From Patrick Heller--very good article explaining the silver /gold market manipulation and why it goes on .This is a continuation from his previous article which i posted a few days ago.


Wall Street Journal Puts Silver on the Front Page—But Still Doesn’t Get It!
Posted: 28 Dec 2010 05:42 PM PST
On December 27, The Wall Street Journal carried a front page article titled, “Price of Silver Soaring.” It is written by Carolyn Cui, who quoted me in another front page article on gold back in September, and Robert Guy Matthews.
The information contained in the article included many tidbits that have appeared in previous columns I have written, so I could say that the Journal may be starting to catch up to me.
I found that the article did not fully detail what has been happening in the silver market in 2010. From the information in the Journal article, a reader might come to the conclusion that silver had a nice price jump in 2010, but that there is a surplus of supply going into the future which may preclude further price increases in 2011 and beyond. The article notes that there was a significant increase in silver investment demand in 2010 without digging into the reasons why this is so.
To provide further information to help people get a better understanding of the silver market, I wrote this week’s column for Numismaster.com to augment the Journal article. Numismaster published this column on the afternoon of December 28 under the title “Nifty: Silver Will Be at $50.”
In the Numismaster column, I listed ten reasons why investment demand for silver has been so strong this year, and why it should be at least as strong in the future. It has a lot to do with the physical short positions in the London Bullion Market Association and COMEX commodity markets. The shortages are becoming ever more difficult to cover with paper contracts, so that the entire market may default and implode in the next year or so.
Since I finished that column, I realized that it led to a further question: Why would any bank or brokerage put itself in the position of having such a large short position in the physical silver (and gold) market? A completely exposed short position would be risky and not protective of shareholder interests, which is why I would not expect them to engage in such a practice.
The fast answer to that question is that the physical market is only a small fraction of gold and silver trading activity. Many major traders, especially in the US and Europe, want to trade precious metals but don’t want the inconvenience of having to handle physical metals. The London and COMEX markets developed to accommodate such activity.
In theory, the London market trades contracts for delivery of the physical metal at contract maturity. Therefore, the London vaults should hold 100% of the metal needed to fulfill all the contracts. However, most traders simply want to hold the position for a time and plan to buy an offsetting short or long contract to close out the position before maturity. In such an instance, no physical metal would need to be delivered. The same activity occurs on the COMEX, though this exchange explicitly does not represent that its vaults contain more than a small fraction of inventory to cover all open positions.
It would be possible for a bank to have a significant short position in the silver market which could be balanced, or hedged, by a corresponding long position in paper contracts. For the past few years, it has also been possible to own shares of gold or silver exchange traded funds (ETFs) to accomplish this same result.
It would also be possible for a bank to trade derivatives or purchase insurance to protect their exposure to a large short position.
Unfortunately, information on paper positions is not reported by either the institutions holding the positions or by the exchanges on which such positions are traded. Information on derivative positions is an even bigger secret.
Derivative positions are only as valuable as the ability of the counterparties on the other side of these contracts to fulfill their obligations should the original party default on their obligations. The size of the derivatives markets for gold and silver is so huge that it dwarfs the physical markets.
There is a problem with this secrecy, lack of transparency, and the lack of disclosure of the financial strength of the counterparties. These leave a lot of room for trouble and deception.
As I have said before, the price of gold can be thought of as a report card on the US dollar, the US government, and the US economy. This gives the US government a huge incentive to suppress the price of gold. By making it appear that the US dollar, government, and economy are all in better shape than they really are, the government pays a lower interest rate on Treasury debt. If the US government were to engage in suppressing gold prices, it would necessarily have to also manipulate silver prices downward, as these two metals generally move in the same direction.
One of the major methods of suppressing gold and silver prices would be to make it appear that there is much more metal on the market than is being generated by the mines, by recycling, and by acknowledged government sales. If a government does not simply sneak some of its own gold reserves out on to the market to sell surreptitiously, it can arrange for a major bank to borrow gold or silver and sell it on the physical market.
As long as governments and central banks don’t have to accurately disclose the amount of reserves they actually have on hand, all kinds of financial chicanery are possible. In years past, the International Monetary Fund (IMF) actually required double counting of gold reserves! If a central bank leased some of its gold, it was still required to report the gold that was no longer in their vaults as if it was still there. At the same time, the other central bank that might possess the leased gold was also required to report it as being part of its own reserves. The IMF still allows this double counting of reserves, but a few years ago it dropped the requirement to do so.
Another tactic to make it appear that there is more physical metal on the markets than is really there is to sell or lease the same metal to multiple buyers who agree to leave the metal in unallocated storage in vaults. The mega bank JPMorgan Chase has a huge short position in the silver market while at the same time serving as the first tier custodian of physical silver for the SLV exchange traded fund. Although having such positions represents a conflict of interest to the bank, apparently it is within rules set down by regulators. However, there are several questions as to whether the physical silver held by JPMorgan Chase may be subject to multiple ownership claims from the ETF and other parties.
There are many more means by which gold and silver prices could be suppressed, such as by changing laws, regulations, and exchange margin requirements.
If it turns out that some of the physical silver does have multiple ownership claims, that could result in the counterparties to derivative contracts being unable to fulfill their potential obligations. It the counterparties are at risk of default, that would put the banks who have hedged their physical short positions with these derivatives at risk of default. You could see a cascade where the default by one party led to another default, and on and on.
The several hundred percent rise of gold and silver prices over the past decade leads me to think that the paper contracts are at a much greater risk of default than publicly perceived. After all, if there really was so much physical gold and silver available to back ownership claims, prices today would probably be 80% lower than they are.
In the process of trying to use lower gold and silver prices to minimize current financial calamities, the US government may have pushed its trading partners and allies into ever more risky positions. This is the reason why the Chinese government and many other central banks are now adding to their gold reserves and major buyers of gold and silver are buying physical rather than paper forms—and taking delivery.
Should the paper markets for gold and silver start to unravel, they could do so quickly. Prices could soar so much that there literally would not be time for people to react and protect themselves. I predict that gold and silver prices in 2011 will rise by a greater percentage than they have in 2010. The actual result could be several times higher than that. Even if a major price explosion does not occur in 2011, I would expect it to occur in 2012 or soon thereafter.
This is the information, along with that of the December 28 Numismaster article, that I wish The Wall Street Journal article had included in its December 27 front page article.

