Hinde Capital On Why Silver Velocity Will Be The Bullet That Sends The Metal Much Higher

Tyler Durden's picture

By Ben Davis, CEO of Hinde Capital, published for King World News. The latest interview of Ben Davis by Eric King can be found here.

Silver Velocity - The Coming Bullet

"Money can lose its value through excessive abundance, if so much silver is coined as to heighten people’s demand for silver bullion. For in this way the coinage’s estimation vanishes when it cannot buy as much silver as the money itself contains…The solution is to mint no more coinage until it recovers its par value”


Our Hinde Silver Trend model has reached a significant low that usually precedes a dynamic move. This move can be lower or higher but our other technical indicators signal a move higher is the most likely scenario.

Silver Seasonality

Our silver seasonality analysis suggests that the trend will be directionally higher in price.

Silver Volatility

Other than just purchasing silver bullion (in allocated form), speculators could purchase volatility. As one can see from the chart below historical price volatility is at the lowest standard deviation on a rolling 3 month basis that it has been for sometime. Straddle break evens look attractive or likewise out-the-money call premiums look cheap, for those who agree with our directional bias for a move higher.

Silver’s timeless fascination

Mankind’s timeless fascination with silver stretches back millennia. As early as 700 B.C., the Mesopotamian merchants used silver as a form of exchange. Later, many other civilizations also came to recognize the inherent value of silver as a trading metal.

The ancient Greeks minted the drachma, which contained 1/8th ounce of silver; and in Rome, the basic coin was the denarius, weighing 1/7th ounce. And let’s not forget the English shilling "sterling," originally denoting a specific weight of silver, which has come to mean excellence. In fact the words for "silver" and "money" are the same in at least 14 languages.

Silver or money is derived from the Ancient Greek: ργ?ντος - arg?ntos, gen. of ργ?εις - arg?eis, "white, shining" ). The Incas of Peru called it the “tears of the moon” because they were awed by silver’s strange gleam and the Chinese believed that a silver locket hung around a child’s neck would ward off evil spirits.

In recent years silver has grown to be regarded as the poor man’s gold. However we suspect silver will shake off this unfortunate shackle and give gold a “run for its money” as the old idiom goes.

There are key fundamental differences between gold and his poor cousin silver. Demand for gold is almost entirely from those holding for financial safety and protection of purchasing power and likewise from fabrication that preserves it. Gold is rarely if at all consumed. A base metal is the opposite, it is consumed. Like iron for example.

Here silver is unique, industry will consume it, and others will buy for financial gain and protection. Fluctuations in the price of gold primarily arise from changes in demand as annual mine supply is small compared to existing stockpiles; of the same magnitude as the small amount lost or consumed each year. Hence over ground supplies don’t change much.

Silver ounces come and go. Unlike gold silver’s active chemical properties lend it to practical industrial use that see much of it used beyond practical recovery. The uses for silver in modern industry are growing. It is the best conductor of both heat and electricity, the most reflective, and after gold the second most ductile and malleable element. It is used in photography, electrical applications, particularly in conductors, switches, contacts and fuses. Silver alloys are used in batteries as cathodes. As a bactericide, silver is used in water purification and air handling systems. Silver is also a natural biocide and is very effective against bacterial infections such as MRSA. New products using silver’s biocidal qualities are being developed each year; clothing, bandages, toothbrushes, door-knobs (flu-protection), keyboards, the list goes on growing.

Silver is much less rare than gold and as a consequence less effort goes into salvaging and protecting it. Annual mine production and consumption are large compared to existing stock piles, so price fluctuations in theory come from both these factors as well as investment demand.

Silver supply demand imbalance

Uniquely silver has been in a multi-decade imbalance between annual “production” and demand from industrial, jewellery and investment. Ted Butler of Investment Rarities Incorporated has become the most ardent silver analyst and has done extensive research into the issues of dwindling stockpiles. His well documented research extended into the leasing market and the existence of huge short positions on Comex (namely among a few large bullion houses) that have been allegedly used to manipulate the price of silver lower for benefit of the “users”. This supply of paper silver has undoubtedly arrested the rise in the price of physical silver bullion, as there would appear to be a structural imbalance in supply vs demand, which can only be resolved by a much higher increase in price in order to encourage ‘normal’ free market forces of supply and demand to interact.

