Boom Goes The Dynamite: Silver Pops

But gold has risen with only slightly more than 1% of the world’s assets in gold.  Right now the world’s assets are about $150 trillion.  Of that number, $60 trillion is in cash, $40 trillion is in bonds, and $40 trillion is in stocks.  But, remarkably, only $2 trillion or just a bit over 1% is in gold.

With inflation headed higher, institutions, which have virtually no allocation to gold today, they will have to increase their allocation to gold.  There have been several studies over the last few months that have suggested that institutions will need to put part of their funds in gold.

If you look at world financial assets, a 1% increase in allocation to gold of the world’s financial assets would require 12 years of gold production at today’s prices.  There simply isn’t the gold available at today’s prices to facilitate even a small move by institutional money into the sector.  Of course they can never get a sizable commitment into gold at these prices.

I would also add that over time they will put a lot more than 1% into gold.  The studies I reference also suggest that institutions will improve their risk vs return situation by moving money into gold.  So I am convinced that there will be a big inflow of institutional money into gold over the next two or three years

After almost 9 weeks of trying to break over $28, silver closed over over $28 on Thurs/Friday and, after a concerted and blatant attempt by the silver manipulating banks to take silver below $28 this morning, it inexplicably shot up like a roman candle at 9:12 a.m. Denver time.  I say “inexplicably” because I could not find any specific news which might have triggered the move, the SPX did not move at all (so the move in silver was not in correlation with the stock market) and gold moved higher higher as well although not anything that closely correlates with the scale of silver’s move.

As subscribers to GATA’s Le Metropolecafe know, one of Bill Murphy’s sources in Switzerland – someone who is described as being in a position to know – has told Bill that JP Morgan is in trouble with its short position in silver.  Please note, that we only see JP Morgan’s massive, illegal but unpoliced short position on the NY Comex market.  We have no idea what its short position on the LBMA or in OTC silver derivatives looks like (although we do know that JP Morgan has by far the largest position in OTC “metals” derivatives per the quarterly BIS report).

Beyond that we do not know much other than JP Morgan has been the big manipulator in the silver market for many years and likely does so on behalf of the Federal Reserve/U.S. Government.  We also know that at some point in the future that JPM’s paper short position in silver is potentially the equivalent of a small nuclear device embedded deeply the bank’s bowels.  The trigger will be the point at which counterparties to JPM’s short position demand physical delivery of the silver JPM is derivatively short on the Comex, LBMA and OTC derivatives market.

On this note, given that JPM is the custodian for the massive SLV ETF, which means JPM is the gatekeeper on the enormous stockpile that SLV is supposed to be stored in JPM-controlled vaults, I would not advise anyone to own SLV.  SLV, like GLD, has the potential to be another Enron.  Just for the record, JP Morgan was one of Enron’s primary advisory banks.