's numbers look more then incomplete.
Whether silver price goes up or down is determined by "investor" demand. Remember that and it is what Sprott is trying to balance in the first letter.
Consider that almost all of the oil ever produced has been consumed and is no longer available. The world inventory is a few month supply. Does that matter as long as there is production comming along to meet demand? Not much unless some people decide to stockpile it for a while and fill some ships. Once the ships are filled, where does the production go?
So, Sprott includes "investor" demand into the equation. That is well and good for the equation. So what is the investor enthusiasm for holding something that does not generate income while holding it and can only be profitable if some other investor wants it? Remember, there is at least 150% of world annual supply held in readib ly available inventory. How big does the supply buffer have to be to prevent a real supply shortage? Oil is only a few months and it seems to be adequate.
How many days supply of coal are in above ground inventory? It is burned and consumed every day, replenished by production, and without a 18 month supply buffer in inventory.
So, what Sprott is trying to explain is why many people would increasingly want to hold his commodity vs. an ounce of gold or an acre of land, or a sheet of copper or anything physical. There will be some demand for a "transactional" commodity. But no one really wants to be holding inert cash or gold or silver. They do not produce income or better living in and of themselves.
And a $100 bill produces a "better living in and of itself"? NOT. That $100 bill has lost 98.5% of its value in the past 80 years. Great investment. The ounce of gold or silver has held its value.
Fact: You could have exchanged your $100 bill for 5oz of gold (five $20 "gold pieces" coins) in 1933. Today those 5oz of gold would fetch you at least $8000.
Silver and gold can be owned quietly, in addition to no taxes, management fees, or hidden charges. It lives outside of the "money-charger" world - where the parasites take x% of your money every year for the privilege of managing it.
The money-changers create a world dominated by inflation, in order to make people 'invest' their money in order to beat this created inflation. The system is designed to take, process, and siphon off the people's money.
The evidence is here, and the gold suppression program applies to silver as well:
http://www.gata.org/node/7997
Also, Ted Butler has been following silver market manipulation for years: http://news.silverseek.com/SilverSeek/1290625106.php
We're all big boys and girls here. Rather than buying a few measly silver eagles, why not dust off the home equity check book and buy yourself a Dec Silver Contract. They're available in 1k and 5k denominations. A perfect Holiday gift for the one you love...just don't drop it on their foot. It won't take too much buying pressure to send the Dec contract soaring. Volume down to a trickle now...I'm sure you could find some room in the garage for a 300lb block of silver...put it right next to the mower.
Hey, why don't you set up a fund and buy physical, a lot. Who cares about the price. Then go long in paper, way long. Take delivery. When the crunch comes, you are sitting pretty. They either have to buy from you to fulfill their contractual obligations, or ??? Either way you are sitting pretty.
OH yeah! There is not enough physical left to do this trick...
I am so tired of all the falderol about this 'naked short' position at the comex and '.... If more participants sell "short" than purchase "long", the paper market price for silver will decline.....'. Sorry Eric, what you say in this sentence IS NOT POSSIBLE. Every ounce sold has to be bought. It is so basic that it is incredible that people try to use this kind of stuff to justify a market view!
There is no overhanging short position on the comex. There is only 'open interest', futures contacts that one party has purchased and another party has sold. Both sides are required to either close out the position, or perform on the contract.
That being said. I am extemely bullish on PM's particularly silver. I appreciate and respect his analysis on investment demand. But the credibility of his opinion is tainted when inflammatory misconceptions are used as a justification for his view.
stick to the facts and stay away from misrepresentations of what the activity on the COMEX means.
Are you sure this is the position you want to take on this?
Let's put it this way. An unlimited supply will not allow the demand side to increase the price and can in fact, drive down the price as the demand is overwhelmed by supply. I would think this is obvious.
The only problem is that naked sellers aren't selling anything, they don't own the silver they are selling, they are counterfeiting.
Yes, every short contract has a buyer but what you are missing is the amount of silver that was naked sold and what the price of silver would be if every seller had to cover that sale with real silver!
That's why all the pundits are telling you to take delivery, so that we shut down the counterfeiters and see what the real price of silver is.
That's also why paper markets (comex) are NOT price discovery mechanisms.
Precious metals are the top performing sector of 2010, and silver is the top performing of the precious metals. Yet it is still ignored by mainstream media.
http://tradeplacer.com
It is worth spending some time looking at the data on the Commodity Futures Trading Commission (CFTC) website, spcifically the end of month reports on the Futures Market.