and here is another great article on the same topic by Jason Hommel:

Wall Street Journal Aids Silver Price Suppression
(Through misinformation, lies and omission! Plus, the year in review, and price predictions for 2011)
Silver Stock Report
by Jason Hommel, December 29th, 2010


I'm called upon by my regular readers to refute, rebut, and rebuke this bad article on silver from the Wall Street Journal.

Price of Silver Soaring
Investor-Fueled 74% Gains Dwarf Gold; Race to Open Mines
By CAROLYN CUI And ROBERT GUY MATTHEWS
DECEMBER 26, 2010

Regarding (RE) the WSJ comment: "unexpected surge in investor demand."

Really? Unexpected, you say? But precious metals bulls have been predicting explosions in the price for ten years based on irrefutable fundamentals and unsustainable market manipulation!

How can investor demand be unexpected when the price of precious metals has been going up continuously for ten years now since the year 2000? Don't investors like to buy things that are rising in price? Don't investors also try to predict things that will rise in price, and buy them before they really rise? Does the WSJ know anything at all about investing?

Unexpected? Really? When the numbers of silver Eagle 1 oz. coins produced by the US Mint has been increasing steadily for the past 3-4 years, up from 10 million oz. to nearly 40 million oz. this year? How can a single year's investor demand be unexpected, when its increase is already a steady trend?

Regarding the WSJ comment: "Prices are rising despite oversupply."

What oversupply? What do you even mean by oversupply?

Here is the dictionary definition of oversupply:
www.thefreedictionary.com/oversupply
"A supply in excess of what is appropriate or required."

Ah, the WSJ is no longer reporting fact, but throwing out opinion now.

