Saturday afternoon, and time for my weekly, 25+ hour labor of love to commence. As you might expect, I’m in a particularly good mood this weekend. Not only was the Cartel delivered a debilitating blow Friday care of “ADMIRAL SPROTT,” but my Giants are playing this weekend for a spot in the Super Bowl. I have been shouting from the rooftops of the importance of PSLV’s surging premium to its Net Asset Value, going back to my January 9th RANT, “PSLV Premium Surges to 31%,” and now you can see why.
Given its status as the world’s only audited, redeemablesilver fund, run by a true ally of PM investors, the Sprott Physical Silver Trust could be this year’s most important stock in the entire world. Thus, the premium on PSLV to its Net Asset Value (NAV), and to a lesser extent that of its sister fund, the Sprott Physical Gold Trust (PHYS), must be watched by ALL PM investors on a daily, or at least weekly, basis. Below are links to the daily NAV of each of these funds.
The NAV of the gold fund can yield valuable information about the tightness of the PHYSICAL gold market. However, gold is a far larger market than silver, and thus less likely to go “no offer” than silver, which could do so at ANY TIME, as it nearly did in September 2008, April 2011, and September 2011. Two of those instances were due to price PLUNGES below the PHYSICAL market’s “equilibrium level,” and one following a price SURGE to new all-time highs. The fact that 2011 saw such dramatic demand EXPLOSIONS just five months apart terrifies the Cartel, as they know pushing PAPER silver below $30 OR allowing it to break above $50 will cause the SAME REACTION. And when I say “no offer,” I mean it, as premiums EXPLODED in all three situations, as supply dried up.
If you want to realize just how endangered the “silver Cartel” is – AS I WRITE – please read the following information.
By far, the HIGHEST premiums – as a percentage of the PAPER spot price – occurred when the Cartel viciously attacked PAPER silver during Global Meltdown I in late 2008. The PAPER price may have fallen below $9.00/ounce, but PHYSICAL demand was so high that bullion dealers were selling coins in the HIGH TEENS. Thus, LET THE RECORD STATE that silver never declined below $9/oz in the REAL WORLD, only in the BIZARRO WORLD of naked shorted futures contracts, fraudulent ETFs, opaque derivatives contracts, and of course MINING STOCKS, which not only are naked shorted into oblivion but have long-term off-take contracts requiring them to sell at the suppressed PAPER price.
However, for all the frenzied PHYSICAL buying in late 2008, absolute demand was DWARFED by what we saw in April 2011 – when silver surged to $50/ounce; September 2011, when it was pounded below $30/ounce during “OPERATION PM ANNIHILATION I;” and NOW, following “OPERATION PM ANNIHILATION II” in December 2011. Miles Franklin experienced most of the busiest days in its 22 years of operation during these three periods, so take a guess what will happen any time the Cartel attempts to push PAPER silver below $30/oz, or allows it to surge toward $50/ounce.
See the table below, depicting how U.S. Mint sales of Silver Eagles before the “SUNDAY NIGHT SILVER PRICE MASSACRE” in May 2011 were DOUBLE that of those seen in late 2008, when premiums surged to roughly 100% as noted above. By the way, I added May 2011 sales to the calculation due to the huge delivery delays that predominated during the time, as discussed in my April 28th, 2011 RANT, Ranting Andy: Alert! Alert! APMEX (and Likely Nearly All Mints) Out of Silver.
Moreover, following “OPERATION PM ANNIHILATION I” in early September 2011, which pushed PAPER silver briefly below $30/ounce, U.S. Mint Silver Eagle sales were 16% HIGHER than what we experienced in April/May 2011, demonstrating that investor demand was even MORE frenzied on the sharp decline than the enormous surge. Miles Franklin had six of its 12 best days ever in the aftermath of “OPERATION PM ANNIHILATION I,” and premiums again rose significantly.
Finally, after early December’s pathetically desperate “OPERATION PM ANNIHILATION II,” sales have again exploded. With January just two-thirds complete, the December/January tally has nearly reached the September/October level, validating the numerous articles I’ve recently posted depicting surging global PHYSICAL demand.
In a nutshell, silver demand is dramatically higher than the period of its greatest PHYSICAL premiums, making it highly likely that any future PAPER smashes OR surges will result in “no offer” situations, and subsequently soaring premiums. If anyone doubts what the world thinks of TPTB’s smoking printing presses, look no further than this chart of U.S. Mint Silver Eagle sales over the past 25 years, which clearly stair-stepped significantly higher upon the commencement of Global Meltdown I in late 2008, and again after the onset of Global Meltdown II last summer.
