Commodity Trade Mantra

The Silver Price Rally, Physical Shortages And Market Sentiment

The Silver Price Rally, Physical Shortages And Market Sentiment

The Silver Price Rally, Physical Shortages And Market Sentiment

Many observers have realized that the price of silver will rise dramatically at some point because the amount of paper silver is many times the amount of physical silver. When this fact is even partially acknowledged by the mainstream, silver will probably move much higher.

Furthermore, silver has historically been a real money substitute for paper fiat currency. The governments of the world cannot afford to allow silver’s price to rise on the perception that people are losing confidence in their country’s paper fiat currency.

Manipulation Has Contributed to Physical Silver Shortages

The price of silver has been kept in check by via the management of a profitable and decades-long net short futures position held by the market’s largest banking players, who have allegedly been acting as agents for the controllers of money.

Of course, if these controllers selling silver make a futures market trading loss, they only have to print more paper money to pay for it, since the seller of a futures contract controls whether or not physical delivery occurs.

Lower paper silver prices also allow them to pick up cheap physical silver from the unsuspecting public that still typically remains unaware of the futures market manipulation.

Chronic Shorts Unwinding

That these illegal and manipulative short positions currently appear to be unwinding as public awareness and even official scrutiny rises has now become widely accepted. Perhaps this is a visible response to the CFTC’s ongoing and largely ineffective five year investigation into silver futures price manipulation.

The revelation that J.P. Morgan Chase and Goldman Sachs are basically exiting commodities also seems timely. Both of these banks are members and primary dealers for the U.S. Central Bank — the privately owned Federal Reserve Bank. JPMorgan and Goldman are essentially acting as fronts for the Fed’s market presence and therefore are one and the same.

While the Fed is neither fully federal nor a reserve, like its name would imply, its independence seems more and more at risk as the need for a buyer of last resort for U.S. government debt is growing. It now seems almost inevitable that the need to prop up the ailing Treasury market will be 100% once the bond market really begins to fall.

Physical Supply and Demand Factors

Still, what if the big players agreed to look the other way and actually allow silver’s price to rise because of an acknowledged industrial shortage? This sort of reasoning reduces the risk to their funny money fiat currency system. The price rise could be framed as simply being due to an increase in volatility, or perhaps more negatively portrayed in the media as speculator driven.

The mainstream has never acknowledged silver’s steady investment demand, and always seems quick to parrot questionable “surveys” that count coin demand as surplus. Furthermore, the bullion banks seem to desperately need gold bullion, if the progressively negative GOFO rates the gold market has recently seen are any indication. Negative GOFO rates are a relatively rare occurrence that means the bullion banks will pay physical gold holders to lease their bullion and are indicative of a physical gold shortage.

Given the recent widening of the gold to silver ratio, silver could readily outperform gold this year before garnering too much attention. This could be the mainstream’s justification for a rise in silver over coming in months, especially since silver’s price has already fallen considerably along with the quantitative easing taper-induced free fall in equities.

Short Term Silver Prices And The Next Leg In Sentiment

In 1863, the Rothschild brothers of London wrote to associates in New York introducing their banking method into America that:

“The few who understand the system will either be so interested in its profits or be so dependent upon its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”

Sentiment at the Dawn of the Rally

Based on internal measures of sentiment, the financial damage to the superficial retail investor
— who is typically blind or firmly in denial about the proverbial inflationary writing on the wall
— has already been done.

Those who participated in the previous price rally largely believe that they lost “money” and can probably see no further than the fiat currency price of anything.

Furthermore, the mindset that “your money should work for you” is a dangerous and illusory entitlement left over from years of credit based monetary and economic growth.

The Next Silver Rally

In the short-term, silver’s painted price tape is not yet indicative of a breakaway price rally. Nevertheless, the price of silver has already recently broken above its 50 day moving average and now is treading water just under the level of its 100 day MA, so bullish price signals are finally starting to arise.

The latest wave of unsuspecting, momentum seeking, and yield desperate weak hands expected to come into the market to buy the dips will be easy picking for the strong armed bullion banks like J.P. Morgan Chase.

This, combined with a very top heavy equity market and inevitable tapering because of reduced official budget deficits, may be a set up for another downside test of the $18 support area for silver. A sign that the bottom is probably in place will come when the speculative funds completely capitulate and sell out their holdings.

Of course, the next rally will ultimately arise when large players like J.P. Morgan Chase decide it is time to briefly lift their price suppressing tactics and allow more hopeful silver bulls into the market

Silver and the Time to Sell

Someone looking to take profits on their long silver position as silver passes through $50, $100 or even $500 per ounce is probably going to be missing what has happened to cause silver’s meteoric rally there.

Those future potential “profits” are really just the preserved purchasing power of their invested dollars. Such profits would act as a hedge against their increasingly worthless fiat currency holdings.

 

Courtesy: Dr. Jeffrey Lewis

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