Why Silver Went Down - Precious Metals Supply And Demand

London (Mar 14)  Rumor-Mongering vs. Data. The question on the lips of everyone who plans to exchange his metal for dollars - widely thought to be money - is why did silver go down? The price of silver in dollar terms dropped from about 18 bucks to about 17, or about 5 percent.

Reportedly silver was already assassinated in the late 19th century… so last week they must have assassinated its corpse. [PT]

Illustration taken from 'Coin's Financial School'

The facile answer is manipulation. With no need of evidence - indeed with no evidence - one can assert this and not be questioned in the gold and silver communities. We have recently come across a term normally used to describe Leftists and Social Justice Warriors, "virtue signaling."

One piously declares that one supports the cause, one speaks truth to power, one sticks it to The Man, well you get the idea. The concept of virtue signaling seems equally appropriate to those who sing the chorus on every price drop, "manipulation."

Besides, we have peeps in high places in London and New York and Beijing, and they tell us silver is manipulated…

Actually, we rather prefer to look at data than listen to whispers. What would the data show if demand for physical silver metal was robust and rising while someone sold so many futures contracts that the price of the metal was forced down just about a dollar?

The basis and co-basis are spreads between physical silver metal and futures. The scenario we just described would collapse the basis and skyrocket the co-basis.

Is that what happened last week?

Before we get that, we want to note that crude oil fell from $53.33 last week to $48.49, or -9%. Copper fell from $2.70 to $2.60, or -3.7%. Wheat fell from $4.53 to $4.40, or -2.9%. People miscall this deflation.

Source: SeekingAlpha