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Thirty Years of Zero Price Discovery in Silver
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Thirty Years of Zero Price Discovery in Silver
Written for Sprott Money by Jeff Nielson (CLICK FOR ORIGINAL)
A recent commentary presented readers with a shocking reality for which there was finally unequivocal data: there has been a supply deficit in the silver market for roughly thirty consecutive years. Such a deficit is unprecedented in the history of human commerce. Indeed, in almost any other market, it would be absolutely impossible.
What is necessarily implied by any supply deficit? Demand exceeds supply, and excess demand can be met only by encroaching upon stockpiles. Only one other commodity market on the planet has sufficient stockpiles to supply the market through thirty consecutive years of supply deficits: the gold market.
What makes precious metals unique in the world of commodities is that they are “precious,” and they tend to be conserved (and hoarded). This is still a reality for gold, but in recent decades the world has been “consuming” silver. That is, using it in small quantities in countless billions of consumer products and then throwing it away in landfills.
However, for thousands of years the world produced silver but did not consume it. Thus, like with gold, the world has (or had) large stockpiles of this precious metal, and those stockpiles have sustained global demand through three decades of supply deficits. But all stockpiles are finite. Indeed, known stockpiles of silver (primarily government holdings) have dried up, and official sales from silver stockpiles are now near zero.
It is for this reason that earlier commentaries have postulated the existence of a “secret stockpile” of silver. There was a cataclysmic 90% plunge in silver inventories from 1990 – 2005 that projected a formal default in this market in 2007, yet no collapse has occurred. The roughly one billion ounces of additional silver required to keep this market supplied had to come from somewhere.
Note how the mere existence of large stockpiles creates the potential for price manipulation. As already explained, in virtually every other market, stockpiles are very limited (in relative terms). Even a couple of consecutive years of supply deficits would put significant stress on those stockpiles, and that “stress” manifests itself in the form of upward pressure on prices.
Where large stockpiles exist, however, such supply/demand dynamics do not exist, and thus neither does the pressure necessary to correct the imbalance between supply and demand. This pressure is known, in economic terms, as “price discovery.”
How is a supply deficit corrected? Buyers and sellers meet in the marketplace. During this commerce, it becomes apparent that the current demand exceeds the current supply and that buyers are competing for insufficient supply. Inventories are depleted, and stockpiles are encroached upon.
What is the definition of a “stockpile?” It is a reserve of some particular commodity that may become available, but only at higher prices. Price discovery is the process by which excess demand leads first to encroachment upon stockpiles and then to higher prices. Through legitimate commerce, buyers and sellers jointly discover that higher prices are necessary to restore balance to the market.
How do higher prices restore balance ? Simple. Eventually, as prices rise, buyers become discouraged by the higher price, and demand falls. As prices continue to rise, more producers enter the market, enticed by the potential for profit, and supply rises. Supply meets demand, and balance is restored.
This is why price discovery is an absolutely crucial mechanism in all markets. This is why price discovery is automatic in all legitimate markets. This is why thirty consecutive years of supply deficits in the silver market is supposed to be an impossibility. Price discovery must correct any supply/demand imbalance in any market in the short (or, at most, medium) term.
Despite these economic dynamics that are automatic in any legitimate market, there has been no price discovery in the silver market for three decades. Because price discovery must occur in all legitimate markets, this alone is proof that we do not have a legitimate silver “market” and have not had a legitimate market for (at least) thirty years.
Instead, what we have is a facade. We have a crooked price-suppression operation disguised as a “market.”
How? How could we have gone from a “free and open market” for silver to a closed, systemic, price-suppression operation? This brings us to the banking crime syndicate’s premier tools for market manipulation: futures trading and short selling.
First, we’ll define the terms. “Futures trading,” very simply, means turning a market into a casino. What is a “futures” trade? It is a bet on the future price of that good/commodity.
Why would our governments have permitted the creation of these casino-markets? The irony here would be hilarious if it were not so perverse. It was (surprise!) the banking crime syndicate that lobbied relentlessly for the creation of these casino-markets.
The pretext given by the One Bank for the necessity of futures trading was to improve price discovery in our markets. The reality, as we have seen for three decades with silver, is that futures trading is a corrupt form of gambling that can be (and has been) used to prevent price discovery in markets.
How does (corrupt) futures trading operate to prevent price discovery? Just ask Jeffrey Christian of the CPM Group, an ex-Goldman Sachs banker. When this self-proclaimed expert on the precious metals markets was testifying before the Commodity Futures Trading Commission (CFTC) in 2010, he astounded the world. Christian proclaimed that what the bankers called the “market” for gold and silver was only 1% actual metal, while the other 99% was the paper-gambling of the banking crime syndicate.
