these are small parts of a long article by gene arensberg in resource investor:

The resultant disorderly crash in spot metals prices is causing significant shortages in physical metal in the U.S. as bargain minded buyers try to capitalize on the artificially low prices. Buyers of physical gold face hefty premiums (the amount dealers charge above the current spot price) if they do try to buy today. At the same time gold scrap supply has dried up to a trickle putting additional pressure on existing gold inventories as we head into the busy season for jewelry.

Premiums for silver have gotten so high that even during this once-in-a-generation panic high-percentage plunge for silver metal there has continued to be more buying than selling pressure in the largest silver ETF, Barclay’s iShares Silver Trust [SLV]. (More about that below).

In contrast to gold, the two U.S. banks that crushed the silver market evidently haven’t seen what they were looking for, because as of September 2, even after silver had been destroyed by $6.00 to $13.44, the miscreant banks had not yet covered or offset very much of their net short positioning. (They may have by now, but the bank participation report inconveniently only comes out once a month.)

Remember that between July 1 and August 5 the two U.S. bank participants in silver hammered the COMEX silver market so viciously that they amassed a net short position of an unprecedented 33,805 COMEX silver futures contracts. It is even unfair to call it a “net short” position, because their long component of the “net” was exactly zero. In other words they were so sure of their actions, so sure they would crush silver, they did not even have a single long contract in silver on August 5.

These two privileged (and probably Fed member) banks were sure because it was apparently their job to break the silver market. And they did break it.

By using the selling pressure of the U.S. Federal government to artificially lower prices on commodities, the Fed has settled for a quick fix – something that will make things look better very short term, but that action will undoubtedly result in harsh long-term consequences.

The disorderly markets we have just witnessed will put strains on producers of all commodities and their production capacity going forward. Before this parlor trick occurred, there was not going to be all that much new supply coming into the system for things like gold, silver, wheat, corn, and oil. Now there will be less supply.

Below $750 many marginal gold mines will be forced to shut down and production will diminish. With each $50 lower in price that reduction of production will escalate.

One of the ironies of investing is that individuals tend to pull their money out of funds in panic at precisely the time they should be adding to those investments.

http://www.resourceinvestor.com/pebb...