Silver stock dwindling?

I know Silver Bugs have been sitting on their hands for the past few months or so, but it might well be this inactivity will soon come to an end.
Why so?
If you've tried to buy silver bullion coins (Maples or Eagles) lately from Kitco (one of the largest sources of bullion e-trade) you'll pretty much know the answer...
There aint' any silver bullion coins for sale! They are out of stock!
I don't know how bad this silver shortage is going to be or if it's going to be hastily met with scrap or even China dumping metal into the market but it does surely point to price increases ahead.
So keep buying on dips because The Crunch is coming!

Ted Butler: A Picture Worth A Thousand Words

A Picture Worth A Thousand Words

By: Theodore Butler
This chart depicts the current condition of the concentrated short position for every applicable physical world commodity, in terms of days world production, from data published by the CFTC. (Chart courtesy of sharelynx.net)

I know of no legitimate economic reason why silver would have such a large concentrated short position, when compared to every other physical commodity. I conclude that the abberation in silver (and, to a lesser extent, gold) can only be explained by manipulation. This is the point that the CFTC and the NYMEX continue to evade

Silver content nightwear to launch in UK to protect from superbug

Here's another interesting newsitem about silver's  industrial usage that increases the drain upon whatever metal quantities are left in stock (source: Mineweb)

Silver content nightwear to launch in UK to protect from superbug

A big UK chain store is putting a range of nightwear on the market incorporating silver thread as a biocide to help prevent hospital acquired infections.

by Lawrence Williams

LONDON -

One of the biggest UK clothing chain stores, Marks & Spencer (M&S), is to launch a line of pyjamas containing silver thread to protect against hospital superbugs like MRSA in two weeks time.

As reported in Mineweb some months ago - see article Esoteric uses keep silver demand flying high, it is silver's bivalency which is perhaps the key, which makes the metal highly reactive to the extent that, among other things, it is a natural biocide which means growing medical usage - and it is being used in clothing too for people in arduous occupations - like the military. It has uses in combating many viruses like legionella - and in the UK perhaps in the fight against hospital borne diseases like MRSA.

According to a report on The Telegraph website Sunday, M&S will market a range of nightwear under the "Sleep Safe" banner and the first item in the line will be a men's pyjamas set to be sold at a cost of £45 (about US$90).

MRSA, a superbug which has hit many UK hospitals, is a major concern among many patients undergoing surgery. Again, according to The Telegraph, Katherine Murphy, a spokesperson from the Patients Association, said: "Superbugs are the number one concern of every patient going into hospital...We welcome the fact these are going on sale, but it shows how desperate the public is", while Dr Mark Enright, a microbiologist at Imperial College London, said the pyjamas would reduce the risk of a patient getting a skin infection that could infect a wound.

MRSA is linked to over 1500 deaths a year in the UK.

Historic Bolivian silver mine at risk of collapse

By Monica Machicao
Reuters
Thursday, July 12, 2007

POTOSI, Bolivia -- High silver prices are drawing a frenzy of miners to a colonial-era mine at Potosi in Bolivia, but the mine has become so dangerous that authorities fear the mine, part of a World Heritage Site, could collapse.

Cerro Rico (Rich Mountain) rises majestically above the town of Potosi, a symbol of a colonial past where Inca slaves died by the thousand extracting silver to enrich their Spanish masters.

Nearly five centuries later, thousands of ill-equipped and untrained miners are turning its graceful cone into a sponge of flimsy tunnels that threaten to cave in on miners working below, prompting Bolivian officials to consider partial closure.

"It's a very important symbol for the people of Potosi and for the people of Bolivia," said German Elias, mining director at Potosi's local government. "The Cerro Rico is a monument that virtually sums up the history of mining."

Miners have already protested the possibility that parts of the Cerro could be closed, sending a warning to leftist President Evo Morales, who has clashed with the country's notoriously rebellious miners over a number of issues in recent months.

The miners -- who work in small cooperatives -- would rather take their chances with danger than earn less money elsewhere or face unemployment.

