The Silver Slingshot

by David EngstromJuly 20, 2015

It’s simple physics, really.  You aim toward the sky and the further you pull back the sling, the higher your projectile goes once you let loose.  This is how I see today’s silver price.  Forces are pulling it further and further back, setting the stage for a monster sky shot once these forces let go.

Some cry manipulation.  To those who do, I say, “what isn’t?” Frankly, I believe manipulation is part of the game.  The Fed manipulates money supply to give the illusion of a growing economy; corporate America manipulates stock prices higher via corporate buybacks; and, banks manipulate the supply of credit by easing or tightening lending requirements. 

Manipulation is no secret.  It’s done intentionally for the purpose of making you behave in a manner that usually favors the manipulators . . . and it works.  We buy stocks at record highs, we spend money instead of saving it and we borrow more when our supply of spending money runs out.  Not until we are left holding a box of rocks in the middle of a flooding stream do we realize the manipulators got the best of us – Again!  Then it’s too late.     

Don’t cry “manipulation” with your last breath.  If you believe it currently exists, see it for what it is, embrace it and react to it with savvy instead of stupidity.  If you think something is being manipulated higher to entice you to buy . . . sell!  If you think something is being manipulated lower to entice you into selling . . . buy!  It’s that simple.  But, never do anything without doing your own research of the facts

To the extent one believes precious metals prices are currently being manipulated lower, it’s only because someone wants you to sell what you have so they can own it.  In the case of silver, supply is diminishing rapidly.  Some say 95% of all the silver ever mined is gone.  Industry has used it up.  Silver is used in almost all technology, medicine, high-tech weapons systems and energy production.  Without silver, our modern technological industries would come to a standstill.   

With above ground supply almost gone, that leaves mine production as the primary source of supply.  Over the last 10 years, according to the Silver Institute, the demand for physical silver has outstripped mine production by 2.661 billion ounces.  This raises the obvious question.  If the supply of physical silver is diminishing, why is the current silver price lower than the average mine’s all-in cost to produce it? 

It’s simple.  Despite plunging inventories of physical silver, the COMEX trades paper silver as if supply is limitless.  It has been estimated that 100 ounces of silver is traded against 1 ounce of physical inventory.  Because few people actually take delivery on contracts, there is no need to actually have the inventory.  In this regard the silver price IS manipulated through illusion.  However, it should be as obvious as is the inability of a magician to actually saw a body in half and put it back together.

Let’s review some critical facts:

  • 95% of all silver ever mined is gone.
  • Over the last 10 years demand for physical silver has outstripped mine production by 2.661 billion ounces.
  • The COMEX trades more paper silver than physical silver actually exists.

If silver is really as important to the future of industry as we know it is, above ground supply is almost gone and demand is outstripping production, how will rising future silver demand be met?  Surely, he who holds the silver, at the time the true supply story unfolds, will have the market cornered on profit.  You can’t make cell phones with paper silver and the only energy you can produce with paper silver is that which is produced when you burn expired contracts. 

These are the truths today’s savvy investors hold dear and there’s just one place left from which to harvest future supply – FROM YOU!  Today, the topic of silver and gold investing is met with negative headlines and scorn.  The mainstream media ignores the obvious.  Instead we hear the economy is recovering, stocks can continue to hit record high after record high, debt is under control, stimulus has worked, there is no inflation, the Greek crisis is over, the dollar will reach new highs and on and on.  All the reasons to own gold and silver are history. 

There’s just one problem.  It’s not working!  While every effort is being made to shake us down and grab all our silver, savvy investors, large and small, are buying more silver like there will be no more silver tomorrow.  Take note:

  • This year, India is on pace to buy up 1/3 of all silver production – if it’s there to buy.
  • JP Morgan, is currently stockpiling silver.  In just 3 years it has amassed more than 60 million ounces.
  • In July, 2015, in just a few days of selling, the U.S. mint was on pace to sell more Silver Eagles than it did in any year between 2000 and 2007.  Then it announced it had run out of silver and suspended sales.
  • China is hoarding silver to meet future demand for solar energy.

In a recent interview, noted analyst Eric Sprott said, “there is so little silver around, I mean if some big investor wanted to buy $5 billion in silver, I think it would be all over here, I think it would just scoop up everything that is available.”  That’s just one reason Eric Sprott has predicted $100 silver.     

While the importance of silver to future industry is undeniable, one cannot ignore the role silver shares with gold as money.  As the illusion of controlled debt disappears, the people will turn back to real money.  When this happens, the silver slingshot will let loose and the silver price will begin to rise toward new highs.  Some predict, because of silver’s dual role as money and as a critical industrial metal, the price could shoot to levels higher than I even want to repeat.

What we do know, in the middle of our last financial crisis, the silver price reached $48 an ounce.  When the next crisis strikes, and I believe it is coming soon, I can easily see silver rising back to crisis level highs.  That’s more than 3 times where it is today.  Are you ready when the silver slingshot lets fly?      

Resources

https://www.silverinstitute.org/site/supply-demand/

http://ericsprott.blogspot.com/2015/07/eric-sprott-central-planners-desperate.html

 

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