Due to the inexorable demand EXPLOSION, 2011 saw official mint sales surpass domestic production in BOTH the U.S. and Canada, a condition I expect to NEVER reverse – EVER! Thus, the U.S. and Royal Canadian Mints will be required to purchase PHYSICAL silver in the open market, competing with retail, institutional, and sovereign buyers, yielding considerable incremental upside pressure.
PSLV’s $349 million secondary offering, which when delivered will add ~10 million ounces to the trust, was announced on Tuesday afternoon, January 17th, with PAPER silver trading at roughly $30/ounce. Silver traded firmly throughout Wednesday and Thursday’s “4-for-4″ Cartel attacks, eventually exploding Friday afternoon – ironically at 10:00 AM EST – after withstanding yet another 3:00 AM attack. By the end of Friday’s trading, silver had risen by more than 5% to $32.30/ounce, nearly 8% above the pre-offering announcement price, and as I proofread is trading at $32.70/ounce…
…nearly at the ~$33.00/oz level it traded at when “OPERATION PM ANNIHILATION II” commenced on December 8th. For new readers, the below WATERFALL DECLINE occurred minutes after the ECB reduced interest rates to 1.0%, simultaneous with the infamous “gold sale headline,” since retracted but NOT denied. This notorious example of cowardly government jawboning, stating “MARKET SOURCES REPORT BIS, BOE & FEDERAL RESERVE WERE SELLING GOLD AFTER IT POPPED TO SESSION HIGH AT GMT 1335 -MNI NEWS,” was detailed in my December 8th RANT, “THE FINAL ACT OF FINANCIAL HUBRIS.”
On Friday, silver blew through its 50 DMA of $31.03/oz like it wasn’t there, and is now staring up at its 200 DMA of $35.93/ounce. When that level is convincingly broken, methinks another surge toward $50/ounce is in the cards.
As you can see by Friday price action, the Cartel “hung on for dear life” by doing everything in its power to prevent its eternal nemesis, PM momentum, from returning, by sitting on gold with all its might. After the typical WATERFALL DECLINE at EXACTLY 3:00 AM EST, their work was cut out for them. Given silver’s EXPLOSIVE action, they couldn’t prevent gold from rising through the KEY ATTACK TIMES of 8:20 AM EST and 10:00 AM EST, so the best they could do was stop gold cold at EXACTLY 12:00 PM EST. For anyone doubting why I call this time the “cap of last resort,” simply observe the excitement in silver throughout the afternoon compared to gold’s flat-line behavior after that time.
Moreover, the targeted for extinction mining shares were violently attacked again – with the HUI plunging seven points in minutes at 2:00 PM EST with gold and silver standing still – resulting in yet another down day while PHYSICAL prices surged. The HUI is now unchanged for the year with gold and silver up 7% and 17%, respectively, with the gap between PHYSICAL metal and PAPER investments widening each week, month, and year.
In nearly a decade of battling the gold Cartel – for my assets, livelihood, and sanity – I have come across essentially every major player in the “shadow world” where the MSM won’t tread. The ‘leaders’ of the anti-Cartel brigade are household names among my readership, but nowhere else; and despite a decade of victories, blowing up one DEATH STAR after the next, our “band of rebels” remains small.
Of course, “small” is relative word. Compared to 2002 – when I first joined the movement – it is significantly larger. The old guard is still there, such as Jim Sinclair, Richard Russell, Hugo Salinas Price, and James Turk, plus a growing cadre of newcomers (myself included), with Bill Murphy and Chris Powell serving as Army Generals for their fabulous work with GATA, the Gold Anti-Trust Action Committee.
Thanks to relentless articles and speaking engagements, plus the viral capabilities of the internet, the mechanism and reasons behind official PM manipulation are gradually becoming understood the world round. I know the “biggest money” is aware – such as the Chinese, Russian, and Arab governments – and slowly, but surely, the message is reaching myriad individuals, institutions, and municipal agencies. I believe global awareness of our cause has only increased from “1 out of 10″ to “2 of 10″ in recent years, but progress is progress, and in doubling such acceptance, the odds on the Cartel’s imminent demise have shrunken dramatically.
Of the group of leaders mentioned above, all are vital assets to our movement – and thus the people of the world. However, none have the financial muscle to directly challenge the Cartel, nor the political connections to get away with it. Except for one person – an avid GATA supporter from the beginning, an increasingly powerful Bay Street fixture over the past decade, and, to boot, a cordial, courteous person. And that man, of course, is Eric Sprott, ADMIRAL of the global anti-Cartel forces.
