Silver prices | Can The New Silver Fix End The Ongoing <b>Silver Price</b> Manipulation <b>...</b> |
- Can The New Silver Fix End The Ongoing <b>Silver Price</b> Manipulation <b>...</b>
- Silver Wheaton Is Not Solely Impacted By <b>Silver Prices</b> - Silver <b>...</b>
- How The Coming <b>Silver Price</b> Bubble Will Develop :: The Market <b>...</b>
- <b>Silver Price</b> Forecast This Week: Downside Speculation Mounting
| Can The New Silver Fix End The Ongoing <b>Silver Price</b> Manipulation <b>...</b> Posted: 28 Aug 2014 12:52 AM PDT The new silver fix is a fact since 17th August 2014. The silver fix has been a driver in setting the silver price in the last 117 years, but now a revised "fixing mechanism" with other "fixing members" is in place. Up until August 14th 2014, three institutions have been participating to the daily silver fix, i.e. Deutsche Bank AG, HSBC Bank USA N.A. and The Bank of Nova Scotia. In the new silver fix, the participating members are HSBC, ScotiaMocatta and Mitsui. Before looking into the question what to expect from the "new" silver fix, it is important to understand what the "old" silver fix has done to the price of silver. Commodity analyst Dimitri Speck has focused his research on discovering silver price manipulation related to the silver fix, more so than the Gold Fix. Based on his extended statistical analysis around intraday average price patterns, he was able to pinpoint when exactly the manipulation (or, intervention) took place, and he provided the world unbiased charts. The next paragraphs focus on his findings; they are based on Dimitri Speck his book "The Gold Cartel."
The key in uncovering the silver price manipulation is to analyze price patterns in three distinct time frames:
In the period before 2010, the intraday average silver price chart clearly shows statistically significant anomalies. The first chart shows the intraday average price between August 1998 and 2011. The obvious observation is that a significant price break down has been appearing right at the silver fix, which is at 7AM EST (New York time). A second sharp decline is visible at 10AM EST, which is probably linked to the gold fixing, see below. The chart takes into account almost 13 years of data, it excludes every form of coincidence or randomness.  average intraday silver prices till 2010 show a visible intervention right at the timing of the "old" silver fix Interestingly, the manipulation (or intervention) in silver is much more pronounced than the one in gold. The next chart shows a data set for a comparable period in time as the previous chart, but applied to gold.  average intraday gold prices till 2010 show a statistically less significant intervention right during the "old" gold fix Dimitri Speck concludes in his book "The Gold Cartel": "Contrary to the situation at 10AM EST, this decline cannot be ascribed to the high correlation with gold. The average intraday chart of silver shows that there are independent price interventions in silver that are not connected to gold." Or, in plain simple words, silver price manipulation is obvious and much more outspoken than gold price manipulation. What happened in the period 2010 – 2011? Between summer 2010 and April 2011, the price of silver surged from below $20 to $49 an ounce. It goes without saying that it was an historic rally. How was such a rally possible given the daily price break down which was discussed above? The answer is very simple: the interventions did not take place in that period of time. The next chart provides clear and unambiguous evidence of the trend change.  average intraday silver prices between 2010 and April 2011 do not show significant and recurring interventions anymore "Coincidentally," in September 2010, JP Morgan announced that they were in the process of winding down their proprietary trading operations. It is no secret that market observers are considering JP Morgan responsible for the manipulation of silver, because of their power to influence price setting, being the bank with the largest stake in the precious metals futures market in terms of derivatives positions. One way or another, the interventions in the silver price "disappeared" between the summer of 2010 and April 2011. However, on 1 May 2011, the sharp rally suddenly stopped and a new phase with another intraday average price pattern became apparent. The price breakdowns from the period before 2010 were back at play.  average intraday silver prices after May 2011 show similar significant recurring interventions during the "old" silver fix The comparison between the three periods of time are so obvious that everyone can observe them. It is the technique to use the intraday average prices, combined with the distinctive time periods, that are the key to uncover these anomalies. From Dimitri Speck's book "The Gold Cartel" page 149:
