A year ago I posted that it was
time to be seriously bullish about silver because all historical inventories
had been finally worked of and that the new price structure now needed to make
mine development an imperative. At the
time, silver was trading $15 - $17.
Today it is trading at $30 and is rising after a month long period of consolidation.
This report pretty well spells
out the reality that demand is rampaging while the present pricing does nothing
to slow it. I think this Bull Run is capable of hitting n unbelievable $100,
though the price will stabilize much lower around perhaps $50 - $75.
My sense is that this move is
presently underway.
This report makes quite clear
that the linkage to gold prices is effectively broken and is strongly diverging.
Thus a move on silver will not need to drag gold although hedgers will find
themselves on the wrong side of the trade.
I think it is time to be a bull and to be greedy. It is rare for that to be a good idea.
Silver Breaks its Golden Shackles
By Adrian Douglas
On September 21, 2010 I published an article entitled “More
Forensic Evidence of Gold & Silver Price Manipulation”. In that article
I showed how silver from 2003 to 2010 had never traded freely at all; I showed
that silver was algorithmically traded with gold and there was a very clear
relationship between the price of gold and the price of silver. For those who
haven’t read the previous article the following figure 1 (figure 4 in the
previous article) demonstrates the inter-relationship.
Figure 1 Cross-plot of Silver versus Gold 2003-2010
Figure 1 is a cross-plot of the price of gold against the
price of silver for every trading day from June 2003 to September 2010. There
are two linear relationships, one is pre-2008 (black line) and the second is
post 2008 (green line). The best fit equations for the two data sets are also
given on the chart.
The stunning revelation from the data analysis was that if on any day I knew
what the price of gold was I would be able to calculate the silver price from
the equation of the relationship! How is that possible in a free market? It
simply is not possible and so the conclusion is that silver is not in a free
market but is manipulated to move algorithmically with the price of gold. I have
written many articles that show that gold is itself manipulated and suppressed
(for example, see Gold
Market is not “Fixed”, it’s Rigged)
I have updated the chart of Figure 1 which is shown in Figure 2.
Figure 2 Cross-plot of Silver versus Gold 2003-2011
Since September 2010 silver has broken its golden shackles.
The algorithmic trading that kept the price of silver subdued for seven years
has been completely annihilated.
On Friday silver closed in complete backwardation on the Comex. Spot silver
closed at $29.075/oz while FEB 2011 closed at $29.064/oz and DEC 2015 closed at
$29.026/oz. I believe this is the first time in history that this has happened.
Silver traded in backwardation between the spot price and futures contract up
to one year out during the blatantly manipulative precious metals bashing of
January, but now the entire futures structure is in backwardation. This is a
sure sign there are shortages of silver because it means that buyers will pay a
premium for silver delivered sooner rather than later.
Signs of shortages have also been apparent from a shrinking silver inventory on
the Comex in the face of rising prices. The registered inventory stands at a
paltry 43 Mozs. In addition there is lots of anecdotal evidence that there are
tight supplies everywhere. There are reports of refineries refusing to take new
orders due to insufficient silver feedstock.
News out of China recently
showed that China China China
The US
This update of my previous work adds more fuel to the fire that the dynamics of
the silver market have dramatically changed. Because silver has been suppressed
for so long we do not know what its free market price should be, but we are
going to find out soon and I strongly suspect it will be many multiples of the
current price.
Adrian Douglas
Editor of Market Force Analysis
Board Member of GATA
February 5, 2011
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