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Murphy''s ''Midas'' commentary for January 17 posted in the clear at GoldSeek
9:25p ET Tuesday, January 18, 2005
Dear Friend of GATA and Gold:
Silver market analyst Ted Butler's latest commentary,
appended, argues that the latest smashing of gold
and silver prices on the commodities exchange is
over and that there's a strong chance of a pop in
silver particularly.
In that respect you might want to check out a
silver price-guessing contest being run by Sino
Silver Corp., which is offering 100 ounces of
silver to the closest prediction of the price of
silver on February 28. You can enter the contest
here:
http://sinosilvercorp.com.gosynapse.com/default.asp?c=2077
Butler's commentary is below.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Get Up, Stand Up
By Ted Butler
www.InvestmentRarities.com
Tuesday, January 18, 2005
The most recent Commitments of Traders Report (COT)
confirmed expectations that the flushout of the technical
funds from the long side of the COMEX gold and silver
markets is complete. In fact, the latest report indicated
that the tech funds had even established short positions
in gold and silver. It goes without saying, of course, that
the dealers have covered short positions hand over fist.
From the top (the COT of Dec. 7), the dealers have covered
100,000 net short gold futures contracts and 37,000 net
short silver futures contracts (even more if options are
included). That's another way of saying the tech funds
liquidated 100,000 long gold futures contracts and 37,000
silver contracts. In ounces, that's the equivalent of 10
million gold ounces and 185 million silver ounces. That's
far more silver than exists in total world known bullion
inventories. It was this technical fund selling that caused
gold to sell off $40 and silver more than $1.50.
Now that the technical fund selling/dealer short covering
appears complete, most of the risk has been removed
from the market. The all-clear signal has been given. We
are now at one of those rare points when there is no
obvious reason to defer purchase.
Of course, I could be wrong temporarily, as tech funds
continue to sell short and we violate the last remaining
moving average in gold (the 200-day at $410-ish). In
silver all key moving averages have already been broken
decisively. But if we enter a significant down-leg from here,
I will acknowledge my miscalculation, although silver will
be an even better buy then. I just want to be clear that
this one-month-plus price smash in gold and silver looks
done to me.
The current COT also seems to confirm my suspicion that
some large, strong hands have entered the silver market on
the long side, replacing the mercurial tech funds, which
change positions about as quickly as weather forecasts
change. This greatly increases the pressure on the dealers,
who will have to sell short even more the next time the
tech funds come back to buy. While I have no way of
predicting if some of these new strong longs will stand for
delivery of actual metal, they could, in sharp contrast to
the tech funds, which never accept actual deliveries.
Whatever happens, the emergence of new strong-handed
buyers in silver isn't good news for the silver dealer wolf
pack. But it is great news for the rest of us.
So once again the dealers completely snookered the tech
funds in gold and silver, extending the dealers' unblemished
win streak. All that remains to be seen is if the dealers go
short on the next rally. Long-time readers know that my pet
theory is that the dealers are smart enough to quit the
game when their short positions are relatively small (like
now), and we then explode in price on a selling void or
vacuum. (The alternative is that the dealers are too dumb to
recognize the true danger in being short silver and will be
overrun when they have a full short position in place.) That
the tech fund/dealer tango is becoming more widely known
to outsiders may persuade the wolf pack to abandon the
silver manipulation.
To that end, the news this week that silver miner First Silver
Reserve (FSR.TO) doubled its silver bullion holdings by
buying an additional 100,000 ounces is good news. Not only
does this purchase reflect the value the company obviously
sees in silver, but the timing of the purchase suggests the
company understands just what moves the silver market
-- namely, tech fund/dealer selling and buying on the
COMEX. The new purchase also reflects on the diametrically
opposed opinions of the silver market and responsibilities to
shareholders held by the silver mining community.
While it is gratifying to see some silver companies attempting
to stand up to the manipulators, it is baffling that those
companies that purport to be industry leaders, namely, Pan
American Silver, Coeur d'Alene, Hecla, and Apex Silver -- still
haven't lifted a finger. Baffling and shameful, in my opinion.
I understand why the COMEX and the Commodity Futures
Trading Commission have to look the other way and pretend
that there is no manipulation, no matter how compelling the
evidence, because it's too late to fess up. I understand why
the dealers continue to fleece the tech funds, because they've
never lost. I even understand why the tech funds continue in
their metal-trading follies, because they're remaining true to
their systems and trading disciplines, as loyal technicians.
But I can't understand the pride and arrogance displayed by
the managements of these four silver companies in pretending that
all is well in the silver market, in the face of all that has
evolved. I can't understand how they can cast aside their
responsibilities to their shareholders and not at least try
to right some very obvious wrongs.
Thank goodness that other silver miners have chosen another
path.
When the silver price explosion commences (shortly, I believe),
I would imagine that the fortunes of all silver companies would
be lifted in the rising silver tide. But I hope that it is not
forgotten that those that may have hastened the end of the
manipulation in silver chose not to do so.
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http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
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http://www.resourceinvestor.com
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http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
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Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
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