Eric Sprott - What Happened in Gold & Silver is Stunning

Today billionaire Eric Sprott told King World News that a staggering 500 million ounces of paper silver traded hands during the takedown in the metals this week. Eric Sprott, Chairman of Sprott Asset Management, had this to say about what took place the day of the plunge in gold and silver: “I can only imagine it’s the same forces that for the last twelve years have been at work in the gold market, trying to keep the volatility very large on the downside. As you are aware, we hardly ever get days when you get an intraday $100 rise in gold. When we look back at what happened (on Wednesday) we saw huge sell orders in gold and silver.”

Eric Sprott continues:


“When I look at the silver market in particular, in a 30 minute span we had sellers of 225 million equivalent paper ounces, in a market that in one year the silver miners only produce 800 million ounces. So again, it’s the paper markets overwhelming the physical market. It’s stunning to me that on a day like Feb. 29th we traded 500 million ounces of silver.

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Thursday, February 23, 2012

Good evening Ladies and Gentlemen:

Gold closed the comex session up $14.90 to finish at $1784.90 (1:30 pm). Silver sensed trouble at the comex inventory levels and responded in kind rising by $1.30 to $35.44. I would like to report on some strange behaviour with respect to the CME reporting on the front February open interest. At 1:30 pm yesterday, the CME reported 94 contracts open. Early this morning somehow this OI was changed to 130 contracts open for Wednesday's resting level. On the bulletin board, they recorded 125 OI for the front delivery month this morning.
It is very interesting in that the OI is always 24 hours back so how on earth can they fool around with the yesterday's official data today? Today the gold price rose exactly 1% similar to the gain yesterday of 1%. On Tuesday it rose 2%. With the gold/silver shares floundering again today, it is odds on favourite that we are witnessing the beginning of another raid.

Let us head over to the comex and see the data and then you can decide for yourself what gives.

The total gold comex OI rose again by an astonishing 9,246 contracts which will excite our criminal banks. They are seeing a big increase in OI and they usually lick their chops with delight when they see total open interest rise dramatically. No doubt it was the bankers that provided the necessary non backed gold paper.
The front delivery month of February saw its open interest fall from 300 contracts to 208 contracts for a loss of 92 contracts. We had 24 delivery notices filed yesterday so again we lost 68 contracts due to cash settlements which seems the norm of late. The next delivery month is April and here the OI rose by 6,156 contracts to 257,506 from 251,418. The estimated volume was again quite low at 139,722 compared to the confirmed volume yesterday of 194,673. It seems that the bankers were willing to provide less paper gold today and allow the price to rise. Let us see if they attack tomorrow.

The total silver comex OI rose by a tiny margin of 420 contracts as the bankers are more frightened to supply the non backed silver paper. As I described above, the front February contract reporting has been very strange these past 24 hours. As I have pointed out , the OI officially reported at 1;30 pm by the CME is now 125 contracts and they reversed yesterday's level back to 94 so the gain in contracts
is now 31 contracts with zero notices filed yesterday. We thus gained 155,000 contracts of additional silver standing. The front March contract goes off the board tonight as does the March gold/silver options.
The March OI stands tonight at 24,966 a fall from 29,215 contracts or a contraction of 4,249.
We will have to wait until first day notice to see how many of these contracts will stand for metal plus all the option holders who will also stand for physical silver. The estimated volume on the silver comex was quite high today at 87,297 as many rolled into May. The confirmed volume yesterday was also very high at 93,555.

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Eric Sprott - Financial Sense Newshour - Silver

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Good evening Ladies and Gentlemen:

The banking cartel continued to launch their assault on the precious metals with gold falling by $13.00 to $1722.80 and silver slipping 1 cent to $33.72. The bankers are in no mood to see the rise in the precious metals. The lease rates lowered considerably Thursday night.  Could the following  have been a harbinger of things to come i.e.  the raid on Friday?





Let us head over to the comex and see how trading fared today and determine amounts of metals standing.

We had a vicious raid on Friday and generally the bankers hope to shake many gold leaves from the gold tree and many silver leaves from the silver tree.  You will be totally surprised by the data.