There is no oversupply, and can never be any oversupply of things such as gold and silver, since they have the least diminishing marginal utility of all things on earth, since they are money. Nobody ever complained that they had too much money.

But what does the WSJ mean by oversupply?

The supply & demand numbers produced by such surveys as www.silverinstitute.org/ who the WSJ quotes as a source, have "sum up" categories called "Implied Net Disinvestment" and "Implied Net Investment".

www.silverinstitute.org/supply_demand.php

When investors are buying, this is often called a surplus, or as the WSJ says, an "oversupply", and when investors are selling, that is called a deficit.

So, apparently, the WSJ is saying that when investors are buying silver that's "oversupply". And thus, when they describe that action as an "oversupply", they are really saying that silver purchases by investors are "inappropriate". Thus, they reveal their bias, with one word.

RE: "Many analysts expected those factors would keep a lid on prices in 2010."

But most silver analysts are employed by LBMA bullion banks who have a vested interest in manipulating silver prices downward, since silver is the Achilles heel, or arch enemy, of the banking system. Thus, "mainstream" silver analysts have never gotten a single year's prediction correct in the last ten years of the bull market in silver and gold. They always "predict" prices for next year that are within about 5% of current prices, and never any higher. Meanwhile, silver prices have risen from $4.15/oz. in 2003 to $30.60 now in 2010, which is a cumulative return of 637%, which, over 7 years, is an average annual gain of 33%. They never come close to predicting such gains.

Check my math, here:
www.smartmoney.com/compoundcalc/

Have any of the mainstream analysts predicted a silver price gain of 33%, for the following year, or even close, in the last 7 years? Never. Thus, they are worse than useless, they are purposefully deceiving, or willfully ignorant, as is this WSJ article. That should be no surprise, and neither should silver's price rise.

RE: "What they didn't expect was an overwhelming flow of money into the market from investors eager to ride a commodities rally."

Overwhelming flow of money into silver? Really? Let's see, there is $14,000 billion to $18,000 billion of paper dollars in the US banking system, which does not count dollars in overseas banks, and the rest of the world is printing up paper money like crazy for competitive devaluations. Meanwhile, the US government has an annual deficit of $1500 billion or more, depending on how you count, if you count off budget items, it could be as high as $3000 billion depending on who you read. Meanwhile, a tiny $3 billion pours into silver, which is a paltry 2% of 1% of the money in the US banking system, and a mere 10% of 1% (or 1/1000th) of new US money creation.

I wouldn't call that an overwhelming flow of money into silver. I'd say that's only a tiny trickle, wouldn't you say?

RE: "This is a story almost entirely about investment," says Stephen Briggs, senior metals strategist at BNP Paribas.

Well, the silver story, in the future, will be almost entirely about investment, but today, investors are still buying only a tiny fraction of new silver mine supply, with the rest being consumed by industrial applications of all sorts, from fabrication, to photography, to jewelry, silverware, and coins and medals.

From the silverinstitute.org:

2009 mine production: 709.6 million oz.
2009 Implied Net Investment: 136.9 million oz. (oversupply, or investor buying)

But let's pause here, and examine the numbers more closely.

Sprott wrote an excellent silver report that reveals that ETF silver demand is not counted in the "demand" numbers for silver!!!
www.industrymailout.com/Industry/View.as...264546678qz%3D3f9465

Fraudulent supply/demand numbers, omitting investor demand, or calling it a "surplus", is part of the manipulation of silver prices.

But this implies a few other things, too.

Either the exchange traded funds are not actually going out into the market to buy silver which means they are mostly all fraudulent, or, their net purchases are more than offset by investors or refiners dumping 1000 oz. silver bars (the only acceptable form of ETF silver) to dealers who sell it directly to LBMA banks. We've never had to dump any silver bars in the last 2 years of our precious metals business.

RE: Investors from the U.S. to China turned to "hard" assets such as copper and other commodities in part as a hedge against inflation worries.

