Silverfinger - How Nelson Bunker Hunt tried to corner the #Silver market

Silverfinger

By HARRY HURT III September Issue 1980 Playboy

IN THE SUMMER of 1979, an invisible hand reached out from an island in the Atlantic and quietly began tightening its grip on the world's supply of silver. The fingers of that hand extended to London, New York, Dallas, Zurich and Jidda. But the only visible clue to its existence was a newly formed Bermuda shell corporation called International Metals Investment Company Ltd. That dull sounding little trading company was not just another offshore tax scam but the operating front for a secret partnership seemingly capable of controlling the world price and supply of silver.

Appropriately enough, two of the principals in that cosmic alliance were Saudi Arabian businessmen with connections to the Saudi royal family. But another principal, the real genius behind the deal, was an American oil billionaire, the head of a clan sometimes referred to as "the royal family of Texas." Though not quite as rich as the Saudi royalty, this man was one of the few private individuals in the world capable of playing in the same league. A lover of intrigue, in the past he had made international headlines with his mysterious wheeling and dealing. Before long, he would again blaze across the front pages. But for the time being, he remained in the shadows, operating behind the corporate veil of International Metals. His name: Nelson Bunker Hunt. 

Gold under Fed Chairman

 
How Gold Rallied Under The Last 4 Fed Chairmen

Gold under Fed Chairman

Has the (Anti-) #Gold Rush Begun?

Options investors are betting they can profit from falling gold prices with bearish puts

Has the (Anti-) Gold Rush Begun?

By STEVEN M. SEARS |TUESDAY, FEBRUARY 19, 2013

Barrons

Options investors are betting they can profit from falling gold prices with bearish puts.

Gold bugs beware.

Investors are assiduously positioning deep in the options market for gold to edge lower even after last week's decline of almost 4%.

Investors are buying bearish puts and selling upside calls as the SPDR Gold Trust pauses after last week's sell off.

With the SPDR Gold Trust (ticker: GLD) at $155, investors are amassing positions that would increase in value if the exchange-traded fund dipped as low as $151 during the next three weeks.

A four-point decline is admittedly not apocalyptic, but it reveals shifting sentiment on an asset that has sustained legions of people since the credit crisis weakened trust in the integrity of the world's financial markets and systems.

The typical trade in recent years has been to buy the gold ETF as well as coins, while using options to buy more gold should the price decline, or to speculate that gold's price will keep rising.

Now investors are playing defense, betting on gold's decline. Options that expire on March 1 and March 15 are attracting most of the action. Particularly active: Puts that increase in value if the fund drops below $151 or $152. So are $157 calls that appear to have been sold in anticipation the fund's price remains under pressure.

Trading volumes are not large enough to make a definitive statement, but they are significant enough to telegraph a message of caution. Some trades total 1,000 contracts, which equals 100,000 shares of the gold ETF.

A look at gold's one- and six-month chart shows prices in an unmistakable decline. The SPDR Gold Trust is down 5% in the past month, compared with a 2.5% total return gain for the Standard & Poor's 500 Index.

Investors who want to speculate on gold's demise, or hedge their own gold investments, can consider the March $151 puts that expire March 15. The puts recently traded at 86 cents. The expiration was chosen on the assumption that some investors may soon panic out of gold if the price continues to decline. If that happens, the value of the puts will increase in value. If the SPDR Gold Trust falls to $148, taking out the 52-week low of $148.53, the March $151 puts would be $3.

The put's return profile is attractive, but do not be blinded by the potential profit. The trade is based on crowd sentiment and a review of recent fund performance. Those are legitimate reasons to initiate a position, but such trades are animal spirits trades. You are banking the crowd panics and hits the eject button. This is a lot different than trading off fundamentals or events, so babysit the long puts and take profits when you can, lest the crowd suddenly zigs rather than zags.

Steven Sears is the author of The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails.