Are Gold And Silver Being Unwittingly 'Cornered'?

by: Paulo Santos

No, this is not some wacko conspiracy theory. By virtue of coincidence, gold and silver might well be under a corner, unwittingly.

First of all, for those not aware, what is a corner? A corner happens when someone purchases enough of a stock or commodity to the point where he achieves control over its price, with intent to manipulate that same price.

Now, I am not saying that someone has been doing that presently, but we know of one instance in the past where such event really took place. I am talking about the infamous Hunt Brother’s corner of the silver market, back in the late seventies and early eighties, whose progress was chronicled in this Times article from April 7th 1980: “He has a passion for silver”. In the article we learn that the Hunt Brothers went as far as controlling 200 million silver ounces or 5670 tonnes, which came to about 1/3rd the annual worldwide silver production back then.

So, is there anything remotely like that incredible, conscientious, accumulation going on today in silver and gold?

Actually, there is.

The single largest silver ETF today, SLV (November 7th 2011) holds 9758 tonnes of silver, and held as much as 11390 tonnes back in April 25th. And how much is the annual worldwide silver production presently (2010)? 735.9 million ounces or 22889 tonnes. So effectively the SLV ETF is controlling 42.6% of the annual worldwide production, and went as high as 49.7% back in April.

This means the SLV ETF today controls more silver than the Hunt Brothers managed to control in their own corner! And it also shows why the silver market has already crashed twice this year – any reduction in SLV’s position leads to a crash, much like when the Hunt Brothers tried to get out.

But it doesn’t stop here. What about gold? If we take into account just the two largest gold ETFs, GLD and IAU, we find out that GLD is controlling 1255.65 tonnes of gold, and IAU has 168.44 tonnes under management, together they represent 1424 tonnes. This compares to annual worldwide gold production of 2450 tonnes (2009, US Geographical Survey). So these two ETFs control the equivalent to 58.1% of a year’s production … also way more than the Hunt Brothers ever managed.

See why it can be said that gold and silver might be, unwittingly, under a corner? A few entities, in this case just 3 ETFs, have already accumulated more silver and gold than the instigators of the most famous silver corner in history ever did! And of course, these 3 ETFs are not the only accumulators of gold and silver. Amazing, no?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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