No, copper has never been a key inflation hedge. Gold and silver are. In fact, recent reports show that JP Morgan has been buying all the world's warehouse copper, up to 90% of it. So, JP Morgan owns the copper, not investors, so this statement is just a bald faced lie.

RE: Exchange-traded funds backed with silver have enabled investors to invest in a market that traditionally was harder to participate in.

I don't know what's so hard about buying $15,000 worth of silver at $30/oz. It's only 500 troy ounces, which only weighs 35 pounds, and comes in a box the size of 9 inches by 9 inches by 3 inches high. Even 60 year old ladies carry such boxes out of our store all the time. That's one of the world's easiest commodities to buy. Contrast with WSJ's beloved copper, at $4.40/pound, which means $15,000 of it would weigh a staggering 3409 pounds! That's why copper is not remotely a viable inflation hedge, and has never been used as commodity money, but only as token money. Even 1 troy oz. of copper, at $4.40/oz. divided by 14.8 troy oz/pound is only worth 29 cents per troy oz., but would cost you about $4 each for minting costs and distribution, and perhaps $5-10 each for widespread marketing via MLM plans.

RE: In recent months, concerns about inflation, the European debt crisis and the U.S. Federal Reserve's recent moves to boost the economy have driven investors to hard assets, also benefiting silver prices.

Really? I agree. But then, why was silver's move so "unexpected" as the WSJ first wrote, to most analysts? Shouldn't this have been easily foreseen?

RE: The craze has reached the coin market.

Craze? Craze you say? What do you mean, craze?

www.thefreedictionary.com/craze
1. A short-lived popular fashion; a fad.
2. A fine crack in a surface or glaze.

Ah, only two definitions for the noun form. Clearly, they don't mean the second. Ah, they imply silver demand by investors is not only inappropriate, but will be short lived, and that it's now popular.

Wait, when only 1/1000th of new money is moving into silver, why and how is that popular? When only 2% of 1% of actual money in the banks, or, less than $2 out of every $10,000 sitting in banks is being invested into silver, how can that be accurately described as popular? No, silver is very unpopular now, still.

Let's be honest. If even 1% of paper money in US only banks, were to be invested into silver, it would be 50 times greater than the investment demand today, which would be as much as $180 billion dollars, moving into the silver market that only produces 700 million new oz. by the mines each year. $180 billion divided by 700 million implies no silver buying from anywhere else in the entire world, and no silver buying from any kind of industrial application, which implies a lowest possible price of $257/oz., at this "1% demand" level, which would still be, long, long before silver ever gets to be "popular".

That's a shamefully inaccurate description, calling silver coin buying a "craze", which also implies things such as:

verb: 1. To cause to become mentally deranged or obsessed; make insane.
verb, intr. 1. To become mentally deranged or obsessed; go insane.

The reason why that word "craze" is particularly objectionable to me is that silver buyers are returning to rational thought. People who think used, dirty, printed paper is valuable are the ones who have lost their minds.

RE: "Silver's reliance on investors to prop up the price could cause it to tumble suddenly."

"Silver's reliance on investors"? No, Investors rely on silver!

But seriously, I agree, silver's price is increasingly reliant upon investors who sell paper money for silver, and at some point that will ultimately halt completely. For example, after silver hits $1 million per ounce, the price could suddenly tumble to either $900,000 per oz., or it could simply stop trading in terms of paper money altogether, as paper money might just not buy anything at all at some point. It is far more true to say that paper money's value relies more on confidence than silver.

But really, the main point with silver is that today's value is certainly not dependent on investors, but rather, industrial demand, which is far larger, and more stable. As China alone continues to develop and surpass the total consumption level of Western nations, their population will consume silver as does the western world. That would be 6 tenths of an oz. of silver, per year, per person, because silver is an essential part of switches in electronic devices. If China consumed that much silver, times 1.3 billion people, that's 780 million ounces, which is more silver than is currently produced annually by all silver mines in the world. If the world is going to ever run out of things like cheap oil, or copper, it will certainly run out of cheap silver, first.

