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It is becoming a commodity driven world. The future of nations will depend on their abilities to discover and sell commodities. The most precious commodities will be water and food. Everyone thinks that oil is the most precious commodity, but man will discover that it is not necessary for transportation in the future. The next 10 years will bring a revolution in transportation that will leave oil behind. Oil will still be needed for lubrication purposes, and for industrial products that are petroleum based. The age of the gasoline-powered engine will soon come to an end. Man will have several choices of engines that run on different commodities. Some will run on electricity, others on water, others on hydrogen. Transportation will change the demand for oil dramatically. As far as investing in commodities, you should be careful to only invest in the actual commodity. We have warned you before about the next bubble being commodity trading. You should be particularly aware of the scams that will revolve around gold and silver. The possibility for scams came about when the ETF’s were created. The ETF’s for gold and silver especially were originally created with the bullion as the physical backing commodity.
In order to offer or sponsor the ETF, the sponsor had to have the physical commodity under their control. While the amounts of bullion or silver that back the ETF’s has supposedly been accounted for, one thing that wasn’t taken into account was the predominance of short sellers. The commodities market originally worked like this. One person had silver to sell and another person bought it. This is not always the case with ETF’s. A short seller can sell you something he doesn’t own, nor is there that amount of silver in existence to be sold. The short seller only hopes to sell something that doesn’t exist and then buy it back for less and the process becomes the transaction. If the seller had to actually possess the silver, then this would be a different scenario. The fact that short sellers can sell silver that may or may not exist means that the price of silver can be artificially held down. You may think that this is just the market and market dynamics. However, this short position issue came about when the ETF sponsors couldn’t get enough silver fast enough to back the sales. It may be the sponsors of the ETF’s themselves who are selling short in order to lengthen the time they have to acquire silver. If all the silver contracts were made to produce the actual commodity tomorrow, many buyers who purchased from short sellers would be holding worthless pieces of paper.
QUESTION: How far along are we in the phase where short sellers are able to keep down the price of gold and silver?
ANSWER: It’s hard to say since short sellers can sell as much as they want. The problem comes when the buyer wants to take delivery.
QUESTION: What would cause the buyer to want to do that?
ANSWER: The buyer may not want to take delivery of the actual metal, but he could demand an accounting that included the serial numbers of the bars he owns.
QUESTION: If an event occurs where all holders of the silver ETF’s demand an accounting and it is discovered they are holding worthless pieces of paper, what will that do to the price of the commodity silver and the silver mining equities?
ANSWER: The sponsor of the ETF would have to make the situation right, either by securing more of the commodity at any price, or paying off the holder of the shares. The price could no longer be held down. The price would skyrocket. The mining companies would have all of their inventory sold in a few days.
QUESTION: What would cause the buyer to demand an accounting of the bars he owns?
ANSWER: Enough bad press about ETF’s that don’t have the backing of the commodity.
QUESTION: How safe are the major gold and silver mining stocks?
ANSWER: Companies that produce the gold and silver are good investments and not as volatile as ETF’s since they actually produce something.
QUESTION: Based on recent events in the market, what is the possibility of a market crash in the next few weeks or months?
ANSWER: (NEWS proof) You will see a small rally going into July that will fizzle out by mid-month, and then it will be followed by three months of bad market news.