Whispers from the Edge of the Rainforest: First R/E, then Silver: The Opportunity of the Decade - Part 1: Shrinking Supply and Rising Demand

Sunday, February 20, 2011

First R/E, then Silver: The Opportunity of the Decade - Part 1: Shrinking Supply and Rising Demand

I have been meaning to do a couple of indepth posts on the subject of silver and what's happening at the Comex and I am going to start with part 1 today.

But first real estate.

The endless pumping goes on.

First up is John Geha, President of Coldwell Banker Canada. He's telling Canadians that you shouldn't expect housing prices to drop anytime soon and that "it is a healthy market for the first-time buyer."

Of course... when does the chief salesman of a product ever tell you that it's a bad time to buy his wares?

The problem, of course, is that he's presented as an 'expert' instead of the salesman he is promoting his own product.

Speaking of promoting your own product, In its latest report the CMHC says Canadian housing prices will move in line with inflation for the next two years.

Again... do you think you will ever hear them tell you that prices are going to tank and not to buy a house right now?

Now for Silver.

If you look to the right hand side, overnight silver is continuing it's dramatic climb. As I write this, Silver is up $0.30 and sits poised to crack the $33 mark (it's at $32.96 right now).

Something dramatic is playing out in Silver right now. Understanding what is going on and the dynamics behind it you will, hopefully, come to appreciate why I believe Silver could explode exponentially in value and why it represents one of the greatest investment opportunities of the decade.

Silver: The Opportunity of the Decade - Part 1: Shrinking Supply and Rising Demand

For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold.

However two significant developments have evolved which have put a giant squeeze on the manipulations, a development which cold drive up the price of silver dramatically and break the cycle of price manipulation.

Over the past two years, the United States have ramped up debt levels. Leaning on their status as world reserve currency to use Quantitative Easing as a solution, confidence is being lost in the US dollar.

In response, China is starting to divest themselves of their massive holdings in US Treasuries and have become huge buyers of both Gold and Silver. Other nations are following their lead.

Recognising the same concerns, individual investors are also starting to load up on Silver.

Meanwhile, unlike Gold, the world supply of Silver is shrinking not rising.

This youtube clip outlines the facts (albeit in a sensationalized manner) and I invite you to check it out:

Given these conditions, the price of Silver should be much higher than it is today.

For years Silver traded in a range of 15:1 to Gold down to 10:1 to the price of Gold (which should put the price at $90 - $140 an ounce).

But Silver has been trading instead from 65: to 45:1 to the price of Gold.

Some analysts have argued that, based on mainstream estimates of total above and below ground Silver (17Boz) and Gold (8Boz), the Silver/Gold Ratio should be 2.1-1. With Gold trading at $1,300/oz Silver should really be trading at $619/oz.

If you were to consider the estimates of total above ground Silver (5Boz) and Gold (5Boz), then the Silver/Gold Ratio should be actually be 1-1. With Gold trading at $1,300/oz then Silver should really be trading at $1,300/oz.

Finally if you were to look at it based on estimates of total monetary bullion above ground Silver (1Boz) and Gold (3Boz), the Silver/Gold Ratio should then be 1-3. With Gold trading at $1,300/oz Silver should be trading at $3,900/oz.

But it isn't. And critics have argued that the reason is that a banking cabal is severely manipulation the price of silver to supress it's rise.

Evidence about that manipulation has lead the Commodities and Futures Trading Commission (CFTC) to conduct an investigation that is being conducted by the CFTC "Enforcement Division".

Although the final conclusions have been delayed by the CFTC, there is clear evidence to support the allegations of manipulation.

Now, with new CFTC position limits about to be imposed combined with (a) increased consumer demand, (b) increased investment demand and (c) decreasing supplies; a situation has been created whereby the banking cabal manipulating the Silver market have been put in a giant short squeeze.

This happened during the December delivery period on the Comex (which saw silver shoot up 70% in value from August to December) and appears to be occurring again for the March delivery period.

It's possible that the short squeeze in the silver markets could lead to the a busting of the banking cabals manipulations and turn silver loose to float to market valuations.

Tomorrow we will talk about the COMEX. Later we will cover the short squeeze now occuring on the COMEX and the rumours of a co-ordinated attempt to execute a short squeeze by some hedge funds.

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