The world annual silver mine output is approximately 650 million troy ounces (average of last decade), with about another 180 million ounces from recycling, and possibly another 100 million ounces from selling from other sources. Industrial consumption is almost 45%, jewellery consumes about 25%, photography is down to about 15%, leaving 15% for investor demand. Investors buy about 100 to 150 million oz. of silver per year, which is barely $2 billion. Yet the BIS estimates that most all of the worlds' banks have $200 billion in ‘other precious metal’ (i.e. silver) notional value worth of derivatives on the books. This seems somewhat incongruous with the lack of supply. It tends to point to a potentially more sinister occurrence. http://www.bis.org/statistics/otcder/dt21c22a.pdf

In July to November 2008 silver net US bank shorts rose from 9% to 99% of the Comex commercial net short positions in one shot. Equal to some 27,000 contracts or 30mm tr.oz of silver sold, just prior to a 50% plus collapse in the silver futures price. The issue we and others in the market have with this egregious positioning is that it was concentrated between two commercial banks. Flip such a position around to the long side and regulators would be screaming ‘blue murder’ and accusations of market manipulation and market ‘cornering’ would be rife. Remember Bunker Hunt.

Two Banks Net Short as % of Commercial Net Short and Silver Futures Price
(observe July 2008 “Commodity Massacre” short activity)

The two commercial banks held 140% of annual mine supply in OTC positions. These two bullion banks dominate the OTC silver market. They range in concentration from 85% to 100% at any one time.

HSBC and JPMorgan % Silver Derivatives (inferred) (average maturity less than 1 yr)

Unwinds of these positions would require more silver than is readily available and will lead to much higher prices as sellers are sought.

The manipulation of this small market has led to low prices whilst a structural imbalance of some note has been growing.

What’s unique to silver is that it has been in a deficit consumption pattern for more than sixty years, with very low prices over most of that time. That would be impossible for any commodity, except that it has actually occurred in silver. But the very reason it has occurred in silver is the reason I think silver is the best thing to own”.

Theodore Butler, Investment Rarities , first mentioned in 1998

The laws of supply and demand dictate that when there is a chronic production shortfall, inventory can only be bid away at higher, not lower prices. Ted argues that most of the inventories consumed over the last 60 years came from government holdings. This amounted to a stupendous 6 to 10 billion ounces, some 100-150 million ounces of silver each year for 60 years. So lets put this in perspective it took 5000 years to accumulative these stockpiles and in sixty, they have gone. Above ground silver is rarer than gold….

As Ted Butler describes it, to look ahead 50 years, it would be appropriate to look back fifty years to gain a sense of perspective. Half a century ago, at the end of World War II, total known stocks of silver amounted to ten billion ounces (with the US government holding 4 billion ounces of that total amount). At that time, we were just entering an era of unprecedented global economic expansion that has lasted to the present. In this era, silver was consumed in a variety of vital modern applications at a phenomenal rate. Today, known stocks of silver have shrunk over 95%, to maybe a half a billion ounces. The nine and a half billion ounce drawdown in total silver inventory, was the result of the persistent shortfall between supply and demand, which continues to this day. Not coincidentally, the current 150 to 200 million-ounce annual deficit in silver mirrors the long-term trend line average. This continuing deficit is remarkable in that there has been decent growth in world production of silver over the past 50 years, but obviously not enough to satisfy the surge in industrial demand.

Fast forward towards the end of 2008 and the seizing up of the financial system saw base metals plummet in value. This was down to a combination of deleveraging and lack of available financing for mining companies. Those encumbered with too much debt and ailing commodity prices had to curtail their current mining operations, in some cases to bare minimums, whilst shelving large capital expenditure projects which would bring on new supply in years to come. As over two thirds of silver production occurs as a by-product from copper, zinc and lead mining, silver mine supply into the future has been stymied.

