Our friends at King World News recently posted two interviews from two blue-chip sources, who report the possibility of an imminent and massive short covering by the government-supported cartel in the gold and silver markets.
As the premiere Web site for breaking interviews from the best informed in the gold and silver market, Eric King’s King World News (KWN) has been atop the drama and inside ball in the metals as it breaks.
James Turk, a frequent guest of KWN, as well as the founder and president of Goldmoney, got word (confirmed by the KWN’s anonymous London trader) of a massive short squeeze potential developing. If gold and silver were to achieve prices north of $1,600 and $40, respectively, and hold above these benchmarks for a day, or two, many of the oversized number of short contracts will have to cover to cut losses from the adverse move higher—a move, said Turk, that could rival the monster rally of August through April.
“I wouldn’t be surprised to see $2,000 (gold) very quickly,” Turk speculated in his KWN interview. “It’s just a question of how the European bank crisis unfolds or the U.S. debt limit unfolds or any one of these number of trouble spots around the world unfolds. Any one of those could light a fire under the gold market and you could see $2,000 very, very quickly. You could also see silver over $50 very quickly.”
Brief panic set in the Italian 10-year note at the close of trading in Asia today, which culminated in a sell off in the 10-year to above a 6% yield. Last time Italy’s 10-year reached the 6% handle, an emergency gathering of Italy’s upper legislative body was assembled to vote on Finance Minister Giulio Tremonti’s austerity package to ward off a Greece-like run on its sovereign debt. The passage of Tremonti’s plan occurred last week, briefly triggering a rally in the 10-year.
But here we are again at the precipice of another sovereign debt collapse, in no less than a week’s time from the last threat. As the EU fights the bond vigilantes of Italian debt, the gold price correlated strongly with the yield on the 10-year following the NY close.
As the 10-year punched through 6%, gold and silver surged to intraday highs of 1,609.92 and $40.85, respectively. But as buyers (central banks?) aggressively bought the notes above 6%, the yield fell back to 5.72%, taking down gold and silver to the $1,600 and $40.15 levels, respectively.
All of that comes on top of a PM market already tight from the escalating buying since the aftermath of the March 2009 meltdown.
“Because the market is so tight still, any kind of huge buying of physical metal is going to send these prices much higher,” added Turk. “Then if you add in what the London Trader is talking about, short-covering coming in, it’s got the potential for an upside explosion.”
And to add another pinch of drama to the ongoing bullish story for silver, Reuters reported Monday the Hong Kong Mercantile Exchange is set to launch a silver futures contract on Friday, in the hopes of tapping into the “growing demand for the metal in China.”
The contracts will trade in lots of 1,000 ounces, as apposed to the 5,000-ounce contracts traded on the Chicago Mercantile Exchange.
Eclipsing a 17% increase in global demand for silver, China’s 67% rise in demand for the gray metal will enable Chinese investors an additional market to trade 2011′s hottest metal without falling prey to rapid-fire CME margin hikes and other maneuvers to protect the JP Morgan-HSBC price suppression scheme.
“The new contract will enable buyers and sellers in China to trade effectively with their counterparts across the world, while at the same time, allowing investors to gain exposure to silver price movements and broaden their investment portfolio,” said HKMEx president Albert Helmig in a statement.
Some analyst say the HKME is another nail in the coffin of the Anglo-American monopoly of the silver market, and that the HKME’s extended hours session will pose an additional problem for the manipulators of the silver price at customary 10 a.m. attack.
Though, typically a seasonally slow period for the precious metals market, this summer has been anything but slow. Turk believes a perfect storm is on the horizon, and expects moves in gold and silver to rival the 1982 blastoff in the metals during the Mexican debt crisis. Gold soared approximately 50% during that summer.
And if the previous 177% run in silver during the 25% rally in gold between August and late April is any indication of things to come for silver, a blow up of the shorts could trigger another breathtaking rally in silver. A similar move to the last silver rally calculates to $100 silver.
“People are looking for the safety of gold and exiting national currencies,” Turk said. “Exiting the dollar, exiting the euro, exiting the British pound, gold is at record highs against all three of those currencies.”
“It’s all very positive Eric, it’s still within my bigger point of view that the summer is going to be spectacular.”