The "old" silver fix has officially come to an end on August 14th 2014. The revised process shows to some extent similarities with the "old" process, although the participants and facilitators differ. First, the participating members are HSBC, ScotiaMocatta and Mitsui. The process is electronic and facilitated by Thomson Reuters, while the LBMA owns the intellectual property rights of the fix. On the other hand, market participants have been complaining lately that the preparations have been intransparant. Similarly, the rationale for chosing the facilitators have been intransparant. A review of the new process was conducted by an ex-Barclays director while Barclays has been found guilty of rigging the gold price, as reported by GoldCore. With the new silver fix, the allegations of manipulation through the old process are inapplicable anymore. Does it mean that silver price manipulation has come to an end? Unfortunately not, according to precious metals expert Dimitri Speck. He explains to GoldSilverWorlds that the "new" fix has the potent to improve the transparancy on the long run, and avoid of conflicts of interest. However, the main manipulation is taking place in the gold and silver futures market. These manipulations appear at any time, just more frequently during the fixing, so that it remains visible in the statistics. Dimitri Speck reiterates that "the fixing is influenced from outside"; as discussed before, the futures market is the main cause for manipulation of the silver price. Unfortunately, that issue cannot be solved by only "fixing the fix." One has to end the manipulations in the futures market, which is, up until now, visibly not desired by the American authorities.  |
| Silver Wheaton Is Not Solely Impacted By <b>Silver Prices</b> - Silver <b>...</b> Posted: 27 Aug 2014 04:30 AM PDT Summary
Silver Wheaton (NYSE:SLW), the leading silver streaming company, hasn't performed well in the stock market in the past month partly due to the weakness of silver prices. But what are the other factors that could have impacted this company's stock? Let's examine some of these factors and also see what is up head for this company including its risks and advantages. Correlation and PerformanceIn the past couple of months, the price of silver dropped by 7.6%, while Silver Wheaton fell by 3%. On a yearly scale, this streaming company has outperformed silver or Shares Silver Trust (NYSEARCA:SLV): Silver Wheaton's stock grew by roughly 26%, while silver remained nearly flat. The company has outperformed silver even though the company has also distributed dividend payments. Despite these major differences, the correlation between the two time series was mostly strong, as indicated in the chart below. Source: Google finance But as you can see, Silver Wheaton's stock price became less correlated to silver in the past few weeks. More than silverAs you well know, Silver Wheaton's performance doesn't only rely on the progress of silver; the company's stock is also impacted by the management's decisions. This includes rising (or falling) attributed production and reaching solid deals. This year, however, the company doesn't expect much of an increase in its attributed production. So one of the main advantages Silver Wheaton has is silver won't have much of an impact on the company's stock this year. Nonetheless, if the company comes up with a new streaming contract, this could all change. Further, looking forward, by 2018, the company expects to reach 48 million equivalent ounces of silver - nearly 33% higher than 2014. Keep in mind, Silver Wheaton doesn't only sell silver but also gold. Currently, the company's gold operations account for roughly 30% of its revenue. This gold segment provides some diversity (but not too much, after all it's still another precious metal) even though, on average, its gold operations tend to be less profitable than silver as indicated in the table below. Source: Silver Wheaton's website Another thing to consider, the gold market has rallied by nearly 6.5% since the beginning of the year, which could partly explain this streaming company's rally in the stock market. Silver Wheaton also has some risks including mismanagement, debt risk and reaching poor streaming agreements. As I have pointed out in a past article, the company's streaming deal may have been highly priced considering precious metals prices took a dive since the deal was struck back in February. The company could also face delivery delays, which could cut down its expected revenue stream and thus adversely impact, over short period of time, its stock price: One of Silver Wheaton's precious metal producers partners Barrick Gold (NYSE:ABX) has been delaying the development of its Pascua-Lama mine since the end of last year. Up to now, Barrick Gold compensated Silver Wheaton with precious metals from its other mines. In conclusion…Silver Wheaton is still a better investment than silver due to its operations, dividend payment, and forward-looking growth in volume of sales. These developments along with a higher share of gold from total operations could bring down this streaming company's relation with silver prices. Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Seeking Alpha PRO helps fund managers:
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| How The Coming <b>Silver Price</b> Bubble Will Develop :: The Market <b>...</b> Posted: 26 Aug 2014 09:07 AM PDT By: GoldSilverWorlds
