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« Canada the Envy of the G7 | Main | Silver Wheaton Corporation: Bought Call Options »
Sunday
May302010

Silver Price Manipulations Appear to Have Failed this time

Silver Coin 31 May 2010.jpg

This is an interesting article regarding the possible attempts to manipulate silver prices recently. The author is Patrick A Heller who owns Liberty Coin Service in Lansing, Michigan and writes "Liberty's Outlook," a monthly newsletter covering rare coins and precious metals. We hope that you find both enjoyable and informative.

Again I remind you that the price of gold is actually a report card on the value of the US dollar, and the American government and economy.  A rising gold price indicates growing mistrust in the safety and stability of the dollar, falling confidence in the competence of the US government, and heightened fears about the strength of the private financial sector.

Such concerns were certainly not allayed when it was recently widely reported that, for the first time in history, the majority of Americans now depend on payments from government as their “income” rather than obtaining their sustenance from the private sector.

Because of this inverse relationship between the price of gold and public confidence in the value of the dollar, the US government can derive huge benefits if gold’s price is suppressed.  Among the benefits are lower interest costs paid on Treasury debt and lower payments on entitlement programs tied to the official inflation rate.

As federal government documents have been declassified and released to the public, it has been confirmed that the US government has intervened to manipulate gold prices starting as early as the end of World War I.  In a letter to the Gold Anti-Trust Action Committee, Inc. (GATA) dated September 17, 2009, Federal Reserve Bank governor Kevin M. Warsh confirmed that the Fed has gold swap arrangements in place with other central banks, one of the means by which gold prices can be manipulated.


The tactics used to suppress gold prices have long become so blatant that professionals in the gold commodity trading pits can easily identify the times when prices are being manipulated.
One event where gold prices are regularly suppressed is at the monthly expiration of gold and silver option contracts.  There are two different expiration dates each month.  Normally, the COMEX options expire on a Tuesday followed the next day by the expiration of Over The Counter (OTC) options contracts.  The larger options market is on the COMEX, though there are ten to fifteen banks and brokerages in New York, London, and Zurich that make markets in the OTC contracts.

Up until they expire, call options give the owners the right to demand delivery of the gold or silver at the contract’s strike price.  Should the price of gold rise above that level (referred to as being “in the money”), owners of call options can pay the strike price and other expenses and demand delivery of the physical gold from the party who sold them the contracts.  Should this occur, that would squeeze gold supplies as the gold inventories on the COMEX are only sufficient to cover a small percentage of outstanding contracts.  A supply squeeze likely would have the impact of pushing up prices.

The COMEX options expired this week on Tuesday.  As I had predicted last week, the prices of gold and silver were suppressed below the strike prices where there were the largest number of call options—gold at $1,200 and silver at $18.00.

The pattern for the past several months has been for gold and silver prices to be suppressed until after the OTC options expired upon the close of the COMEX the next day.  Once the monthly options have expired, the pattern has been for a quick recovery in both gold and silver prices.

That is not what happened this week.  The first part of the manipulation to keep gold below $1,200 and silver under $18 through Tuesday’s COMEX close was successful.  However, almost as soon as the COMEX closed, gold and silver prices climbed above those levels.

On Wednesday, it looks like the US government, which largely acts through its US and foreign trading partners, was unable to push down gold and silver prices below the critical $1,200 and $18 at the COMEX close!  Where this manipulation tactic has worked for many months in a row, this time the surge in demand for physical gold and silver overcame the resistance.

The failure this week of these manipulation efforts is a huge signal that we are closer to the day when the floodgates will give way and we see gold and silver prices surging more quickly and by greater percentages than we have seen in decades.

To read this article in full please click here.

Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles". His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com.


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.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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.

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Reader Comments (1)

Gentlemen, I suspect if we count all the illegal aliens receiving welfare benefits it may be true that a majority of americans are receiving government aid. But, it certianly hasn't been widely reported in the main stream media, particularly Fox News channel which tends to be more of a straight shooter on such things. If true, it supports my contention that welfare (and welfare fraud) is our fastest growing industry. Medicare and medicaid fraud alone amounts to in the billions yearly. Much of this fraud is perpetrated by foreigners who come to the US, set up sham businesses, quickly bill the government for services, pharmaceuticals or durable goods such as wheelchairs, and then quickly disappear with the loot.
Add to this the cost of the disproportionally high amount of crime caused by illegal aliens with the attendent cost of prosecuting and jailing them. Three hots and a cot, doesn't come free. Yet a surprising number of Americans are against the new anti-immigration law going into effect in the state of Arizona this summer.
The list goes on but my point is made.
Best regards...S

May 31, 2010 | Unregistered Commentersnakeman

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