Sprott Makes His Move of the Comex, Physical to Break from Paper

Following the dramatic and viral news of famed trends researcher Gerald Celente’s confiscated MF Global future brokerage account, scaring legitimate commercial sellers and buyers like a Celente to withdraw from the fraudulent system, the crafty Canadian billionaire Eric Sprott positions himself to make a bold move to finally break the Comex grip on the silver market.

In his Nov. 25 interview with King World News, Sprott’s noticeable focus shifted to his PSLV closed end fund, from his usual discussion with King about the European fiasco and other selling points for owning bullion.  Sign-up for my 100% FREE Alerts

After a brief moment discussing the tired, yet power ‘printing presses’ case, for owning bullion, the discussion turned to the real juice.  His message to both physical buyers and sellers of silver:  You can trust me to deliver.

Here’s how it works—

“If you had a total bust and people feared the banking system and started buying gold,” Sprott said,  “. . . by that time currencies will almost be worthless . . .”  And no one will take on counter-party risk at that point, either.

“All you know is that there’s only a couple of things that you have to have your money in to be safe,” he continued.  “For example, I’m writing a letter basically suggesting to the silver producers, you know you guys have all of this money in banks, why do you have it in banks?”

Knowing full well that mining CFOs cannot justify holding their own inventory in lieu of cash on their balance sheets because the company suddenly wants to become a hedge fund instead of silver producer, it appears that Sprott may likely follow up his “letter” with a personal visit to explain to the brass that he would like to nudge the Comex out of the business of clearing deliveries.

And why not?  Sprott’s $1.5 billion available firepower today now represents more than the 31 million ounces worth of silver stored at the Comex.  So the choice Sprott offers silver producers is simple:

Trust the CME/Comex following the MF Global affair, or trust Sprott Asset Management’s viable $10 billion enterprise, which sports a healthy premium to NAV as proof of his reputation and massive customer base.  Sprott is telling us that he’s positioned to make a market beyond the retail end of the business.

And, on the buy side: How likely is Celente, or anyone who read his shocking tale of how he was robbed by the U.S. financial system, to initiate future delivery of bullion (or anything, for that matter) from an obviously dysfunctional and criminal clearing operation at the CME/Comex?  Moreover, wouldn’t a declining base of buyers in the futures market ease JP Morgan’s naked short selling operation that much more, suppressing prices to its legitimate commercial accounts?

Now comes in a big buyer of silver; he wants to buy the metal but doesn’t want to take delivery though the Comex in fear of being ripped off like some rube taken in by the Nigerian bank scam that’s now moved to the Comex.

Sprott has a solution.

“In my ideal, we get a couple of institutions come in here and say, ‘Hey we’d like to take down a couple of hundred million bucks worth of silver, we love your vehicle,’” Sprott added.  “And then we might go and say, ‘Okay, I think it’s time to go out there and go raise some money to buy silver.’”

And to mitigate the effect of an escalating premium this ideal couple hundred million ounce order would have on the NAV premium to the small buyer, Sprott can raise the money through a Letter of Credit in conjunction with an assumed wide premium take down available to him from selling some PSLV shares to raise cash, arrange delivery from the producers (who have by then ‘invested’ in silver), and the deal is made.

Everyone’s happy, except the Comex.  Big buyers get a deal from NAV premium, producers don’t lose sleep, and small buyer aren’t hurt by the sudden volume.

“I’ve always stated that I’m not going to do anything that would negatively affect the premium of that fund,” Sprott reassured investors, as these silver aficionados know soaring silver prices also ratchet up PSLV NAV premiums, a complaint voiced on the Internet from time to time.

And as far as the timing of such a price-popping event?  Sprott won’t venture to say, or isn’t telling.

“So we’ll just have to wait for the right time and who knows when it happens?”  added Sprott.  “Maybe we have to imagine that the silver price is moving up, which we haven’t been in that environment recently, but the interest can come back very quickly.”

Sprott’s plan is a win-win-win proposition for investors, producers and him.

Expect registered silver at the Comex to dwindle now that MF Global has done its job chasing participants from this tiny marketplace.

Who’d imagine that another Son of American Liberty would come from a profiteering billionaire from Canada?  Marquis de Lafayette Sprott has come to the aid of America once again.