Surging Silver Sentiment Signals Spiral

June 26, 2013

For obvious reasons; most of the discussion in the precious metals sector over recent months has focused on the gold market. The Great Paper Liquidation which began (secretly) at the end of January before openly manifesting itself in April with sharp price-declines was a liquidation of paper-called-gold.

With many (most?) of those paper-holders simply swapping their paper for real metal, and with lower prices igniting gold demand in China and India; the Great Paper Liquidation quickly morphed into the Great Physical Accumulation. With the phony, paper market being (literally) a hundred times larger than the real gold market; naturally massive, net-selling of this paper would (and did) take down prices.

Then there is the silver market. There was no Great Paper Liquidation with respect to paper-called-silver. In reaction to the (premeditated) Cyprus Steal, the “smart money” dumped their paper-called-gold for real metal. But apparently there is no smart money in the paper-silver market.

Put another way, unlike the gold market there has been no reason at all for the decline in silver prices. The massive drop in the price of silver (which has exceeded the decline in the gold market) has simply been the result of more, naked manipulation. The price of silver fell not because it “should have” fallen (like gold); but simply because the banking cabal could manipulate prices lower.

The Pied Piper trading algorithms which the banksters have used to enslave all markets have resulted in an unprecedented (and obviously fraudulent) level of correlation in our markets. When one commodity market moves in a particular direction; they all move that way. This is an extremely powerful tool for committing market crimes, but (as we shall see later) it’s also a vulnerability.

The banksters have taken down the price of silver with impunity below $20/oz (and been able to take it to such extreme lows) because unlike with the gold market there has been no stampede of physical demand in the silver market. Silver demand has been strong (but not spectacular) in China, moderate (at best) in North America, and nothing short of dismal in the key Indian market.

In short, in the silver market (at the moment) lower prices lead to even lower prices – because of the lack of a strong demand response. For silver bears (and wavering bulls); this would seem to signal that the silver market is entirely at the mercy of the banking cabal, with no dynamics at work to reverse the current grind lower and lower. Not so fast.

We have seen (in unequivocal terms) that lower gold prices do spark an immediate demand-response. In the recent frenzy to accumulate physical bullion; we saw markets all over the world explode with higher demand. Indeed, gold demand in India has soared to such extremes that the Indian government (and the bankers) have taken every step imaginable to attempt to suppress Indian gold imports.

But those same actors have seen no need at all to intervene in India’s silver market. The same Indian bullion-buyers rabidly buying gold because it’s so cheap are (apparently) shunning silver because it is too cheap.  What could alleviate such a conundrum? The banksters’ own market-rigging algorithms.

The mechanics here are simple and inevitable. We know at some point that the scorched-Earth attacks on bullion markets will cause demand for gold to ignite to such an extreme that the price of gold will simply catapult itself through any further attempts at price-suppression.

It is the answer to the question: why is the price of gold not still below $300/oz? Low prices lead to high prices. Destroy supply, ignite demand, deplete inventories; and prices must rise. The “magic number” at which that reversal will occur is unknown/unknowable.

It will either be the result of improved sentiment by the general, retail-buying public; or (more likely) it will be an arbitrary number at which level the Big Buyers have already committed themselves to marching prices back up again. Either way, it is a turning point which cannot be precisely predicted.

How does this affect the Silver Conundrum; where lower prices simply lead to lower prices? Correlation. 

When over-powering supply/demand dynamics drive the price of gold to new, nominal highs (whether the banksters like it or not); their trading algorithms will still be at work in these markets. While Frankenstein mostly serves his master, as all horror-film buffs know; he always ends up running amok now and then.

So it is with the banksters and their abominable trading algorithms. Indeed, this is precisely why (with supposedly “free and open” markets) we now have electronic “circuit-breakers” in operation – to cease trading in our “free and open markets” any/every time the Frankenstein trading algorithms run amok, and cause prices to go to extremes against the wishes of the banking cabal.

When the gold market explodes; it will drag the silver market higher with it, because of those same trading algorithms. And once a rising price of silver causes sentiment to swing from positive to negative; that’s when the fun begins. The key (and obvious example) here is India.

In 2011 as the silver market was spiking to its short-term peak; total silver demand in India spiked along with it – all the way up to over 4,400 tonnes. When the silver market sagged in 2012 following the banksters’ great silver massacre; Indian demand naturally fell with it; declining to a little over 3,200 tonnes in 2012.

Indian silver demand in 2011 was about 40% higher than in 2012. But where the numbers get very interesting is when we look at India’s silver imports:

…While total demand for silver was 3,234 tonne in 2012 as against 4,437 tonne in 2011, import was 1,900 tonne, against 4,087 tonne in 2012.

In other words, when sentiment in the Indian silver market took off, not only did demand spike, but silver imports went absolutely ballistic. When India was consuming 4,400 tonnes of silver in 2011; more than 90% of that silver was imported silver – i.e. coming out of global inventories. Even at short-term highs in price; Indians were hoarding not selling their own silver.

Conversely, when silver sentiment fell in India; not only did demand fall by about 30%, but silver imports plummeted by roughly double that amount. This is where we are at the moment. Sentiment in general, and Indian sentiment in particular is at a trough in the silver market, resulting in sub-par demand.

This is a Contrarian’s dream, since not only are the mechanics of the next rally in the silver market crystal-clear; but we have a near-term precedent to refer to in predicting how the next silver rally will unfold. The gold market will be ignited into the Next Rally by lower prices leading to rabid demand. A rising price of gold will drag the price of silver higher with it – thus igniting sentiment in the silver market.

With the gold/silver price ratio having once again been stretched to an ultra-absurd 65:1, there is plenty of room for silver to greatly outperform gold in the next rally. As informed investors know; the natural occurrence of gold and silver is at approximately a 17:1 ratio, and the historic price-ratio is roughly 15:1.

However, with massive/new/increasing industrial demand for silver having literally consumed most global stockpiles; the global supply of silver hasn’t been so low (relative to gold) for at least 500 years – when large deposits of silver were first discovered in the New World. This means any long-term “top” in the price of silver implies a gold/silver ratio substantially below 15:1.

It may not be possible to state when the Next Rally will begin in the silver market, but it’s much easier to state how it will end: with the price of silver in triple digits – along the way to even greater long-term highs. And (ironically) without the banksters’ Pied Piper algorithms we couldn’t be nearly as certain in writing our own script.

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

Most silver is produced as a byproduct of copper, gold, lead and zinc refining.