How do asset bubbles develop? Most often, an asset bubble develops when an undervalued asset which has a compelling investment story and there exists an overall financial environment of sufficient buying power, catches the collective interest of the crowd. For example, by the mid-2000's and after years of steady appreciation, residential real estate developed into an asset bubble amid the self-fulfilling cycle of continued gains and the availability of easy credit. As far as great stories go, silver has the best potential story to develop into a bubble. First, there is little argument that it is among the most, if not the most undervalued asset of all by objective relative historical price comparison. In addition, it is at or below its primary cost of production, as evidenced in recent quarterly earnings reports. Remember, most bubbles start out with an asset that is undervalued – on this score silver more than qualifies as being undervalued. Aside from extreme undervaluation, the silver story is multi-faceted. Silver is both an industrial metal and a primary investment asset, the net effect being that very little newly-produced silver is available for investment, perhaps only 10% of the one billion oz produced yearly (mine plus recycling), or 100 million oz annually. In dollar terms, at current prices that comes to less than $2 billion per year. There are two ways to look at that; the observation that there are countless individuals and investment funds capable of ponying up that entire amount on their own and the fact that $2 billion amounts to less than 30 cents on a per capita basis for the world's 7 billion inhabitants. Simply put, there is no other asset class which would require less buying to develop into a bubble than silver. Apart from newly-produced silver available for investment, the amount of previously produced metal available for investment, or world inventories, is also shockingly low. As a result of a 65 year deficit consumption pattern that ended in 2005, world silver inventories have been depleted by 90% from the levels existing at the start of World War II. Today, only a little over one billion oz of metal in accepted bullion industrial form exists with perhaps another billion oz existing in coins and bars. In dollar terms, that comes to $20 to $40 billion, where most other asset classes (stocks, bonds, real estate and even gold) are measured in the many trillions of dollars. And please, never confuse what exists with what's available for purchase – only the owners of the small amount of silver that exists will determine at what price it is available. The conclusion is simple – the asset requiring the least amount of buying to create a bubble is, automatically, the best candidate for developing into the biggest bubble. The fuel for any bubble is total (world) buying power versus the actual amount of an asset available for purchase. Previous, as well as prospective, bubbles in stocks, bonds and real estate grew to many trillions of dollars of total valuation. At $200 an ounce, all the silver in the world (bullion plus coins) would "only" amount to $400 billion, not even a rounding error to the total valuation of stocks, bonds, real estate and, even, gold. In other words, due to silver's current undervaluation and its shockingly small amount in existence, it has more room to the upside than any other asset class. But I'm not done. Silver's unique dual role as a vital industrial material and primary investment asset creates a setup for something happening that has never occurred in any previous bubble. As and when sufficient physical investment buying develops in silver to drive prices significantly higher, the industrial consumers of silver, in everything from electrical and solar applications to medical and chemical applications, will likely be subject to delays in the customary delivery timelines of the metal. As is almost always the case, whenever industrial consumers of a commodity are deprived of timely deliveries, they resort to stockpiling that commodity as a remedy, further exacerbating delivery delays to other users. Thus, the stage is set for something the world has never experienced previously – an asset bubble accompanied with an industrial shortage. The two greatest upward price forces known to man, an asset bubble and a genuine commodity shortage, appear set to combine in silver. Either one, alone, would have a profound impact on the price, but the combination seems both inevitable and almost impossible to contemplate in terms of how high the price of silver could be driven. And it's hard to see how intense investment buying wouldn't trip off industrial user attempted inventory stockpiling or vice versa; it doesn't matter which comes first. Tying everything together, there is one and only one explanation for why silver is so undervalued and the asset bubble/industrial shortage hasn't occurred yet – the ongoing price manipulation on the COMEX. Massive amounts of paper contracts traded between two groups of large speculators (technical funds and commercials), measuring in the hundreds of millions of ounces and completely unrelated to the supply/demand fundamentals have set the price of silver. This COMEX price control