Price And The Fool’s Game

January 12, 2015

The reason why a mirror only switches your image left to right and not also up and down is an elusive property of optics. Optically, the image appears as if you somehow walked around to the back of the mirror to face it again. 

But rarely do we ask ourselves questions like these. Normally we just take it for granted. 

To understand price in today’s world is, ultimately, about understanding price mechanism. 

At the heart of all price discovery is the true darkness where few dare to gaze. The amount of light necessary to reveal that truth seems physically impossible. Yet it is nothing close to a physical reality. It is purely an irrational fantasy backed by faith, hope, and fear. 

No one knows what the paper price of silver will be tomorrow; making a prediction is a fool’s game which illustrates that something is undervalued in the context of what is true is the potential energy of this market going parabolic.

It can happen any moment. What would be a likely trigger? There are many, but what if the big investment banks decide the time is right to remove themselves from their concentrated selling position? If they publicly announce the departure of the so-called market maker – removing themselves as a way de-risking or future damage control?

Or, they decide to rig the market in their favor. And they let silver ride up close to its inflation adjusted – its monetary adjusted high. 

There is plenty of room to run. Plenty of justification in retrospect. Plenty of reasons waiting to be paraded. 

What is the incentive for keeping the cost of silver artificially low?

1. Profit. If you owned the majority of shares in any company. 

That position – which is illegal of course – would enable you to move the price in any direction you wanted. 

The majority ‘share holders’ of COMEX silver futures dictate the direction of prices by using their large position to influence the behavior (positioning) of technical trading managed money funds. 

They induce selling, and buy back or cover short positions at a profit. 

2. Silver has both commodity and investment demand. Investment demand is less predictable and too close to ‘monetary’ demand to ‘let it’ trade freely or have it reflect actual physical supply and demand. 

And so much fuss. Silver is a tiny market. Wall Street could dictate the perception of the rise in price the entire way.

Public participation is unnecessary. In fact, if and when the price begins its return to reality, the public will face a ‘no bid’ market. 

What happens when the price goes no bid?

As you know, paper markets for gold and silver (which currently determine price) are massively leveraged. 

The estimates of the amount of paper against the available physical inventory range from 40 to more than 100x’s.

If a tiny percentage of futures traders “stood” for delivery – then the market would stop as actual deliveries could not be made. This creates a “no-bid” price environment, where the physical price would skyrocket.

Ultimately, this is a paper derivative system for the banks and by the banks. 

Any way you frame it. Every way that could be imagined — this is baked in the cake.

Consider the obviously bullish macro issues visible – accessible to all.  Add to that the years and years of price control.

Remember the big short, and there you have the ‘coiled spring’ — the beach ball held under water.

Can they keep this up forever? Can they smother the price indefinitely?

Of course not.

It’s a long term play (of course it’s a fragile set up) – accidents happen – so there is always the fear of missing out on what was clearly articulated and understood. 


Courtesy of

Peru became the world’s largest producer of silver in 2012.