RE: "He forecasts an average price of $30.10 per troy ounce next year "

Yes, the analysts never predict a price 33% greater, which, as I calculated above, is the average annual gain in silver so far in this bull market. Next year's "average" is always today's price, and always paired with a warning about silver moving down. In less than two days, next year's average price was exceeded this year!

RE: "But he cautions, "The number is only going to be achievable as long as fresh money keeps moving in."

And why wouldn't it? We know that the USA alone will print from $3000 billion to $4000 billion next year. So why wouldn't at least $4.5 billion move into silver next year? Perhaps it's more likely that $400 billion will move into silver next year, and silver's price will be $1000/oz.? Well, maybe not, but a more conservative estimate might be about $10-20 billion, which could drive silver to $50-100/oz., as that's how this trend is developing.

RE: "Silver's all-time high was set in January 1980 at $48.70 an ounce, or $129.32 when adjusted for inflation."

Perhaps the worst lies of all. What do they mean by "inflation"? The CPI index that does not count food, fuel, housing, tuition, or medical expenses? What does CPI count these days? What's left? Imported clothing, goods made in China, and computers?

Instead, if we count inflation as the monetary base, as M3, which is no longer published, we might observe that M3 was $1.8 trillion in 1980, and nearly $18 trillion today, an increase of ten times as much, thus, the true inflation adjusted high is not $129.32/oz., but rather $500/oz.!!!

See, another part of the lie is the false specificity of that .32 at the end of their $129.32, to make it sound so official and supremely accurate, but it's not remotely accurate.

And neither is my estimate of $500/oz. That's a low ball figure. Is money M3? What is M3? M3 included short term bonds. Well most of the bond market is now all "short term" bonds, given that they stopped selling the 30 year bond, and given that interest rates are all so low, all bonds are priced at the near equivalent of actual dollars. And the bond market is far larger than the $18 trillion estimate of M3. The bond market could be $25 trillion to $35 trillion, who knows? Data on that is hard to find.

Much of the bond market is as fraudulent as the paper promises in the silver market. A lot of people don't buy bonds anymore, they just place bets on the direction of interest rates, by buying futures on bonds, or options on bonds, which is an even more fixed and rigged game than the silver price.

Which brings us to derivatives, the bets on bonds, called "interest rate derivatives", which are estimated to be as high as $400 trillion or more.

If that is money, then the inflation that has taken place since 1980 is just off the charts, and will ultimately drive silver prices to far higher than $500/oz.

RE: "This year investors are expected to pile a record $4.5 billion into the silver market, accounting for 24% of the world's total demand, says GFMS Ltd., a metals consulting firm in London. That's the highest level, in dollar terms, in decades. Silver's relatively small market size�$19 billion compared with $170 billion for gold�has also played a role in amplifying the impact of investors, according to GFMS."

Silver's price is moving so fast, it was up nearly $1/oz. in the few days since this WSJ article. Silver's market size, at 700 million oz., times $30/oz., is already $21 billion, not $19 billion, but this is a tiny quibble of a fact.

The point is that $20 billion, or even $4.5 billion, in a world where $3000 billion of new money is being printed annually by the USA alone, and perhaps as high as $8000 billion worldwide, is really, really, really small, even if it's a record number. But the WSJ article never makes comparisons like this, it just warns that $4.5 billion is a lot, "the highest level in decades", and the word billion is a lot, in terms of real things, but it's not a lot in terms of dollars, which are not real things.

RE: "The strength in silver prices has prompted a flurry of development around the globe and pushed anticipated production in 2010 to 733.2 million ounces, up 3.3% from 2009 levels, and up 14% since 2006."

Ah, did you think they said that new silver mine supply will increase 3.3%? No, that's anticipated production. It may be less! They write as if this 3.3% increase is a lot and will act to reduce prices. However, new paper money in the USA alone is about 3 Trillion / 15 Trillion, or 20%! And world population growth is about 1.1%.

RE: "The market is set to see a surplus of 64.4 million ounces in 2010, says Barclays Capital, which could curb prices."

