Harvey Organ, 12.12.2010
Good afternoon Ladies and Gentlemen – I was doing a little review of Kirby’s paper and I noticed in the BIS section of his report where he describes the total derivatives of silver at 217 billion dollars, the report also lists the forwards and swaps at 81 billion dollars and the options at 46 billion dollars. The BIS report is for 6 months data from Jan1 2010 through to June 30.2010.
We know that the average price of silver during that period was around 17.00 dollars USA so we can come pretty close to finding the short positions by the major banks in ounces. When the BIS uses the term forwards and swaps, this is a good proxy for the actual physical shortfall in silver. The reason is this is in dollar form the total amount of silver leased from country x or swapped with a counterparty. A call option, although a liability of a bank, does not represent borrowed metal.
OK let us see where this lands:
The total forwards and swaps of silver in the period Jan 1 2010 through to June 30/2010 according to the BIS is 81 billion dollars. The average price of silver during that period is $17.00. Remember, also that the BIS nets out banking longs from shorts, so the forwards and swaps is probably a true picture of all the bankers short position on physical silver. Thus by taking 81 billion dollars and dividing by 17.00 dollars we get 4.7 billion oz of silver shortfall. I had originally estimated that I thought the shortfall was 3.3 billion ounces.
We know that the USA had 2 billion oz in 1990 and that silver is gone. The supply of silver from the mines over the 20 yr period has averaged around 500 million oz and demand of oz. at around 750 – 800 million oz. This year demand will exceed 900 million oz. It has been our supposition that China has supplied the remaining ounces of silver with their left hand in order to receive gold in the right hand.
The BIS data is accurate and it seems that this is the true physical shortfall of all the banks. Let us now add in the options shorts:
The BIS lists options at 46 billion dollars with an average price of 17.00 dollars or 2.7 billion oz of puts and calls. To get at the shortfall here, the BIS nets out longs vs shorts at the bank level. However it is does net out speculators like myself. Let us say that I sold calls on silver and the bankers took the buy side. The BIS would include that in its option figures. If Bank X did a buy and Bank Y underwrote the call, then the BIS nets it out.
So let us conservatively say 10-15% is non bank calls and puts. So we can safely subtract 15% of the options total of 2.7 billion oz to give us a risk factor of 2.3 billion oz of silver that the bankers are at risk for in the options department.
Thus the total risk in ounces from all our bankers is: 4.6 billion oz (forwards and swaps–true short position of physical) + 2.3 billion (options like puts and calls)= 6.9 billion oz.
The OCC report lists the 5 major usa banks that are at risk with JPMorgan, HSBC, Citibank, Wells Fargo, and Bank of America the named parties. The total risk that the Comptroller monitors of these banks is 13.577 billion dollars. With an average price of 17.00 dollars, then in ounces, the approximate total risk is 800 million oz.
The shortfall at the comex by the 2 major banks is around 500 million oz and Bart Chilton on Friday stated surprisingly that ONE bank had 40% of the silver shortfall this year at the comex (and you safely say that that bank is JPMorgan. Also remember that the CFTC cannot monitor the OTC and trading at the LBMA I believe that Ted Butler is correct when he states that JPMorgan and HSBC are trying to get out of their silver mess.
Kirby has noticed that the total derivatives of all banks are rising and in particular he notes that Goldman Sachs and Bank of America who have holding companies have a big increase in derivatives.
Is it possible that the quarterback, JPMorgan is handing some of the major shortfall to their halfbacks, Goldman and Bank of America on orders from its owner…the Fed?
I will leave it up to you to decide.
In case you have not read this important paper, I will again include it in full for you:
When researching the precious metals, often times things are seldom as they appear on the surface. GATA Secretary and Treasurer – Chris Powell – has said that the true picture of a nations’ gold holdings are, “more closely guarded than their nuclear secrets”. This has been more-or-less proven true based on the Federal Reserve’s reaction to GATA’s 2009 FOIA request for information concerning GOLD SWAPS. The Fed is ON RECORD admitting they’ve done gold swaps – which, by definition, necessarily utilize sovereign American gold stocks.
To date, the Federal Reserve has stonewalled GATA’s FOIA request citing their ‘privileged status’ and reluctance to divulge ‘trade secrets’. GATA has maintained that the Federal Reserve / U.S. Treasury in conjunction with other Central Banks have for years been suppressing the price of gold [and silver too] – in efforts to mitigate and to cover up their own debasement of fiat currencies.
Historically, when Central Banks or governments print more and more fiat money, precious metals prices RISE. The money printing is not only inflationary but when done to excess it can undermine confidence in faith based fiat currency regimes. Precious metal has no counterparty risk and cannot be printed – which is why it “is” and always will be money. Remember folks, gold is money, as evidenced by EVERY Central Bank in the world listing gold bullion on their balance sheet as an official reserve asset.
GATA has identified and documented that Central Banks utilize precious metals derivatives, and in particular swaps, as a primary method by with Central Banks rig metal prices. In the presence of EXTREME money printing, it’s understandable why Central Banks and governments would want to suppress the price of gold [and silver] and be less than transparent about their nefarious activity in this regard. Knowledge and detail regarding these activities could undermine a nations’ currency, their credit rating and thus their ability to service their sovereign debt.
