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More On The Silver Dive: "Massive Sell Orders" Coupled With Bolivian Nationalization Halt Combine For Perfect Weak Hand Shakeout Storm
Two key factors that appear to be contributing to the rapid move in overnight silver (and subsequent jump to pare half its losses) is i) the fact that Bolivia, despite being in a cash crunch has for the time being yielded to miner demands and has put its nationalization plans (as discussed previously here) on hold, and ii) there has been a dramatic bout of selling coming out of nowhere, despite the PM complex having opened very well bid earlier on, in what appears a coordinate effort to nuke silver exclusively.
From the WSJ: "Opposition from Bolivia's independently organized miners stopped President Evo Morales from implementing plans to boost state control over the country's mines Sunday, according to leading officials who were advocating takeovers of the country's vast mineral wealth. Mr. Morales has generally used May 1 labor day festivities to highlight his socialist agenda of reverting the country's energy and mineral resources to state ownership. On previous labor days, he announced nationalizations of Bolivia's strategic hydrocarbon reserves and the electric power grid, with mass rallies and military displays. This year, however, anticipated takeovers of the mining sector failed to materialize." None of this however, is news, as Coeur d'Alene and, of course, Sumitomo, the two biggest silver miners in the politically embroiled country already were assured their facilities would not be touched so we fail to see how this non-news is in any way validating of a nearly 20% move. Elsewhere, Bloomberg notes what appears to have been a massive coordinate attack on silver starting just before 6:30 pm Eastern.
From Bloomberg:
"We opened up this morning n New Zealand exceptionally well bid across the board," Jonathan Barratt, managing director at Commodity Broking Services Pty, said in a phone interview from Sydney today. "We got a high in gold and then we got massive sell orders in the spot market and the price fell through. When futures opened the market fell again."
Looks like the old sell into low volume trick to flush the stops and kill the weak hands has worked again. Throw in last week's two CME margin hikes and Friday night's margin bonanza by MF Global, and one had a perfect storm set up for another wipe out in silver to start the week.
In the meantime, silver promptly managed to retrace over 50% of the move shortly after the dump. At this point whatever holders remain following last week's margin action and this evening's fine example of shock and awe will likely need far more energy and capital to be shaken out by the same entities whose primary goal is to prevent the surge in silver and ongoing capital-sapping collateral calls. Since none of the actual fundamentals before the long-term trajectory in silver (and gold) have changed, this appears like a rather attractive entry point.
Lastly, one should recall that silver had a mini 10% correction last week and not only promptly recovered but nearly passed the $50 level shortly thereafter. This time will not be any different.
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LOL, he is posting his opinions so that when it pops he can say I told you so on such and such a date.... time will tell.
Along those lines, I believe that both gold and silver are bubbles, as a long term low risk investor (of my own wealth) I have steered clear. My life style is such that I do not wish to take physical delivery and assume the risk of adequately securing it (I am not willing to die to "protect" my "monetary wealth", that seems like a oxymoron to me).
If (at this point I don't think it's an "if" but a "when") a major shit storm occurs, the currency collapses and (perhaps) we go to a gold standard, you are not going to be allowed to keep your gold. TPTB have played this hand before, clear legal precedent in the USA has been established on this point... people holding gold will be in the minority, it will get very ugly.
TD Ameritrade's ThinkorSwim futures trading program has just announce an increase in silver futures margins to twice the Exchange Requirements:
$30,037.50 on /SI
$6,007.50 on /YI
Here comes the Grim Reaper longs.
Is Trump asking to see the Body yet?
It will be burned before morning, or something equivalent. The US will adhere to muslim tradition, or pay the price.
Perhaps his followers will steal the body and claim resurrection.
Bin Laden the gardener.
There are about 15 trolls that are going to be laughing at all of you guys who said they were buying silver in the high forties and the guys today saying they were buying silver from apmex tonight. None of you actually buy any silver that post here so fortunately all you brave boys who say you bought silver tonight at apmex are just pumping and will not lose any more money than you already have. All of you who announced buying silver in the high forties are not very smart. Just sheeple like uncle bigs says. stupid trend followers and mo mo investors not real men who are real contrarians and always stand alone against the crowd.
LOL. +1
Very intriguing
When the blast comes out of Obama's birth certificate release and its fall out, we have Osama's death being announced.
And then silver is hammered down.
But Gold is firm.
Stock Markets are up.
The Euro zone and countries are still in big trouble or rather getting worse.
The US Dollar about to be dumped by the world gets another revival.
The games people play!
Which means possible this is a last ditch effort by the banksters to cover their shorts
Been slogging my way through this book and just read this passage today – pure coincidence. Thought I’d post it in light of the latest silver news.
