By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
On July 31, Numismaster.com published my article where I passed along information that the investigation into the LIBOR interest rate manipulation scandal in Great Britain would soon expand. Further, I anticipated that this scandal would lead to other investigations that would possibly cover the activities of JPMorgan Chase and its alleged suppression of silver prices.
Now, three weeks later, the LIBOR investigation has expanded from one to 16 banks in the US, UK, and the rest of Europe. JPMorgan Chase is one of the banks on the list.
The price of silver ended at $27.90 in US markets on July 31. As I write this about noon on Tuesday, the price of silver was up about 5% since then, well over $29.00. Over the same time period, the price of gold is up about 2%, only the third time its price has exceeded $1,630 on the London PM fix in the past 11 weeks.
For the month of August through the 20th, the price of silver has reached $28.00 exactly 38 times, only to be knocked down each time, until yesterday. Today it jumped further to break through $29.00. Although precious metals prices don’t move in a straight line, we may now be experiencing the exposure of the huge physical shortages in the silver market. When these become headline news, prices will take off.
The strength of gold and silver thus far this week has largely been prompted by higher expectations that the European Central Bank will begin aggressively purchasing European bonds as part of their bailout program. Such a program would be explicit inflation of the money supply. Or, stated another way, the ECB will choose to deliberately devalue the Euro, dragging other currencies down with it.
ECB officials are trying to deny that any such decisions have yet been made for a bond-buying program. But the truth is that the basic decision to do so has already been made. Now it’s only a matter of working out the details before making the decision public.
The actions of the ECB are not occurring in a vacuum. Investors large and small are reacting. For instance, in recent filings with the Securities and Exchange Commission, it is documented that billionaire George Soros has sold off almost all of his investments in financial firms such as banks and brokerages, and that he has used about $130 million of the proceeds to purchase gold. Billionaire hedge fund operator John Paulson, who earned about $20 billion with his investments in the 2008 financial crisis, has substantially increased the amount of gold investments by his hedge fund to 44% of the value of all assets in the fund.
If the price of silver can surpass $30.00 and hold there at least 3 days, it will likely continue a quick rise, dragging gold along with it. Even if it doesn’t happen in the next few weeks, I expect it to happen sooner rather than later.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.