Banks Cover Gold Shorts, But Not Silver, Yet By Gene Arensberg 15 Sep 2008 at 10:47 AM GMT-04:00
"Following the U.S. Fed and Treasury Department’s blatant intervention raid on gold and silver to bolster the U.S. dollar, the few large U.S. banks that hammered the futures markets with an avalanche of short futures sales have covered most of the short contracts in gold, but not silver, yet. "
This article is too long already, but the importance of this issue compels a few more comments, in no particular order.
By using the selling pressure of the U.S. Federal government to artificially lower prices on commodities, the Fed has settled for a quick fix – something that will make things look better very short term, but that action will undoubtedly result in harsh long-term consequences.
The disorderly markets we have just witnessed will put strains on producers of all commodities and their production capacity going forward. Before this parlor trick occurred, there was not going to be all that much new supply coming into the system for things like gold, silver, wheat, corn, and oil. Now there will be less supply.
Below $750 many marginal gold mines will be forced to shut down and production will diminish. With each $50 lower in price that reduction of production will escalate.
One of the ironies of investing is that individuals tend to pull their money out of funds in panic at precisely the time they should be adding to those investments."