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Jeffrey Lewis
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Dr. Lewis is is the editor of the Silver-Coin-Investor.com and The Lewis Mariani Silver Letters He is a health professional who has been teaching, writing, and publishing information about silver and precious metals investing for regular people for over 7 years.
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  • Silver Prices And Priceless Rumors

    Strange rumors have been cropping up in the silver market lately - all seemingly designed to quell relatively buoyant market sentiment.

    One example was the recent CFTC story printed on the Financial Time's front page citing a source predicting that the silver market manipulation case will soon be dropped.

    Another case was the recent trader revelation about the bullion banks being long physical precious metals and short futures contracts, although this has since been substantially debunked by none other than the well-known silver market manipulation whistle blower Andrew Maguire.

    Basically, concentration is the issue, not hedging - as silver analyst Ted Butler has been pointing out since the 1990's. Essentially, it is the presence of just a few large players who make up the short holdings that are positioned against a much more diverse group of longs that is the primary issue.

    This situation is acceptable in the same way that it was apparently acceptable for Ponzi schemer Bernie Mad off to show "everlasting" high returns, which eventually were exposed for the sham that they were.

    Silver Market Manipulation is Fact, Not Theory

    The point here is that the damage is done. For the investing public, the manipulation of the silver market is now well documented, transparent and quite obvious. No longer is an elaborate or paranoid conspiracy theory required.

    Thanks to years of work by GATA and Ted Butler, who has paved the way for an army of blog writers and market analysts, the story has become easily accessible for the growing number of precious metals investors from all walks of life. These people are now increasingly coming to terms with precious metals market manipulation almost half a decade after the latest financial crisis.

    Such investors have typically lost faith and confidence in the established financial and government institutions and are calmly looking for investment diversification and long term preservation of their capital.

    Silver Hoarders - From the Hunts to the Modern Day Metals Investor

    The Hunts were convenient scapegoats for the previous major silver price rally of the 1980's. At that time of high inflation, these notable hoarders seemed radically right of center and far outside the mainstream. They were wealthy Texas oil men, who could have been scripted right into a well-known television series.

    Today's silver investor is part of a much more diversified group of physical longs. Armed with logic and reason - plus a working knowledge of the varied uses of silver in jewelry, medicine, cutlery,tableware, electronics, photography and elsewhere - they have many excellent reasons for hoarding silver to help protect their future financial security.

    All of these represent valid reasons for holding physical silver that just serves to lend further support to the longstanding and almost forgotten monetary significance of this precious white metal, which will remain a valuable hard currency long after the un-backed paper Dollar is defunct and worthless in commerce.

    For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

    Oct 05 11:29 PM | Link | Comment!
  • Silver And Margin Requirements Redux

    Wary silver investors may be wise to watch out for a pre-election margin hike. Especially if silver's price gets too frothy or starts dragging the price of gold up along with it, since such events could signal the reemergence of unpopular inflationary pressures.

    The Chicago Mercantile Exchange or CME is a self-regulated, for profit organization that sets its own margin requirements. The CME's maintenance margins for silver futures contracts are still at relatively levels compared with other markets, despite the precious metal's recent consolidative trading patterns seen prior to the Fed's announcement of its latest QEIII package.

    Lower margin requirements used to attract greater speculative trading activity since it is cheaper to establish a given futures position in terms of the capital required to be placed on deposit as margin.

    Due to its per-contract commission structure, the CME profits more from increased trade volume. This explains why it promotes HFT or algorithmic trading as a means for providing liquidity, while at the same time blithely ignoring the heightened market risk of such automated trading methods, as well as their tendency to induce a faulty price discovery mechanism.

    Higher Margins Intended to Quell Volatility?

    In reality, the CME shifting its margin requirements for silver has been used selectively to the market, but not necessarily in the rational manner that one might expect.

    For example, the CME has raised silver and gold futures margin requirements even as their prices were already dropping sharply. This rather counterintuitive tactic was employed in early May of 2011, just as silver prices were coming off from their historic high levels achieved in late April of that year. Many traders believe the CME's move may have contributed substantially to the notable market crash that followed shortly thereafter.

    In contrast, the CME has just lowered - yes lowered - their margin requirements for equities related futures contracts virtually across the board by roughly 12 percent. This move announced in its Performance Bond memo dated September 20th, came as a real surprise since equity indexes like the S&P500 have been approaching five year highs.

    Market Manipulation Tactics

    The CME's recent margin requirement changes makes them seem like one more in a list of manipulative market 'tactics' used to trigger either big sell-offs at convenient times or to stimulate chronically weak markets just ahead of a national election.

    The markets for precious metals are just not deep enough to prevent manipulative behavior. Consider for example, collusion among the other 3 of the 4 largest traders, who together hold nearly half of the entire outstanding Comex short positions.

    They might agree among themselves to sell initially, and then buy their short positions back together, thereby whipsawing the market. The high frequency of counter-intuitive moves or 'out of character' price action demonstrates that such collusion may be at work behind the scenes.

