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Silver price up as JP Morgan cuts short position and backwardisation rules

By: Peter J. Cooper

-- Posted 16 December, 2010 | | Discuss This Article - Comments:

Silver market experts have long pointed to the massive short position held by several major banks as the prime reason for the metal being underpriced and the only commodity still trading below its all-time high of thirty years ago.

But the headlines in the Financial Times today announced that JP Morgan has ‘materially reduced’ its position in silver to counter these allegations which it denies. It is perhaps no coincidence that silver is up 70 per cent since August.


At the same time the silver market is in backwardization, that is to say silver for immediate delivery is priced more highly than silver for future delivery. That is generally what you see when a market is tight with not enough supply to meet immediate delivery, so you get a better deal if you can afford to wait a while.

Both factors are mega-bullish for the silver price. The fraudulent manipulation of the silver price is over, and the artificial block to very much higher prices removed.

The price spike that has emerged since last summer when banks began covering their short positions is set to go higher. As ArabianMoney has previously argued to break $50 early in the New Year is perfectly possible.

That would take out the old all-time high of 1980. Normally after such a spike a correction follows because the buyers eventually run out, and this rocket fuel is exhausted.

Moving much higher

However, as we discussed in detail in the December edition of the ArabianMoney newsletter (click here to subscribe and we will also send you the December issue) there is still a great deal of life left in the precious metals bull market, and any set back will only be temporary.

ArabianMoney is one of 65 global forecasters predicting $5,000 gold within two years and the forecast ramp up for silver to $320 an ounce offers an even higher rate of appreciation.

-- Posted 16 December, 2010 | | Discuss This Article - Comments:

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