I noted all the % monthly changes in long and short positions for both Non-Commercial and Commercial Traders.
Non-Commercial Traders (NCTs) are defined as those who "do not own the underlying asset or its financial equivalent; they hold only positions in futures (or options) contracts." - correct me if I am wrong, but JPM and HSBC would be NCTs.
Commercial Traders (CTs) are defined as those who " hold positions in both the underlying commodity and in the futures (or options) contracts on that commodity", and "who use futures or option contracts in a given commodity for hedging purposes, as defined in CFTC regulations." - this group would therefore have a lot of PM producers and those who actually deal in the physical metal, like a bullion dealer - ...and may include the likes of JPM and HSBC where they are Trustees for a PM fund of some form or another, though in the end they aren't known for being bullion dealers/producers etc.
Now insofar as Silver is concerned, the CFTC data shows the following for 2010:-
a) Using January as 100 - through to the end of November 2010, the net LONG positions of CTs INCREASED by 2.7%
--- through to the end of November 2010, the net SHORT position of CTs DECREASED by 5%.
b) Using January as 100 - through to the end of November 2010, the net LONG positions of NCTs (JPM&HSBC et al) INCREASED 36%
--- through to the end of November 2010, the net SHORT position of NCTs (JPM&HSBC et al) INCREASED 49%
((NB: I looked at the data of end-of-month positions for 10 months to the end of November. One interesting stat I have not yet been able to reconcile is that for the entire period, the end-of-month net position for CTs was always SHORT, and the end-of-month net position for NCTs was always LONG - whether much position changing occured in the final days of each month to always maintain these net positions I do not know, but they clearly appear (intuitively) to be at odds with the entire net growth/decline position after 10 months of data, especially for the NCTs - so I invite comment on this issue - but perhaps the easiest conclusion is the best namely, the NCTs have always maintained net LONG positions, because knowing the market has been purposefully held down, then one day it could only 'pop' to where it should, therefore the NCTs have also been holding the opposite side to their efforts at SHORTING, awaiting the day the SHORTS stop piling back in, thereby making a killing on their LONG positions in the process - but who really knows at the moment - though I am reminded of how GS were revealed to have betted on the failure of so many of the mortgage backed products they flogged to unsuspecting buyers...))
Some quick observations and conclusions:
a) NCTs are playing the COMEX hard in Silver, clearly throwing a lot more cash behind a lot more short and long contracts than CTs.
b) Despite the Nalven lawsuit brought against JPM and HSBC, NCTs are still piling on the SHORT positions, having in fact increased their net SHORT positions as a group since the lawsuit was filed.
c) The Nalven lawsuit against JPM & HSBC was filed on 2 November 2010 - at paragraph 43 of the Complaint it states, in effect, that 'as of 19 October 2010, less than four market players hold 24.3% of all SHORT bets in the Silver market, where JPM and HSBC are among those participants.'
d) Sprott in his November article (All that Glitters is Silver) states that there are approximately 684 million ounces of Silver available for sale -- he then states that 'open interest' Silver contracts on COMEX represent approximately 871 million ounces of Silver -- therefore Sprott is suggesting a shortfall of some 187 million ounces that would go un-covered were physical delivery called for.
e) Now when you look at c) and d) above, and being very 'back of the envelope', we can conclude that in nominal (approximate) terms, that collectively JPM & HSBC are on the hook for about 212 million of those 'open interest' ounces of Silver -- a dollar figure for that quantity is about $5.9 billion bucks.
f) Now in light of the shortfall of 187 million ounces, and there being no immediately available information to suggest that either JPM and/or HSBC are in fact holding anything like 212 million ounces of Silver, then even if it turns out they own a little bit of that Silver, there nonetheless remains a few BILLION dollars that may be in need of covering - to which I say OUCH!
I'll let the rest of you to come up with further observations and conclusions.
Good luck
Now in light of the shortfall of 187 million ounces, and there being no immediately available information to suggest that either JPM and/or HSBC are in fact holding anything like 212 million ounces of Silver, then even if it turns out they own a little bit of that Silver, there nonetheless remains a few BILLION dollars that may be in need of covering - to which I say OUCH!70-642 \ SY0-201 \ 350-030 \ 640-816 \ 646-364