Saturday, January 21, 2012

Silver moves well over $1 on Friday due to QE3 expectations and Sprott PSLV

Silver had a wonderful day on Friday, sparking a 5% move to close at $32.30.  Along with silver, gold, Platinum, other metals and the Dow all increased by the end of trading.

What were the catalysts for these moves?  It may have been a two-fold action.  First, the dollar was in decline throughout the day, and the Euro has recovered around 300 bps since its 126 lows earlier in the week.  This could very well signify that the markets are factoring in QE3 by the FED, and the rumored $1 trillion in quantitative easing.  Secondly, and particularly for silver, buying may be in play by Eric Sprott for his PSLV etf, in which he guarantees all contracts will be backed by physical silver, as opposed to the JP Morgan manipulated SLV and GLD on the American exchanges.

Here is the kicker as well... if $300 million purchased in silver can lead to a 5% increase, how much could a $3 billion or more move cause the price to climb?

"Today’s incredible move was the culmination of a comment made by UBS analyst Edel Tully. He stated that hedge fund manager Eric Sprott may be in the market buying spot futures in a private letter to his clients." And even as the premium dropped, the price of spot silver increased by over 5%, on the speculation of silver being taken out of the market and delivered to Sprott.

So to summarize: speculation that $300 million in physical silver may be taken out of circulation raises the price of the underlying by 5%. Does that mean that a $3 billion follow on would result in a 50% rise in spot; $30 billion in 500%, and so on? - Zerohedge


Post a Comment