You bought silver with high expectations! Then it crashed while endless news reports informed you that silver would drop even further. Frustration! Misery! Despair! Depression! You have lived it all. There was no light at the end of the tunnel.
Darkness and despair covered the land of silver. There was no joy in silver-ville.
But, then from the depths of despair and ugly bearish sentiment, a rally materialized. But, not just a small rally, a huge rally – totally awesome! The price doubled in a few months. Then it paused, scared some of us out, and rallied even further. You heard that silver was going to $100 or maybe $200 per ounce. Analysts outdid each other with higher and higher projections. You congratulated yourself on your foresight and financial acuity by investing in silver – sheer genius – forgetting that you almost sold out for a loss at the bottom. The manic phase is great while it lasts…
Silver rallied, and you waited for even higher prices before you sold. If you were rational or just lucky, you sold out before it crashed 25% in a week. If you did not sell out, you screamed to anyone who would listen, “they crashed it,” and “I should have sold out before the crash,” and “it’s not fair.”
Silver investing felt like a bipolar roller coaster ride – manic up followed by depressing down. You began to self-medicate with alcohol and wishful thinking. You sought out others who agreed with you, told you what you wanted to hear, and…
Begin the analysis in 1971 when Nixon dropped the link between the dollar and gold. A pack of Marlboros cost (depending on local taxes) about $0.39. We paid about $0.36 for a gallon of gasoline. The DOW Index was about 850. Silver was priced at about $1.39.
Today we have more currency in circulation, far more debt, and much higher prices – what does it mean?
Examine Graph 1. The prices for retail cigarettes, crude oil, national debt, silver, and the true money supply (TMS) (see notes at end) are shown on a log scale graph with all prices normalized to start at 1.0 in 1971.
National debt (green line) has increased rapidly since 1971 and even more rapidly, on average, than the other items. (National debt has increased over 12% per year for the last five years.)
Silver (black line) and crude oil (red line) prices have been erratic with peaks in the early 1980s, troughs in the late 1990s, and substantial rises since 2001.
Cigarettes and TMS have increased steadily since 1971.
TMS (also M2, M3, etc.), debt, and most commodity prices have increased exponentially since 1971. Because the dollar was not backed by gold, dollar creation, total debt, and prices increased rapidly.
Not shown are some prices that increased more rapidly (medical costs and college tuition) and some that increased more slowly (postage and bread).
Nixon dropped the link between the dollar and gold in 1971. Thereafter, the money supply rapidly expanded, consumer price inflation went wild, and both silver and gold increased in price by over a factor of 20 in early 1980.
Volcker raised interest rates, killed both inflation and inflationary expectations, and changed the economic landscape to allow for a nearly 20 year bull market in stocks. Silver and gold dropped below their long-term up-trend. Why put money into silver from 1982 – 2000 when it was easy to make money in stocks?
The stock market crashed in early 2000, and the world changed after September 2001 (9-11). After that event, borrowing, spending, massive deficits, exploding national debt, war, and even bigger government became the norm. Stocks have gone nowhere, on average, for the last 13 years. Silver and gold, anticipating the massive increases in debt and money supply, woke from a two decade sleep and began a bull market that is likely to run for many more years.
The correlation is simple. More debt means higher prices for silver. Examine the following graph. Note that RSQ = 0.916 for smoothed(13 period moving average) monthly silver prices vs. National Debt – a close correlation.
The amount of information on silver as an investment being analyzed and discussed lately has been astonishing. I remember only a few years ago that it was only the likes of Ted Butler, David Morgan and Jason Hommel that ever promoted the amazing investment opportunity that silver represented. Now there are literally hundreds of “pro-silver analysts” out there talking about the supply/demand deficit, COMEX Commitment of Traders Report, fraudulent Silver ETFs and the dual role of silver as both an industrial metal and monetary metal. I LOVE IT!