Wait, wait, wait. Silverinstitute.org says the 2009 "surplus" is 137 million oz. of implied net investment, while Barclays says the 2010 surplus will be 64.4 million oz.? Ok, if investors were buying 137 million oz. in 2009, and even more in 2010 to explain the current rise, how will 64.4 million be enough to satisfy them, without the price moving up?

Less silver certainly won't curb prices, unless, by using the word "curb" Barclays is implying a chart formation that looks like a straight line up before leveling off, somewhat like a curb on the side of a road. But Barclays is not implying that, for sure.

The article notes that a few silver mines will be increasing production. No mention is made of any mines that will be decreasing production, or closing altogether, which, of course, happens all the time in the mining business. Mines are depleting assets, and run dry.

That sums up what I needed to refute in the article.

The article makes no mention of any of the following of this year's major news items in silver:

THE YEAR IN REVIEW

1. No mention of the fact that JP Morgan was sued by at least 25 firms for manipulating the silver market. (A new lawsuit against JP Morgan on behalf of SLV investors was just filed, two days after the WSJ article). news.silverseek.com/SilverSeek/1293546686.php
2. No mention of the BIS reports showing that world banks have a net derivatives exposure of $137 billion of "over the counter" "other preciouse metals" liability, which is a short position, mostly in silver. Links:
www.bis.org/statistics/derstats.htm
www.bis.org/statistics/otcder/dt21c22a.pdf
3. No mention that the BIS changed their own reports, reducing the number for June, 2009, from $203 billion, down $100 billion, to $93 billion, after the US Justice department said it was investigating JP Morgan for silver manipulation.
4. No mention that JP Morgan admitted to being short silver, and wanted to placate internet criticism by attempting to cover their silver.
silverstockreport.com/2010/jp-morgan-silver-short.html
5. No mention that the CFTC's Bart Chilton admitted that one large trader had 40% of the silver market at the COMEX.
6. No mention that the CFTC has been investigating silver manipulation for over two years.
7. No mention that the CFTC just delayed imposing position limits on silver.
silverstockreport.com/2010/cftc-delay.html
8. No mention of the recent rumor that JP Morgan has two of the CFTC commissioners on their payroll.

9. No mention of Andrew McGuire's CFTC testimony of a prediction in advance of a JP Morgan silver manipulation.
10. No mention of Jeff Christion's CFTC admission that the LBMA is leveraged 100 to one with nearly zero actual physical metal backing up most "physical" accounts.
www.bullionbullscanada.com/index.php?opt...ntary&Itemid=131

MY PRICE PREDICTION FOR SILVER: At least a high of $40/oz. by next year, 33% higher than $30 this year.

If the past seven years is any guide, silver's price should continue at pace, if not outperform, the past seven year's average gains of 33% per year. Someday, silver could really blow up much faster than that. Frauds do collapse suddenly. The dollar is fraud. Fractional reserve banking is fraud. Fractional reserve banking in silver is fraud. Most of the financial world is fraud today. Silver is not a fraud and is the opposite of fraud. Silver is not a promise to pay, silver in your hand is evidence that you have been paid in full.

=====

But let's assume, for the benefit of the doubt, that Carolyn Cui is just a very bad researcher on silver, and was not intentionally omitting all the major news items on silver in the past year.

How honest is she? Or the WSJ for that matter?

Here's a WSJ article on silver from May, 2008.

Fundamentals Begin to Weigh On Silver
New Mines' Output, Economic Weakness Could Crimp Prices
By CAROLYN CUI May, 2008.
online.wsj.com/article/SB121098087701600147.html

Ah, not very accurate, and not a very good warning. The WSJ should have warned that the dollar would fall, and that people could protect their purchasing power by buying silver. Did they? Sadly, no. They have never gotten it right on silver in this entire bull market, and are as woefully wrong today, as they were two years ago.

Excerpt: Barclays analyst Suki Cooper, who targets silver's average price at $15.20. "Silver's fundamentals look less compelling this year and are more likely to push prices lower," she wrote in a research note.

