Wild Price Changes in Silver
(Up and Down over 5% in a day, mean the silver price is ready to go up!)
Silver Stock Report
by Jason Hommel, September 15th, 2013
I have been a bit amazed by silver's wild price changes lately. People have asked me to comment on it. I have my thoughts, so I'll share.
The price swings reinforce that the silver market is tiny, and the paper money markets are oversized.
The price swings show that the paper money market is gravely threatened by the silver market.
The price swings indicate that the paper money printers are pushing the silver price around to keep people away from silver, because they fear the inevitable price rises that printing excess money always leads to.
The price swings in the silver price are actually a forecast for a large price rise in my opinion.
But let me show why I believe that is so.
First of all, I have no insider information, no tips, no secret knowledge, no research capacity, no news commenting skill to explain why silver moves up or down on a daily basis; I cannot explain the past 24 hour price changes, and I cannot predict the next 24 hour price moves. Nor do I know any other source that can do that consistently, except perhaps the ones manipulating the price in the futures markets, but they don't share that information, not even with their own clients. In fact, they are more likely to push the price down so as to trigger the stops of their own clients! In other words, if their customers place trading orders that say they will sell silver if it dips to a certain price, then the silver price manipulators will push the price down, to trigger the stop loss selling orders.
I do have the long term fundamental understanding of roughly how many Federal Reserve Notes and other paper liabilities are in the system that can be exchanged for silver, and I have a rough idea on how frighteningly little silver is available. I would estimate the paper money and bonds in the banks at about $16 trillion, what used to be termed M3, which is no longer reported. I suppose this is growing at a rate of about $1 trillion per year due to the Federal deficit.
I would estimate that no more than about 300 million ounces of silver are available for investment purposes, and the vast majority of that is probably not in forms the public would ever buy, meaning that it is in such forms as silver shot pellets, or 1000 oz. bars. The reason is that forms of silver for investment such as rounds, coins, and 100 oz. bars regularly tend to sell out nation wide, and then wide premiums begin to develop to ration what is left.
So then, why are there such sudden price swings and changes? First, what kind of price moves are there?
Silver has moved up from about $18.50 to a high of about $24.46 in the last month. That's a gain of $5.96/oz., which is a gain of 32.2% in about three weeks!
But since then, silver has moved both up and down by about 5% in a single day, moves of over $1 per ounce!
This week, since Monday, silver moved from a high of $23.82 to a low of $21.38 on Friday, 9/13/13, five days later, a price drop of $2.44/oz., for a drop of 10.2%!
It is important to understand the standard interest rates for lending in our era. Most people in the future looking back at our era will not believe this, but the prime lending rate is 3.25%, as is indicated here:
This indicates that lenders think that if they get 3.25% return in a year, they are somehow beating inflation, and making a wise investment. HAHAHAHAHAHAHAHAAHAHAHAHAHAHAHAHHAHAHAHAHA!!!!!!
Not really, because the lending market is rigged. It really indicates that the Federal Reserve is trying to hold the economy together by pushing cheap money into the economy through Federal Housing lenders who are trying to re-inflate the housing bubble to keep home prices high. Again, future generations would read that sentence and probably not understand why the government would have such a disastrous policy.
Regardless, the point is that if we were in a stable economy, with a stable price environment, with sound money, even allowing the gold and silver prices to trade freely, the silver and gold prices should move up no more than the standard interest rate, or about that 3.25% per year.
After all, if silver moved up at clearly defined constant rates more than the lending rate, say, at 5% per year, then any moron or nincompoop or fool after a few short years could otherwise see that buying silver would be a far better move than keeping savings in the bank or buying government bonds. And if people did that, well, paper money values might collapse even faster, driving up silver values even faster, and there could be runaway inflation, and paper money could just collapse to zero as everyone headed for the safe havens of silver and gold.
Clearly, they can't allow that.
(And actually, since 2004, silver has moved up from $4.15/oz. to $21.38/oz., over the last nine years, which is a compounded average annual gain of 20%!!)
So, to let paper money exist, they must keep a lid on letting silver and gold prices rise, and they do. Or, they need to hide the steady average annual gains, behind wild price changes.
So, with artificially low prices, eventually the pressure builds, like today, which is why we have had a runaway bull market in silver and gold for the past nine to ten years now.
But what would happen if half of the $18 trillion tried to buy 300 million ounces of silver within a year?
It's easy math. A trillion is a million million. So, cancel the millions.
It would allocate out to $180 million / 300, or $600,000/oz. for silver, if half the money in the banks tried to buy the remaining silver in a year, which is the price that would be crossed as paper money dies and goes to zero value.
Clearly, the people who print paper money at rates of $85 billion per month don't want to lose the right to print that paper money. Clearly, the people who print paper money at rates of $85 billion per month have not yet bought a lot of silver for themselves to hoard, since $85 billion / 300 million ounces would be $85,000/300, or $283 per ounce.
But what would silver moving up at 5% per year, with a steady increase per day, with no price fluctuations look like? A compound interest rate calculator shows.
If silver gained only 5% per year, that would be a price change of 0.02% per day, over 250 trading days, which would create a gain of 5% per year.
See that? Silver is supposed to move up by LESS than 0.02% per day in a stable financial system, not 5% moves in a day, which are 250 times higher, or lower, than what might be expected!
Therefore, what do the 5% price moves per day, up and down, mean, when the interest rate should suggest price moves of less than 0.02% per day, or less than 5% per year?
Now, before I get to that, let me address the potential nay sayers who may claim that it's "Normal" for silver to move that much, because that's what we see. Well, why doesn't the interest rate fluctuate that much? It doesn't, because it's "fixed" by the Federal Reserve, because we live in a financial system of "fixed" prices. If they fixed prices for silver like they do for the interest rate for money, they might make silver as stable as the interest rate.
So, I can guess now what the wild price changes in silver actually mean.
First, I think it indicates that the price is a lie. A manipulation. A false report. A bogus claim.
The quoted price is called the "spot" price, and it is a ticker tape of paper futures market trades in lots of 5000 oz. at a time. Each lot is one contract, and thousands of contracts trade in a day. Most of these paper contracts do not result in any delivery of silver, since they are for delivery "in the future" on the futures markets.
The futures price is pushed around by electronic and pit traders who trade both futures and options and puts.
We are able to base our prices at jhmint.com based around those prices, because we can re-order silver from wholesalers who do the same, because there are billionaire wholesalers who do the same.
But it's those who have the net worth exceeding $100 billion, that push the price around, illegally, with no criminal prosecution, because they are probably doing it on behalf of the Federal Government, with the specific intent to keep people in paper money, and out of silver.
See, I feel and believe that the government is attempting to make silver look "volatile" and shaky and unpredictable, but the truth is that paper money is what is truly volatile and shaky.
See, if paper money were stable, and if paper money were not threatened by silver, then there would be no need for silver to move anywhere more than about that 0.02% or less per day.
See, silver does not come due in a large harvest season. Mine output and refinery output is rather stable in comparison to harvesting crops, and should have much more stable prices, day after day, month after month.
The wild price changes are also reflective of the truth that the silver market is extraordinarily tiny, and the paper money market is beyond massively huge. Huge paper money trades moving into and out of silver push the price around far more than it should otherwise trade if the financial system were sound, and soundly backed by silver and gold, and if there were no excesses of paper money.
In other words, the major price swings in the silver price are actually a forecast for a large price rise in my opinion.
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