Leaked! This Will Happen With SILVER Prices - Andy Schectman

Summary

The speaker discusses the manipulation and leverage within the gold and silver markets, emphasizing how commercial and central banks control prices through short-selling and futures contracts. They explain how the system allows for overleveraged positions, with banks holding massive short positions in gold and silver, often without the metal backing them. The narrative highlights how the suppression of prices benefits these powerful players, who can drive markets down and then buy back at lower prices. This manipulation creates significant risk, as demonstrated by the collapse of Bear Stearns in 2008 when the silver market spiked.

Takeaways

• 😀 Central banks have been aggressively buying gold and silver, setting record highs in recent years, which is continuing.
• 😀 Central banks and commercial banks are using the manipulated prices of gold and silver to accumulate large quantities without holding the physical metals.
• 😀 The futures market was originally designed to hedge against risks in industries like farming, where producers sell their goods in advance to lock in prices.
• 😀 A covered short is when a business like a metals company sells paper gold, backed by physical gold they hold, to offset market risks, rather than speculating.
• 😀 Central banks and large institutions can leverage minimal capital to control massive amounts of gold and silver contracts, inflating the market without having to back up the contracts with physical metal.
• 😀 The system is corrupt and over-leveraged, with rehypothecation, meaning more contracts exist than there is physical metal to back them.
• 😀 Commercial banks and central banks use short selling as a method to drive down the price of gold and silver, betting on future price declines to make a profit.
• 😀 When the price of metals rises sharply, institutions that have short positions must scramble to acquire physical metal, or they will face financial collapse.
• 😀 The practice of short selling, when executed with leverage, can cause major financial institutions like Bear Stearns to go bankrupt, as seen during the 2008 crisis.
• 😀 Short squeezes, where prices rise quickly due to massive buying to cover positions, can escalate the price of gold and silver rapidly, creating financial turmoil for those who are heavily shorted.

Q & A

What is a 'covered short' in the context of trading gold and silver?

A 'covered short' refers to selling gold or silver contracts on the market while having the physical metal to back the short position. This is different from an uncovered or 'naked' short, where the seller does not hold the actual metal, and is therefore speculating that prices will fall.

Why are central banks buying so much gold and silver?

Central banks are buying massive amounts of gold and silver because they are shifting their reserves away from treasuries and other assets. This shift is driven by the desire to reposition wealth and protect against potential financial instability, with central banks seeing gold and silver as more stable stores of value.

How does the manipulation of metal prices benefit large commercial banks and central banks?

By suppressing the price of metals like gold and silver, large commercial banks and central banks can accumulate these metals at lower prices. This strategy allows them to build substantial reserves without the market realizing the full extent of their purchases, leveraging the artificially low prices to their advantage.

What was the role of the futures market in the script's explanation?

The futures market, as explained in the script, was initially designed to help producers like farmers hedge against risks related to fluctuations in commodity prices. In this case, it’s applied to metals where traders can offset the risks of price volatility by selling or buying contracts for future delivery.

What are the risks associated with shorting precious metals like gold and silver?

The primary risk is the potential for the price of the metals to rise dramatically, forcing short sellers to cover their positions by purchasing the metals at much higher prices. This can result in significant financial losses and even business failure, as seen in the case of Bear Stearns in 2008.

What is 'rehypothecation' in relation to COMEX gold and silver contracts?

Rehypothecation occurs when contracts for gold or silver are issued without the corresponding physical metals to back them. In the case mentioned, the number of contracts far exceeds the actual available metal, with a ratio of 1,500% (15 times more contracts than physical metal), indicating an overleveraged market.

Why can large commercial banks control a disproportionate amount of gold or silver with relatively little capital?

Large commercial banks can control large amounts of gold or silver by using leverage in the futures market. With a small margin requirement (such as $7,000), they can control contracts worth millions of dollars. Their ability to leverage their capital allows them to hold vast amounts of notional gold and silver without needing the physical metal.

What does it mean when the script talks about the market being 'overleveraged'?

When the market is overleveraged, it means that there is more exposure to risk than there is physical backing. In the case of precious metals, this overleveraging occurs because there are far more contracts than there is actual physical gold or silver to deliver, which can cause the market to become unstable if prices spike.

How do large commercial banks and central banks manipulate the price of gold and silver?

These banks manipulate the price by using large short positions in the futures market. By selling contracts into the market, they can drive prices down, triggering more selling. Conversely, they can trigger buying by pushing prices through resistance levels. This creates a narrative that can influence other market participants to follow suit.

What happened to Bear Stearns in 2008, and how is it related to shorting precious metals?

Bear Stearns collapsed in 2008 partly due to their massive short positions in silver. As the price of silver rose unexpectedly, Bear Stearns couldn’t cover their short positions, leading to their financial collapse. This incident highlights the dangers of being overexposed in leveraged positions in commodities like gold and silver.