is both the curse and the promise in that it not only explains the undervaluation, it will explain why it seems inevitable for an asset bubble/user shortage to develop. Think of it this way – the asset with the greatest potential for becoming the biggest bubble ever had better have the greatest story ever as well. And that is what the COMEX silver manipulation is – the key ingredient in the greatest investment potential score ever. If silver wasn't manipulated how good would the story be? Absent manipulation, I wouldn't buy or hold silver because that would mean that free market forces were setting the price all along. In other words, if silver wasn't manipulated there would be scant reason to buy it in my eyes. If I wasn't convinced silver was manipulated, I can't see how I would have ever written this or anything about it in the past or could have become interested in it in the first place. As painful as recent prices have been to existing holders because of the manipulation, without it there would be little chance for a price explosion at some point. The easiest major potential change in the silver price equation is for the manipulation to end, one way or another. And if history and logic win out, the silver manipulation must end, not the least because of the coming clash between paper and physical silver. Some call it the disconnect between paper derivatives contract on the COMEX and actual physical silver, but in reality the story is that COMEX futures contracts are very much connected to each other via the delivery mechanism. The connection between paper and physical has been forged because the main COMEX futures speculators are only interested in trading paper futures contracts and not in trading physical metal. Technical funds have no desire to buy and sell real metal for full cash payment when they can deal in paper contracts for only 10% cash down because they are trading, not investing. The problem is that the trading between the technical funds and the commercials has become so large that it dwarfs real world silver supply/demand fundamentals and ends up setting the price of silver in violation of commodity law. I know that this perversion of the price-discovery process has existed for a long time, but it would be wrong to confuse longevity with permanence. The fact is that while the COMEX paper market dominance has lorded over the real supply and demand fundamentals, the stage has been set for a physical asset bubble/industrial user panic event. I've become convinced that any prospective bubble in silver won't be driven by the aggressive buying of COMEX futures contracts, but only by physical buying. For one thing, the crooked CME and CFTC would never allow any group of traders to drive silver prices sharply higher by buying unlimited amounts of COMEX futures contracts. If the technical funds do buy big amounts of COMEX silver futures contracts (as was the case from June to mid-July), you can almost be certain that the CME and CFTC knew that those funds would be soon forced to sell on lower prices. As a result, any bubble in silver must and will develop from physical investment buying. Surely, any industrial user inventory buying panic must involve immediate physical delivery and not a paper futures contract in a time of delivery delays and uncertainty. In fact, it is hard to imagine, as a silver bubble begins to develop, a greater urgency for holding only physical metal to intensify, due to a growing recognition that the COMEX manipulation was responsible for the former low price. Since I am speaking in terms of a potential historic asset bubble in silver, I am implying that the price of silver will far exceed its true value at some point before correcting sharply. It is before that collapse point, that God-willing, I intend to sell. I am not deluding myself that I will come close except hoping not to be terribly early or late. While I respect anyone's reasons for buying and holding silver, my mission has always been to help end the manipulation and be done with silver after that was accomplished and reflected in the price. This article is based on a commentary of Ted Butler's premium service at www.butlerresearch.com which contains the highest quality of gold and silver market analysis. Ted Butler is specialized in precious metals market analysis for over four decades. Source - http://goldsilverworlds.com/physical-market/how-the-coming-silver-bubble-will-develop/ © 2014 Copyright goldsilverworlds - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors. © 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication. |
| <b>Silver Price</b> Forecast This Week: Downside Speculation Mounting Posted: 18 Aug 2014 12:43 PM PDT