"This is the only way we have to make a living and we have to risk our lives to work here in the mine," said 23-year-old Julio Mamani. He earns less than $20 per day, relatively good for South America's poorest country, where the average monthly wage is about $115.

He pushed a wheel-barrow heaped with rubble to be loaded onto a cart and carried out to the daylight above. A 13-year-old boy worked nearby.

... Bridge of silver

Legend has it that enough metal was extracted from Cerro Rico to build a bridge of silver from South America to Europe, and the mine has left an indelible mark on Bolivian culture due to the cruel toll it took on indigenous slaves.

Its vast reserves turned the nearby city of Potosi into the most populous in the Americas in the 17th century, with some 120,000 inhabitants -- more than London, Paris or Madrid at the time.

A slump in silver prices threw its elaborate colonial churches and mansions into a long decline and, while the recent metals boom has brought a little prosperity back to Potosi, the chilly highland region is still one of Bolivia's poorest.

"Mining started in the Cerro Rico in 1545, and it hasn't stopped since," said Manuel Farfan, the regional head of Bolivia's state mining company Comibol. "Production's increased today because of the prices," he said.

Today about 15,000 miners work the site every day in round-the-clock shifts, and conditions have not changed much since Spanish conquerors brought slaves to work here nearly 500 years ago.

The centuries of mining mean rich seams of silver are harder to find so greater risks are being taken.

"There are few places with a lot of silver so the danger is that miners are excavating the natural pillars that act like internal beams inside the Cerro," said Samuel Rosales, a former miner and sociologist who does research for Care International, a nongovernmental organization.

Potosi's mining director, Elias, said irresponsible removal of the natural beams meant more and more pressure was building up inside the mountain.

"The exploitation has caused a kind of sinking to take place in some parts of the sides of the Cerro Potosi in the recent past," he said.

Regional and national mining officials and experts from the state geology service, Sergeotecmin, are about to start work on a survey of the site.

Converting the site into an open-pit mine would cut the risks.

But local people have fought past proposals that would change forever the graceful silhouette of the mountain, which stands behind the chilly Andean city that lies nearly 4,000 meters (13,125 feet).

"The people of Potosi wouldn't allow it because the Cerro Rico is precious to all Bolivians," Elias said.

* * *

Ted Butler: Blood from a stone

Ted Butler: Blood from a stone

Oikonomika Blog: Unprecedented dishoarding by central banks fails to push gold down

Neal Ryan's daily gold market note for the Blanchard Economic Research Unit today added up the desperation of the world's central banks to prop up the U.S. dollar system by rigging markets. Ryan finds central bank gold sales of more than 240 tonnes in just the last four months, dishoarding at an unprecedented rate. "Seeing the gold price hold above the $640 level during this period of increased sales should be the best demonstration of just how robust the physical demand side of the market is at present," Ryan writes...
Read the entire erticle here:
Unprecedented dishoarding by central banks fails to push gold down

Ted Butler: The raptors rule

Silver market analyst Ted Butler's new commentary, "The Raptors Rule" analyzes the latest commitment of traders report and finds more evidence that the gold and silver shorts are starting to lose money to more nimble longs. You can find Butler's commentary at GoldSeek's companion site SilverSeek, HERE

Ted Butler: Concentration foretells silver explosion

Jim Cook Interviews Theodore Butler

Cook: You’ve been consistently bullish on silver from close to $4 an ounce. How bullish are you these days?

Butler: As bullish as I’ve ever been. Which, incidentally, surprises me.

Cook: Why?

Butler: Well, I always thought that after silver doubled or tripled, I would tone down. I never imagined that the market structure would remain so bullish and that new factors would be impacting the silver market.

Cook: What’s making the market structure look so bullish?

Butler: The level of the concentrated short position at this late stage of the game. It’s the one thing that tells me we have a long way to go before this move is over. I’ve talked many times about the big short position in silver. Others are beginning to take notice.

Cook: So, what’s happening?

Butler: We’re seeing more aggressive players taking on the big shorts.

Cook: Is it your current view that the four or less big dealers who are short so much silver may be losing control?

