Occupy Wall Street Revolt reaches Silver Market

Arab Spring spreads to the United States.

As operation Occupy Wall Street buds into a potential monstrous patch of weeds scattered throughout, what would be, otherwise, a bankers Garden of Eden, with unconfirmed reports of the Transportation Workers Union, Teamster’s Union and Verizon Workers slated to join in on the bankers bashing this week in NYC, the silver market, too, is undergoing its own protest—of sorts—against the Monopoly money of the bankers—the U.S. dollar.

Speaking with Financial Sense Newshour’s James Puplava, CEO of KDerbes Precious Metals, Kathy Derbes, told listeners that September’s swoon in the silver price sparked a shocking revolt against paper money, as her clients came in with “extraordinary buying” for all silver products “across the board” in a frenzy to trade paper for precious metals, especially silver.

Derbes account corroborates reports out of King World News’ Eric King, who interviewed Eric Sprott of Sprott Asset Management last week, in which Sprott said his firm had been wiped clean of its silver stock during the huge price drop of the week ending September 30.

Similar to Sprott’s clients, Derbes’ explained that her clients are well-healed, shewed investors who are acutely aware of the bullish fundamentals underpinning the bull market in silver.  In fact, in the minds of these investors, according her, the reasons for converting paper money to hard-money have intensified.  “They know what’s going on,” she said.

While the selling intensified in the silver futures pits last week, Derbes said her clients previously had picked up on the paper game played at the Chicago Mercantile Exchange (CME) and don’t interpret the price drop as a disappointment.  The opposite reaction, she said, is true: these investors see the calamity as a gift.

“That [silver's 30+ percent drop within three days] was intense selling for a myriad of reasons, Derbes explained.  “But while that was going on, my clients on the physical side have had just extraordinary buying.”

“I think investors are really smart; they know what’s going on.  They understand that these price breaks, particularly this time around, are not telling us anything about fundamentals of gold and silver,” she continued.  “In fact, I think the reasons for owning it have gotten a lot stronger.  It’s basically a reaction to, in my opinion, short-term liquidity needs brought about by a number of different issues going on in the macro environment.”

Not only have premiums increased for sovereigns and privately-minted silver coins at bullion dealers during last week’s sell off, dealer delivery times are expected to match the delays following the aftermath of the global 2008-9 sell off.  At that time, reports from dealers across the globe indicated long lead times for larger orders, most notably, of which, came from Sprott Asset Management  and the subsequent ongoing drama associated with protracted delays in delivery of its 694-ton silver order in late 2010.

On Jan. 10, 2011, Sprott issued the following news release: 

As of Nov. 10, 2010, the Trust had contracted to purchase a total of 22,298,525 ounces of silver bullion. As of Dec. 31, 2010 a total of 20,919,022 ounces of silver bullion had been delivered to the Trust. The Trust expects to take delivery of the final 1,379,503 ounces of silver bullion by Jan. 12, 2011.

Derbes believes the market for silver may become tighter, still, in subsequent weeks and moths ahead following last week’s massive drop in the spot price at the COMEX.  Coin premiums have soared on Thursday and Friday of last week, just as they had during the last steep correction in paper silver two years ago.

“We’re probably in the beginning stages of what could be shortages; it certainly looks that way, so we’ll have to wait and see what happens,” she reckons.  “I’ll tell you this, the buying has not stopped.  If anything, it’s intensified this week.  It’s pretty amazing.”

“We have to remember that it’s [silver] a market that cannot be printed into existence like the paper currencies.”

The Occupy Wall Street movement is the latest in, what appears to be, an ongoing and more intensified crises in confidence in US institutions.  While protestors descend on Wall Street to voice their anger regarding its government taking side with big bankers and the Fed during the toughest economic times since the Great Depression, investors in droves are casting their vote against the paper dollar and in favor of hard money—gold and silver.

Dow Theory’s Richard Russell: Gold $1,880

As the gold price doggedly trades above $1,600, the Godfather of stock market newsletter writers, Richard Russell, recently wrote that he’s targeting $1,880 for the king of currencies, gold.

“There isn’t much clear and defined in this market except for gold,” stated Russell, the author of The Dow Theory Letters.   “How much of this is based on the Washington shenanigans I don’t know, but once the debt boost is solved the test will be whether gold tends to hold its gains.  By the way, the P&F [Point & Figure] chart shows a price objective of 1,880.”

Incidentally, according to stockcharts.com, the technical rule for a breakout price objective for gold suggests a target of $1,910.

Nevertheless, today’s GDP report only buttresses Russell’s assessment for the future direction of the gold price.  Friday’s GDP report came in at a dismal 1.3% rate for the second quarter, while the real shocker in the Commerce Department announcement was the drastic downward revision for the first quarter to 0.4% from the initially published pace of 1.9%.

Plunging GDP and jobs puts the Fed in a situation not dissimilar to the summer of 1933, but, back then, the debt levels were a mere fraction of Boston University Professor Laurence Kotlikoff’s estimate of $200 trillion in today’s unfunded federal liabilities—which is an amount too unimaginable for creditors to anticipate anything other than a some form of default.  Under that scenario, gold could be just beginning to gather additional steam.

“I’ve studied bull and bear markets for over half a century,” added Russell.  “In my experience, great extended bull markets, such as the current ten-year bull market in gold, don’t die with a wheeze and a whimper.”

The gold market is telling Russell the American public has yet to fully comprehend the no-win policy decisions yet to be made in Washington and at the Fed, as well as much higher food and energy prices in store for Americans during the second half of 2011 due to the Fed’s QE2 (inflation) program—a prediction made this week by Euro Pacific Capital’s Peter Schiff.

And like Schiff, the older Russell relies upon his more than 50 years of acquired instincts for anticipating another gold craze he thinks is destined to be launched by the retail investor—a craze he’s stated in the past could dwarf the gold mania of 1979-80.

“They [gold bull markets] die amid excitement, torrid speculation and finally the wholesale entrance of the retail public,” continued Russell.  “I’ve yet to see any of those characteristics in the current gold bull market.  Therefore, I’m trusting history, and I’m sitting (in) the gold bull market.”

Russell also sees the possibility for a divergence in the Dow and gold, which, from the start of the rebound in both assets off the March 2009 lows have moved in tandem between a ratio of as high as 10:1 and 7.8:1.  But this week, the Dow-to-gold ratio has fallen through the 7.8 level to the 7.5 level—a sign that gold has usurped the dollar as the premier safe haven asset.

“Wait, does it make sense for the Dow to sink while gold moves higher?” Russell asked rhetorically.  “Under one scenario it does.  Here’s the scenario.  Bernanke continues to stimulate, but the newest stimulation (like the old ones) don’t work, and the declining stock market is already discounting Bernanke’s continuing failure.”

And what does Russell say about this year’s rage of the precious metals—silver?

In his latest edition of his daily newsletter, he wrote, “Silver broke out above both its 50-day and 200-day moving averages, and its MACD has turned bullish.”

Growth in gross domestic product — a measure of all goods and services produced within U.S. borders – rose at a 1.3% annual rate. First-quarter output was sharply revised down to a 0.4% pace from a 1.9% increase.

Economists had expected the economy to expand at a 1.8% rate in the second quarter. Fourth-quarter growth was revised to a 2.3% rate from 3.1%.