Silver Soars 26% In 26 Hours

Tyler Durden's picture

It appears rumors (there's that word again) of precious metals' demise have been greatly exaggerated yet again. After hitting a low of $26/ounce just shortly after 24 hours ago, the metal has since soared by a whopping 26% to $32.90 (thank you CME and Shanghai Gold Exchange). That's $6.90 in one day. The same with gold. It seems that the market has finally had its brain kicked in a little following the realization that an expansion in the EFSF from E440 billion to E3 trillion (which has about 0.01% probability of happening, and would likely see the mobilization of a certain army first) would mean an exponential decline in the credibility of that "other" currency, which while potentially retaining its value against the "first" currency, will have been devalued that much more against the real, undilutable currency. We expect the market to comprehend that Goldman, for once, was spot on in its evaluation that anyone who bought yesterday at the lows, will have already made their full year unlevered return in one short day.

Silver:

and Gold:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fips_OnTheSpot's picture

Spell insanity: M-A-R-K-E-T

spiral_eyes's picture

No surprise in any of this:

Nothing in that last liquidation did anything whatever to affect any of gold or silver's long term fundamentals.
 

Kicking the can down the road using the same policy tools that Bernanke has been using for the past three years (i.e., forcing rates lower and-or forcing inflation higher) will result in harsher negative real rates — making treasuries into an even worse investment. Eventually (i.e., soon) the institutional investors — and more importantly (because their holdings are larger) the sovereign investors — will realise that their capital is rotting and panic. In fact, there is a great deal of evidence that China in particular is quietly panicking now. The only weapon Bernanke has is devaluation (in its many forms) — which is why he has been so vocal in asking for stimulus from the fiscal side.  

And — in spite of the last week’s gold liquidation, as China realised long ago — the last haven standing will be gold. Why? Because unlike treasuries (the biggest bubble in the word) and cash it maintains its purchasing power in the long run.

The Emperor is wearing no clothes, bitchez.

http://azizonomics.com/2011/09/26/the-emperor-is-wearing-no-clothes/ 

 

Snidley Whipsnae's picture

"Because unlike treasuries (the biggest bubble in the world) and cash it maintains it's purchasing power in the long run."

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

No fiat currency that we know of has lasted longer than forty years.

PMs have been money for at least 5000 years.

When paper fails, and it will, the world will return to some form of PM referenced money.

Sooner or later the 'paper pm' game will blow up...the sooner the better. Paper PMs are a total farce, since they have counter party risk.

Popo's picture

Tyler -- your post is difficult to understand:  

So... you think the expanded EFSF is extremely unlikely -- and yet you believe the rise in gold prices is warranted?   Aren't those contradictory statements?

Can you clarify that?

$4 Trillion expansion in the EFSF and $5000 gold makes sense.

But no expansion in the EFSF would seem to be bearish... 

So which is it?   Your sarcasm seems to be playing two different positions on this post...

Edward Fiatski's picture

You seem to be confusing GLD & gold.

Belarus's picture

I called Sprott and they do have silver for sale, although they were out of some bars. However, interestingly, remember all those silver bears that said buying Sprott 15-20% above NAV is insane becuase when the price gets smashed you'll lose via sport price and premiumium compression? Well...not so fast. After the largest 3 day drop in over 31 years, Sprott's premimium increased!

Furthermore, this only coincides with many vendors unable to keep up with demand, even though conventional wisdom and crowd behavior would tell you crickets would be chirping at the dealers. As we know, also not so. There was almost no vendor that didn't struggle to keep up with demand. It appears silver bulls are value hounds more than they are tin foil hat wearers. 

I expect the insanity to be far from over, we can only hope JPM and HSBC continue to suppress the price and that every EU and EU bank decides to shore up more capital by selling evermore paper GLD and SLV once the EFSF fails.....

goldfish1's picture

There are conflicting reports about the near term outlook for silver. These articles illustrate for me the issues between the technicals and the naked short selling.

Clive Maund intimates that this rally sets the stage for the next takedown, indicating silver is poised to drop to the low 20's. 9/25/11

"...If you think this nascent crash is just some sort of heavy correction that has has almost run its course, you need to open your eyes...

...the magnitude of the decline on Thursday and Friday against the background of emerging deflationary forces strongly suggests that silver will soon crash this support and continue its freefall even lower - and there is no significant support below the $30 area until it gets to the $20 area...

 ...Silver longs have already been taken to the shearing shed and royally fleeced over the past few days...

