"the bankers have decided to bomb gold and silver" - what's that mean ?

[gunDriller]

from Harvey Organ's blog -

"Tomorrow is the big jobs number, and as usual, the bankers have decided to bomb gold and silver as a setup to this big monthly report."


http://harveyorgan.blogspot.com/

HOW do the bankers bomb gold & silver ?

I gather it has something to do with "shorts".

What is a short ?

Is it an offer to sell at a lower price, call it price "X".

Or is it some kind of paper contract, where, if the price does not fall, and the customer asks for delivery, the holder of the short has to buy the physical metal at the lower price ... which could be very expensive if the price spikes.

Also, what are the legitimate uses of a short ? I can understand a silver manufacturer wanting to make a contract to deliver at price "Y", which might be lower than the current market price. I can also understand a dealer like APMex sitting on 1 Million ounces of silver and wanting to protect themselves against a fall in price. So they buy an option of some kind. If the price falls, the option pays off. It the price doesn't fall, well then you're in the enviable position of having 1 million ounces of silver with a higher price, and your options are worthless.


So if anyone would care to take a stab at any of these 3 questions, I'd appreciate it.

[Bigjon]

A short is a sale of a futures contract at the going price. For every short there is a long, someone who bought the offered contract. The contract may be in the near month or as far out as there are contracts about 2 years. There are contracts for every month in the near term which is up to (some number) of months. Beyond the near term there are official months where contracts are always available and depends on which commodity usually about every other month but gold and silver always offer a December contract.

A futures contract is a promise to deliver and size depends on which exchange the contract is through, comex is 5000 oz silver, 100 oz gold; CME 1000 oz silver Can't remember, gold ; CME offers mini-contracts

There are usually bids for contracts waiting for the price to match the offer and if enough contracts are offered the price goes down as the number of bids at each price level are matched up.

Down goes the price.
conversely if enough longs show up and their bids eat through all the offers and there are usually offers for sale as the price goes up.

[Bigjon]

Options come in two flavors, Puts and Calls.

A Call option gives you the right but not the obligation to buy a futures contract at the designated strike price before the contract expires

A Put option gives you the right but not the obligation to sell a futures contract at the designated strike price before the contract expires

Options limit the amount of money you risk to what the options costs.
If an option is ‘in the money’, most people just sell the option instead of exercising it

[gunDriller]

thanks - that's helps !

i'll have to think about it a while though.

[joe_momma]

The important thing to know is that the large investor-banks do not need to have either physical possession or the money to cover naked shorts - they could offer a giga-jillion of contracts if they want to.

(Oh, yeah, they also do not have to settle the contract delivery - instead they can insist on either an ETF certificate or FRNs.)

[Horn]

Yeah, they've been extending the summer duldroms a couple weeks out in recent years if memory serves me correctly.

The old adage "sell in May & walk away", should been renamed "still in by June & you're a loon" ;D

[Saul Mine]

Mum's The Word (http://www.gold-eagle.com/editorials_08/butler062210.html)

[Steal]

Mum's The Word (http://www.gold-eagle.com/editorials_08/butler062210.html)


Thanks Saul
How can JPMorgan holding 30% of the silver market not be manipulative? That the answer is not forthcoming is something I ask you to think about.

You know, JPM is a pretty big fish and though I do not remember the numbers, does not our govt have much $ tied in with them in pensions, etc,etc.? If any of this did pan out, would that also have a cascade effect on areas much bigger than just the silver manipulation market?

[Saul Mine]

Thanks Saul
How can JPMorgan holding 30% of the silver market not be manipulative? That the answer is not forthcoming is something I ask you to think about.

Not that I know anything, but I will pass on the only answer I have heard. It's from Antal E. Fekete. Some companies trade the spot price versus the futures price. That is a trick that generates steady income with some commodities, but takes a lot of training to do well. Such trades can be completely covered but would appear to be naked shorts to anybody outside the company. When the authorities investigate they are not at liberty to say that they do or don't find some such arrangement.