Silver’s demand has continued to rise but its price has remained relatively flat, leaving some investors perplexed and even more investors hungrier than ever for more of the precious metal. One precious metals researcher likened silver to a pressure cooker with a broken relief valve and rattling top that’s ready to blow.
Over the last few months, massive quantities of silver – more than 220 million ounces – have been deposited into the world’s silver exchange-traded funds (ETFs). This is the most physical silver that has ever been bought and sold into silver investment vehicles in history – all within three months. That fact alone should have pushed silver’s price upwards significantly. Yet, while being up from their March low, silver prices are flat from yearend and even after a historical spike in demand are nowhere near historical highs. In fact, silver is still down 65% from its peak nine years ago.
Some investors and researchers attribute this odd behavior to price manipulation. Concentrated short selling on the COMEX could be one factor, while other suggested methods of manipulation are increasingly complex.
In any case, with all the collective short selling that has occurred over the years on silver, some researchers have noted that we’ve never witnessed a collective short covering on silver. This means that, even when the price has risen, rather than dropped (as short selling would intend), these groups have not had to deliver the physical silver or buy the physical silver necessary to cover their short. Instead, it appears they have managed to either wait out the rise or rig the pricing deftly enough that it can drop faster than it rises, enabling them to avoid the fallout.
At closer look, “odd” becomes a generous term when describing what seems to happen to the price of silver.
Regardless of why and how the silver market has become what it is, investors and researchers alike are increasingly optimistic about where it is going. Demand has clearly risen, and even if it does not directly cause the price to rise (though it should, according to laws of basic economics) due to price manipulation or other factors, it still places pressure on the metal’s price to rise. It’s also worth noting that this type of pressure does not dissipate over time, but rather builds and eventually forces a response.
Further, if or when the price does rise and a collective short covering does occur, we would have to assume that the price would then explode. The groups that have artificially suppressed the price of silver would not be able to produce or buy the physical silver needed to cover their short, and the price would likely not be able to be rigged into dropping since so much physical silver has already been sold into the market. Logically it would follow that all the pressure that’s been building on silver in its suppression by these groups over the years would finally be released.
In this event, experts say to expect silver to jump in “dollars” rather than “dimes,” implying that its climb could be more fast and furious than we’ve ever seen.
In closing, I’ve saved the sweetest observation for last: in light of the factors I’ve mentioned above and those I’ve discussed over the past few months, those who are accumulating silver are not chasing prices higher. They’re purchasing it like it’s “hot money” before the “hot money” phase ever begins. This means that it’s also not too late for you or your clients to get a position in silver before its “hot money” phase.
If you’d like to better understand why investors are accumulating this way, or if you’d like to learn more about silver as simple wealth insurance, contact us today. I’ve been in this business for over a decade and have fully trained my staff on the “ins and outs” and “ups and downs” of precious metal as an investment and in its indispensable role as wealth insurance.