...they are likely to bleed steadily to death as silver heads lower in the weeks and months ahead. "It will come back" they will console themselves, and they and their cheerleaders will be looking around for someone to blame - the banksters, the cartel, the Comex, J P Morgan etc, who have conspired to cheat them out of their just rewards - anyone but themselves..."

http://news.silverseek.com/CliveMaund/1316994129.php

Chris Powell (GATA)  9/27/11 quotesMarket analyst Izabella Kaminska:

"While the likes of GLD insist that every share outstanding is matched by a gold bar -- and this is almost definitely true -- what they can't claim is that there's a way to differentiate gold with previous claims on it from gold without previous claims on it within its reserves (i.e., borrowed gold). It is consequently entirely possible that gold ETFs are sitting on mountains of borrowed central bank gold."

http://ftalphaville.ft.com/blog/2011/09/14/677021/why-gold-forward-rate-...

As a lay person here who has studied and been interested in these matters for decades, I see that timing is the key to success in trading, buying and holding. The manipulations by the FED and others seem to have no limits, although we know this cannot last forever.

Can someone please comment to these excerpts and elucidate further?

DosZap's picture

Chris Powell (GATA)  9/27/11 quotesMarket analyst Izabella Kaminska:

"While the likes of GLD insist that every share outstanding is matched by a gold bar -- and this is almost definitely true -- what they can't claim is that there's a way to differentiate gold with previous claims on it from gold without previous claims on it within its reserves (i.e., borrowed gold). It is consequently entirely possible that gold ETFs are sitting on mountains of borrowed central bank gold."

 

I totally agree,an one more thing.

How many times has this gold that's on LOAN, been sold(it's unallocated),and their is nothing saying that the entire stash of GLD has not been sold at a parer ounce  ratio of 1000-10,000 to the actual ounce.

SRV - ES339's picture

Can someone please comment to these excerpts and elucidate further?

This latest raid was very successful (lots of fear, and margin selling out there)... the PTB are now in the money for the comex expiry, and they will cover shorts all the way back to $40+... this is a speed bump.

Manthong's picture

"anyone who bought yesterday at the lows, will have already made their full year unlevered return in one short day"

.. that is anyone trading GC during Asia open.

Snidley Whipsnae's picture

I believe the German people and German courts have had enough of sending their Euros to PIIGS...

"Germany's Top Judge Throws Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution and Popular Referendum for Further Powers

"Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).

Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.

"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said.

"There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people," he told newspaper Frankfurter Allgemeine"

BigJim's picture

That dude better keep away from hot-tubs.

Bicycle Repairman's picture

.....and accidentally exploding mailboxes, wherever he may be driving.

GetZeeGold's picture

 

Even my kid sister saw this screw job coming.

 

SWCroaker's picture

You seem to insist that Tyler be consistent at all times and in all statements, when commenting on the most byzantine and bi-polar thing man has yet created: the markets (PM markets, at that).  A bit petty, IMHO.

Tyler Durden's picture

Good question, and here is the simple answer - PMs are nothing but a bet on central planning stupidity and failure.

Everything else is noise.

We can give you 100% guarantee there will be much more central planning stupidity and failure.

saulysw's picture

Interesting answer - note the "we". Tyler is a collective.

CrazyCooter's picture

I reached the conclusion a long time ago that ZH was a team probably larger than the few folks listed (Marla, etc). The volume of research, analysis, attention to market details at all hours, and so on is just beyond the ability of a few people.

Obviously these folks have skills that would allow them to partake in the market with OPM, so I further assumed they are sufficiently wealthy to afford the hobby.

I could be wrong!

Regards,

Cooter

P.S. I am up at 3AM here because I can't sleep and ZH entertains me ...

swanpoint's picture

Maybe, ZH is really the crew at CNBC working "the other side." Why else would Reggie M be on TV?

CrazyCooter's picture

I haven't ever seen a guest at CNBC carry their balls in an ash can. So, I must logically conclude that ReggieM isn't part of your conspiracy.

Regards,

Cooter

Chicago bear's picture

Please refer to rule #2 in FC.
You are a we too. I am a we too. They are a we too. God is a we too. No point in investigating.
Bernanke is a we too which is Tylers point and why I bought metal close to yesterday's low as it was running up.

Fukushima Sam's picture

PMs are not only a bet, but a weapon...

Everyone reading this, go out and buy at least an ounce of silver today.  You will strike a blow against the system that oppresses us.