The CFTC is the supposed “regulator” of the U.S. casino-markets, the largest (and most corrupt) markets in the world. Jeffrey Christian had just told the chairman of that commission, another ex-Goldman Sachs banker, Gary Gensler, that the Big Banks had drowned the gold and silver markets in paper, a move which prevented (necessary) price discovery.
What did the CFTC do after being presented with this proof of futures trading corruption in the gold and silver markets? It did nothing. Well, technically, it “probed” the silver market for five years (or so it claimed). And after studying the most corrupt market in the history of human commerce for five years, it proclaimed that it had found nothing. Absolute corruption.
Note the effect of such futures trading as confirmed by these banking insiders themselves. Futures trading operates to effectively create a gigantic, artificial supply of a commodity – a fraudulent supply. This is the bankers’ world of paper-called-gold and paper-called-silver, where investors entering the marketplace are told that they are being sold “silver” or “gold” when all they have actually purchased is a (worthless) piece of banker-paper.
This brings us to another primary tool of fraud used constantly by the banking crime syndicate: short selling. Again, it’s necessary to define this term. “Short selling” is, literally, selling something that the seller does not own.
As with the banking fraud known as “fractional-reserve banking,” short selling is prima facie fraud, meaning that it is fraudulent on its very surface. As with fractional-reserve banking, short selling is illegal for any individual or entity outside of the structures of the banksters’ pretend-markets.
As with futures trading, short selling creates an artificial supply of a commodity, another fraudulent supply. To create a veneer of legitimacy for this fraud, short sellers are supposed to “borrow” what they sell onto the market, effectively selling something that they (at least) possess, even though they don’t own it.
Despicably, this is not what usually happens. Instead, we see the systemic crime known as naked shorting, when short sellers do not borrow what they are selling but instead perpetrate naked fraud – thus the term “naked shorting.” As with all other systemic financial crime perpetrated by the One Bank, our pretend-regulators and pretend–justice officials simply ignore this blatantly illegal activity.
Why would our governments have allowed the introduction of short selling, let alone the illegal devolution of naked shorting? Once again, we can thank the bankers. And, once again, we see more of their Machiavellian inclinations.
“Give us short selling,” they hissed, “and we’ll give you better price discovery.” In fact, the silver market perennially reports the greatest amount of shorting in any commodity market (in proportionate terms), and yet – as we have seen – the result is no price discovery, ever.
Notice how both futures trading and shorting are tools of financial crime with an obvious downward bias in terms of their principal effectiveness. Create an artificial increase in the supply of anything, and you automatically put downward pressure on the price of that commodity.
This pattern would be obvious to any child competent in arithmetic. Yet what do we see in silver? We see thirty years of consecutive supply deficits and zero price discovery. We see proof of systemic crime.
We also see two tools of obvious financial fraud placed into the hands of the banking crime syndicate. Those tools have an obvious/systemic price-suppression bias, and we see them being used more – and often illegally – in the silver market than in any other market, year after year.
A previous commentary pegged today’s “fair price” for silver at $1,000 (USD). At this moment, we see the price of silver below $14/oz (USD). After three decades of this comically obvious fraud, perpetrated by a single crime syndicate, what do the officials in our governments and regulatory institutions tell us? It’s just business as usual.
Please email with any questions about this article or precious metals HERE
Thirty Years of Zero Price Discovery in Silver
Written for Sprott Money by Jeff Nielson (CLICK FOR ORIGINAL)
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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. |
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Pure lyin' and stealin'; both the banksters about "real" markets and the regulators about regulating. Problem is, they're still being rewarded for lyin' and stealin'. Pretty stupid for the folks being lied-to and stolen-from to keep putting up with it. sigh.
Hmmm paper and ink or something tangible hmmm. How will I decide...
When the fiat con ends what will be money?
This is just an advert for Sprott - not to be taken seriously!
I'll go follow the link and read, but even before I do, how can a commodity that has an average production cost near $15/oz have a value of $1000/oz?
I'd like to see a chart that shows the price of an average size chicken egg in grams of gold for the past 500 years or so. That chart would probably tell us a lot more about the appropriate price of silver than the combination of facts and rationalizations in that article.
Off the top of my head, I'd guess the overhead required to produce chicken eggs and silver have both fallen a similar amount over the centuries. That might be wrong, but at least the chart should be within a factor of 2x, 3x, 5x probably. Yet $1000/oz is something like 65x the current production cost, which seems crazy.
How can the "appropriate price" of anything be so utterly disconnected from production cost as this article claims?
Disclaimer: I'm a huge fan of precious metals.
$1000 an ounce is way beyond pushing it, until the dollar's demise, then that will seem like a bargain. What's silver priced in the Argentinian peso?
The same way a bottle of water that cost to walmart is 0 and they sell to you at 1 buck or a bottle of air cost 20 bucks in China for 5000% profit and a precious metal such as silver with unique physical properties cant have that potential?