2009 saw such a swift turnaround in copper prices that silver production was a record 709 mm troy ounces. This was 25 million ounces higher than in 2008 and arguably would have been higher had it not been for the crisis. But this is a moot point as we have just outlined. It took thousands of years to build up ten billion ounces, so to create a current surplus of over 2% does not appear feasible with the supply demand imbalance we have. We will caveat; it is exceedingly difficult to ascertain the true levels of inventories, and there is always disparity on the numbers depending on which data collector you converse with. However as can be seen below inventories remain exceedingly low, irrespective of whose data one observes.

Silver inventories have only turned up as assessed by CPM group, because they have included Silver ETFs, such as iShares SLV. This seems odd, as these inventories already existed, and were merely ‘transferred’ into these vehicles.

In a nutshell- for many decades the world has consumed more silver than it has produced. That has necessitated a draw down of previously produced silver - the existing inventories. There has never been a situation in any commodity where such conditions have failed to cause a dramatic price increase.

Money velocity rises leads to Silver rise

Hinde Capital rigorously examines collates and archives proprietary economic and geo-strategic data to help provide us with global, national and regional sectoral insights. In 2009 “HindeSight” Macro research was spun off as Variant Perception www.variantperception.com. Variant has in very short order become a respected independent voice. Their growing independent macro research services are widely used by institutional organisations, hedge funds, corporate and family offices.

In their latest August monthly “De Facto QE in Emerging Markets” they discuss that loose liquidity and undervalued emerging market currencies are leading towards excess foreign exchange reserve accumulation and loose credit conditions. Underleveraged emerging markets with higher velocity will continue to benefit from accommodative monetary policies of a developed world beset with high debt and low monetary velocity. At Hinde we employ their analysis and in conjunction with the VP team have drawn some assertions on the relationship between growing forex reserves, increasing monetary velocity and the trajectory for silver. What we have determined is that the macro back drop is also exceedingly promising for silver in the near term.

When foreign exchange reserves are accumulated, they represent an expansion in central bank balance sheets. (Of course, some of the reserve accumulation can be sterilized, but this is only happening partially at best.) Excess reserve accumulation is acting as a massive de facto form of quantitative easing.

Source : Variant Perception

Continued reserve accumulation can lead to inflationary pressure, over-investment, complications in the management of monetary policy and misallocation of domestic banks’ lending and asset bubbles. As the following chart shows, there is a high correlation between reserve growth and emerging market stock returns.

As EM reserve growth has continued in recent months we expect the MSCI continued outperformance to Western stock markets to support silver prices. Silver has a strong correlation with the MSCI Emerging markets:

Exchange traded commodities are very cheap

VP have highlighted before that exchange traded commodities are cheap. Industrial commodities that are not exchange traded are not far from their all time highs, and they barely sold off during the earlier sell-off in risk assets through April to June.

Source : Variant Perception

The ratio of the CRB Index vs. the CRB Raw Industrial Index is at all time lows, indicating significant undervaluation. The CRB Raw Industrial Index is driven by fundamental demand and not speculators, while the CRB Index is driven by speculators. (The Raw Industrial Index includes things like copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, hogs, lard, steers, tallow, butter, soybean oil, lard, print cloth, rosin, and rubber.) The Raw Industrial Index contains no energy inputs, so is not driven by higher oil. VP also look at the JOCI Index which includes many non-exchange traded commodities (for example burlap, steel, lead, tin, nickel, hides, rubber, tallow, plywood, red oak, benzene, ethylene, etc). They both present a similar picture.

Source : Variant Perception

The charts could not be clearer. Exchange traded commodities have never been cheaper relative to non-exchange traded commodities.

VP has followed a framework of observing leading indicators in trying to determine if ‘deflation’ or a double-dip recession is on the horizon. They wrote in a recent monthly that they believed the world was experiencing a mid-cycle slowdown, similar to that seen in 1994 and 2004. “The momentum of growth has peaked and our forward looking indicators have peaked, but they are still positive and pointing to continued growth ahead.”

