Silver Prices Before the
By Dr. Jeffrey Lewis
the silver market been pricing in the coming collapse?In a word, no!
Markets dominated by the impulses of real people largely no longer exist. The
machines have taken over, as bots read the news and respond rapidly with large
matter how volatile world markets will get, remember that there will be more
Cyprus-type events, more Quantitative Easing programs, more denials of the
importance of inflation, more threats from Central Banks to remove liquidity,
more mining sector failures and more bubble callers designed to influence
mainstream investor opinion.
COMEX Dominates Metals Pricing
Prices for physical precious metals still move based on the COMEX futures price
action. If silver futures rise, physical prices go up, and if futures fall,
physical prices drop. Furthermore, just like always, silverís price action
typically depends on the monthly event cycle.
example, trading in silver is always heavy around the COMEX options expiration
dates, as professional option traders actively rebalance their portfolios to
remain delta neutral.
Furthermore, several key events tend to provide intuitively positive news for
the precious metals. These include the release of the FOMC Minutes, speeches or
testimony by Fed Chairman Ben Bernanke, Presidential press conferences, and the
various jobs reports that are dominated by the Non-Farm Payrolls data release.
Hedge funds have reduced long silver exposures and seem to be maintaining a
short bias.Commercial shorts have reduced their net positions.
Overall, it seems that the silver market has reached a likely bottom for now.
This has nothing to do with deflation, inflation, bond markets or currencies. It
is instead all about the paper trade.
Deflationary Fears and Silver Demand
Economies tend to naturally go through periods of deflation and inflation as
they weaken and then strengthen. Long term silver investors should beware of the
futility of focusing on this cycle to forecast demand for silver.
government budget deficits are running $1.2 trillion per year, and unfunded
liabilities are increasing at rate of $6.9 trillion a year. In just a few years,
the Medicare system will be bankrupt, thereby adding another $1 trillion per
year to this deficit. Budget deficits will only grow from here.
deflationistís theory has always been that when pushed into a corner, the
politicians will make the tough choices and implement the necessary budgetary
cuts, but they will not.
deflation argument might seem correct until the day that the inflationistís are
proven right, and the whole thing spirals out of control in the blink of an eye.
This traumatic event will most likely take the form of a currency crisis and an
international crash in the U.S. Treasury market.
How Silver Looks Now
Industrial demand for silver might well decrease in future as cheaper
replacements like Grapheme are found. Nevertheless, if that happens, the
chronically undervalued silver market would probably go right back to focusing
on the unresolved problem of this mountain of outstanding sovereign debt.
weak economy, people start questioning the creditworthiness of those who have
taken out existing loans that they may not be able to repay.
global economy will eventually experience the same sort of severe financial
crisis that the United States experienced in 2008, in which many financial
institutions would have failed had the U.S. government not stepped in with
truckloads of just printed bailout money. Government intervention in businesses
seems to have now become a regular occurrence.
Remember, silver is just a commodity until the day that the increasingly tenuous
paper currency based financial system finally unravels. Then it will once again
become hard money, and investors who want to preserve at least some of their
wealth through such a crisis will wish they owned it.
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