[T.S.R:16853] Bob Lenzner: Silver Will Cross $50/oz By May2011, HSBC, JPMorgan Could Go Insolvent As Shorts Cover

Ananthan Thangavel of Lakshmi Capital  is long silver futures and call options for his clients– and will add to his silver positions on any pullback. He knows there are huge short positions in silver; CFTC records show that 44.1% of the gross short position in silver is held by the 4 largest traders.  

And he reports in a  comment on the silver market on Lakshmi's website ("A Twist on the Silver Market") that "Some traders I have spoken with are targeting the 40-50 level within 4 months." A chart of silver prices shows that silver in recent  weeks has outshone the rise in gold prices by jumping  50% from around $18 to nearly $30 and then backed off to $27.16 today. This extraordinary increase in the price of silver suggests that short covering might explain  part of the gain. 

Nevertheless, bullishness on silver is also based on the feeling that "the world's silver supply and mining production is not enough to satisfy the increasing industrial demand as well as vastly increasing investment demand, Thangavel wrote me in an email Nov. 10. Only 116.1 million ounces of silver out of 2009 production of 709 million ounces were available to satisfy investment demand. "This huge shortfall indicates that the outstanding short position cannot be solely on behalf of producers, because there is a far larger outstanding position that could possibly be hoped to be mined this year, " Thanagvel wrote today.

 

"For months and in  some cases years, conspiracy theorists and market pundits have been speculating about the manipulation of the silver market by large banks, including JP Morgan and HSBC," Thangavel wrote today.  "Recently, these theories have been given significant weight as CFTC Commissioner Bart Chilton stated his belief that the silver market was being manipulated."  Chilton stated that "there have been fraudulent efforts to persuade and deviously control" prices in the silver market, which "should be prosecuted."

 

On October 26, Chilton stated at a CFTC meeting that "I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted." A JPM Chase spokeswoman refused to comment at all on rumors in the marketplace.

 

As a result of Chilton's  public statement,  several individual investors  brought lawsuits against JP Morgan and HSBC, claiming  they lost money on positions they took in silver futures on  the Comex. One such suit claims that in  August, 2008 JP Morgan and HSBC controlled over 85% of the commercial net short position in COMEX silver futures, and that this represented a short interest of 169 million troy ounces of silver, equal to about 25% of annual world mine production.

 

The suit charges alleges that beginning in March, 2010 "the net short positions of silver futures held by commercial banks, of which Defendants comprise the vast majority, have been reduced by more than 30% ." And the suit alleges that silver's dramatic gains to its highest level in 30 years were caused by the buying  back of silver futures contracts.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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