The total gold comex OI rose by 1599 contracts from 433,372 to 434,971.  The bankers were thoroughly
annoyed that nothing fell in either metal so they raided again today.  These crooks are something else.
The front delivery month of February saw its OI fall from 1201 to 1083 for a loss of 118 contracts. We had 54 delivery notices so we lost 64 contracts to cash settlements as Blythe must be getting worried with the huge delivery notices and no real metal to give our longs.  The next big delivery month is 7 weeks away and here the OI fell slightly from 239,062 to 238,833.
The estimated volume today at the gold comex was 135,060.  The confirmed volume on Friday was a monstrous 204,286.  It kind of shows you what a raid will do with respect to volume.  No doubt our HFT traders also played a part in bringing down the gold price.

The total silver comex OI rose by a rather large 1131 contracts despite the raid.  As I mentioned above, no silver leaves fell as these longs are very strong and they are totally oblivious to any banker raids.  The front options expiry month of February saw its OI fall by only 5 contracts despite 73 delivery notices on  Friday.
We thus gained 68 contracts or an additional 340,000 oz of silver standing.  The next delivery month is March and it is only 3 weeks away.  Here the OI fell from 46,622 to 45,083 for a loss of 1500 contracts as these rolled to the future month of April. The estimated volume today was very anemic at 36,392 contracts.
No wonder silver rebounded as the bankers were loathe to supply too much non backed paper.  The confirmed volume on Friday was big at 56,010 contracts.
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'The truth behind the silver market'

By Eric Sprott & David Baker
As we approach the end of 2011, the Silver spot price has admittedly endured a tougher road than we would have expected. And let's be honest -- what investment firm on Earth has pounded the table on silver harder than we have?

After the orchestrated silver sell-off in May 2011, silver promptly rose back to US$40/oz where it consolidated nicely, only to drop back below US$30 within a two-week span in late September.

The September sell-off was partly due to the market's disappointment over Bernanke's Operation Twist, which sounded interesting but didn't involve any real money printing. Like the May sell-off before it, however, it was also exacerbated by a seemingly needless 21% margin rate hike by the CME on Sept. 23, followed by a 20% margin hike by the Shanghai Gold Exchange -- the CME's counterpart in China, three days later.



The paper markets still dictate the spot market for physical gold and silver. When we talk about the "paper market," we're referring to any paper contract that claims to have an underlying link to the price of gold or silver, and we're referring to contracts that are almost always levered.

It's highly questionable today whether the paper market has any true link to the physical market for gold and silver, and the futures market is the most obvious and influential "paper market" offender.

When the futures exchanges like the CME hike margin rates unexpectedly, it's usually under the pretense of protecting the "integrity of the exchange" by increasing the collateral (money) required to hold a position, both for the long (future buyer) and the short (future seller). When they unexpectedly raise margin requirements two days after silver has already declined by 22%, however, who do you think that margin increase hurts the most? The long buyer, or the short seller?

By raising the margin requirement at the very moment the long contracts have already received an initial margin call (because the price of silver has dropped), they end up doubling the longs' pain -- essentially forcing them to sell their contracts. This in turn creates even more downward price pressure, and ends up exacerbating the very risks the margin hikes were allegedly designed to address.

When reviewing the performance of silver this year, it's important to acknowledge that nothing fundamentally changed in the physical silver market during the sell-offs in May or mid-September. In both instances, the sell-offs were intensified by unexpected margin rate hikes on the heels of an initial price decline.

It should also come as no surprise to readers that the "shorts" took advantage of the September sell-off by significantly reducing their silver short positions. Should physical silver be priced off these futures contracts? Absolutely not. That they have any relationship at all is somewhat laughable at this point.

But futures contracts continue to heavily influence spot prices all the same, and as long as the "longs" settle futures contracts in cash, which they almost always do, the futures market-induced whipsawing will likely continue.

It also serves to note that the class-action lawsuits launched against two major banks for Silver manipulation remain unresolved today, as does the ongoing CFTC investigation into silver manipulation, which has yet to bear any discernible results.

Meanwhile, despite the needless volatility triggered by the paper market, the physical market for silver has never been stronger. If the September sell-off proved anything, it's the simple fact that PHYSICAL buyers of silver are not frightened by volatility.

They view dips as buying opportunities, and they buy in size. During the month of September, the US Mint reported the second highest sales of physical silver coins in its history, with the majority of sales made in the last two weeks of the month.

