Silver and Powerful Forces

Example 1:  When a golfer hits a shot to the green he often yells “sit” as he orders the ball to slow or stop near the flag.  Even professionals indulge in this bit of satisfying self-delusion.  However, the ball responds to powerful forces, such as wind, the undulations of the green, its own momentum, and gravity.

Example 2:  A mother demands that her teenage son clean his room.  Instead he responds to powerful forces, such as testosterone surges, cute girls, and teenage rebellion.

Example 3:  Silver prices surged higher in early 2011 and have collapsed since then in spite of increasing investment demand.  The silver market was responding to powerful forces.  What forces?

  • The COMEX is very important in setting global silver prices, but the COMEX is almost entirely a paper market. Relatively speaking very little physical silver changes hands compared to the number of speculative paper contracts.  Speculators and large firms such as JP Morgan are powerful forces that can and do move the silver market.
  • The Fed has created over $3.5 Trillion since 2008 which recapitalized banks and levitated the bond and stock markets. It seems clear that this powerful force did not want the silver and gold markets moving higher.
  • It has been widely reported that the US President met with a group of bankers on April 11, 2013. Shortly thereafter the silver and gold markets crashed, apparently victims of massive paper short sales on the COMEX.  Large and powerful forces can indeed move markets.
  • China and Russia are aggressively purchasing silver and gold, including all their domestic production plus considerable quantities from the West. It is in their best interest to purchase metal at lower prices.  Similarly, the West does not want China or Russia dumping their hoard of T-Bonds, which would hurt the T-Bond markets, the dollar, and would force interest rates higher.  Some powerful international forces are working to maintain silver and gold prices at lower levels.

 

What seems strange:

Demand for silver is strong and apparently increasing but the COMEX driven price for silver has been weak; it just hit a four plus year low.

The “all-in” cost of silver production has been widely quoted at or considerably ABOVE current prices.  But how long can this continue?

Consider this chart of the S&P 500 Index and the Fed balance sheet.  It appears that the $ Trillions created by the Fed dramatically assisted the S&P in its upward journey.  But what happens when the newly created dollars, euros, and yen are used to buy silver and gold instead of bonds or stocks?

 

Fed Balance Sheet

Fed Balance Sheet

Consider this graph of silver investment demand, which has increased substantially.  (2014 demand has been even stronger.)

Silver Investment Demand

Silver Investment Demand

Consider these graphs that show (estimates for) Chinese and Russian demand for gold.  From which vaults do you think all that gold was removed?

 

Estimated Gold Demand in China

Estimated Gold Demand in China

 

Russian Central Bank Reserves

Russian Central Bank Reserves

Powerful forces can impact markets for considerable time.  Gold has broken its triple bottom at about $1,180.  Silver has made a new four year low near $15 – about a 70% loss from its 2011 high.  What happens next?  My guess is that the High-Frequency-Traders will attempt to squash all rallies until The-Powers-That-Be are properly positioned to make a fortune on the inevitable rally.

 

S&P 500 Index - 20 years

S&P 500 Index – 20 years

 

Silver 20 Years on Log Scale

Silver 20 Years on Log Scale

The longer a market is repressed or levitated, the more violent the correction.  I suspect we will see violent corrections in the next six months in the silver, gold and stock markets.

For several years it seems that powerful forces have been aligned against gold and silver.  What will happen to prices when some or all of those powerful forces reverse and align in favor of precious metals, for their own protection and profit?

Read:

They Are Burning The Furniture Now

False Price Discovery

 

Gary Christenson

The Deviant Investor

GEChristenson.com

 

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6 thoughts on “Silver and Powerful Forces

  1. I happened to be googling cognitive dissonance (having two thoughts that disagree) , at the same time I was reading this article. It lead me to CBT (cognitive behavioral therapy). I was distracted by some real life things. Then returned to my comp. and started reading this article. lol. I thought I was reading a cognitive dissonance site. because the first few paragraphs are examples of cognitive dissonance and then The rest of the article is about understanding why we have conflicting ideas and results about the silver markets. The information (prices) we absorb from the silver world, conflicts with what we know about supply and demand. The over printing of paper dollars conflicts with what we believe about value etc.
    I am beginning to think practicing some form of CBT and applying it to my silver investing would increase my understanding and therefore my results. Am I crazy, stupid or genius?


    • I think you can best answer your question although I lean toward “genius.” But yes, strange things are happening in the silver market and a sensible look says prices are way too low, and will not last at these low levels for long, regardless of the powerful forces at work.
      The Deviant Investor


  2. I am not sure why the low current price of silver is spooking people.I know that my silver is worth way more than paper silver and that the market is ran by big rats. The truth always comes. It just gives me even more reason to buy. And be sure to acquire free silver from junk switches and relays!


  3. “Powerful forces” is descriptive but it is not hitting the nail on the head. I refer the curious to my current “Silver Squelchers” series. Silver will not reverse higher merely because “powerful forces” decide to allow it. It will reverse because natural law cannot be indefinitely set at defiance, and because people desire actual wealth and seek protection from the superstructure of debt.
    http://srsroccoreport.com/silver-squelchers-part-1-and-their-interesting-associates/silver-squelchers-part-1-and-their-interesting-associates/


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