The gold/copper ratio is one such leading indicator VP look at (it is an intuitive real world measure of excess liquidity). It gives an advance read on ISM manufacturing. After a huge surge, followed by a sharp slump, it has started to tick up again. The new orders to inventory ratio has also picked up again over the last few months.

Source : Variant Perception

Over the summer concerns about a European banking crisis helped push sentiment to very negative levels. The VP Mania and Panic indicator, which measures risk aversion and risk taking globally, shows that only during the crash in October 2008 had the indicator been lower.

Source : Variant Perception

Extreme sentiment in western stock markets, undervalued exchange traded products including silver and a turning up in the gold/copper ratio suggest the precious metals complex will rise substantially in short order under a surfeit of monetary reserves that is originating primarily in the West but accumulating in the East and on other developing nations’ balance sheets. We observe the Gold silver ratio closely.


SUMMARY of the most important Gold Silver ratios

As Ferdinand Lips (of ‘Gold Wars’ fame) writes, the Gold Silver ratio makes for one of the most fascinating questions of monetary history, and also one of the most mysterious. This ratio was at 10 in antiquity, by the Modern Age it was at 14. By the eighteenth century governments tried to stabilise at 15, but without success. In the nineteenth century the ratio was completely destabilised as it raced towards 60 and then back to 16 by the First World War 1930 and at the height of the Great Depression it hit 100 and this decade appears to have stabilised at 55 to 60; an anomaly in light of all we have written about here.

- 90 Was the ratio of silver to gold when the price of an ounce of silver was at a low in 1991. With one ounce of gold one could buy 90 ounce of silver. In recessions the spread widens.

- 51 Was the average ratio of the price of gold to silver in 2007. In boom time the spread narrows.

- 17 Was the gold / silver ratio at the time of the record gold and silver prices in 1980. Bunker Hunt corners the market.

- 15 Was the official ratio of gold to silver during the great period of Bimetallism, 15 ½ for France (1803), 15.68 for the USA (1800), 14,29 for England (1806).

- 12 Was the gold/silver ratio in Antiquity in Rome.

- 12.5 Was the ratio in Greece at the time of the death of Alexander the Great in 323 BC.

The ratio of production and reserves of gold and silver:

- 13 Is the ratio of world production from 1493 to 1931. For this 400 year period 13 times more silver than gold was produced.

- 8 Was the ratio of silver to gold production in the world in 2006. What is being said is that eight times more silver than gold was produced in 2006.

- 7.64 It the ratio of all production of gold and silver during one century (1900-2003). In the 103 year period, there was 7.64 times more silver than gold produced in the world.

- 6.4 Was the ratio of the ground reserves of silver to gold in 2000.

Source: Dr Thomas Chaize

Despite silver's intrinsic properties as an industrial element, it was once money. Silver began to lose its status as money starting in the late 1800's, as nations stopped using silver, and started using only gold as money. Over 100 years of this "demonetization" has caused a serious drop in silver's value, and this trend is about to be reversed as investors re-learn that silver is a great store of value because of its intrinsic monetary properties. As paper money continues to waver, the neglect of silver's use as money will end. Once again, silver will be valued based on other measures of value, such as a day's wage, or a tighter ratio to gold; real money. If silver exceeds its historic value, due to this scarcity - from its importance in electronics and nanotechnology - then perhaps a silver dirham, a silver quarter, or a silver dollar will be worth far more than a day's wage, as it once was.

If you don’t believe silver won’t be considered a monetary asset then think again. Malaysian state Kelantan have just re-introduced gold dinar and silver dirham coins as an alternative to Malaysia’s currency, the ringgit. http://blogs.ft.com/beyond-brics/2010/08/13/malaysia-looks-to-ancient-alternative-currency-gold/ . Likewise and perhaps of more significance is the second wave of precious metals liberalisation in China. At the beginning of August China’s PBOC (Chinese central bank) announced its intent to support overseas investment plans by investments in and financially backing for “large scale” bullion companies. Recall China held on to a silver standard throughout the Great Depression, many years after the rest of the world demonetised silver.



