Silver Manipulation is Its Own Worst Enemy

No market can be manipulated forever. The manipulation of the stock market, bonds, currency, and interest rates will all inevitably come to an end. Something has to give. Perhaps a debt crisis will bring about the end of this era. A geopolitical conflict, if large enough, could effectively end our current system altogether. A currency collapse would negate the ability of a central bank to manipulate many of these markets in any currency other than the one that is currently failing. This also holds true for the manipulation of the precious metals market, that has continued for so long. Any of these events could bring it to a halt.
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However, the fact that the precious metals market actually deals with a physical asset, at least in theory, means that none of these events need to happen to bring the manipulation to an end. The manipulation can destroy itself. By distorting the supply and demand fundamentals for so long, this manipulation has created a situation in which future supply of silver will be unable to meet future demand for silver. I'll tell you what I mean by all of this. Manipulation of silver prices generally involve suppressing the price of silver, over the long term. What has been done in the past in order to make this manipulation effective, and to avoid a significant physical shortage, is a selling off of above ground physical reserves. In fact, from 2007 to 2016, demand outpaced physical production, by over 500 million ounces. If you also include silver that was added to exchange inventories, this number balloons to over 1100 million ounces of silver.

That's only in the last 10 years. Over the last 50+ years, billions of ounces of above ground reserves of silver, which were oftentimes held by nations such as the United States, have been depleted. Some of this silver has ended up in the hands of individual investors. Some has been bought up by larger institutions and exchanges. However, the vast majority has been used up. The silver was used is some small quantity, and is now lost for all intents and purposes.

Silver manipulation and price suppression would not be possible without this depletion of above ground silver. Long ago, the physical market would have caught up, and the market would have corrected itself. What we have now, is a perfect storm of shrinking above ground reserves, and decreasing mining production. By keeping the price of silver so low, for so long, silver mining has been disincentivized. Essentially, silver mining production has not been keeping pace with the actual supply and demand figures. Mining has has not kept up with this depletion of above ground vaults. This is expected, considering this dumping of silver on the physical market distorts the supply and demand fundamentals.

However, it has created a difficult situation for those that wish to keep the price of silver low. In a market that is not distorted, silver production likely would not be topping out in 2015. Instead, silver production would be much higher than what it is currently. Some people reading, might be thinking something along the lines of, "But 70% of silver is mined as a byproduct, it isn't affected by this supply and demand." What I'm saying, is that if this suppression was not occurring, more than 30% of silver would be mined at actual silver mines. I couldn't give you a number, but it'd be higher than 30%. The price of silver would be higher, which would open up many areas for mining and exploration, that are not currently economic to mine for silver.

This is why I am saying that manipulation is its own worst enemy. It will, inevitably, bring about its own demise. One of the scenarios I talked about above, such as currency collapse, could bring this manipulation to an end as well. However, it is quite possible that manipulation of silver and gold will do that to itself. Mining production is not increasing as much as it should be, and above ground stores of silver are shrinking.

Another thing to keep in mind, is that roughly 70% of silver mining supply is mined as a byproduct. This mining occurs at gold, copper, lead, and zinc mines. Copper, lead, and zinc are all considered industrial metals. In the next economic downturn, which I believe is right around the corner, I believe we will see decreased demand for these base metals. With that decreased demand, will be a decrease in mining. When mining of these metals decreases, we'll also see a decrease in the amount of silver that is mined as a byproduct. This will make it even harder to keep this charade going, and will only bring an end to this manipulation even sooner.

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