The following data set is taken from the June, 2010 Bank for International Settlements [BIS], Semiannual OTC Derivatives Report and it is compared to other data from the U.S. Office of the Comptroller of the Currency’s, June, 2010 Quarterly Report on Bank Derivatives Activities.
Relative comparison along with analysis within the data sets sheds new light on the scope of the precious metals price management scheme. Additional analysis is presented regarding the number and identities of other possible [or likely] players. It also illustrates how paper derivatives have become tools to determine/rig price instead of the intended and stated purpose of price discovery of the underlying physical asset. [Quelle]
OTC Derivatives Report: http://www.bis.org/statistics/otcder/dt21c22a.pdf
Question: There are a total of 417 Billion notional in Gold derivatives outstanding – AND THE GOLD / SILVER Price RATIO is 49:1 – then WHY are outstanding notional silver derivatives 127 Billion???? These BIS numbers suggest that the proper gold / silver ratio should be roughly 3.3:1 or silver priced TODAY at 1,400 / 3.3 = 424.00 per ounce.
Now, let’s take a peek at what the U.S. Office of the Comptroller of the Currency tells us about “other precious metals” held by U.S. Commercial Banks:
source: U.S. OCC
OCC data tells us that J.P. Morgan and HSBC constitute 13.5 billion worth of the BIS’s reported total of 127 billion of derivatives in “other precious metals”. That’s about ONE TENTH of the total. WHAT ABOUT THE OTHER 90 % ??????
Note: Even if we compare the OCC totals for silver versus gold derivatives from the table above – OCC data is supportive of a “proper” gold / silver ratio of 131.6 / 13.6 = 9.7 This implies a silver price of 1,400 / 9.7 = 144.00 per ounce of silver.
Coincidentally, or perhaps not, COMEX open interest in gold futures is roughly 600K contracts @ 100 oz. per contract that is roughly 60 million oz of gold open interest. COMEX open interest in silver futures happens to be about 135k contracts @ 5,000 oz per contract which is roughly 650 million oz of silver open interest [note that silver open interest is not quite 11 times the open interest of gold]. So, again I ask, why is the gold / silver ratio at 48: 1?????
***For those who are not aware, silver naturally occurs in the earth’s crust approximately 7 – 10 times more frequently than gold.
Now, let’s take a look at ALL Derivatives of U.S. Commercial Banks as reported by the OCC:
source: U.S. OCC
Take note and remember that the breakout provided – above – by the OCC was forCommercial Banks ONLY.
Finally, let’s now look at the ONLY OCC data table depicting ALL Derivatives held byU.S. Bank Holding Companies:
source: U.S. OCC
- The BIS tells us that total global outstanding “other precious metals” derivatives are 127 billion.
- General market wisdom [gleaned from OCC Commercial Bank data] suggest that J.P. Morgan and HSBC are the two dominant players in silver [other precious metals]
- Yet, the U.S. OCC tells us that J.P. Morgan and HSBC combined – make up 13.577 billion of the 127 billion BIS total [roughly 10 %].
- The U.S. OCC tells us that Morgan Stanley and B of A and Goldman have an additional combined 70 TRILLION in derivatives – at the Bank Holding Company level – but they give us NO HINT as to what portion of these totals consist of precious metals activity. We are left to assume that this is because the OCC is only mandated to regulate Commercial Banks – while Bank Holding Companies fall under the purview of the Federal Reserve.
- Unless J.P. Morgan and HSBC are LYING to regulators as to the extent of their silver market activity – there are other MASSIVE players in the silver price suppression game. Who ever these ‘players’ are – metaphorically, they MUST BE BLEEDING FROM EVERY ORIFICE with silver’s parabolic run up in price over the past few months.
- Most likely among American entities are MORGAN STANLEY, B of A and Goldman Sachs – since together they are operating a 70 Trillion derivative “BLACK BOX” about which we know LITTLE to NOTHING as it pertains to precious metals.
- Any way you slice it – precious metals data reporting on the part of American regulators is atrocious. Simple MATHEMATICS tells us a gold / silver ratio at 48:1 is EXTREMELY contrived and REEKS of manipulation on the part of the Federal Reserve and the Banks they are charged with regulating.
Got any physical Gold and/or Silver yet?
- Ungedeckte Silber-Short-Positionen: 4.6 Milliarden Unzen
- Silberförderung pro Jahr etwa 500-700 Millionen Unzen
- Silbernachfrage seit etwa 15 Jahren höher als Förderung – daher mittlerweile alle staatlichen Läger leer
- Nachfrage in 2010: 900 Millionen Unzen
- Aus den Daten der OCC ergibt sich ein Gold-Silber-Ratio von 1:3.3 – 1:9.7 – aktuell 1:49
- Ohne Short-Squeeze ergibt sich somit ein normaler Silberpreis, berechnet auf Basis des aktuellen Goldpreises, von 144 – 424 Dollar pro Unze
- Im Falle eines Short-Squeeze dürfen wir bei extremer Übertreibung, was ja das Merkmal eines Short-Squeeze ist, guten Gewissens mit Faktor 5-10 des gerade ermittelten Normalpreises rechnen. Silber könnte dann kurzzeitig teurer als Gold werden.