Letter to the editor: Paper pressure keeping gold, silver down

In 1980 the physicals led paper gold and silver higher. Now 33 years later, the paper is leading the spiraling physicals lower.
It was January 1980 when silver touched US$50 an oz. and was hovering in the US$40s. Henry Jarecki was the head of the silver exchange on the Comex, and he was also the CEO of Mocatta Metals, which was thought to be over 50 million oz. silver short and staring at bankruptcy.

Jarecki was desperate and did the unbelievable: he ordered the Comex to accept no “buy” orders and only to “sell” silver contracts. Silver dropped like a rock — I was astounded, and the Hunt brothers were wiped out.

Here it is 33 years later: paper gold is driving the metals lower while the physicals are in tight supply. Hundreds of tonnes of gold are being bought on the cheap while a record number of gold contracts are sold short along with millions of shares of the gold ETFs.

To make money, these financial institutions will have to cover their shorts and if they’re short the contracts, they will eventually have to make delivery.

The downward drift will eventually stall, and I can envision an eventual stampede to cover these shorts.
Incidentally, a contrary signal was given with the Wall Street bull on the cover of The Economist.

Donald M. Werner, M.D.
Binghamton, NY