Silver Price and The Winds of Complacency

Not even a surprise Presidential election result could sever the bonds that have held prices in check for more than 5 years.

From a mainstream media perspective, the financial system is a neat little house of cards. Made to look like sturdy boxes on a hilltop; institutional pillars …. that are all the same. The cards are carefully controlled and non-random. They are rigged.

Precious metals will always be rigged to some degree.

From imposed (gold) price standards to the London Gold pool era, and today with a grotesque dominance via concentration on the CME Group’s “Commodities Exchange” (COMEX)– the most important exchange and center of metals price discovery on the planet.

The main difference now is that technology has made it easier to manage prices, while the ‘information age’ is used to dumb down the masses as to the reality of supply and demand.

If that wasn’t bad enough, government has legal (policy) mechanisms in place to intervene at the behest of the political-financial class.

(Take a walk around the Gold Action Trust Committee’s website, GATA.org. It’s all very clearly documented).

The Exchange Stabilization Fund has a legal mandate to intervene in any market as a strategic necessity. Admissions stemming from the most powerful elite make it unquestionable that gold and silver are specific and important targets.

Yet, that these facts remain taboo is only a temporary phenomenon. Memes are not hard wired. Like emotions, they are subject to the very lightest winds of sentiment.

One would think that advertisements of volume trading discounts given to central banks for futures trading would change the nature of that wind. For now, prices are favoring the story, a dominant world view consensus that all is well.

Indeed, the mechanics of commodities price discovery is too complex to hold even the brightest mind’s attention. Only a figment remains of what once was a testament fair (not perfect) exchanges.

Price action makes market commentary and “trickle down economics” is the ultimate justification for broken down policy. Yet, the mainstream debate (and to a significant extent the hard asset world where the manipulation taboo) still reins supreme.

But all of these so called debates end up coming around full circle back to the issue of artificial and, by definition, non economical intervention.

For example, a reader wrote in recently questioning mining supply data. The dominant world view assumption is that mining supply has been relatively flat. Yet it is only down slightly. Or in other words, steady. And this must be an indication of flat to lower prices, again based on the assumption that the prices are the truth.

But rigged prices cover up an encyclopedia of truths. Very few pure silver mining plays exist. Most silver produced as a by-product. Prices have been below cost of production for the primary miners for years.

They are a slave to the system that rigs their prices. They are completely dependent on the institutions that provide their credit and therefore will not dare bite the hand that feeds them.

Calling a spade a spade in these markets would be like asking for more regulation – or asking credit lines to shrink or interest costs to rise. It slowly destroys the system from the inside out.

Price discovery is a totally different arena. Futures markets are where price is ‘discovered’ for now.

Miners and users are no longer a part of that equation.

Keep in mind who publishes the data.

The silver institute and the GFMS Thompson Reuters are  descendants of the ‘silver users’, who obviously have a major bias for keeping prices low. Silver is a miraculous commodity that also happens to be ancient money. (Ancient in the sense of a bird or reptile – not a dinosaur).

Mining goes along with the rest of the supply and demand data produced by the financial class for the financial class. These are where monetary considerations are covertly (or in many cases overtly) omitted from the data and nearly always from the analysis.

The data comes via highly skilled analysis – by perhaps some of the smartest in the room. But the lenses they are looking through are distorted. It’s starting from a faulty set of biases. A false premise.

The system is just smart enough to be good at what it does, but not smart enough to question the true benefits, the deeper meaning.

Silver has a monetary demand component that surveys and interviews cannot convey. Immeasurable and not unique to silver in and of itself; paper used in the silver market to manage the price for profit has no other match. Paper derivatives are what drive price. Paper is infinite – until the wind of sentiment changes.

Because it is profitable and convenient to suppress prices, we have the in which the price is far below inflation (by virtue of base money supply) adjusted highs – even by conservative measures – using average prices without the spike from 1980.

Again, there is no conspiracy about price manipulation. It’s just a set of facts easily proven by the data provided by the CFTC.

It’s done right out in the open, similar to interest rates, equities, or forex.

While there should be a relationship between real supply, demand, and price – it is obscure at best. The directional movement of world price depends on how the large commercial traders on the COMEX decide to make it.

Short term, if it’s profitable for them to move the price lower, they will do it. And when they are positioned to let the price move up they will let it.

Long-term, that which is ripe for disruption always disrupts eventually. We saw a glimpse of this between August 2010 and April 2011 when ‘price discovery’ briefly, yet undoubtedly shifted away from paper to physical.

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