But investors who hold silver through this short-term weakness are soon to be rewarded for their patience. As it stands, speculators have out about 21,600 short contracts on the white metal representing 108 million ounces of physical silver, a 19.2% increase from the week before, according to data from the U.S. Commodity Futures Trading Commission. It's also a 71.2% increase from two weeks ago when short contracts were at their lowest levels on the year. This means that silver is currently in a cycle of growing short positions, which suggests that at least for a little while, silver investors are going to have to absorb some losses before there are any advances. Also working against silver in the last week is that there was no rise in the number of speculators going long, providing no support for price growth in the face of increasing shorts. But this is going to reverse itself in due time... How Speculation Fits In to the Silver Price ForecastTypically, silver - like gold - will move on negative economic conditions. Recently, turmoil across the globe in places like the Gaza Strip, or on the Ukrainian-Russian border, has to some extent provided a safe haven for investors looking to move away from the dollar and equities this year. But macroeconomic events alone are a difficult indicator of silver price movements, as the small size of the silver market creates high levels of volatility. So while a spike in investor interest can help silver make quick dramatic advances, it can also just as quickly have its gains erased when investors pull back. A good recent example of this was last month, over concerns of the Portuguese banking sector. Silver soared when Portugal's second-largest lender, Banco Espírito Santo SA, revealed on July 10 that its retail clients were holding the commercial paper of its parent company, a company that had just two days earlier announced that it was going to miss payments on those debt obligations. Panic ensued and silver jumped 1.5% on the day and peaked at three-month highs of $21.47 an ounce. But over the following weekend, it became clear to markets that those events were fairly isolated, and that only the Portuguese bank was going to suffer, not the Eurozone as a whole. Silver investors pulled back. On Monday, silver saw a 2.5% decline, erasing the previous week's gains. Speculation, however, has been a fairly consistent silver price predictor in 2014. So far this year, silver prices have had a correlation of -0.86 with speculator short positions, bets on silver prices falling. Statisticians will generally look for a correlation of between -0.7 and -1 to determine whether there is a strong inverse correlation between two variables. With inverse correlation as solid as it is, this suggests that as short positions grow, silver prices will fall. And on the other end, when shorts reach a peak, silver prices reach a low and are poised to gain. "When there are few shorts, that leaves the price vulnerable to renewed short selling," managing partner at CPM Group, Jeffrey Christian, wrote in an email to Money Morning. "So, too, when there are a lot of longs, that leaves the price vulnerable to profit-taking selling by the longs." So far, there have been two periods of silver shorts moving to peaks that were followed by a period of short contract liquidation and coinciding silver rallies. The first was in early February, when short contracts totaled close to 34,000. In the period of liquidation to follow, silver gained 12.3% in just two weeks. The second peak was reached after a three-month bear session, where shorts mounted from mid-February to early June, when they hit record highs at around 49,000 contracts. The short contract sell-off period to follow was protracted, lasting from early June to late July, and delivered gains of 9.3% just before the shorts began to grow again. Right now short contracts are still well below their peaks on the year. With short contracts at about 21,600, there is still room for that total number of contracts to grow, and for silver to continue to fall before a peak is reached. But with silver speculation in 2014 providing a pretty clear picture of where silver prices are headed, the more this number grows, the bigger the gains and the longer the rally after that peak is reached. More on profiting from today's market volatility: Economic skirmishes like the situation in Russia can quickly escalate into all-out trade wars, where even the victors lose. But you don't have to be another victim.Here's how you can understand, and profit from, this surging European volatility... |
Ted Butler writes: What is an asset bubble? An asset bubble occurs when a large number of buyers, normally not usually prone to speculate in an asset, bid the price of that asset much higher than underlying valuations would support, most often fueled by leverage or borrowed money. Typically, towards the terminal phase of the bubble the most compelling reason for continuing to buy the asset is due to the rising price itself, as all caution is thrown to the wind amid the collective belief that prices can only move higher still. Then, when the last possible speculator has purchased the asset, the inevitable occurs and the price of the asset collapses as previous buyers turn into sellers and attempt to get out. Since the formation of the bubble and its inevitable collapse are driven by the collective emotions of greed and fear, it is generally impossible to predict how long an asset bubble will persist and how high the price can climb, as well as the timing and extent of the subsequent collapse.
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