The Silver Market: An 'Operation', Not A Liquidation
Recent, previous commentaries ( http://www.gold-eagle.com/editorials_12/nielson041813.html ) have focused on the massive liquidation in the paper-gold market; as large investors (in large numbers) have fled that paper in favor of real metal. It has now been established that this flight out of the paper-gold market was in response to the Cyprus Steal – and at least to some extent has been a choreographed event.
Naturally this had led to a question from readers: what about the silver market? Indeed, while the silver market has also seen the price for paper-silver plunge; there has been no corresponding liquidation of paper-silver. So what is going on here?
Regular readers have already supplied their own answer to this question, in their mail and in their comments on our Forum: yet another “manipulation operation” in the silver market. When any market exhibits some violent move in prices for no reason; we are justified in suspecting manipulation. When any market exhibits violent price-moves for no reason on a regular basis; we are justified in concluding that manipulation is taking place.
Such has been the case in the silver market not simply for years but for decades. The primary whistle-blower in the precious metals sector has been GATA; the Gold Anti-Trust Action Committee. However, despite its original focus on the gold market it has spent increasing time/energy focusing on the silver market – drawn by the especially blatant/egregious evidence present there.
What the chart above illustrates is not a recent phenomenon, or a temporary aberration. It is a permanent, heavy-handed club; being used by the same handful of bullion-banks to perpetually beat-down the silver market.
In both its size and its concentration; it represents a significantly more extreme position in the market than that of the Hunt Brothers – when they were convicted (in 1980) of manipulating the silver market. By itself, it is conclusive evidence of silver manipulation.
Those readers interested in a more detailed, long-term examination of silver-manipulation can refer to an older commentary: Fifty Years Of Suppressing Silver. And for those readers interested in even more historical insights into the silver market there is The Silver Steales; a detailed chronology of the silver market by Charles Savoie.
Returning to the present, we have a silver market which was already severely depressed (http://www.gold-eagle.com/editorials_12/nielson111512.html ), where inventories had already suffered long-term decimation, and where demand remains robust; suddenly plunging lower for absolutely no reason. Defenders of market-manipulation will suggest this was a “sympathetic reaction” to the gold market…except it wasn’t.
Unlike the gold market; there has been no paper-liquidation in the silver market. In fact, while holdings of paper-gold have been plummeting, holdings of paper-silver have been steadily rising. You can’t have a “sympathetic reaction” occurring between markets with opposite dynamics.
So with holdings of paper-silver rising, with demand for physical silver remaining solid, and with there being no “sympathetic reaction” with the gold market; we have the silver market plunging lower for absolutely no reason. Manipulation.
However, the bullion-banks who operate this silver-manipulation scheme are nothing if not obvious. For those readers still skeptical of the notion of market-manipulation – despite all of the financial corruption all around us – the banksters have (as usual) “left their fingerprints” at the scene of the crime.
At Kitco Metals, inquiring minds can see a series of charts like the one below, corresponding with each of the different time periods in the silver “leasing” market:
Much like the recent margin-hike by the CME group telegraphed a deliberate intention to push bullion prices lower; negative lease rates are a virtual signed-confession. Not only does paying traders to borrow silver (and short it onto the market) lead to the market being temporarily/briefly flooded with silver; but the negative lease-rates themselves have become like a “clarion call” to these predators that another bankster operation is underway in the silver market.
What must be at least quickly noted is the strange aberration in the chart above: the very brief and seemingly inexplicable “spike” where lease rates momentarily inched back into positive territory.
One can only engage in conjecture here. However, given that the spike occurred at precisely the same time that precious metals markets began their (staged) “crash”; there is a theory consistent with all these facts. Despite the bullion-banks trying to pay traders to short silver for them (with their negative lease-rates); there were so many “shorts” lining-up at that time that massive demand drove rates back into positive territory in spite of the banksters’ intentions.
We know this could only be massive demand to short silver because of the price action: if these traders had all (or mostly) been leasing silver to go long; prices would have inevitably risen rather than fallen.
Readers need to understand that commentaries of this nature are not intended to frighten them away from the silver market; indeed, they should hopefully have precisely the opposite effect. We have a commodity which is highly coveted by both investors and industrial users, where obvious evidence of price-suppression means we can buy this asset at wonderful “sale” prices.
But what about the manipulation, ask cautious investors? My response to that concern has always been the same: low prices lead to high prices. In the 1990’s; ruthless price-suppression in the silver market drove prices to a 600-year low (in real dollars) – below $4/oz. What did that lead to?
First it led to the extermination of nearly all the world’s silver miners, decimating supply. Simultaneously, the artificially low price for silver led to an explosion in industrial demand – in hundreds of new applications. The simultaneous effect of those two changes was to cause silver inventories to plummet by 90% between 1990 and 2005.
And where did that lead us? To $49/oz in 2011. More specifically, it was the major “operation” in the silver market during the Crash of ’08 – where silver was momentarily tugged below $10/oz near the end of 2008 – which led to the short-term peak of $49/oz in the spring of 2011.
We see a similar, if not identical picture today. What was/is necessary to take the price of silver above $100/oz (to something approaching a current “fair-market value”)? Dragging the price all the way back down close to $20/oz. Low prices lead to high prices.
Naturally, this ties in with a piece of “good advice” which investors heeded, once upon a time: buy low, sell high. The time for investors to be buying silver is not when prices are soaring higher in yet another meteoric rise. The time to buy is after or even during another bankster Operation in the silver market.
Yes, (as with anything) investors must address the fact that prices could still go lower first. This is why investors (unlike gamblers) do not use margin/leverage in their financial management. However, if prices do go even lower in the short term; supply and demand tells us this means even higher prices in the not-too-distant future.
Buy low and sell high. Ironically, the serial-manipulation of the silver market actually makes this philosophy especially easy to practice for investors. When we see (via prices) that silver is obviously “on sale”, and we see (via bankster behavior) that these are obviously artificial prices; investors then have their cue to buy.
Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.