Long term silver fundamentals imply a substantial re-rating of silver will happen, but this was first highlighted at the beginning of the decade and as yet remains highly undervalued. When such assets are so undervalued one has to maintain a core allocation. However as Fund managers, we also have to look for prudent times to increase (or even reduce) such holdings. We look for inflection points on nearer term horizons to adjust allocations higher. Right now we believe is that time.

Although the current gold/silver ratio at 65 looks to be the mean of a severe financial crisis and boom time, we believe this will become the upper band (cheaper end) of the spread. At this point in the monetary cycle we envisage the silver spread narrowing to nearer 50 or tighter this fall (on overshoots) in line with the surfeit liquidity that similarly buoyed markets in 2007 despite the on set of subprime mortgage issues. Should we see more monetisation of silver then this spread will narrow dramatically and sooner.

We believe the near term catalysts for an outperformance of silver are a pick up in monetary velocity (notably Asia), a potential cessation to excessive ‘manipulative’ silver Comex shorts by a very concentrated number of bullion banks (namely two), positive seasonals, and a trend ready silver bullion market. We believe the narrowing in the gold silver spread will be based on a superlative break out to nominal new highs. The coming silver bullet just may be approaching faster than we could imagine.

To hear the recent King World News interview with Ben Davies CLICK HERE.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Bolweevil's picture

He had me at "Copernicus".

kathy.chamberlin@gmail.com's picture

you had me @ "Copernicus". 2

good long article.

AUD's picture

"For in this way the coinage’s estimation vanishes when it cannot buy as much silver as the money itself contains". This statement is stupid.

Had me before "Copernicus". I didn't read his last piece on ZH either.

jeff montanye's picture

the thrust of the article seems sound.  i own some silver stocks for, basically, his reasons. and if i'd investigate more before opening my yap i'd find that 'jewellery' is brit for jewelry.  i only noticed the tip-off "whilst" on second reading.

Johnny Dangereaux's picture

Stupid is as stupid does. Go to www.coinflation.com and you'll see what he is talking about. A 1964 Kennedy Half dollar is worth 6.66 "dollars"...get it?

ATM's picture

Probably closer to $7.25 now or about 3 gallons of gas in my neighborhood.

septicshock's picture

Sorry to steal a spot up so high, but I want to make sure people aren't suckered into over purchasing silver. Silver production yearly is over 20,000 tons a year. Production has been rising astronomically every year. Gold production has been declining every year as it is getting harder to find.
I own both silver and gold.... Gold is like my hundred dollars bills and silver is like change.

Ultranaut's picture

But has production been growing enough to meet demand? Will production continue to grow? I'm new to this whole game, and hence ignorant in a possibly obvious way, but it seems as if silver demand is likely to significantly increase.

septicshock's picture

I don't know whether it will continue to grow at it's current rate and I doubt anyone can know. What I do know is that silver is a byproduct of copper, zinc, and even gold production... and therefore silver has significant yearly growth in production. These are facts from wikipedia, not manipulated data and charts to serve any sinister purpose.

Put it this way, it costs five hundred dollars to mine a single ounce of gold. Silver being a byproduct of mines producing copper, zinc and other metals makes it significantly cheaper to obtain. These are simple facts. I recommend you research these points for yourself.

I own silver and gold. I would prefer a bull market for both of these PMs.

DarkMath's picture

I'd have to agree with you septicshock. The more I read about Silver ratios being as high as 100 to one the more Bed Davies lost me.

I know that when the Hunt brothers tried to corner the market people started selling their Silver Silverware. The same thing could happen. If Gold and Silver spiked in price I think people would sell their Silver first.

There's just too much uncertainty with BiMetalism which is really what Ben Davies is arguing would drive the price of Silver higher.

Did you all know that BiMetalism was was motived the story of the Wizard of Oz? In 1873 the US left the BiMetalic standard and in doing so favored Northeastern banks over Agrarian MidWestern interest. Dorothy's shoes weren't made of Ruby's but of Silver. Silver  gave the poor man a financial say so when the ability to use it for money was taken away MidWesterners felt the moneyed East had taken over the government. The Wizard of Oz was more that just a kids story.

kathy.chamberlin@gmail.com's picture

Bed Davies

it's Ben Davies,  silly.

