My April 13 article discussed Gene Arensberg’s theory that a short squeeze was developing in silver. The article further disclosed Arensberg’s evidence. With silver down sixty-five cents (as this is written) from yesterday’s New York COMEX close, one has to ask how a silver short squeeze is developing.

On a day-to-day basis, a short squeeze cannot be proved or disproved, just as one day of falling prices is not evidence of a bear market. Arensberg bases his position on ongoing developments: shrinking silver inventories in COMEX-approved warehouses, reduced large commercial traders’ short positions in silver futures contracts, and a flattening of the contango.

Following developments such as a potential short squeeze can be exciting, but CMI Gold & Silver Inc. clients need to remember their reasons for buying silver (and gold). Most probably, those reasons do not include the buying silver because of someone speculating about the potential development of a short squeeze. (Still, a short squeeze in silver, if one is developing, would be rewarding to silver investors.)

The primary reasons for buying silver and gold are the exploding federal budget deficit, the ever-increasing national debt, the crippling trade deficit and expectations of massive price inflation because of the massive monetary inflation associated with the exploding federal budget deficit. These four problems may be the Four Horsemen of the Apocalypse, but we still have the fact that many states and cites are bankrupt. And, let’s not forget the fragile condition of the world’s banks and the world’s monetary system.

There are lots of valid reasons for buying silver, other than the developing short squeeze in silver, but following the developments around any short squeeze certainly makes for an interesting and sometimes exciting silver market. Here is a link to the April 13 article: Silver squeeze developing? Here is still more information about investing in silver.

“I fear this means there is mischief afoot,” Sherlock Homes would say to his associate, Doctor Watson. And, off they would go to bring criminals to justice. Where is Sherlock when we really need him?

The Group of 20 (G20 in today’s parlance) is meeting in London to seek solutions to problems with the world’s financial system. Because the attendees are acting under the government umbrellas, anything the do will be “official.” Therefore, I suspect official mischief is afoot in London. Additionally, anything the Group proposes will receive wide publicity.

Undoubtedly, some choice programs will be proposed to “address the world’s financial and economic problems.” Insomuch as there has been talk of a “new world currency,” or a “single currency,” ideas coming from the meeting should be of interest to all gold/silver investors.

It is likely that the dollar will officially be reduced in standing in the world’s monetary system. However, the dollar will remain a major part of the system simply because it is the world’s most widely used currency. Further, the U.S. economy remains one of the world’s largest, and that cannot be dismissed. Still, the dollar remains on a slippery slope to a reduced standing in the world’s monetary system. The value of the dollar relative to other currencies, and gold and silver, can be expected to continue to fall.

Of specific concern to gold and silver investors will be the advancement of the idea of selling IMF gold to fund IMF programs. I’ve posted an article titled Will G20 actions exacerbate problems? in CMIGS’ article section. The article notes that gold investors faced IMF sales in the 1970s and gold afterwards climbed to $850, a high that stood for twenty-eight years. IMF sales are not to be feared, although announcements of IMF sales may cause some downside movement in the price of gold.

I also suspect that other actions as a result of the London G20 meeting will make things worse economically. See the article for my reasoning.