Butler: Yes, they may be a lot closer to losing control. They are facing competition from other commercial interests for the very first time.

Cook: You claim this short selling is a manipulation. If that’s true, why couldn’t the big dealers keep things under control for years to come?

Butler: It is becoming more and more obvious the level of concentration they hold in the market.

Cook: What level is that?

Butler: A recent COT report showed the big four or less traders were net short more than the entire total commercial net short position. There’s no rigid number that translates into concentration equaling manipulation, but if 100% doesn’t set off warning alarms, I don’t know what would.

Cook: Where do you get that information?

Butler: It comes straight from the government. They are the ones who acknowledge that concentration is a requisite for manipulation, and that’s why they publish the data.

Cook: What data?

Butler: The concentration data in the long-form Concentration of Traders report, which is published every week for every commodity.

Cook: These big dealers may be able to overcome the things you mention. They have a lot at stake.

Butler: Remember, there’s the law of the physical realm. Just like the kids’ game, rock, paper, scissors, the big shorts can sell all the paper they want and temporarily control the price, but the day of reckoning will arrive because those paper contracts represent a physical delivery requirement. That’s the guaranteed check-mate.

Cook: So, it has to end.

Butler: At some point. If you ask me when, my answer is that no one can know that.

Cook: Let’s talk about the new factors, the small dealers. You call them raptors. Who are they?

Butler: Like the big traders, their specific identity is protected by law. Why their anonymity is protected today is a mystery to me, but that’s a different issue. We can’t know their names, but we can know some things about them.

Cook: Like what?

Butler: They are most likely broker-dealers and financial firms, as opposed to hedge funds, who are not classified as commercials. We also know these firms are not likely to be mining firms or other hedgers, even though many assume that.

Cook: Why don’t you think these could be mining companies?

Butler: Because mining companies have been reporting that they have been buying back forward sales. The changes in the COT bear no relation to the quarterly reports from the miners.

Cook: What are the raptors doing now that’s got your attention?

Butler: As I’ve written, they have built up an impressive net long position against the dealers.

Cook: How do they do that?

Butler: By outmaneuvering the largest commercial traders, which I dubbed the T. Rexs. I speculated that the T. Rex looked increasingly trapped in their massive concentrated net short position.

Cook: That’s a startling development. What does it portend?

Butler: The long-term manipulation in silver might be on its last legs.

Cook: Can you give us more details?

Butler: The COT, dated May 22, indicates, in the clearest terms, just how powerful a force the raptors have become. In both silver and gold, the raptors accounted for the lion’s share of the week’s dealer net buying. While the biggest traders in gold and silver still have sizable concentrated net short positions, the raptors have sizable net long positions. In fact, the raptors in silver moved to their largest net long position in history according to this report – almost 14,000 contracts (70 million ounces).

Cook: How much are the big boys short?

Butler: That particular COT showed that the largest eight or less traders had more than 131% of the total net dealer short position. Incredibly, the four largest traders in silver had a net short position slightly larger than 100% of the total net commercial short position.

Cook: What exactly does that mean?

Butler: Without the four largest traders in silver, there would be no commercial short position at all.

Cook: Where would we be if they weren’t short that much?

Butler: Without these super-concentrated short positions, the price would be shockingly higher.

Cook: They’re holding the price down?

Butler: You will never see clearer public documentation of manipulation than this. Make no mistake that this situation in silver, which has been allowed to persist, is the single greatest regulatory failure in the history of financial markets.

Cook: Greater than Enron?

Butler: Sure. The regulators didn’t have years of clear warning about Enron. As you know, many hundreds of people have been petitioning the regulators about the silver manipulation for years. It’s that prior notice, based upon their own documented information, which renders this the greatest regulatory failure.

Cook: Whose culpable, the COMEX or the FCTC?

Butler: Both. We have a self-regulatory structure, which means the NYMEX/COMEX is supposed to be the first line of regulatory protection, overseen by the CFTC. Therefore, both have dropped the ball. What makes matters worse is that the NYMEX is now a publicly traded institution, which should make them more sensitive to this issue.

