Tuesday, March 15, 2011

Eric Sprott on Silver Manipulation

In a recent interview, Eric Sprott of Sprott Asset Management commented on the topic of Silver manipulation.

As we have discussed at length, the silver market is so small it lends itself to being held down artificially.

In our last post, Harvey Organ noted that 101, 076 contracts traded on the COMEX on Monday of this week (driving down the price of Silver significantly). Each contract is worth 5,000 oz's. This means over 505 million oz's traded that day!

To put this into perspective, there are only 800 million oz's of silver produced in any given year. The 505,380,000 oz's represents almost 72% of worldly silver production if you include China and 84% if you do not include China. The reason I put the figures for China is simply because China keeps every oz of silver it produces.

And the banking cabal supposedly flooded the market with 500 million oz's of unbacked paper contracts in one day!!!

Sprott was asked what measures might free up the market movement?
  • As you probably know, all sort of lawsuits accused HSBC and JP Morgan of manipulating the price of silver in 2008 when it went down. In that situation, quite frankly, I was the most surprised and disappointed person in the world to see that in the middle of a financial collapse, the price of silver—and even gold—didn't rally. It seemed so unlikely that that should've happened. In my mind, that consequentially suggested forces might have been at work that weren't normal in those markets. But the manipulation will end, if there was manipulation. I'll explain why.

    On commodity exchanges, the majority of transactions never settle in physical delivery. Just as an example, of the 800 million ounces of silver produced in a year, there are days when the commodities markets will trade 500 million oz. Well, obviously, nobody is settling this stuff because you can't have an 800 million oz annual market and trade 500 million oz in a day. These are just people pressing buttons on computers—you know with their algorithms or whatever—but they're not taking physical delivery. Manipulation takes place when a person who has more money than another person can drive the price of a product up or down, and it's easy to manipulate a market wherein all you need is fiat currency.

    Manipulation will end when enough people say, "You know what? I'll take delivery of that product." I think that's what's happening in silver. More and more people are taking delivery. The dealers who are short something like 400–500 million oz. have like 42 million oz. in storage. Our organization alone owns more than 42 million ounces. That's not a lot of silver to cover a short bet of 400–500 million ounces. With every delivery period, those inventories keep going down. They're going to go down to the point where everyone realizes there is no silver left. As a matter of fact, for all intents and purposes, I think there might be no silver available today, as some mints are no longer taking silver coin orders because they just can't provide them. So, it's obvious to me that this supposed silver inventory doesn't exist anymore and that ends the manipulation.

Eric Sprott was then asked about the fact that there are far more investors in the silver sector right now than in previous decades and what impact that is going to have on those manipulating the silver market.

  • (Are there more investors in the sector right now?] Absolutely. I think the phrase that probably captures silver's behavior, to which it's always been referred, is "poor man's gold." I think those who haven't bought gold are, to some extent, seeking refuge in silver. But anybody who's been a student of the silver market, as I myself might qualify, realizes we have a very tight situation here. And as this momentum builds to participate in the silver market, the shorts are just going to get overrun and the price could get excessively explosive.

I'll say it again. Silver is the opportunity of the decade, the shorting antics of this week notwithstanding.

Beware the Ides of Farce.


Email: village_whisperer@live.ca

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  1. For vancouverites and richmondonians who want to buy some real silver (or gold).... I recommend the 10 oz bars from vbce.ca They are always super shiney and fit in the hand nicely. 50 and 100oz are heavy.... but, poured in ingots... not as pretty. VBCE.ca Debit card, bank draft or cold hard cash.

  2. Don't overlook First Majestic's online store. They usually have 10oz bars but better still, they have an 18oz coin set that really is something to behold, especially the 10oz coin. The premium is reasonable however, mailing costs add to that premium (unfortunately, this applies to all online purchases).