    Other manipulative tools are the daily caps on upward price movement, but without any limit to how far prices can move to the downside. This comes from the work of GATA, and in gold such price rise caps are rarely over 2%, but are mostly set at 1%.

    Furthermore, position limits that enable large speculators to build concentrated positions allow manipulation. The latest proposal to alter position limits was recently thrown out, and it remains unanswered why large banks are classified as commercial traders at all.

    Financial data announcements that are potentially 'adjusted' can also provoke sharp market moves.

    Silver Margin Hike Coming?

    Silver prices seem managed, with convenient crashes coming at seemingly just the right time because the metal is tied to the greater economy.

    This reinforces the idea that, despite the industrial demand albatross, silver is still an unofficial yet ever present currency anchor.

    Furthermore, the Fed's recent open-ended QE announcement - along with more and more investors waking up to the silver story- has created a notable rebound in precious metals sentiment that is increasingly being reflected in silver's price.

    Perhaps one should not be too surprised to see another silver contract margin requirement hike coming soon from the CME.

    For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

    Oct 05 1:58 AM | Link | Comment!
  • Why Samsung Is Not Buying Silver

    Cluff Gold, a gold mining concern focused on West African assets,recently signed a Memorandum of Understanding with Samsung. Under the unusual agreement, the huge Seoul, South Korea based industrial company will be offering substantial funding tothe mining concern to help develop its mining portfolio in the initial form of a $20 million unhedged loan facility.

    This is the very first financing deal of its kind, where a non-mining concern has shown an interest in a mining company to help provide it with a reliable supply of bullion over the longer term.

    For whatever reason, capital from outside the mining industry is now starting to become available to it.Interestingly, the well-known shorts in the mining shares could well be in trouble, although the fact that Samsung is buying into a gold miner highlights the fact that it is probably too late to do the same for silver.

    Silver Miners are Spread Thin and at the Mercy of the Banks

    Although a desperate need for consolidation exists in the silver mining sector, the capital to do so seems quite hard to come by since miners are typically viewed as risky borrowers by funding banks. This situation creates significant problems for the supply of silver going forward.

    If a tech company announced a similar joint venture with a silver miner, it would very likely create an industrial panic and see the price of silver push sharply higher. This move could be large enough to break the global financial system, especially if the famously short bullion banks are not as hedged by offsetting transactions in the OTC sector as they claim to be.

    Basically, the worldwide surge in investment demand for silver is competing with constant industrial demand for a metal that is universally believed to be vastly more ubiquitous than it is due to years of extreme price distortion.

    Furthermore, silver's monetary history ties it to gold, even though they have different intrinsic values. Nevertheless, no central banks own silver in comparable quantities to their gold holdings.

    Impact of the Samsung/Cluff Gold Deal

    Overall, as noted by many, including the legendary gold mining CEO, Jim Sinclair,the story is a major game changer that demonstrates substantial international corporate investment in a monetary metal.

    It also highlights the persistent under valuation in the sector, and the desire by industrial concerns to secure their long term supply of a precious metal.

    Furthermore, the creative financing deal demonstrates the recognition of the facts that:

    (1) Gold mines mine money,

    (2) The supply of gold is dwindling and

    (3) Gold plays an important role in the high tech industry, which is actually quite minimal compared with silver's broader industrial importance.

    The deal also indicates that the precious metals bear market inflicted by widespread hedging of gold shares is now coming to a close. Just think about it, if Samsung or another large tech company tried to source silver in this way, it could very well trigger a spreading crisis.

    Precious Metals in the Rehypothecation Era

    The Samsung/Cluff Gold deal also comes in the era of rehypothecation, which involves a broker pledging as collateral for a bank loan the securities in customer margin accounts.

    Basically, the rehypothecation of assets, which infinitely dilutes claims on real assets, can and will ultimately lead to total losses even for investors who thought that they had strong collateral backing.

    Furthermore, the inventory of the world's credible assets is literally evaporating in absence of Cap Ex spending, which is also one of the reasons behind the ECB's seemingly endless lowering of its collateral requirements.

    Why Buy Silver?

    Within this investing and supply environment for silver, a substantial buying interest could well have a remarkable upwards impact on the price of silver for the following reasons:

    (1) Not much silver left. This is the same reason that central banks are not buying silver. Basically, silver has been dis-hoarded and any major buyer would immediately induce a short covering panic that would end all panics.

    (2) Silver miners are spread thin. The supply of silver is largely a byproduct of the mining of other metals because the primary silver producers are still viewed as risky. They also often have trouble finding funding for their mining operations and exploration activities.

    (3) Strategic threat. No one wants to be the one that blows the silver market sky high with large purchases, so gradual accumulation often seems a more prudent investment strategy in the relatively thin silver market.

    Although Samsung may not be buying silver - yet - this innovative deal with Cluff Gold indicates that conditions are favorable for more "finance for supply" transactions of this type over the years to come.

    For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

    Sep 28 11:20 PM | Link | Comment!
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