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« Silver Prices at a Thirty Year High | Main | The Accumulator Trade 1 Open 15 Dec 2010 »

Silver price up as JP Morgan cuts short position and backwardisation rules

coins 17 Dec 2010.JPG

This article, by Peter J. Cooper, appeared on yesterday and includes some interesting gold and silver price forecasts

Silver market experts have long pointed to the massive short position held by several major banks as the prime reason for the metal being underpriced and the only commodity still trading below its all-time high of thirty years ago.

But the headlines in the Financial Times today announced that JP Morgan has ‘materially reduced’ its position in silver to counter these allegations which it denies. It is perhaps no coincidence that silver is up 70 per cent since August.


At the same time the silver market is in backwardization, that is to say silver for immediate delivery is priced more highly than silver for future delivery. That is generally what you see when a market is tight with not enough supply to meet immediate delivery, so you get a better deal if you can afford to wait a while.

Both factors are mega-bullish for the silver price. The fraudulent manipulation of the silver price is over, and the artificial block to very much higher prices removed.

The price spike that has emerged since last summer when banks began covering their short positions is set to go higher. As ArabianMoney has previously argued to break $50 early in the New Year is perfectly possible.

That would take out the old all-time high of 1980. Normally after such a spike a correction follows because the buyers eventually run out, and this rocket fuel is exhausted.

Moving much higher

However, as we discussed in detail in the December edition of the ArabianMoney newsletter (click here to subscribe and we will also send you the December issue) there is still a great deal of life left in the precious metals bull market, and any set back will only be temporary.

ArabianMoney is one of 65 global forecasters predicting $5,000 gold within two years and the forecast ramp up for silver to $320 an ounce offers an even higher rate of appreciation.

Over in the options trading pit, we now have 59 winners out of 61 trades, or a 96.72% success rate and have opened 3 new positions.

sk chart 10 Dec 2010.JPG

The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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Reader Comments (2)

"Both factors are mega-bullish for the silver price"
Oh yeah, like Oil price in July/2008?
Production cost for Silver is between $3-$5/oz.
I'm waiting for USA,Canada to increase production like 2002 for additional 640 metric Tones of Silver and many European minning companies from Bulgaria,Poland,Russia,Greece,Sweden,Kazahstan to
increase production about additional 800 metric tones in 2011,2012.
PLUS possible INCREASE of productions in Australia,Japan,Moroco,India,S.Africa etc. for additional 1,000 metric tones of Silver.
Well next two years will see about 10% increase of production and Silver is alredy in bubble teritory because Gold production cost is $450-$700/oz or avg. ratio 1: 2.5,
and Silver avg.ratio is 1:7.5 production cost.
He,he SILVER $320/OZ is possible only if $US will be replaced with new world currency AND will going back again to monetary golden standards. Than gold should be $55,000 to $60,000/oz. JP Morgan has currently short possitions of Silver and they are selling the contracts to stupid hedge brockers.Well maybe will see pressure till January/Feb. 2011 BUT the game is over for Silver in 2011.
When China,Mongolia production cost is $3/oz, and you've mentioned Silver Wheaton with many latinos mines production cost is $4/oz and USA,Europe,Canada about $5/oz, than WHO is so STUPID to pay almost 70 to 100 times more than production price. Oh yeah High demand,bull shit the last 2 weeks demand is much,much weaker and will see in 2011,2012.

December 23, 2010 | Unregistered CommenterMike SR


December 27, 2010 | Unregistered CommenterJOHN FOSTER

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