This is the second of what seems to have become a series of diaries chronicling the coming surge in precious metals prices. In June I pointed to the
peak price of gold in eurodollars - check out that live chart - and I gave a basic description of the futures markets.
Today I'm going to talk about a little bit of news in the silver scene, an attempt to create a Silver Exchange Traded Fund (ETF). An ETF is the opposite of a futures market, it is a 1:1 purchase of physical metal. Therefore, every share of the ETF is backed up by bullion.
Interested readers, flip forward --->
There are several Gold ETFs in other countries, and one was just
added to the NYSE. Recently, an application for the first ever Silver ETF was submitted to the SEC by Barclays Bank, which apparently has been
rejected.
The US Securities and Exchange Commission has turned down Barclay's[sic] Global Investors application to establish a silver electronic trading fund platform, sources in the market told Platts Thursday. Barclays already have an ETF for gold.
Wow, you say. So what?
The current ETF application was for One hundred and thirty million ounces, which, if backed by physical silver, would amount to half of the naked COT short commitment, and according to Ted Butler, more than all the known physical reserves.
So now starts the speculation - Did Barclays know where to get 130 MM ounces of Silver? Did recent COMEX delivery action reveal their pitiful attempts to do so? Ted Butler believes it could be one of two explanations:
In the first two days of the September contract delivery period, over four million ounces of silver were brought in to the COMEX warehouses ... to satisfy delivery demands..
The contract stopper for this physical delivery was the beleaguered AIG, who took 8.5 MM ounces in total. Basically, they emptied the vault. But some say that AIG wasn't a proxy for Barclays, they were in fact unwinding a rather large hedge, done in a private deal with China. Our asian friends are demanding their chair back as they see the musicians getting tired.
My other diary made the point that the price of gold was finally becoming unhinged from the value of the dollar. Today I have two charts which show that Silver is now being suppressed and is due to be "uncoiled":
2 year price of Gold
2 year price of Silver
I realize that by posting this, I have created a bit of frustration on the part of those of you who agree with the trends I cite but are unable to take advantage of them. Last diary, one comment asked if I would recommend you buying into a futures account. My answer, Hell NO. These markets are dangerous. But then again, for a relatively small risk, you can get a toehold in a rising market. I'm wary of writing a futures trading 101 diary, but may be compelled to do so. Be forewarned it will fall far short of expert advise.