The Takedown, part 3?

10:55 pm (Hawaii) Just when things looked so promising for Spot Silver, we have this. It looks like yet another takedown by the puppet masters. Just as the price hit 38.75, it got mauled down to 37.57. Looks like there was some fighting by bulls along the way, but when it's this one-sided, there can be only one reason. Price is now lower than it was when afterhours trading ended stateside earlier today (Wednesday).

Just another 30 minutes or so before Hong Kong closes shop. London and Globex took Spot Silver higher the past two days overnight. But it hadn't been knocked senseless like this in those instances. Could the CME really announce another margin hike requirement in the morning? I can't say I would be shocked. But with all the brouhaha in London over JP Morgan and manipulation of price in the LME, any puppetry (paper silver manipulation, lies about physical silver in the Comex vaults, etc.) would be at least a bit surprising.

Update 11:03 pm (Hawaii) Holy crap it just got worse. Back to vertical crashes by the CME Mafia. Guess I should've taken my silver play profits when I had the chance. Nothing I can do here but watch a dvr, read a book and go to sleep. They can't keep silver down forever and they know it. I'll be patient.

Update 11:08 pm (Hawaii) Gold getting beaten down, as well. The earlier margin hike abuses (five hikes in nine days) scared off plenty of speculators. Then Spot Silver moved from 32.20 to 39+ before dropping again. What happens this time? If buyers can't push Spot Silver back up, will the price just melt and dissolve back to the low 30s? Or worse? 

I could've avoided the risk by cashing out earlier, or by learning how to buy puts. But it's too late now. If the price keeps getting brutalized when peon premarket trading starts in less than 3 hours, I'll get some ZSL and hedge myself for the bumpy ride. It's a good thing I'm 60% cash. If they take it below 35, below 33, even below 30, I'm ready for more physical. 

Update 11:24 pm (Hawaii) Spot Silver finally bounces a tiny bit. Gotta hand it to the CME. If they really felt like it, they could take it to 30 overnight. That would probably be too obvious and blatant, even by their standards. They could be doing this to 1) ease buying pressure, 2) create better physical buying opportunities for its vault, 3) counter China's new gold futures instrument in Hong Kong, 4) send a message to China regarding its coming silver futures instrument. 

FX Street: USD weakens on prospects of China buying EU bonds (May 26 2011)

Path of least resistance

5:34 am (Hawaii) The indices have been rather quiet, but PMs are reaching higher. Spot Gold was constant around 1522-1527 overnight and is now above 1530. Spot Silver has inched over 37.50. With each little grab higher, a little more fear leaves the PM market. As Turd Ferguson wrote yesterday, there's not a whole lot of resistance for Spot Silver between 36.50 and 39, so holding this territory is vital for bulls. All the litigious action in London regarding JP Morgan and other entities over monopolization clearly has an effect on what used to be typical counter measures by the CME. A little part of me wouldn't be shocked if grenades start falling and an attempt to drive Spot Silver down happens. We shall see.

I opened a small position in AGQ at 195 this morning. Still holding positions in EXK (up 5.6%) and XG, which is stuck in the mud at 10.43, down almost 3% from my entry point two days ago. Eventually, buyers will return to XG, no idea when. I'm more than 60% in cash.

With that, AGQ just cracked 200 and EXK is closing in on 9.90. The biggest gainer on my Metals list is GPL (+7.8%).

Brits say 'Bollocks!" to shysters

12:15 pm (Hawaii) Via SilverGoldSilver.com via Zero Hedge, a story from Reuters points to this as maybe the biggest reason why PMs were up today.

Zero Hedge: Inquiry into monopolistic trading practices by JP Morgan on LME launched (May 24 2011)

Financial Post/Reuters: LME needs to get tough on warehouses (May 24 2011)

Reuters: Lawmakers alert watchdog on LME warehousers (May 24 2011)

This from Zero Hedge:

And another big oops for Blythe Masters who apparently has decided to move now officially investigated market manipulation practices to London and away from the CFTC. In the meantime, silver Comex holdings continue to decline and at last check, are flirting with the record low 100 million ounce level. Once can only imagine (literally) what is concurrently happening at the LME and/or LBMA. 

Bada bing

11:27 am (Hawaii) Bullish for gold? Fast Money reporting via Doug Kass that someone bought 50,000 gold call options between $1600 and $1800/oz (out of the money). They will expire in August-Sept, a total of $50 million in call premium paid — whatever that means. Kass says given the size of the purchase, it's likely a central bank or sovereign fund. Is this positioning for QE3?

Brian Kelly thinks it's China swinging for a home run, a win-win plus delivery of physical gold. Terranova thinks it's a good trade. Adami isn't sure central banks are allowed to buy calls. "If they're right, they'll make 10 times that."

What they say is always interesting, but doesn't affect my trades. They won't talk about Endeavour Silver or Extorre Gold Mines. Not today.