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Ed Zimmer
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Ed is a graduate of The School of the Ozarks (now known as College of the Ozarks) in Southwest Missouri. He spent 14 years in broadcast news in the Midwest covering, among other things, commodities. He is currently manager of a healthcare support facility doing over two million dollars a year in... More
  • The Kangaroo is loose (Send in the clowns) 1 comment
    Oct 6, 2009 9:13 AM

       With the stock market taking cues from HFT, the private equity firms flipping companies until they bankrupt and manipulation the flavor of the day, it's actually refreshing when something comes along and upsets the applecart.     Until today, I fully expected the Commercial Shorts in the silver market to eventually create enough pressure to keep a lid on silver prices as long as the Fed kept a lid on interest rates, thus propping the dollar.

       Leave it to Aussies to throw a marsupial into the stew pot.    The unexpected raise in interest rates down under sent the dollar lower, providing an unexpected boost to the price of silver and doubtless sent the Commercial Shorts a jolt they were not expecting.     Of course this is Tuesday when the Commercial Short positions are set (for the report) and I would expect the numbers to rise by a few thousand to offset the dollar drop and try to re-exert pressure on prices.

      This could be the start of a flood of increases, coming not from the usual suspects (Europe and the US), but from developing countries and those down under. (which includes South America).     Pressures from rate increases in other countries could force the hand of the Fed to protect the dollar, which could also put an end to the talk of green shoots as rising interest rates would further put hurt to the US economy.

       As of last week, the Commercial Short pressure position was negative 1.96, up from  negative 1.86 the week before, indicating that the Commercial Short Position was almost two dollars higher than the spot price and at the highest negative level since October of 08 when silver was just $9.28 per ounce.    The spot increase back to $17 drops the pressure position to negtive 1.17.   Just to get it back to the 1.96 position would require a massive add to the short position of about 4,000 short contracts.   At the current time, Commercial Short positions total 450 Moz of silver, 9 times what is available to meet those contracts in COMEX warehouses.

       Silver under contract on the COMEX is at the highest level in more than a year, with Commerical Short Positions of 90,838.    This one position alone is 82% of all short positions on the entire COMEX and it is held by less than 8 traders, two of which are large US banks.

       If the US does nothing, and other countries begin to raise their rates, Commodities in general will go up.    If the US raises it's rates, the touted recovery is very likely to stall as bankruptcy and unemployment rates rise on a steeper curve.      The US economy may be a big stick in the water, but water respects nothing that floats.    Hang on folks, it's going to be a bumpy ride.

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  • Boot
    , contributor
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    Interesting! Pun intended. Should be a costly week for the silver shorts. Ante UP!
    6 Oct 2009, 09:19 AM Reply Like
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