3 us banks hold 51% gold shorts...

Maybe I posted the article below under the wrong header because there was little comment.

Now have a think of how a paper market might operate when just three US banks with pockets so deep that they could just keep on selling held 51% of paper gold shorts and two US banks held an amazing 81% of silver shorts.

Now I wonder whether there would be legislation and screams of manipulattion from the mainstream financial media, who are now silent, surprise, surpise, if just two or three buyers accumulated over 50% of paper gold long positions and and over 80% of silver long positions.

It was also interesting to see that First Majestic is now marketing mint 99.9% pure silver into coins, ingots and bars from its web site. Obviously this company has had a gutful of what is allowed to happen to the Comex paper silver price and has decided to start ignoring it.

By Gene Arensberg
16 Nov 2008 at 12:00 AM GMT-05:00

A lack of physical bullion supply at the same time of extremely strong demand for popular small bullion items coupled with artificially low futures dominated spot prices for gold and silver resulted in extraordinarily high premiums for virtually all bullion products in October. The very high premiums continue and availability remains tight....

Who said it was supposed to be fair?

as reported by the Commodities Futures Trading Commission (CFTC) Bank Participation in Futures Markets Report on November 4, just 3 U.S. banks held a gigantic portion of all the commercial net short positioning on the COMEX, division of NYMEX.

According to that CFTC report, the three U.S. banks held a net short position of 38,949 contracts in gold futures. All traders classed as commercial held 76,406 contracts net short on November 4 with gold then at $763.39, so the three U.S. banks collectively held a staggering 50.98% of all commercial net short positions on the COMEX....

As shocking and infuriating as that potentially illegal positioning in gold futures appears, it pales in comparison to the banks’ positioning in silver on the COMEX.

Again, as of November 4, just two U.S. banks held 22,684 contracts net short in silver. All traders classed as commercial by the CFTC held a collective net short position of 27,908 contracts with silver then at $10.20 the ounce. So, just two big U.S. banks held a gargantuan 81.28% of all the collective commercial net short positioning on the COMEX, division of NYMEX.

It is not even fair to call the two U.S. banks position a “net short” position. The banks were so certain that they could drive the futures price of silver lower on November 4, that they did not hold a single long contract for silver then. No wonder silver has since tested as low as the $8.40s on the cash market.

No, that’s not fair at all, but it apparently is fine with today’s regulators at the Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC)....

As mentioned in the last Got Gold Report, this divergence between the real physical markets and the paper futures markets is causing physical metal to flow away from the futures markets warehouses and into the physical market and is strongly increasing demand for silver and gold ETFs.

Eventually, however, a combination of forces will bring the very high premiums back in to more normal levels once the markets stabilize. One of those forces will be increased scrutiny which is coming to the futures industry. Whether they like it or not, they have asked for it.

The abusive actions taken by a small number of very large and well funded banks have now destroyed a good many companies, shuttered a large number of mines and guaranteed that there will be widespread shortages of physical metal as we go forward. Hopefully, that will put the spotlight on the very unfair and one-sided rules the futures markets currently employ and allow for more equal footing for all investors in the months and years to come

Some companies get it right

For example, some companies have begun bypassing the futures markets by directly producing and selling bullion items to the public. In a November 14 press release, First Majestic Silver Corp. [FR.TO] said:

“The Company is continuing to analyze various options to reduce its operating costs and to squeeze out the most optimum margins possible. One example which is proving to add substantial value is management decided to mint 99.9% pure silver into coins, ingots and bars which are actively marketed on the Company's web site. Interest levels for these products are extremely high and are beginning to represent substantial revenues for the Company. These products tend to sell at substantial premiums to COMEX spot prices. It is anticipated that these sales of refined silver products will represent approximately 10% of the Company's silver production by February 2009. The Company is also exploring other ways of selling its silver outside of the normal avenues of commercial sales.”

Bully for First Majestic. It’s about time we see a company take the bull by the horns to step outside the corrupt, and manipulated established market that has so mispriced a vital commodity...

That’s something we need to see more of. Companies refusing to accept overly low pricing by paper traders. We need to see more of the Big Dogs in the metals biz holding back production, buying metal off the miscreant futures markets to deliver into December commitments in large quantities and removing metal from those who don’t respect it in favor of the popular physical markets where people do respect it.

One more time, if the hedger and short seller dominated futures markets are so intent on driving prices for metals to absurdly low levels then they shouldn’t mind seeing the metal in their warehouses heading out the door to the physical markets that actually want it."

Full article at http://www.resourceinvestor.com/pebble.asp?relid=47994