Silver’s D-Day has arrived
So here we are, 27th February, the day when the March futures contract is active and available for delivery.
Less than 90 million ounces in the Comex vaults and vastly more standing for March delivery, so what a coincidence - exactly as happened in November when at this exact time there was an ‘outage’ which suspended trading. Last time it was the air conditioning, this time ‘technical issues’, but the timing was no coincidence. Insiders believe that a bank or banks caught short and an exchange in danger of default were forced to attempt an unwinding of positions while the market was supposedly closed for business and at prices and in a form that cannot be ascertained.
The key question is why the regulator that had previously fined JP Morgan $920 million and jailed their trader for market manipulation, is now turning a blind eye to such obvious price manipulations. Perhaps because these activities are preventing the implosion of the western paper metals markets.
Price discovery is moving away from western markets, eastward towards Shanghai where the silver price is significantly higher in the absence of futures manipulation. It was interesting to see mining shares moving higher yesterday while the Comex metal prices fell. Apparently, miners have started to bypass these markets and are selling direct to consumers because trust in western commodity markets is evaporating. Indian investment funds have announced that from 1st April, gold and silver units will be priced off domestic rather than prices set in London - another signal and of the end of western metals trading and pricing leadership.
Although we should expect continued price volatility, in my view, the direction of travel appears obvious. If physical demand continues to exceed supply there is only one outcome, so we are hanging on to our metal investments!
About the author
Jo Welman had a career in the City spanning 45 years and worked in a wide variety of financial sectors. After graduating from Exeter University in 1979 with a degree in economics, Jo spent ten years at Baring Asset Management where he managed a range of UK and US pension funds and unit trusts, investing across multiple sectors including bonds, international equities, commercial and residential property and private equity.
In 1989 Jo became Managing Director of merchant bank Rea Brothers’ institutional and private wealth investment management division. Over the following decade Jo launched a series of specialist investment trusts and funds in a variety of industry and property sectors, before forming a joint venture with reinsurance broker Benfields (now Aon Benfield) and raising one of the first limited liability corporate capital vehicles for the Lloyds insurance market in 1993. As part of his long-standing involvement in the insurance industry, Jo co-founded the Benfield Re-Insurance Investment Trust plc (Brit) in 1995. Following the sale of Rea to Close Brothers in 1999 Jo became Chairman of Brit Insurance Holdings Plc and in 2001, in partnership with Brit and Benfields, he co- founded specialist asset management firm, EPIC Investment Partners (EPIC).
Jo continues to provide corporate finance and investment advice to entrepreneurs and private investors. He sits on the board as a non- executive director of ARK Syndicate Underwriting
“Feet up by the pool”
Jo does not receive any remuneration for his EPIC commentary. Instead, EPIC is pleased to promote the latest edition of his book “Feet up by the pool”.
Profits from sales of the book go to The Money Charity, a charity that shares Jo’s objective to help fill in some of the worrying gaps in the school curriculum. These omissions leave many young adults lacking in the financial awareness that they need to survive in a world where they will rely on their own savings if they are ever to stop working. Even if they earn the right to a full State Pension, today this amount hardly covers council tax and utility bills, and so they need to save and build up a sum of capital amounting to around twenty times their desired retirement income. A frightening number.
As Jo eloquently says, “If we can do our bit to raise awareness of the impending UK saving and pensions crisis, the exercise will have been worthwhile.”