Based in Toronto, his Sprott Securities investment bank has become ubiquitous with the mining sector, particularly in Canada but increasingly in the States as well following his 2010 merger with Rick Rule’s Global Resource Investments in San Diego, California. Moreover, his long-time partner John Embry has been equally ubiquitous in the anti-Cartel fight, perhaps the first high profile financial sector figure to state his anti-government views publicly – sanctioned, of course, by his boss Eric Sprott.
In recent years, Sprott himself has taken the spotlight, personally attacking the gold Cartel in public missives and speeches, in essence taking the mantle of ADMIRAL from the aforementioned group of extraordinary men and women, specifically “GENERAL SINCLAIR.” I have only met Eric Sprott once – this summer at the London GATA Conference – but we have been well aware of each other’s views for many years. Moreover, through GATA I have become quite friendly with John Embry, Sprott’s Chief Investment Strategist, who not only is a brilliant analyst, but one of the best people you will meet. Perhaps my kinship with Eric and John relates to the same “Ranting Andy-esque” passion they share for the cause, a trait common to staunch GATA supporters.
Anyhow, due to Sprott’s access to capital, devotion to Precious Metals, and savvy business decisions, his firm has become a force to reckon with, as well as himself personally, rumored to be a billionaire. Our small but growing camp includes many wealthy people, but few with the motivation and ability to break the Cartel. And that is just what Sprott’s PHYSICAL gold and silver bullion trusts, tickers PHYS and PSLV, respectively, were created to do, the polar opposite of the ETFs GLD and SLV, created by the U.S. government to divert potential PHYSICAL purchases into fraudulent PAPER PM investments.
In just two short years for PHYS, and one for PSLV, the market capitalizations of these powerful PM investment vehicles have grown to $2.1 billion and $1.1 billion, respectively, including last week’s $349 million PSLV offering. PHYS owns 1.2 million ounces of gold, making it a legitimate means for institutional investors to secure PHYSICAL metal in quantity, but that amount is not enough to impact the global supply/demand balance. However, PSLV’s 33 million ounces of silver (assuming the newest 10 million ounces are delivered as promised) represents 3.5% to 5.5% of the global silver supply (very little of which is for sale at current prices), and thus represents a MAJOR THREAT to the Cartel.
When PSLV completed its IPO – $575 million in November 2010 – the Cartel was forced to resort to implement its “D-DAY” offensive days later, and still silver doubled in the ensuing six months to an ALL-TIME HIGH of $50/oz, necessitating the Cartel’s BIGGEST GUNS YET to be brought out for the “SUNDAY NIGHT PAPER SILVER MASSACRE.” However, per the analysis at the beginning of today’s RANT, PHYSICAL silver demand has continued to grow no matter what they have tried, particularly in the aftermath of increasingly intense PAPER attacks, such as “OPERATION PM ANNIHILATION I” in September 2011 and “OPERATION PM ANNIHILATION II” in December 2011.
THAT is why last week’s PSLV offering is such a potentially market-moving “offensive” in the WAR against the Cartel. Given the vastly more fragile, and distrustful, state of the GLOBAL financial system compared to late 2010, and soaring, record demand for PHYSICAL silver, I would not be surprised if, at the least, the Cartel is swamped by PHYSICAL demand in the coming months, leading to a third attempt to break through the ULTIMATE KEY ROUND NUMBER of $50/ounce PERMANENTLY.
There is no way of knowing how things will play out in the near-term – although my level of confidence is growing each week – but the long-term result, and not verylong at that, is already cast in stone. Anyone seeking victory in the life or death war between “financial good and evil” owes a debt of gratitude to the tireless efforts of GATA Army soldiers the world round, but particularly that of its undisputed leader, “ADMIRAL SPROTT!”
Finally, an inspirational “nugget,” way off topic but sure to bring a smile to your face. While listening to the “Big 80s” channel on Sirius/XM radio, I came across this “oldie but goodie” from the MTV heyday of the mid-1980s, a cool song by “two-hit wonder” Spandau Ballet titled – you guessed it – “Gold.” Per my ongoing theme that ONLY gold has historically been MONEY, we are “genetically programmed” to understand its significance. Cultural references to gold’s unparalleled value are everywhere, rarely emanating from people one would consider “goldbugs.” More than seven million people have watched this You Tube video, with 98% “likes” versus just 2% “dislikes,” so the public seems to agree. As the song states, “GOLD, YOU ARE INDESTRUCTIBLE!”
PROTECT YOURSELF, and do it NOW!