Ranger4564's picture

Popo... my take, no exp EFSF leads to institutional failures and collapses, communities struggle, so currencies struggle, gold rises; yes exp EFSF leads to lack of confidence in the system and currency devaluation, gold rises.  Gold likely rises more when they devalue currency, but I don't know enough financial history to be certain.

theotheri's picture

Dead cat bounce.

Metals are merely industrial components. The store value argument is an antiquated wife's tale that's sadly outdated in a world connected by mobile devices in every hand.

Gold and Silver have value of course but their ridiculous run up has way more to do with speculative bubbles filed by agile hedge funds than inflation protection.

CrazyCooter's picture

Then why do all central banks hold gold by the hundreds and thousands of tons? Why did the US build an army base (Ft Knox) to house a good chunk of our gold (most of the rest is at West Point)? Might be the same reason China has been buying gold hand over fist (they are 1k tons and want 4k tons)?

It might be because ... gold is money? If only a famous banker said something to that effect I might have some traction with this crazy observation!

Now, I am not saying we are going to gold backed money, because if TPTB have any influence we will end up with SDRs ... while the world figures out what the new international trade money is, gold will prove to be a wise choice to park ones savings.

Regards,

Cooter

theotheri's picture

I'm not saying gold doesn't have value, I'm saying the value is about $1000/oz.

Ft. Knox was constructed before computers. Technology has changed the uniqueness of the yellow and silver metals.

youngman's picture

You can be the guy with the Apple Iphone gold App....I will be the Ft knox....

BigJim's picture

Your disdain for gold as money would make sense if we had one-world government, which could enforce one fiat on everyone.

However, we don't have this situation. And we have multiple countries competitively devaluing, some primarily for mercantalist reasons, and others to dilute their debt so they can (nominally) avoid default.

In this setting - where the indentured labor of their increasingly unemployed citizens is no longer sufficient to outweigh a country's debt obligations - possession of commodities becomes important to underpin a currency's value. The USD, for instance, is now mainly underpinned by oil (this is a mixed blessing, but that's another topic).

Of all the commodities, PMs are the most suited to being used as money, gold in particular, because it has very little use except as a store of value (people are willing to pay a small fortune for its use in jewelery precisely because this reason).

Just out of curiosity - how are you arriving at a 'value' of $1000/oz, when by definition, the market determines the value of everything - and even at present prices, we know various government agencies are suppressing the price?

Bicycle Repairman's picture

"Your disdain for gold as money would make sense if we had one-world government, which could enforce one fiat on everyone."

That is the key part of your answer, not one-world government.  Even with a one-world government, central planning breakdowns would lead to alternative black market currencies.  It's about enforcement.

BigJim's picture

I think you're right, that in the long run, if there was a one-world-government, with a single fiat, it would still break down eventually because central planning just doesn't work, and black-market currencies would arise (again). The enforcement is key... I live in a city, so perhaps I have too much belief in TP'sTB ability to force us all to use their particular flavor of fiat, and, by extension, a NWO to do the same, planet-wide.

There are a couple of things mitigating against this... if Russia and China didn't exist, I could believe an NWO might arise, but I doubt they can offer those countries' existing kleptocrats greater wealth or power than they already have, so it won't happen.

However... for the sake of argument, if (say) SDRs became the new universal currency, I think the purchasing power of gold would plummet, at least until the SDR regime started showing signs of breakdown... which might take another 40 years. By which time I'll either be dead or too senile to enjoy my Au speculations. Meanwhile, in such a scenario, my Ag should do ok, because the fundamental industrial demand/diminishing supply equations still hold.

CrazyCooter's picture

While the question wasn't directed at me ... I can't sleep ... and it should be a fun thread ... so ...

I would take M1:

http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt

I would take the US proven gold reserves:

http://en.wikipedia.org/wiki/United_States_Bullion_Depository

http://en.wikipedia.org/wiki/West_Point_Mint

I believe the rough/approxinate total is ~8k tons between these two where there is approximately 32000 ounces in a ton.

So, in grade school I learned how to take 2,098 billion and divide it by (8000*32000) which is roughly 8k/oz?

Lets assume a 40% reserve ratio, which would net ~3.2k/oz.

Would you like to discuss M2 or perhaps total liabilities (so we can be solvent again)?

Regards,

Cooter

Edit: I linked to the US Mint instead of West Point ... oops!