JLee2027's picture

All the above-ground silver in the world won't make enough money to handle the world's current needs.

Anton LaVey's picture

... Unless the price of {silver/gold} is allowed to rise to reflect a correct value vs paper money.

Dollar devaluation is the way to go. FDR did this during the Great Depression, lowering the value of the US Dollar from US$20.67 per ounce to US$35 per ounce (if I remember correctly).

Of course, the United States were, at the time, in a much better position than the one they are in now. To handle the current needs of the United States, the price of one ounce of gold or silver would have to be in the... tens of thousands of US dollars? Some people have mentioned, even advocated, targets of US$30,000 per ounce of Gold. Which is not as crazy as it sounds, provided the vaunted reserves of Fort Knox are still intact (a big IF).

And this, ladies and gentlemen, is why I invest my dough in Gold and Silver.

Of course, I don't know anything, so feel free to ignore me.

cossack55's picture

Which also led to the creation of the Bank of North Dakota in 1919.  The only state with its own bank.  The only state (maybe Wyoming) that is still solvent.  Hard to believe 49 other states prefer to send their money to the evil 13 banks.

tmosley's picture

All the real silver silverware was sold back in 1980.  There is none to be found these days.  Even Harrods doesn't sell real silverware--only plated.  Hell, I was going through the estate of my grandmother, who was worth well north of a million dollars before she got age-related dementia and gave all of her money away (to scammers and charities).  She had a number of tea sets and what appeared to be silver platters, but all turned out to be plated.

You can't really count on new hoards of silver coming onto the market, since most were already washed out way back then.

Raymond K Hessel's picture

I know silversmiths in NYC.  Your assertion about silverware is completely false.

Hephasteus's picture

It's a tough analaysis. Silver is about 15 times more common than gold. And it's going to lag behind gold in where it is on the oh shit meter. Silver hasn't even entered phase 2 of the process. Gold is square in it. Once gold crumbles silver will get put in it's position though. So it's probably going to act differently. Enjoying a run up, but with lots more defectors chasing bad money for good. As the bad money will try to actually be enticing beyond a bullshit facade.

I knew consumers were going to retrench in June. It still a long way to get a picture of it. What you are seeing right now is the beginning phase of some really horrible shit the governments are staring out. They'll distort and minimize it at a much greater quantity than they did the first one.

So you're warning is not invalid in my eyes. It's just not very clear. My belief is that if you are going to go with silver as your main horse. You are going to have to be much more patient than goldbugs.

trav7777's picture

Silver is not a buy and will not run like gold until production peaks.  Spot on with your comment.

Soon as silver production peaks and begins to decline, the price rise will be as relentless as gold's.  The latest production data I've seen suggests we might be on a plateau, but until there's a YoY decline, it's premature to call such a peak.

JLee2027's picture

I would tend to agree with that, but the wild card is COMEX. Leasing of Central Bank silver stopped years ago because they ran out. Now they lease and sell customer silver. Basically, the market is tapped out of new large supplies while in Gold you can in theory run to a Central Bank and get some. You cannot do with silver.

The point I am making is that a COMEX default, when it happens, will happen in silver first. 

The Alarmist's picture

That is a good point ... if meltdown were to occur, buying your wheat (I am assuming you will bake your own bread) in retail quantities, or anything else in retail quantities for that matter, will most likely be easier using a given quantity of silver rather than gold. I suspect it would be more on the money to say that silver would be your "walking around money" rather than your pocket change.


septicshock's picture

Nice point. Silver as walking around currency...

septicshock's picture

It's nice to see people flagging comments as junk inappropriately just because they don't want to hear a viewpoint that doesn't support their investment. I own ten times more silver in weight than I own in gold. I would benefit greatly from a price move in silver that closed in on gold. I can dream, but neither my bearish comment nor my wildest dream will have any impact on the price of silver. Gold rarity will be a better store of wealth than silver for the foreseeable future.
I own silver also because it will definitely store value better than dollars will. I have no doubt that silver will be worth more dollars in the near future. I simply state not to OVER invest in silver alone for your benefit. Junk my comment, it has no real significance except prove ignorance and anger over a view point that contradicts your blind hope.

uno's picture

I'm still watching the ratios at the bottom of the weekly chart, winding up for a move.  Next week is expiration for the metals.  I still think there will be a drop and cover of shorts before the real move up.



truont's picture

His name is Ben Davies.

