And, unfortunately, I'm not talking about my sex life.
The CME has now raised margins on silver three times in the last five days for a cumulative increase of about 35%. I can only draw one conclusion: This unprecedented move, taken in context with the significant reclassification of delivery-eligible silver by several of the major bullion banks 10 days ago, leads me to believe that the silver Comex is/was indeed in grave danger of failing.
Again, I apologize for the brevity. Today is Mrs Ferguson's birthday and I must go prepare dinner and cake. However, I want you to think about this: Why were silver margins raised and why in stages?
Plenty of reasons are passed around for margin hikes. The primary reason, though, is to control overheated speculation which is leading to a dramatic increase in the price of a commodity.
The politicians are all hot and bothered about energy prices but where are the crude margin hikes? Keeping oil prices low is of national economic interest but instead silver gets its margin raised.
Food prices are exploding but where are the margin hikes on corn and wheat? Every American, indeed everyone in the world is impacted by higher food prices, but instead silver gets its margin raised.
Is silver a vital commodity? Are the skyrocketing prices having a detrimental effect on jewelers worldwide? Can the U.S. suddenly not afford its annual quota of cruise missiles?
Ask yourself, why is it suddenly so vital to raise silver margins by 35%? Then ask yourself, why did the CME act in stages? They clearly knew that margin rates were going higher. These hikes were planned well in advance. Why did they not raise margins 35% last Monday and call it a day? I'll tell you why...because they knew that a one-time increase would be quickly shrugged off by silver longs and the hike would have no lasting impact. No, instead, they've chosen to raise in stages, thereby, holding longs at bay for fear of additional hikes at any time.
The CME/EE complex is desperately trying to squash demand for silver. The entire price discovery and delivery process of the Comex is collapsing. These desperate times are calling for desperate measures and you are seeing them play out in real time.
The key now is to be patient. If The Cartel is desperate to save the Comex and smash silver, we should let them. Besides, why would we want to see this magnificent cash cow slaughtered before we could extract every possible fiat penny? I had been expecting a selloff/consolidation from the period of 5/6-5/20. It is clear now that, since the Comex is going to survive May, the selloff began ahead of schedule. Let it play out. Let silver come in a little more over the next 5-7 days. I'll be looking to buy every time silver trades down between 40 and 42. As we move into late May, the market will begin to focus on the July delivery and we will once again roll to new highs, in silver and in our personal accounts.
Here's a four-hour chart that shows you everything you need to know.
In gold, the situation is not nearly as intriguing. I expect further weakness here, too, as lots of buying energy was utilized in the two attempts to surpass 1575. It will consolidate now and even trade down toward 1520-25. I will be buying some August gold calls in this area.
Be patient. The "Death Dance of The Death Star" will begin anew in a few weeks.