Greider, William. Secrets of the Temple: How the Federal Reserve Runs the Country. New York: Simon & Schuster, 1987
…While the economy was rapidly deteriorating, Paul Volker faced an ancillary crisis—the collapse of the silver bubble. Speculators led by the Hunt Brothers of Texas had driven the price to a peak above $52 an ounce in January. When the bubble burst and prices started subsiding rapidly, the speculators were in trouble and so were the banks and brokerages that had financed their silver buying. As the value of silver declined, the lenders had to demand more cash or collateral form the Hunts to support the loans. If silver fell far enough, not even the billionaire family form Dallas could come up with the ante in time. In the extreme, the loans would be defaulted and the lenders would be left holding a lot of silver that want worth much in a collapsing market.
The moment of crisis came on March 27, (1980) remembered in commodity market as “silver Thursday.” A top executive of Bache Halsey, second-largest brokerage in the nation, had phoned Volcker the day before and warned that if the price collapsed further, Bache would not survive. It had lent more than $200 million to the Hunts, and the value of the silver collateral it was holding was shrinking every day. On silver Thursday, silver fell in value by 0ne-third—from $15.80 to $10.80 an ounce. Volcker and other federal bank regulators began a series of hurried catch-up meetings to determine the extent of the Hunts’ borrowing and how seriously the financial system was threatened. Some of the regulators reared they might be on the brink of a historic panic, not unlike the crash of stock-market speculation that launched the Great Depression in 1929.
The initial rumors and misinformation made the banks’ exposure sound even larger than it was, but it was still substantial. All told, twelve U.S. banks, the American branches of four foreign banks and five brokerage houses had provided the Hunts’ silver-buying venture with more than $800 million in loans—equivalent to almost 10 percent of all the bank lending in the country during the previous two months.
The Federal Reserve’s admonitions against speculative lending had been ignored, nor had it used its regulatory powers to actually stop the silver lending. But Volcker did not dwell on that point now; the question was whether a further slide in silver prices would bring down any major banks. First National of Chicago, ninth-largest in the country, was most vulnerable, having lent the Hunts a total of $175 million either directly or indirectly. If silver prices fell to as low as $7 an ounce, the value of the collateral held by the banks would be worth less than the loans they had made.
On Friday, the silver markets paused in the descent and the price stabilized long enough to allow Bache and some others to sell off silver collateral without absorbing fatal losses. Then a new crisis developed: to augment their rice speculation, the Hunts had bought futures contracts for silver totaling 19 million ounces from Engelhard, the giant international minerals firm. Futures were normally used as a hedge against sudden price changes, an agreement to pay a certain price six or nine months later when the commodities were delivered. But futures could also be a high-risk gamble—betting that the price would be higher in the future. The Hunts lost their bet. Delivery was due on Monday, March 31, and Engelhard was demanding cash for its silver--$655 million.
If the Hunts defaulted on Monday, the price of silver would fall drastically again and the entire accumulation of speculative bank loans would doubtless crash with it. While $800 million was a lot of money, the dozen major banks and foreign ones were large enough to survive a loss of that magnitude. What the regulators most feared was the aftershock—the possibility that such a spectacular one-day debacle would set off a general panic among investors, pulling their huge deposits of the exposed banks like First Chicago and threatening their liquidity.
In that event, the Federal Reserve had the power, of course, to bail out the threatened bank or banks with unlimited advances from the Discount window—in effect, replacing the lost deposits with government loans until confidence I the banks was restored. That remedy would have been politically awkward, given what was happening to the rest of the American economy. And the Federal Reserve chairman did not wish to find out what would happen if he stood aside and let the banks take their losses.
Instead, Volcker gave his blessing to another solution. That weekend, quite by coincidence, the Associtiaon of Reserve City bankers was gathering in Boca Raton, Florida, bring together the leaders of all the vulnerable banks and others who might help out. Volcker attended too. On Sunday evening, the banks held an all-night bargaining session with the Hunts and Engelhard represtatives. The negotiations led ultimately to the terms for a private bailout—a new loan of $1.1 billion form thirteen banks which would extinguish the Hunts’ old debts, five them the means to settle with Engelhard and stretch out their obligation over ten years.
Paul Volcker was down the hall in another hotel room and the bakers kept him informed hour by hour of their progress. In the end, with certain provisos, he blessed the transaction—a crucial assurance for the banks. If Volcker had not consented, the major banks would have found it difficult to participate, perhaps impossible. After all, the Fed had just imposed new credit controls on the nation and the new loan package for the Hunts directly violated at least the spirit of that program, in effect, rolling over loans that were made purely for speculation. Technically, the fed did not bail out the Hunt brothers and the banksters. No government was at stake. But, practically speaking, Volcker had saved them by granting a huge exception to the rules he had just imposed on the American economy.