I like this Davies guy. 

Blasting GLD/SLV as "not for serious investors", dynamite CNBC interviews, providing this research on silver for free...

I give Davies 5 gold stars.


ArrestBobRubin's picture

Yeah, he's the real deal. His CNBC and King World News interviews show his deep command of the PM investment sector and all that's going on behind the scenes. I just wish I had 100K to open an account with him.

Mr. Davies has to be scaring the living daylights out of the cartel creeps. He's the whole package: highly intelligent and credible, articulate, tough, persuasive, and especially telegenic. JPM and HSBC must crap themselves each time he gets on the air or net. Davies is helping insure that the existing racket has as short a shelf life as possible. Thieves get most desperate at the end, and to see what was done to silver today only confirms that we must indeed be in the end game.

The paper silver market currently is a plaything and piggy bank for JPM and HSBC. Gary Goldman Gensler and the CFTC continue to make like Hellen Kellers. Oh yeah, gimme that FinReg. Laughable... Well let me tell ya boys: we're not relying on any miracle transformations from serial financial terrorists. Expanding global demand for physical PM (I'll take even just 300 million new Chinese buyers thank you), and the big money's move out of Comex and the LBMA and into fully allocated PM investments are just 2 of many big reasons that mean the end of this legalized theft in the near future. Of course, if butt boy Gensler actually does something about naked shorting and position limits, it'll just be gravy on our returns.

Treeplanter's picture

The cartel's paper scams just put more energy into the coiled spring of real metal.  It's helpful to see such thorough research. This article refreshes my satisfaction from Feb. when I bought 500 silver maple leafs as silver dipped below 15.   Funny thing, delivery took three times as long as in '09.

Dismal Scientist's picture

'Here silver is unique, industry will consume it, and others will buy for financial gain and protection.'

Whats not to like ?

NoVolumeMeltup's picture

Well you can't eat it which is why I only invest in baked goods and bonds printed on the tastier paper.


DosZap's picture

"Whats not to like ?"


The only thing now, is Industry wil consume it...we have NO Industry consuming it.

What's it has going for it, is scarcity, above ground(unlike Gold, it is a by product of mining other metals).

SLW owns no mines, and pays barely over $4.00 an oz for it at present.......

Funny, since it's sitting at $18.30 spot.

The real catalyst for the ratios coming closer together, will be the lack of Gold availablility(when & if the melt down comes).

The price of Gold will be so expensive, that Silver will be the only thing left most folks can afford, and the lack of supply, will eat it up FAST.

In '08, it took over 6 mos to get 500ozs. of Mapes/Eagles, Gold & Slvr deliveries were WAY out.

Thomas's picture

Industry consumes it big time. There is silver in almost every electronic device made these days.

TGR's picture

And every single mirror in everyone's bathroom around the world.

Hell, just imagine the ground-to-ceiling mirrors in every bathroom, bedroom, living room and kitchen of all the wall street poseurs who feel a constant need to admire themselves and you'd have a demand knocking on the door of the electronics industry.


DosZap's picture

Yeah, you missed my point, the economy( Industry) is dead as shit..............especially in Hamerika.The only Corporations doing well are short staffed, and exporting.

Nonconformist's picture

Actually, SLW is paying the equivalent of about $12 an oz and seems to be getting plenty of takers in the mining industry.  So, who to believe, the miners or the analyst?

tmosley's picture

You mean the miners that opened massive hedges at less than $5 and then closed them near $20 for huge losses over the course of a decade?