I tried to use my Sprott money ...but found that nobody else wanted it... even the banks would not accept it... thought I was buying low and would sell high... guess what? it went lower... even advertised on Ebay...but no takers... damn ...will try to invest in something else
Finance is the method of masking or altering the price of assets through speculation and diversion of demand "you dont actually want that silver, you want the option to sell that silver at a later date , or the option to buy that silver at a later date at certain prices " most assets nowadays trade that way, and its gotten to the point where no one actually wants the underlying assets so such small delivery claims are placed that the brokers essentially trade imaginary silver/gold/stocks back and forth all day long and no one cares if there are 100 to 1 oz sold/for every oz that exists.
Finance is Fraud in nature (its all a ponzi scheme), so long as no one asks for delivery their assets will remain worthless.
The great Irony is that all the people who buy silver contracts have to do to become rich is buy a contract and all ask for delivery in mass, the paper market would implode pushing the value of their claims through the roof.
But silver investors are too dis-organized to orchestrate a run, but if they did.... they would certainly earn greater returns by cornering the markets, and forcing the vaults to buy back the contracts at a premium to avoid default.
The banks are all insolvent when looked at in real terms.
READ THE FINE PRINT
The Crimex has the right to settle all trades in cash, ever since the Hunt Brothers.
There is no shortage of silver. Buying shitty mass produced coins minted by the million and paying a huge mark up is not the way to invest in silver. I have seen tons and tons of scrap at Hatton Garden in London. People are still using it as money, selling it to the Jew scrap dealers to pay their rent.
And stocks are not "shitty mass-produced" coins?
And bonds are not "shitty mass-produced" coins?
Lol Stocks/Bonds are all shit-coins, you only buy them because someone else might buy them.
And the irony is everyone buys things with shit mass produced coins, even the fucking penny is made from like pewter/zinc coated with copper paint.
The entire currency is made of worthless paper and base metals.
The entire deposits in banks are digital nothing, just accounting entries on imaginary books.
And you have the nerve to call silver rounds "shit coins?" lol
Is 5% a "huge markup"? What's the "better way to buy silver"? You forgot to mention that.
Remember the Hunt brothers silver manipulation scandal? Innocient times. Now it is assumed to be manipulated.
https://en.wikipedia.org/wiki/Silver_Thursday
How do companies like Sprott stay in business when every prediction they make is not only wrong, but a total catastrophe? Seriously, what moron takes them seriously or is stupid enough to invest a dime with them? How is that huckster still a billionaire?
A recent article here suggested that grain (New World usage) or corn (Old World usage), bartered for pure silver metal, is about the same as it was 2300 years ago. Not 70:1 (1000/14).
The thing about precious metals is that investing in them is very safe. Even in the very worst case they will almost always be worth (inflation adjusted) more than half of what you paid for them (assuming you paid fair market price at the time). You can't say that about any form of paper investment.
And why won't it continue for another 30 years?
No point whining and losing money for the next 3 decades.
Advocatus Diaboli
Faulty reasoning, even if only for advocacy's sake. Unless conditions were nearly identical to the past 30, it's an irrrelavency. Anyone think the next 30 will resemble the last 30? Show of hands?
In two weeks' time we will reach the 26th anniversary of the peak of the Nikkei. Of course Japan's debt, deficits and QE are totally out of control, but betting against JGBs is not called the widowmaker trade for nothing. XAU JPY has been in a flat trading range during the last 3 years of Abenomics and Japan still has $1.2t in foreign currency reserves. Perhaps they can last another 4 years before the long-awaited hyperinflation and 'reset' ?
We are 8 years on from the 2007 peak in the S&P, but it has continued to make new highs this year, and now stands 30% above that previous peak. I suspect the Fed can run the printing presses longer than any of us can stay solvent. Perhaps the starting gun has not even been fired on the 'great crash' that will lead to 'destruction of the dollar', hyperinflation and a 'reset' ?
Advocatus Diaboli
Think of holding physical PMs as being "for the children" - your children.
When silver dropped to 13.99 I arranged for our friendly neighbourhood mailman to bring me more.
When silver dropped to 13.99 I arranged for our friendly neighbourhood mailman to bring me more.
Did you plug his ass when he delivered the goods?
>>>Did you plug his ass when he delivered the goods?
This is a bit harsh; still, home delivery of PM's by third parties may be convenient, but it is a rather poor idea... long-term-security-wise.
If I were truly In the Spirit of Fight Club, I'd just say it was fucking stupid.
30 years of zero price discovery in all commodities and most other asset classes.
I want a monster box for Christmas. Less than $9000.00. Thanks.
I was buying at 30, 40 and $50. Now, I'm short on fiat. Still have the stash, but would love to lower the cost basis.
