For the time being, the silver price is
essentially set in the paper market where the daily average trade on
the Comex is approximately 300 million ounces. An outrageous number
when you compare it to the daily mine production of about 2 million
ounces. As Bart Chilton, Commissioner of the Commodity Futures Trading
Commission stated on October 26, 2010, “I believe there have been
repeated attempts to influence prices in silver markets. There have
been fraudulent efforts to persuade and deviously control that price.
Based on what I have been told and reviewed in publicly available
documents, I believe violations to the Commodity Exchange Act have
taken place in the silver market and any such violation of the law in
this regard should be prosecuted.” Which brings us back to the phrase
“Follow the money.” In our view, it is almost inconceivable that
investors would allocate as many dollars to silver as they would to
gold, but that is what the data shows. The silver investment market is
very small. While the dollar value of gold in the world approaches $9
trillion, the value of silver in the forms of jewelry, coins, bars and
silverware is estimated at around $150 billion (5 billion ounces at $30
per ounce). This is a ratio of 60:1 in dollar terms. How long can
investors continue to buy silver at the current ratios when the
availability for investment is only 3:1? We are surprised that the
price of silver has remained at such a depressed level compared to
gold. Historically, the price ratio between gold and silver has been
16:1, when both were currencies. Today the ratio is 55:1, so what are
the numbers telling us? We believe this is one of those times when smart
investors will be well rewarded to “Follow the money.”
Submitted by Tyler Durden on 12/24/2012 - 16:37
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