BigJim's picture

Yes, this is Rickard's line, and it has a great deal of merit.

One thing I don't see discussed, is the inherently inflationary effects of governments revaluing gold at (say) $7500/oz. I believe CBs hold around 20% of all gold; which means that if even 25% of the 'outside' gold is sold to CBs, then their holdings will double, and the issuance of fiat will double.

Am I missing something here?

Ranger4564's picture

I view it similarly but slightly differently. 

When you see that a society is struggling with economic productivity, there are fewer goods and services being produced, less trade, less GDP, less employment, etc. That leads to currency devaluation as the currency is not trusted and not demanded, leading to the search for a different base for the currency.  In your example, Oil, but military oppression has often been used historically. Essentially, if your economy is in trouble, and you want to save your currency, you have to do something... find something to pin the value to, or beat the crap out of the rest of the world so your currency is still more valuable.  I choose neither.

The reason I choose precious metals is not because I want Gold / Silver to back the currency, it's because I don't believe the society will be able to rescue their currency, so I am trying to grab hold of a universally accepted currency... coins / bullion / etc.  In the world today, all societies are collapsing, and bonds / treasuries / stocks in any region of the world make no sense. When you have no where else to store your wealth, Gold / Silver make the most sense.  Additionally, investing (ok, buying) Gold / Silver also takes money out of the other asset classes and makes it harder for the society to manipulate their currency.  In this light, Gold / Silver are really worth a whole lot more because it is trying to represent the collective productivity of all societies on the planet, and any material assets as well.

BigJim's picture

I hear you - I think :-)

I agree, if there is true societal collapse, then PMs will be one of the few stores of value, along with guns, ammo, defensible property, and water/food/energy production facilities. And medicine, alcohol... and women, if things get truly barbaric. Not that I'm advocating sexual slavery, I hasten to add.

But I'm more optimistic - my planning is aimed at dealing with a steady, decades long slump in wealth as all currencies are inflated and everyday items become more expensive. My thinking is that in such a future, PMs should rise in purchasing power relative to practically everything else.

theotheri's picture

?? In the world today, all societies are collapsing, and bonds / treasuries / stocks in any region of the world make no sense.??

 

Alll societies are collapsing?  Sorry I missed that memo.  I suppose you access your high speed internet access out of thin air? And your local police force has vanished?  Hospitals closed down?  Groceries stores empty?  Beaches desserted?  Sheraton Hotels totally vacant?  Parking lots empty?  Subways and trains abondoned?

 . 

StychoKiller's picture

Next Friday, I believe that the Sun will rise in the east around 6:30am.  It hasn't happened yet, but intelligent people can extrapolate this event from all the previous times it has happened.

There are over $14Trillion reasons why owning Au & Ag is prudent right now.

theotheri's picture

"Just out of curiosity - how are you arriving at a 'value' of $1000/oz, when by definition, the market determines the value of everything - and even at present prices, we know various government agencies are suppressing the price?"

 

You can see from this chart of M3 growth that gold started running away from it around $1000/oz.

http://www.howprofit.com/wp-content/uploads/2011/05/US-M3-VS-Gold-1970-2...

BigJim's picture

I must be even dumber than I thought. How does this chart - showing the ratio of gold to M3 since 1970 - prove (or even suggest) that the price of gold started 'running away' at $1000/oz, and that this establishes what the 'value' of gold should be now?

GoinFawr's picture

 Paul van EEden, is that you?

Hobbleknee's picture

Conversely, how is paper money a store of value? The dollar has lost over 94% of its value since the Fed took over.

theotheri's picture

That's bullshit.  If you bought 30 years bonds 30 years ago, paid taxes on the interest and reinvested the proceeds in more 30 years bonds I think you would have done just fine.

 

I'm sure there's a regression analysis somewhere on the interweb that shows what the total return looks like.

GoinFawr's picture

lol, speaking of 'bullshit' and 'regression': nice choice of timeframes.

As you are so fond of pointing out: this isn't 1981.

BigJim's picture

But we're talking about the purchasing power of 'paper money' here, aren't we? Wouldn't it be fairer to look at how much your $ would buy now if it had been salted away in 1913, 1933, or 1971? Seeing as those are all key points in the timeline of our increasingly paper-y currency.

But let's say, for the sake of argument. you decided to invest in US treasuries... how much would they all be worth now if you'd chosen the above dates?

Mike2756's picture

Don't get too excited, just a vicious rally.