The contact out of London has updated King World News on the Asian buyers which have been squeezing the shorts in the silver market. The London source stated, “There is an insatiable appetite for physical silver here and the shorts know that, the shorts know they are checkmated. The Asian buyers are layering in bids to take advantage of bear raids in the paper market which have been used to shake out the weak hands.”

November 10, 2010

Asian buyers were able to pick up silver at a discount at the lows of yesterday. They are continuing to buy today and tomorrow. People have to remember that spot trades 24 hours a day, so as the shorts raid the market, physical buyers already have orders in to buy tonnage of silver at a time on that weakness.

As I said to you the other day, the locals which were short with the banks were overrun when the price of silver stabilized just above $25.50 for a few hours. The local traders were margined out and silver moved over $1 higher later that same day.

In other words, the only entities that are left short here are the Fed backed banks. Nobody in their right mind would be short here.

Spot has been trading in front of futures here in London all day. We have been in backwardation all day long on the LBMA.”

How about downside from here?

“They (the banks) wanted to target $25.50. If they are able to do that it will have to be achieved on a sharp, fast move down. The longer you hold the price down, the more physical you are going to give up and the lines will cross against you.

The only way to get the lines to cross in your favor is a sharp move down where you quickly cover into stops from weak-handed longs. They will lose too much physical metal if they try to hold it down at those levels for an extended period of time.

You have to remember, the banks are trading against their own clients, on their own books, and they know where all of the stops are. If they see a large number of stops down there, they may go and grab them like a bandit.

As we close out the LBMA session, the banks are painting the tape lower here in an attempt to make the market look weak. As I said previously, the reality here is that there is an insatiable demand for physical silver. If we don’t get dips any time soon, the Asians will simply start to buy physical silver at higher prices.”

So the Asian buyers are enjoying this weakness in the silver market?

“Of course they are. $30 is just going to be a small pause along the way to much higher prices.”

This is a fascinating battle between the paper and the physical market. This is not a market for the small players, leave the trading to the professionals. If this is the time of the month where you are scheduled to make your monthly purchases of physical gold and silver, go ahead and do that. As James Turk and I have said all along, don’t get cute and try to time the market. Most of the time it will humble you.

Eric King

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