Precious Metals And Financial Blasphemy (Part 1)

August 21, 2016

“...legitimate powers of government reach actions only, & not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should 'make no law respecting an establishment of religion, or prohibiting the free exercise thereof,' thus building a wall of separation between Church & State. Adhering to this expression of the supreme will of the nation in behalf of the rights of conscience, I shall see with sincere satisfaction the progress of those sentiments which tend to restore to man all his natural rights, convinced he has no natural right in opposition to his social duties.”

  •  Thomas Jefferson, Letters of Thomas Jefferson

 "In matters of style, swim with the current; in matters of principle, stand like a rock."

  • Thomas Jefferson 

Physical precious metals investing requires a tough skin and an open mind willing to grasp a much bigger picture. 

It also requires the painful admission that just as the past cannot be reincarnated - no one can predict a future that does not exist with certainty. 

It is a struggle against the religion of fiat finance and the layers of myth, folklore, and idols come and gone. 

And yet, there will forever exist the group of sound money advocates who cannot help go down the road of making price predictions. 

Who can blame them? 

Once the bullish premise underlying precious metals is clearly articulated, it’s only a matter of when for both the speculator or the wealth preserver.  Or the industrial user, in the case of silver. 

It’s the answer most sought after and for someone who genuinely cares about helping others navigate this complicated dilemma, it is painful withhold opinion. 

Of course, many analysts and commentators prey off the requirement to not just “be right and sit tight and act while you can”, but the need to feel right as well. 

Sadly, this makes easy pickings for the mainstream “dollar bug” and/or the “manipulation-denier”. 

Below are a few examples of how the dollar loving techno-bull fantasizes that he or she can ‘make a killing’ in the paper driven markets, while handing the bugs their “worn out” arguments on a silver platter. 

The “paper bug’s” view of the precious metals world: 

“The gold market is no more manipulated than any other, has pretty much always been the way it is now, and nobody is forcing you to invest in precious metals rather than any other asset…” 

True, just about everything is meddled with and fixed - but the precious metals only more so. 

And what it is really saying is that precious metals are not also very much monetary assets. 

They will say, “Oh yes! But anything can be a monetary asset.” 

Yes. Some things serve as monetary assets better than others and depending on the circumstances – like the precious metals and their centuries-long track record. 

“There is no structural shortage of gold – and especially not of silver; the vaults are not “empty” as COMEX inventories, GLD and other inventories have held up and, in some instances, increased over the past. 

There is no apparent prospect of a COMEX default (and there is eligible metal available for delivery in abundance), there is no 100:1 leverage in paper gold, and there is neither any reason why nor any prospect that the gold: silver ratio should collapse down into the teens. Such are simply myths which are regurgitated by the ill-informed and the willfully misleading.” 

The silver commercial net short position held by the 8 largest traders is the equivalent of more than half a year of combined world annual production - north of 220 days. 

The big commercial banks have expended the equivalent of 400 million ounces of silver opposing each step of the early 2016 price rally. 

These derivatives are staggering and could never be delivered or settled.

The frantic movement of silver in to and out from the COMEX-approved warehouse system over the last 4-5 years (first noted by Ted Butler) has been unprecedented on a weekly and often daily basis. This is perhaps the only way of gauging true flow of metal fulfilling promises behind the scenes.  

The scramble to source metal in a situation where a few would stand for delivery, refusing to take paper in lieu of metal would cause the market to go no bid. 

Eligible is not metal just sitting, un-owned and therefore ready to be mobilized on a whim. 

As for the gold:silver ratio, there is a kernel of truth raised in the objection. 

It isn’t so much that the ratio should conform to historical patterns or parallel mining production or demand character. 

It’s more about where we would be if price formation had not been dominated by a futures market that long-ago morphed from its humble origins as a true exchange to an unregulated house of pure speculators dominated by the banking powers that be. 

Myth functions as a concession to sometimes painful or confusing realties. The fact that we speak of value in terms of a forced legal tender and fiat is one such concession.  

Courtesy of

Spanish Conquistadores invaded the Inca Empire in 1528 to steal their silver and gold.