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Are Gold and Silver in Short Supply?

Nov 18, 2008

There are some who say that physical silver and gold are in short supply, and that it is quite possible that those who have bought futures will ask for delivery when their contracts come due on November 28.

http://www.marketskeptics.com/2008/11/mother-of-all-short-squeezes-for-gold.html

So mark November 28 on your economic calendars and see what might happen. If these people are right, the entire economy would get another earthquake.

Max Keiser says that Russia might be behind the major demand for physical metal. He says they are unhappy about the drop in oil prices, since they are Europe's major supplier of oil. Perhaps they intend to fight back through the gold and silver markets.

http://disinter.wordpress.com/2008/11/12/max-keiser-on-the-coming-comex-default/

I have been following this for some years now. People figured that once the first futures contract for silver could not be filled (due to a scarcity), then the price would spike. This has proven to be false. All they did was to DELAY DELIVERY. I'm not sure how they could break a contract, but perhaps they made an agreement in the back room. Or perhaps they started re-wording the contracts. I don't know.

The point is that the dealers know about this shortage, and so by the law of supply and demand, they are able to charge higher premiums (profit margins) on quick delivery. In other words, if you are willing to pay more for immediate delivery, someone is probably willing to sell gold or silver coins for a price that is much higher than the published "spot" price. The spot price really only reflects the price of a promise to pay (that is, paper), if you don't really care how long you have to wait.

With such a price differential taking place, it is only a matter of time before everyone sees the shortfall and will want actual delivery on the metal they have contracted in their futures contract. Could November 28 be the day that this happens? We will see.

Here is an article showing the global shortage of gold coins:

http://www.nypost.com/seven/11182008/business/governments_cant_handle_global_run_on_go_139306.htm


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Dr. Stephen Jones


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