Laughable! Exactly as I predicted, these buffoons always predict "same as last year" prices, and are never bullish.

Excerpt: CPM Group, a New York-based commodities research firm, expects demand for silver to hold up this year, and its price to average $18.25.

=====

I've seen better reports on silver from CAROLYN CUI. I've even written to her a time or two. So I can conclude that she is not ignorant, but willfully ignorant, or being misleading on purpose. Perhaps if she does not "toe the line" she will be out of a job, but if your job involves lying, you should probably quit.

So, what should we conclude, and what should we do, in the order of most importance?

1. Buy silver. Buy real silver that you have carried, lifted, and stored in your own vault.
2. Do not trust the Wall Street Journal, or CAROLYN CUI or ROBERT GUY MATTHEWS ever again.
3. Cancel your subscriptions to the Wall Street Journal.
4. Write nasty letters to the WSJ's advertisers, and boycott them (just kidding, don't waste your time).
5. Subscribe to the free newsletter at the Silver Stock Report.
6. Share this report in your own blogs online, or on facebook.
7. Write your own refutations of future mainstream hit pieces on silver, exposing their intentional lies and misinformation, and lack of information.
8. Write to Write to Carolyn Cui at carolyn.cui@wsj.com and Robert Guy Matthews at robertguy.matthews@wsj.com and ask them for their honest answers and justifications to the accurate information presented here, just for the fun of watching them squirm.

Thanks for the post, Navderek. I liked this piece by Jason Hommel much more than other recent pieces he has written (most notably the "short 3.3 billion ounces piece).

To be clear about Jason Hommel: here is a guy who definitely knows the silver market VERY well. My criticism of his work is that he gets "overly exuberant" when it comes time to drawing conclusions.

At the same time, there can be no doubt that Jason Hommel was the FIRST person to ever talk about silver going to prices somewhere around $500/oz. He took a LOT of heat for tossing our numbers like that a couple of years ago - and now starts to look like a MUCH smarter guy than 2 years ago (lol).

He does a VERY good job of refuting Wall Street Journal B.S. here, so this is a recommended read for everyone.

Here is MIDAS' theory of the manipulation; this one more likely than the Chinese Shorts exercise:

" MIDAS

Good Morning Bill,
Well, this has the classic earmarks of a raid here and now as you observed yesterday, we saw HUI tracking down all afternoon yesterday in an ominous underperformance, and now overnight we have the "classic" stunt , the one they always use... namely the chart breakout to a marginal record high at 30.90, touching off buy stops to short into, (and add muscle to the raid when they sell), in short same old same old. A parting kiss from larry.

Plus JPM has to mark that position to market tomorrow night, plus China (fully aware of this) extended an engraved invitation to knock down the whole commodity spectrum in a thin market so they can buy them. I concede copper is not cooperating, but Copper is to the US as Rare Earths are to China, ...economic war material I expect JPM is licensed to take copper to 6 to 8 to put it to those Chinese good and hard.

So lets see if they try and raid, which leads me to my second thought, which I have never seen advanced anywhere, very probably because it appears so off the wall

And its this.With all requisite humility.

These raids have become almost perfunctory in the last year. They used to really clobber us for large, but in the last year or so the raids are kind of mousy, lots of sturm and drang, but diminishing damage to the downside.

In fact, the gold raids look somewhat like JPMs raids in the silver market, the takedowns are entirely related to trying to extricate themselves from the uncovered short position , and the primary buyers at the bottom of the raid are they themselves.

Well, do you suppose there is any possibility that the United States Government might in fact want gold UP. I beg your pardon? yeah, that’s what i said ...UP.

Is it further possible that this rather steady and disciplined 10 year bull market in Gold could at least in part be driven by the United States recovering their swapped and otherwise encumbered Gold , in short restocking Fort Knox. Sure they talk the talk, but just look at Gold's walk, because they in fact they are surreptitious BUYERS, undoing the encumbered tons they swapped out over the last 30 years.

Well, that’s just nuts. But not if there were two halves to the equation.