Cook: Let’s say a price explosion did happen in the silver market as you suggest to be likely. Won’t the exchange whitewash it and find a way to let the big shorts off the hook?

Butler: Many people seem resigned to that outcome, but I’m not so sure. There is too much awareness on this issue to sweep it under the rug.

Cook: A lot of these guys move from government to the private side and vice versa. If they are of one mind, it may explain why they have ignored your warnings.

Butler: I accept that. And, I further agree that they don’t want to see a scandal develop in silver. But, the factors concerning silver suggest to me that it will play out differently than what they desire.

Cook: You’ve certainly been a voice in the wilderness. Why do you think you are so alone in this analysis?

Butler: There are not many analysts who have 35 years of hands-on futures and options trading experience and have been personally involved in a major manipulation case as I was in orange juice 20 years ago. We all look at things in life through the prism of our own unique background and experiences, and I’m no different.

Cook: I found your last couple of articles about the commercial shorts in silver as dinosaurs to be interesting. But I can’t help but notice that you are alone in this type of analysis. Why do you think that is?

Butler: I think people have a natural aversion to the idea that a market may be manipulated, no matter how compelling the evidence may be. Mention manipulation and people automatically assume you are a conspiracy nut.

Cook: Okay. But not one analyst at the major financial firms ever mentions it. How come?

Butler: There’s a very practical barrier to admitting the silver market may be manipulated for those analysts employed by large firms.

Cook: Like what?

Butler: Like you don’t work here anymore.

Cook: Well, they ignored you when you warned about Barrick and other mining company hedging. You were right and they lost billions. I just keep thinking that in the case of the concentrated short sellers, the responsible parties will slip the noose.

Butler: It’s not going to be possible to escape the bullish consequence of the silver manipulation as it unwinds.

Cook: Okay. In spite of the concentrated short position, the silver market looks healthy. Any comment?

Butler: To be sure, the recent sell-offs in gold and silver have improved the market structure. It’s flashing all green. We are in the best COT structure in silver in seven months. It’s indicating low risk and high reward. Further sell-offs will only improve the market structure. This is not a time to be timid, in my opinion.

Cook: When the rally commences, how far will it carry?

Butler: That will depend on the selling behavior of the big dealers. If they sell short aggressively on the way up, the rally will eventually be capped. But even then, it could run two dollars or more in silver. If they don’t sell aggressively, then the rally will carry much further, perhaps morphing into the big one, which ultimately is inevitable.

Cook: What if the raptors get even more aggressive in their buying?

Butler: It injects a new dimension. Previously, it was always the tech funds versus the dealers. In that match up, the dealers always won. Now, we’re talking about something else – dealers versus dealers. This match up is different, and potentially very profound. The main point is that conditions are definitely changing in COMEX trading patterns.

Cook: In what way?

Butler: The terrible performance and loss of assets of some of the technical trading funds. Not all of them, and certainly not hedge funds in general, just some of the super-mechanical funds that the dealers have been snookering for years on the COMEX. Like the one I usually mention, John W. Henry.

Cook: Anything new with them?

Butler: Just this week there were published reports in the Wall Street Journal that John Henry’s biggest investor, Merrill Lynch, was pulling out $600 million due to poor performances. This would knock Henry’s trading assets down close to $500 million from where it was two years ago, or $3.2 billion. That’s an 85% decline in trading assets, and with it, a commensurate decline in trading positions.

Cook: What does that mean for silver?

Butler: It means the food supply for the dinosaurs is shrinking. The dealers knew how to play the mechanical tech funds and lived off them for many years. But, now that these tech funds are disappearing, the T. Rexs and the raptors have to hunt differently.

Cook: So, how will it play out?

Butler: No one knows for sure, but it will be a different pattern than we’ve seen. It is the prospect of change that encourages me. We’ve had ironclad control by the dealers for the past 20 years in silver because they preyed on the tech funds. That period encompassed the silver manipulation and provided the reason for the manipulation – profits to the dealers supplied by the tech funds. That era appears to be ending, and with it, hopefully, the long-term manipulation.

