Silver, JPMorgan, HSBC, China, $21 USD and why you should buy silver
The title is quite strange, I admit it. That is, unless you read the whole post. Now, the chart above clearly shows a recent break out in silver spot price just around $20. That was a very powerful move above the March 2008 peak of $21 and some change. Such a huge breakout has been too high too fast for too many and now, there is a firm believe in the minds of those people that a fair price of silver is under around $20 - that is where silver spent most of the past 2½ years. For the most traders who trade nothing but paper on Comex, $21 silver is the high side of the fair price.
Well, if you look at the chart above, you may understand why, if silver which is currently trading at $24.40 USD goes to a $21 range, never mind lower, I will sell my last pair of underwear to hoard as much silver as possible. If you still don't get it, just trust me and try to buy as much as you can. Silver, at between $20 to $22 price range will be the buy of the decade, may be of two decades. Now to the JPMorgan, HSBC.
There are currently two lawsuits filed separately by two investors against JPMorgan and HSBC. The first investor accuses these banks of placing spoof trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law. The spoof trading order is an anonymous buy order placed on a certain stock or commodity for a huge number of shares or contracts through an electronic communications network. Then seconds later, the order is cancelled, or withdrawn. So it is never executed.
Certainly, once such a large order is placed, the price jumps because other investors following the market closely rush to buy what seems to be a hot item and drive up the price. When the price rises, the spoofer sells shares at the higher price and gets out. The rest is often left with a substantial loss as the price quickly drops back to its prespoof levels.
The second lawsuit alleges the banks conspired to suppress prices of silver futures to profit from enormous short positions in silver futures. That is pretty straight forward for everyone and requires no further explanation I hope.
The funny thing is as both JPMorgan and HSBC reduced their silver trading and holdings in the futures market after a government investigation began in March, silver price has increased from around $16 to $24.50, as you can see on the same chart. Take it for whatever you want, but I think it is quite bullish for silver, whichever way those lawsuits go.
And now to the China factor. Apparently, due to a sharply increased demand from Chinese industries and investors, silver exports from China are expected to drop about 40% in 2010. And if you think that's bad, consider that according to the customs data, silver exports plunged over 70% through the first 8 months. In 2009, China exported about 3,500 metric tons of silver, but has exported only 970 tons through August of 2010.
Now you must understand that only Peru and Mexico produce more silver than China. The amount of silver coming to the global marketplace in 2010 will drop by almost 75 million ounces, which represents nearly 8.5% of all annual global supply from 2009. With worldwide demand going through the roof, all these ounces will be thoroughly missed driving silver price much higher. Dare I suggest, $28 by the summer 2011? The predictions I made in Gold, silver prices 2011, 2012 look rather meek at this moment.
So here you go, JPMorgan and HSBC lawsuits, Chinese internal demand and much smaller exports are expected to support and drive silver prices quite higher. The very current price of $24.65 - a full 25 cents increase from the moment I started writing this post looks quite attractive. Of course, $21 USD level would be even more so. But don't wait.
Fri Oct 29, 2010 10:10AM | Copyright: www.bad-credit-advisor.com | More in Gold Investing | Comments (0)
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