Although Governor Henry Wallich was not happy with Volcker’s handling of the situation, he did not challenge the chairman’s decisions as the crisis manager. “Suppose a large firm had gone bust,” Wallich said. “It wouldn’t have been the end of the world. It would have been a great tragedy, but it would have been a disaster on a smaller scale. The argument against dong anything was: let the banksters and the brokers take their lumps.”
Philip Coldwell, who had just retired from the board, resented the bailout. “I was very unhappy with the chairman that he let Bunker Hunt off the hook,” Coldwell said. “Hunt clearly was trying to corner silver, and I thought he should pay the price. In my very simplistic way of looking at it, I didn’t see anything wrong with the banksters’ paying the price too.”
As details of the silver bailout became public, Volcker was grilled again and again at hostile congressional inquiries, led most effectively by Representative Benjamin Rosenthal, chairman of a subcommittee on government operations. Why had the fed been so blind to what was going on? And why had it rushed to the rescue? Volcker provided explanations and endured many harangues, but the congressional anger produced a misleading public impression. The critics were tenacious and sincere, but Volcker well understood that these attacks were less meaningful than the heavy press coverage mad them seem. Senators and representatives with much more influence privately supported him. Indeed, the congressional delegations from Texas and Illinois had pleaded with Volcker to save their troubled banks. Volcker was not defying congress, as it appeared, but cooperating with the private wishes of its leading members.
This illusion was often the case in the relationship between Congress and the Federal Reserve: the public heard the angry critics and perhaps assumed that the Federal Reserve was seriously threatened. The fed willingly took the heat, confident in the knowledge that private, unspoken support from Congress would ultimately protect it. Well -publicized congressional attacks on the Federal Reserve often had the quality of charade.
In the silver crisis, Volcker made a distinction common to central bankers but offensive to many outside the financial world. His perspective expressed the Federal Reserve’s central purpose: rescuing major financial institutions was in the public interest, but government bailouts for other kinds of private enterprises were wrong. A major banking failure could set off a wave of larger and unpredictable consequences, other bank failures and perhaps a genuine panic that would destabilize the financial system. But the bankruptcy of a major manufacturer or retailer was a limited event, a natural consequence of free-market forces. People would lose money, workers would be out of jobs, but the system would adjust dynamically and create new enterprises, new jobs. If government came to the rescue of every failing business, where would it end?
Given his financier’s perspectives, Volcker would see no contradiction in the fact that he promoted a rescue for the major banks that had ignored his directive (and, ultimately, for their customers, the Hunt brothers) while he simultaneously opposed a government bailout for the Chrysler Corporation. The central bank followed a selective definition of free enterprise: economic stability required that banks and other large financial firms must be saved from their own folly. But when other kinds of businesses failed, that was considered a normal, healthy feature of free-enterprise capitalism.
The Federal Reserve, in fact, had the power to lend directly to nonbanking corporations that were in trouble, but it had always refused to do so. Though it was not widely know, the Fed had already turned down Chrysler before the auto company went to Congress for help. Since 1935, the law had given the Federal Reserve extraordinary authority to make special loans to an individual or institution, public or private, in distress. The law required only “unusual and exigent circumstances.” Except for a few instances during the Depression, the Fed always said no to such financially desperate parties, rejecting pleas from Midwestern grain farmers, Lockheed Corporation and the City of New York, among others, as lender of last resort, the fed would stretch quiet far to aver failure in financial markets, but couldn’t do the same for anyone in the productive economy…
http://www.321gold.com/editorials/moriarty/moriarty042511.html
Interesting article. Not something everyone will agree on here, obviously.
There can not be a run on comex. And the london gold pool didn't collapse. And every single gold pool or goldsmith vaulting service that has been involved in fractional reserve lending and paper recepiting has not collapsed since the 1600's. All historical reporting of exchange collapse after exchange collapse are all fabricated fairy tales made up by people who don't know that expanding the supply of somthing with paper and recepits and iou's also causes the underlying gold and silver atoms the paper expands with to grow as well.
Monday is going to be so much fun! Lets make some money ppl. Ok now I have to do the math (-44) plus 18 equals???, hey I can do this!
Apmex hedges, so a big change in price won't affect them much.
Ag back over $45 - you can't keep a good metal down. MMMMMM - metal.
looking at a 200yr candlestick(add, bol.bands,rsi,macd) chart..this move would not be unexpected.In fact, i would almost say it could have been anticipated, with several more ahead..i only wonder how far back the Chinese would be reading their charts for finding spot value/PPP/fair-market-value in PM's.
America being a "paper tiger"..it would only take a few of ounces of PM's to be effective as a paper weight.
Just a matter of time, I feel. If silver drops below $40 then I`ll buy more. Looking at Kitco, it seems to be making a slow increase back to the `pre slump` (lol) levels. As many have said here, just players like JPM and Goldman Suchs trying to keep a lid on a volcano. We`ll see what happens, anyway.
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