The last I got was $14.92 in my hand. I did pay $28 for some though. I expected prices to fall again today with Options Expiration, but it's up 3%
When getting change the other day after buying something I checked, as I always do, the dates. I had a 1958 quarter, score!!!!
Even LBJ stated back in 1965 that silver consumption of that day was double the production.
http://www.presidency.ucsb.edu/ws/?pid=27108
You have to check the dates? That shit stands out to me like a sore thumb.
Buy more PMs now so you can enrich the PM peddlers and lose even more of YOUR wealth.
Maybe Investurd could explain why JP Morgan has been scarfing up record amounts of physical silver?
http://www.bing.com/search?PC=WCUG&FORM=WCUGDF&q=jp+morgan+silver+bullion+hoard&conversationid=
I'm betting he's far too cowardly to do so.
I'm waiting for a reply as to why they would incur the expense of purchase, vaulting and insurance for physical when paper is "sure thing."
Over to you, Captain Nemo. Notice any interesting volcanic activity yet?
What a hoot!
Buy more PMs now so you can enrich the PM peddlers and lose even more of YOUR wealth.
Can you spell "stupid"? I N N V e s t u h r r . . . . .
OK, I'll do that. Just sent my check to APMEX for another monster box of silver maples.
Monster boxes of Silver Maples are good.
APMEX? YIKES a fool and his money.
https://comparesilverprices.com/
Thanks for the link!
As an aside, APMEX did sent me a Christmas gift; a nice, shiny, gold colored plastic piggy bank for my fiat...
I am predicting the day in the next several years when the first cargo ship, loaded with high-concentration metal ores simply sucked up from the rich deposits accumulated around sea floor volcanic vents, starts heading for port to unload, and the mining company sends a press release announcing this historic event. While all you PM cultists have been waiting in vain for the USD, US treasuries, etc to collapse, the market for previously relatively rare PMs is going to collapse, and instead of getting a huge windfall of profits from your decades of "stacking", you will get wiped out.
Keep buying and stacking, the more expensive the lesson, the better the learning.
Meanwhile I have delightful profits on the treasuries that I bought on Wed - in ONLY 2 days !!! - while all you gullible PM cultists are LOSING MORE money daily and continuing to worship at the throne of fantasy and folly.
You're waiting for undersea volcanoes to puke up pure silver and we're delusional?
Hahahahah.......hahahahahahahahhahahahahahahahahahahahahahahahahah.
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH
Why "several years" from now and not right now?
Several is like how many in your world? What big technological advances in undersea mining will we see?
It's rather cowardly of you not to answer.
Machines are under development, will be deployed in sea trials in 2016.
Once they start harvesting all the rich deposits, your stashes will be worth much less.
I always love this argument! Yes! We are totally going to mine the shit out of gold and silver in the deep, cold ocean or on asteroids traveling through space!
And then the price of PMs are totally going to plummet! Making all our PMs worthless. Because running a deep sea diving operation or traveling through space capturing and mining asteroids is clearly much much cheaper and easier than say... digging a hole in dirt, like stupid miners are doing now for the outrageously expensive all-in cost of about $14.
Clearly, once those deep sea deposits and asteroids are being mined, Home Depot will be full of cheap gold doorknobs and silver flowerpots. I can't wait!
"These mighty peoples, the Atlantean race, harnessed great undersea engines that could pull rich mineral deposits, and pure precious metals, jewels, spices, credit cards, fashion wear, cotton candy, billiard tables, Fabio memorabilia and many other wonderful things from the sea floor. Taken by gigantic suction cups to a central warehouse the size of our present-day Wyoming, this incredible store of wealth was then meticulously separated into WEALTH, AWESOME WEALTH AND UNGODLY AWESOME WEALTH. Sadly, this techology was lost when the great continent sank beneath the waves and became in-continent."
UNDER DEVELOPMENT
SEA TRIALS
ALL THE RICH DEPOSITS.....
It is you who is delusional.
Pretty typical of Trollworld, assertions with out rudimentary documentation.
Don't feed the trolls.
https://en.wikipedia.org/wiki/Deep_sea_mining
Initial estimates of deep sea mining viability turned out to be much exaggerated. This overestimate, coupled with depressed metal prices, led to the near abandonment of nodule mining by 1982. From the 1960s to 1984 an estimated US $650 million had been spent on the venture, with little to no return.[3]
I suggest you not lean your head against your microwave when you're heating your bagels. I suspect a leak. Both your microwave and your head.
More likely to be a collapse of fiat before mining the ocean floor for significant amounts of precious metal.
More likely to be a collapse of fiat before mining the ocean floor for significant amounts of precious metal.
Just like the fake fucking gold train.... Billions I tell you Billions!
Just like the INFINITELY predicted and prophesized but never arrived collapse of the USD & US treasuries by the PM cult witch doctors and their feeble-minded gullible blind followers, lucrative suckers for the PM peddlers.