Cook: The Silver Institute just came out with its 2007 Silver Report. Any comment?

Butler: The world is still not generating a surplus of silver in spite of the sharp rise in price. While this is true in most industrial commodities, it is particularly important in silver.

Cook: Why?

Butler: Silver is unique among industrial commodities because it’s also an investment. It’s this potent combo, industrial demand plus investment demand that gives silver the moonshot possibility. And, considering the amount of investable wealth being created in the world, it’s hard to imagine some of that wealth not spilling into silver. It’s a booster rocket in silver is just waiting for ignition.

Cook: Can you sum up the current situation?

Butler: After 60 years of deficit consumption, the amount of silver available per capita is the lowest in history. At precisely the same time the amount of investment buying power is the highest in history. Throw in the manipulation, the short position, the unrelenting demand from China and India, and the obstacles to increased mining production and I need to lie down and be calm to tone down my long-term bullish feelings.

Europe central banks to miss gold sale quota again

Oikonomika Blog: Europe central banks to miss gold sale quota again

Jason Hommel: Why Silver will Soar

Silver Institute Survey

Silver Stock Report
by Jason Hommel, May 23, 2007

On May 14th, the CPM group issued their "CPM Silver Yearbook 2007", and I commented on it in my report, http://www.silverstockreport.com/2007/230.html

Today, the Silver Institute issued their annual "Silver Survey" of supply and demand. http://www.silverinstitute.org/news/pr23may07.html

A notable difference between the surveys is the estimated annual mine supply.

The Silver Institute lists mine production for 2006 at 646.1 million ounces.

The CPM group estimated 2007 mine supply to increase 3% to 520 million ounces.

Maybe I don't understand the nuances of how they are counting, but that's a big difference.

Nevertheless, both surveys put net investment demand for 2006 at about 60 million ounces.

The Silver Institute put 2006 net investment demand slighly lower than in 2005, while the CPM group listed net investment demand up in 2006.

The Silver Institute put net government sales at 77 million ounces, more than net investor demand.

In sum, both surveys show that the silver market is very small, and very tight. Silver consumption vastly exceeds annual silver mine supply, and the difference is largely met by silver recycling.

I'd like to make two big main points. First, people are unaware of the fundamentals, and second, the fundamentals are fantastic.

First, despite the different numbers, I think the surveys are mostly correct. They are sponsored by both silver producing companies and silver using companies, so the sponsorship bias should be neutral. But these are industry surveys mostly produced for people in the industry. The CPM group and Silver Institute are not marketers, nor do they have large marketing budgets. They do survey work.

Therefore, most silver investors are not familiar with these surveys, nor who produces them. But I think they should be. (But I'm biased as a silver investor.) I've polled silver investors at the mining shows who have come to hear the guy from "silverstockreport" speak, and perhaps less than 5% of silver investors have heard of the CPM group or the Silver Institute, by a show of hands. This is a very bullish signal. The silver fundamentals as presented by these two silver surveys are fantastic. If silver investors are unaware, then likely most of the world is unaware of the fundamentals for silver.

Second, the fundamentals clearly show that there is no room in the silver market for any significant investor demand. Net investor demand was listed by the Silver Institute as 64 million ounces. At an average 2006 price of $11.55, 64 million ounces was $739 million of net silver investment demand.

M3 is calculated to be $11.5 trillion. Source: http://www.nowandfutures.com/key_stats.html

World Net Silver demand in 2006, as a function of U.S. money in the banks, is ($739/$11,500,000), which is 0.006% of U.S. money.

If the wider public became aware of the silver fundamentals, net silver investment would be much higher, and so would silver prices. With a market this tight, and the world this unaware, the silver price will probably rise much higher than anyone can predict.

Silver prices were up 58% in 2006 at $11.55 per ounce, up from an average 2005 price of $7.31 per ounce. Prices in 2007 now seem cheap on the charts having recently dipped to about $13.04 today.

And given that investors tend to buy more of things that show positive investment returns, net silver investment demand can continue to increase for a long time, helping to cause the very returns that investors seek.