Here then is the equation.

The debts and entitlements of the US are unrepayable in real dollars, we all know the math is unworkable, they only possible way to resolve them is with a massive inflating away of today's dollars, perhaps so debauching the currency in the process that it loses its role as the worlds Reserve Currency. We will pay our debts with these dollars and the world (read China) can whistle.

The " New " Reserve Currency will be a reconstituted US Dollar backed by Gold. The United States will never willingly give up its hegemonic role as the worlds reserve currency. To be that new Reserve Currency, you better get your Gold back (if indeed it ever physically left) , and unwind trillions in decades old swaps. In short unencumber it for its new role as the backing for the New Dollar to come.

In short , they pay the present unpayable debts with grossly devalued "Old Dollars", and get Fort Knox organized as the linchpin of a forthcoming Gold backed " New Dollar" and forward we go. They can price Gold at whatever they like if they own the majority of it.

So, it sets up almost a comical irony, no , not almost, it is comical. GATA arm and arm with Uncle. I weep.

To suggest that GATA and the US are inadvertently on the same side of the Gold market for their own respective reasons has me laughing out loud, that this steady relentless multiyear climb from 250 in 2002, is the Federal Government covering decades of swaps, because if you look at the multiyear pattern, it is a bit redolent of a giant short being covered. Slowly and relentlessly. And they are at pains not to let it get loose. Nor however do they stop it.

Could the US government in fact WANT to gradually bring Gold back on to the reservation of respectability, tactically smacking GATA upside the head at hundred dollar increments, since you can hardly revalue it to 8000.00 from 250 bucks, it would look ridiculous.

Much better to ease it up I n a controlled disciplined fashion. Optics.

Bill Murphy's face will, one fine day soon, grace the new hundred dollar gold backed bill. Bill, get it? Now, that IS optics.
gs"

There is a saying in the agriculture community that when a commodities' bull run makes the front page at the Wall Street Journal, that the run is over. Time to sell, because it has become a Bull trap. Get everyone investing as the regular players take their profits.

For them to be downplaying the silver run speaks volumes in the opposite direction.

The Midas comments above reminded me of a similar line of thinking by Jim Rickards. In a recent speech titled "Economics And National Security" to a Washington group of Senior Security Officials he comes up with an analysis which concludes that the USA has a secret weapon and is a gold superpower.

Here is the one + hour video:

outerdnn.outer.jhuapl.edu/rethinking/Vid...esentationVideo.aspx

The part on Gold starts around the 62 min. mark.

So the theory that the US could use its gold and also the 6000 tonnes of European gold stored in the US to go back to some kind of a gold standard and preserve the status of reserved currency for the mighty dollar may not be that far-fetched after all...

TO all of ''ABOVE'' ..GREAT POSTS ! THANK YOU .

Sorry to "rain on the parade" here, but I think that this theory is even less likely than the "China is the silver short" theory.

The idea that the U.S. could engage in a stealth-default on $TRILLIONS in debt, whip out a big stash of gold the next day, and tell the world they wanted to start printing the "NEW reserve currency" again, (at best) would be greeted with laughter.

A better guess is that all of the creditors whom the U.S. cheated out of their $trillions would be asking the U.S. to hand over its gold - or be forever locked-out of global credit markets.

I recall reading the WSJ article and thinking that, 'Ya, this is better than most of what I read mainstream, but still totally lacking in content and current events, with several key ommissions, that would give a true picture of the silver market and a more probable 2011 outlook.'

Then I read Hommel's article and WOW, I hadn't really thought about it critically at all! I'd given the WSJ too much slack, evidently, because of who they were and due to my automatic low expectations.

It goes to show just how vitally important the web and metal bloggers are for real events, real information and properly reasoned expectations when considering precious metals and their future, and our own future.

I am so happy Jeff!

I just wrote a tiny, hurried response that actually posted.

With IE no less!

Ah, it's going to be a good year for those of us who will act with reason, good timely information and patience for the things we all know will and must occur. Though undoubtedly it will be a bumpy ride.