Newsroom

Update

September 12, 2008

Dear clients of Worldwide Precious Metals,

In light of the last tortuous weeks for all, we thought you would like to read the comments sent from our clearing house, Precious Metals International Ltd, as we all try and make sense of recent events.

With best regards,

John P. Downes
President
jdownes@wwpmc.com

The recent downturn in all commodity prices has been the result of the following.

1) US Government intervention into the private sector, spearheaded by the Fed Reserve and US Treasury. Their purpose: to force commodity prices down creating a false or synthetic PPI and CPI and to boost the US Dollar against other foreign currencies. This takes pressure off of the Federal Reserve to raise Interest Rates.

2) Preparation for Nationalization of Fannie Mae & Freddie Mac (An event that has now happened) in a “bandaid” effort to stabilize the Credit Crisis.

3) Massive liquidations by Hedge Funds as they unwind their highly leveraged Long positions in Commodities. Don’t be surprised to see one announcement after another about various Hedge funds closing their doors and returning to their Customers whatever piddling amount of funds they have left.

4) The extensive Government influenced media stressing a downturn in China’s GDP which would mean a slowing in their demand for commodities such as Copper, Oil, Aluminum, Iron, Ore, etc.

5) A well kept and secret intentional manipulation of the Silver Market conducted by two US Banks. This is discussed in Mr. Ted Butler’s Articles and bears our serious attention.

To Understand Mr. Butler’s theory one must have an understanding of the Commodity Futures and Options contract Market and the Regulatory Authority of the Commodity Futures Trading Commission (CFTC).

Relative to Futures Contracts the CFTC has reporting requirements of participants which are designed to prevent “Control” (which equals the ability to manipulate price) by any one or collective group of participants.

As these relate to Silver, the Reporting requirement is 150 Contracts (long or short) (750,000 oz).

Position Limits are 1500 Contracts [7,500,000 oz) Remember these Regulatory requirements are designed to prevent "Market Control and Price Manipulation"]

Mr. Butler has uncovered information (unfortunately too late) that on or about August 5th, 2008 – Two unnamed US Banks placed short sell contracts to sell just short of 170,000,000 oz of Silver. That’s the equivalent of 34,000 Contracts (226.66 times the Reporting Requirement) and 23 times the Position Limits.

Clearly these positions were designed to “control and manipulate” the price of Silver. Yet the CFTC did nothing and to our knowledge is avoiding requests for investigations into the matter.

It would not be surprising should the truth ever be discovered, to learn that the Banks were heavily exposed to their Silver Depository Customers, but that’s a discussion for another day.

The Big Question is how this could happen – Why and How was it kept secret and why the CFTC did nothing.

In our opinion all of these actions have been orchestrated, and are as they relate to Commodity prices, only temporary as the fundamentals of supply and demand have not changed. Nothing has changed in terms of short supplies for Gold and Silver and the reasons to own them have become even more compelling.

What we are experiencing is the equivalent of putting a “Bandaid” on the Titanic. US Banks are failing and the more the Government comes to their aide the more money has to be printed. That’s inflationary, pure and simple.

The One thing we can say is that relative to where prices of Gold and Silver are projected to go over the next several years – these current prices represent an excellent opportunity for purchasing, cost averaging and being conservatively Pro-Active.

Due to increased volatility that can be expected, Investors should stay away from the Futures and Options Markets and Concentrate on Ownership of the Physical product.

Ownership of actual physical Precious Metals provides a flexibility that can not be found in any other investment product. They are the only hard asset that can be instantly sold or financed regardless of Market activity.

Over the next several weeks look for prices to stabilize, but don’t be disappointed or surprised with fast moving price swings. Accumulation of Gold and Silver during this period should yield exceptional returns in the years ahead. Just remember not to overextend yourself and be patient.

Trading Department – Precious Metals International Ltd.

© 2010, Worldwide Precious Metals.
www.wwpmc.com

Update
Posted by Worldwide Precious Metals on Friday, September 12, 2008

As featured on: