9/13/09 Historical Backwardation Foretells Coming Collapse

Precious Metals Market Analysis, By Michael Pennington (Copyright 2010 Pennco Coins)

On several occasions this year I have written about backwardation as silver slipped into and out of twice this year. It’s happened again, but with significant differences. Earlier it only happened in London and at much lower price. Now it has happened on COMEX and is indicating a severe shortage of metal in New York. Again, backwardation is the phenomena when investors are willing to pay more for metal now than several months from now. In other words they would rather pay more now and possess the metal rather than risk not having any metal in the future.
Importantly, the bullion banks that typically arbitrage the various markets have not stepped in to deliver physical metal and buy it back in the future at a lower price, while also avoiding storage costs in the meantime.  Either the bullion banks don’t have the available physical silver to arbitrage, or they are unwilling to take the risk.  In either case, the conclusion is a bullish one for silver.  The possibility of a short squeeze in silver cannot be ruled out, particularly given its very bullish chart picture.
Implications are enormous. The OTC abrogated contracts for silver and gold contracts, ripe with corruption and entirely unregulated, could wound deeply Goldman Sachs and JPMorgan. The demand for Hong Kong gold is more a symbolic threat, adding thrust to what already has begun. Germany, Switzerland, and the United Arab Emirates have also demanded a return of their gold from US and UK storage locations, the corrupt centers where the gold was routinely leased illicitly. This trend puts considerable pressure on the COMEX, which could be deeply wounded from lack of underlying metal, as its corruption is exposed and shorting without collateral backfires.
The gold and silver price suppression scheme for the last eighteen years has consumed millions of ounces of both metals. This criminal activity was done to assure the re-election of the highest government officials and to cover-up the crimes themselves. Now their desperation is a hint the end is near. These type of things usually end very badly. Today, they are trying to use paper gold and silver whenever possible to hide the fact there is no metal. This is the very reason why I say Gold and Silver will one day soon be impossible to purchase at any price.

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This entry was posted in Dollar, Federal Reserve, Gold, Gold to Silver Ratio, Palladium, Platinum, Silver and tagged , , , , , , . Bookmark the permalink.

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