Reports from India in early October indicated that physical silver demand had created short-term supply issues for physical delivery due to problems with airline capacity.

In China, which reportedly imported 264.69 tons (7.7 million oz) of silver in September alone, the volume of silver forward contracts on the Shanghai Gold Exchange was more than six times higher than the same period in 2010.

It was clear to anyone following the silver market that the physical demand for the metal actually increased during the paper price decline. And why shouldn't it? Have you been following Europe lately? Do the politicians and bureaucrats there give you confidence?

Gold and silver are the most rational financial assets to own in this type of environment because they are no one's liability. They are perfectly designed to protect us during these periods of extreme financial turmoil. And wouldn't you know it, despite the volatility, gold and silver have continued to do their job in 2011.

As we write this, in Canadian dollars, gold is up 23.4% on the year and silver's up 6.8%. Meanwhile, the S&P/TSX is down -12.3%, the S&P 500 is down -5.1% and the DJIA is up a mere +0.26%.

So here's the question: We think we understand the value and great potential in silver today, and we know that the buyers who bought in late September most definitely understand it... but do silver mining companies appreciate how exciting the prospects for silver are?

Do the companies that actually mine the metal out of the ground understand the demand fundamentals driving the price of their underlying product? Perhaps even more importantly, do the miners understand the significant influence they could potentially have on that demand equation if they embraced their product as a currency?

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Sprott Physical Silver Trust Announces Completion of its Follow-on Offering of Trust Units

TORONTO, Jan. 23, 2012 /PRNewswire/ - Sprott Physical Silver Trust (the "Trust") (NYSE: PSLV / TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP (the "Manager"), today announced that it has completed its follow-on offering of 26,450,000 units of the Trust ("Units") at US$13.20 per Unit for gross proceeds of US$349,140,000 (the "Offering"). This includes the exercise in full by the underwriters of their over-allotment option.  Purchasers in the Offering included Sprott Inc. and the Sprott Foundation, which are affiliates of the Manager.

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering, and as of January 23, 2012 has contracted to purchase a total of approximately 10.57 million troy ounces of physical silver bullion. Once the Trust has taken delivery of all the silver bullion, it will publish the serial numbers of all bars held by the Trust on its website.  The net proceeds of the Offering per Unit were greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering, as required under the trust agreement governing the Trust.

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Sprott Physical Silver Trust Prices Follow-on Offering of Trust Units in an Aggregate Amount of US$303,600,000

TORONTO, ONTARIO--(Marketwire - Jan. 18, 2012) - Sprott Physical Silver Trust (the "Trust") (TSX:PHS.U)(NYSE:PSLV), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP, announced today that it has priced its follow-on offering of 23,000,000 transferable, redeemable units of the Trust ("Units") at a price of US$13.20 per Unit (the "Offering"). As part of the Offering, the Trust has granted the underwriters an over-allotment option to purchase up to 3,450,000 additional Units. The gross proceeds from the Offering will be US$303,600,000 (US$349,140,000 if the underwriters exercise in full the over-allotment option).

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering. Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering.

The Units are listed on the NYSE Arca and the Toronto Stock Exchange under the symbols "PSLV" and "PHS.U", respectively. The Offering will be made simultaneously in the United States and Canada by underwriters led by Morgan Stanley and RBC Capital Markets in the United States and RBC Capital Markets and Morgan Stanley in Canada.

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Eric Sprott: "Who is not Getting the Silver?"

Physical silver hits a record 30% premium over spot

By Tyler Durden
One of the main reasons why we have been not so focused on paper representations of real currencies (i.e., Gold and silver) is that ever since the MF Global debacle, in which it became all too clear that if physical gold can be "hypothecated" via conflicting ownership, then there is no way that paper versions of precious metals are viable and indeed credible. After all, the only real owner at the end of the day is the certificate holder, which as we have explained before, is none other than DTCC's Cede & Co. Good luck collecting when the daisy chain of counterparties starts falling.

Which leaves physical. And for a good sense of what the "real" price of the metal is, not one determined by institutions whose interest it is to preserve the hegemony of paper, one can either try to procure gold and Silver at a retail merchant, or one can look to the premium of a dedicated physical ETF over spot. Such as Eric Sprott's PSLV which as of today is trading at an all time high premium of 30%! In other words, someone is willing to pay up to 30% over spot for the right to be closer to the physical metal than merely have a paper claim on a paper claim (pre hyper rehypothecation and what not).

