Four key influences seem to be at play in creating artificially low prices in the silver market:
1. Outside Markets – these tend to have a deflationary influence, until suddenly they do not.
2. Physical Market – this has been surging ahead of and outside of the manipulated futures price.
3. Commercial Traders – these typically dominate the market and act as fronts for the manipulative central banks that are the so-called “not for profit” market participants often spoken about.
4. Tech Funds and Professional Traders – these players tend to be relatively stoic and inwardly focused. Their trading decisions are typically purged of all emotion and seem insensitive to the above factors.
Price Control – Here’s How to Do It
First of all, investment banks need to be installed as commercial traders in the silver market. Then, allow major futures exchanges to self-regulate.
Next, establish a concentrated short position, whether hedged, or otherwise. Then encourage High frequency Trading and eliminate the human market makers with any sense of real value.
Welcome managed money that trades blindly and unemotionally based on technical indicators. This provides a universal status quo that is almost always wrong.
Encourage confusion between the concepts of correlation and causation.
Encourage turning a blind eye toward key pricing factors, such as:
• Physical market tightness and surging demand ahead of falling prices that are the result of policy or price control. The manipulation allows paper silver to trade as if all the silver ever mined is sitting in vaults, just waiting for a magic fiat currency price to set it free.
• Outside indicators. Take the most bullish indicator and completely reverse the logic. For example, claim that Central Banks are not buying silver because they only want to hold “real” money, which is actually just intrinsically worthless paper or electronic currency. Ignore the fact that they could not buy enough silver if they wanted to.
Insult insects by creating two extreme groups of zealots – silver bugs and gold bugs, and then incite war between them to further divide public perception on the subject of holding precious metals as an investment. After all, no one hates a silver bug more than (many, not all!) gold bugs who claim that silver bugs have the wrong metal and that gold is the only true money.
Silver is as Much the Canary as Gold
Silver may be in an even more attractive position for a rally than gold because of its COT structure that still shows pronounced short futures positioning in concentrated hands, in addition to the tell-tale piling on of managed money or speculative hedge funds on the short side.
Also, many developments in the financial markets tend to make holding silver look good. These include the Zero Interest Rate Policy or ZIRP, the LIBOR scandal, money laundering, the MF Global disaster, and the ongoing manipulation of CPI and jobs data to make the headline economic picture look much rosier than it really is.
Basically, the price of silver loves inflation. The almost 500 percent rally seen in the price of silver from October of 2008 to April of 2011 as the price rose from 8.44 to 49.77 was inflationary, and it was fueled by widespread concerns over a shaky financial system, huge piles of money being printed to prop it up, and panic short covering.
Furthermore, that was not just a minor short covering rally fed by blind-trading latecomer hedge funds. The rally in silver to a new all-time high was sufficiently threatening to be effectively halted and the market forced into a consolidation phase above the 26 level by a “reverse Hunt Brothers, CME margin increase debacle”.
As that key support level approaches once again, silver continues to look attractive as a long term investment.