Of course having so many eyes on the silver market you would expect that all the bullish silver angles have been addressed, investigated and exposed but I have found over the years that there are always some bullish factors hidden in the mysterious world of silver investing that explode into the consciousness of the market at the oddest time compounding the reason for silver to rapidly rise in price. Ted Butler has exposed the most of the bullish silver discoveries in his studies of silver spanning many decades, but that does not preclude the little guys out there from exposing a new idea/discovery that further promotes the silver cause. Here are some of the unique angles I have brought to the table over the years:
To those of you watching the price of silver rise thinking how exciting it is that the silver buyers are finally diving into the silver market and driving the price higher, unfortunately, you are living in a fantasy world. There is no “free market” in silver where supply and demand matters and drives the price movements. Silver is a “managed market” and has been since the early 1970′s. It is managed via computer programs run out of the Fed NY and the basement of the US Treasury. Computers trading back and forth with each other to SET the price…every day, every trade and every tick.
So when silver rises 20% in a matter of weeks or silver dives 20% in a matter of days you should not be surprised. It is meant to play with your emotions and scare (or force) you out of the silver market.
But knowing this should not slow down your positioning for the END of this silver price “management”. It should motivate you to BUY MORE PHYSICAL SILVER and be ready for the END of this management process. Yes, it is ending. The Good Guys tried to end this game back in 2008 but they were stopped short…mainly because WE THE PEOPLE were not ready. So a decision was made to wait until the NEXT US election to finally pull the plug on official silver market rigging. We are now nearing the end of this phase of silver manipulation.
That is why the price of silver has risen so high and dropped so fast in the past 4 years. To delay the inevitable silver moonshot. That is why the CFTC refuses to end this obvious manipulation up until now. That is why the price is rising so fast as we approach election day. This is the END game.
The latest Bank Participation Report is a tell tale sign that something is up. The US bank short positions of COMEX silver futures grew more than 8,295 net contracts, to 28,760 net short contracts from the last report on August 7.
Lots of news out this week about the silver manipulation case being dropped by the Commodity Futures Trading Commission (CFTC) with zero action. The first of several stories was put out by the Financial Times on Monday. FT.com reported,
“A four-year investigation into the possible manipulation of the silver market looks increasingly likely to be dropped after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation. The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors. In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price. But after taking advice from two external consultancies, the first of which found irregularities on certain trading dates that it believed deserved more analysis, CFTC staff do not have sufficient evidence to bring a case, according to the people familiar with the situation. The agency’s five commissioners have not yet formally determined the outcome of the investigation, leaving the possibility that staff could be instructed to dig deeper. A CFTC spokesman said: “The investigation has not reached its conclusion.” He declined further comment.”(Click here for the complete FT.com story.)
Just like Usain Bolt at the 2011 World Championships, it appears that the FT has jumped the gun. Commissioner Chilton has informed us that ‘The Financial Times report related to silver is not only premature, but inaccurate in several respects‘.
As to whether Chilton believes the silver market has been manipulated the Commissioner informed us:
“I continue to believe, consistent with my previous statements to which you referred, and based upon information from the public, that there have been devious efforts related to moving the price of silver. Incidentally, I also believe there have been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns.”
The Doc’s full correspondence with Commissioner Chilton is included below:
Eric Sprott of Sprott Asset Management is one of the best performing money managers with returns topping 20% for more than a decade. He has $10 billion under management, and it’s no secret Mr. Sprott is a long term bull on physical gold and silver. It looks like other big money men like “Bond King” Bill Gross are also thinking about going long on the yellow metal. Sprott points out, “When the Bond King goes to some sort of physical asset, I think you can see some kind of sea change.” So, why aren’t gold and silver prices higher? He says, “I can make a compelling case the price has been suppressed.” If it wasn’t, Sprott says, “Gold would be $2,500, and if the ratio was 15 to 1, the price of silver would be $150 an ounce.” The suppression game cannot go on forever. Mr. Sprott also says, “The economy is already taking a cliff dive and that is before we hit the cliff. . . . It’s hard to imagine anyone being optimistic going forward here.” If there is war in the Middle East, Sprott says, “Oil would go crazy, gold would go crazy, anything physically real would be in demand.”