Physical Silver Surges To Record 30% Premium Over Spot, In Backwardation

One of the main reasons why we have been not so focused on paper representations of real currencies (i.e., gold and silver) is that ever since the MF Global debacle, in which it became all too clear that if physical gold can be "hypothecated" via conflicting ownership, then there is no way that paper versions of precious metals are viable and indeed credible. After all, the only real owner at the end of the day is the certificate holder, which as we have explained before, is none other than DTCC's Cede & Co. Good luck collecting when the daisy chain of counterparties starts falling. Which leaves physical. And for a good sense of what the "real" price of the metal is, not one determined by institutions whose interest it is to preserve the hegemony of paper, one can either try to procure gold and silver at a retail merchant, or one can look to the premium of a dedicated physical ETF over spot. Such as Eric Sprott's PSLV which as of today is trading at an all time high premium of 30%! In other words, someone is willing to pay up to 30% over spot for the right to be closer to the physical metal than merely have a paper claim on a paper claim (pre hyper rehypothecation and what not). Incidentally the last NAV premium over spot record was back in April 2011 just as silver went parabolic and the entire commodity complex experienced the infamous May 1 takedown when it collapsed by $8 dollars in milliseconds on glaringly obvious coordinated intervention. Said otherwise, like back then, so now there is an actual shortage, manifesting itself in the premium. And while last time its was the price plunge which eased supply needs, we are not so sure how one will be able to spin a collapse of the current, far lower paper silver price.

Sprott's Call for Silver Producers to Hold Back Metal Strikes Chord

The Gold Report and Eric Sprott

On November 30, Eric Sprott, chairman of Sprott Inc. and one of the largest holders of physical silver and silver equities globally, issued a call to action to 17 of the world's largest silver producers to limit the sale of the metal until prices increase. In this Gold Report exclusive, we asked the activist investor and insiders what impact such a declaration could make in one of the most volatile subsets of the resource sector.



In an open letter to silver producers at the end of November, Sprott Inc. Chairman Eric Sprott cited an overleveraged banking system, weakening dollar and increasing demand as reasons to hold profits in silver rather than selling all production and putting the proceeds in the bank. "Given the current environment, we see much greater risk holding cash in a bank than we do in holding precious metals," Sprott said.

Interviewed mid-December Sprott, who is a major investor in physical and silver equities, explained why he wrote his letter. "I have always liked silver because I look at the physical supply and demand metrics and they scream that silver should be higher. But the price is being kept down by paper silver traders who are abusing the market."

As proof, Sprott pointed to the day last April when silver hit $50 an ounce (oz) and then immediately dropped $6/oz in 13 minutes when almost none of the markets were open. "A billion ounces of paper silver traded that day. The mining industry only produces about 700 million ounces (Moz) a year. The major financial institutions, which had been shorting silver for a long time, refused to let silver break $50/oz so they manipulated the market to keep a lid on it," Sprott charged.

"That is why I think the physical silver producers, the miners, need to be more active participants in the market," Sprott explained. "When silver is produced for less than $15/oz and sold for $30/oz, theoretically the producer is making $15/oz. I believe it is irresponsible for companies to leave that money in the bank where it is vulnerable. It is too risky. Producers have to find something to invest in and the obvious choices are gold and silver. It seems very logical to me that silver producers should invest in silver as a monetary metal."

"I'm not trying to create a Hunt Brothers type situation," he said, referring to when Nelson and William Hunt tried to corner the silver market in the late 1970s by buying as much as a third of the world's supply, driving the price up to almost $50/oz before the market crashed on Silver Thursday. "I'm just trying to create a fair playing field. Producers should take their future into their own hands," he said.

To those who compare his call for silver producers to act in concert to the methods of an oil cartel, Sprott said he agreed with the business model. "OPEC [Organization of the Petroleum Exporting Countries] was right that the price of oil was ridiculously cheap. Coming together to control supply was probably one of the more responsible things oil producers did. They were being disadvantaged and they took appropriate action. I think that's what the silver industry should do," he said.