Yeah, miners are actually pretty stupid.

DosZap's picture

Non, not what I read last week...................just over $4.00oz.

Get a link please, as I would love to agree w/your contention $12.00.

They have NO exposure,no mines, and back dated contracts at these prices with miners.

Treeplanter's picture

SLW is one of that handful of miners that will go up when the metal and the big markets take a hit.  The others are often in lock step with the machines following both spot prices, the Dow and S&P up and down.  So far it looks like the miners will go down with the broader markets when the ski jump come back to earth.   Feels like we are watching a race between the PM short squeeze and moonshot and the Crash of 2010.  Or will the new QE inflat the markets a while longer?  

DosZap's picture


SLW is not a Miner, they own no mines.............

nmewn's picture

67.2 bitchez.

Al Gorerhythm's picture

TICK, TICK, TICK ...........BOOM!

sid farkas's picture

sweet jesus, why is this on zero hedge? You'd think with all the cheering for guys like Hugh Hendry around here that people understand the deflationary scenario that's about to play out.

Nevermind the elasticity of silver supply (as a byproduct of mining other metals) that this guy fails to mention. Silver is going to get obliterated if (when) this ponzi scheme falls apart. I'm not against holding some physical silver for a SHTF type event, but speculating on the long side while bond yields are plunging and M3 is down ~10% seems particularly dumb.



RockyRacoon's picture

Those encumbered with too much debt and ailing commodity prices had to curtail their current mining operations, in some cases to bare minimums, whilst shelving large capital expenditure projects which would bring on new supply in years to come. As over two thirds of silver production occurs as a by-product from copper, zinc and lead mining, silver mine supply into the future has been stymied.

Got any other bright ideas that demonstrate that you didn't read the article?

merehuman's picture

Thanks RockyRacoon. Whatever price silver goes to is as meaningless as the value of the dollar. What price is a potato when hungry, how valuable is the dollar whithout the government to uphold it?

down with the dollar and the fed, up with real money, silver and gold

sid farkas's picture

I've seen this same article in various forms everytime silver is near a high. The pertinent piece of information, if you're going to do supply/demand analysis, is what is the elasticity of silver supply. It is my understanding that not all possible silver is recovered from base metal mining and that for a constant amount of base metal mining variable amounts of silver can be economically extracted depending on the spot price.



cossack55's picture

When the approaching meltdown occurs, who do you think is going to be doing the mining?  Who do you think will own the mines (hint: involves # of guns)? How do you think they will get the ore to the plants, refined silver to mints that won't exist.  Man, you have got to start thinking outside the box.  When it goes, it all goes. Pull your face out of FT and walk the streets. You will learn much more that way.

sid farkas's picture

I don't think we disagree about a SHTF scenario, having some physical silver in your possession would be a good thing. But you have to be insane to think long bets on paper silver are going to pay off. When it goes, nobody is going to be paying or delivering physical silver, like you said it all goes.

I was long silver and gold since 2003, but at this point it makes no sense. The right thing to own now is USD (heresy, I know).

augmister's picture

+1  Dollars!  And kept fresh and safe in the Bank of Sealy and Bank of Amana.  Once the market tanks, all the shiny will be pulled down with it.  ON SALE!  The dollars will buy lots of shiny at that point.  Must be nimble and ready.

Conrad Murray's picture

Most of the inflation/deflation debate stems from the issue of timing.  As the economy continues its downward trend, lots of wild stuff will happen.  Nobody really knows exactly what or precisely when, but I think the general list is: The markets will crater(even gold and silver), BS will print and fire up the Chinooks, the world finally says "No mas", the dollar loses reserve status and everything goes apeshit for some time, PMs emerge as a primary means of exchange then eventually back a new world currency(or the NWO thing doesn't work out and we all Mad Max around until civility, however nationalist, is once again appealing).  Then we do it all over again.

Spitzer's picture

You are a moron.

So you suggest joining the biggest bubble ever in bonds ? talk about dumb.

What is the quality of those bonds if the economy that backs them is imploding ?