2013: A Silver Market In Review

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  • Tue, May 06, 2014 - 07:08am

    #31

    davefairtex

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    tracker charts

Tracker-

No, thats a new one on me, I've not seen this particular chart before.  It does seem to highlight an interesting pattern – its around some sort of exponential function – or is that the magic curve that happens to best fit the move higher or what?  It sure looks pretty.  🙂

If the pattern holds, then silver takes off like a scalded cat the second half of 2014, next stop: 40.  And then a straight line up to 80, where it peaks, moves sideways for a time, and then plummets again.

Assuming silver continues this astonishing two-year oscillation around this function of yours.

Armstrong always said that things move in cycles – perhaps the trick is just in finding the right one for each instrument.

I think we are in danger of having a mutual admiration society…

  • Tue, May 06, 2014 - 10:41am

    #32
    Hrunner

    Hrunner

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    Money, Emotion and Silver

Late to the party, due to work duties, but as the Irish say "is this a private fight, or can anyone join?"

Of course, I am on the money side of silver, and the suppression side. Dave, your constant posting of copper:silver charts is really starting get under my skin, because I don't get why posting something that spans incredibly wild 10-fold swings, three monetary collapses, two World Wars, one complete disconnecting of gold to fiat currency, a massive silver market corner, to name a few "tiny" events makes any kind of relevant point to us understanding what is going on May 6th, 2014.

It's analogous to saying "except for Hitler, Stalin, Mao, Pol Pott, Idi Amin Dada, Castro, Milosevic, al-Gaddafi, governments are generally peaceful and work to the best interest of the citizenry."

Sorry, I can't ignore the key events in history.

The history of modern monetary systems is highly invasive and highly manipulative policies aimed at controlling prices of precious metals in favor of supporting government fiat currencies.

Let's try to focus on a few key facts and frame things historically- apologies for any repetition from Jim H.'s point of view.

Silver is an industrial metal and a monetary metal.  It's dual nature makes analysis of price complicated but not impossible.

Silver's monetary history is thousands of years old, it is described as money in the Bible (as a payoff to a corrupt Judas Iscariot to betray Jesus, e.g.), and it's longevity and utility as money is clearly evidenced as its use as money in the U.S. up until 1964.

The last couple of decades where silver has been taken out of use as money is the vast exception compared with the thousands of years of history where silver has been used as money.  So let's keep things a bit in perspective.

Perspective:  "the faculty of seeing all the relevant data in a meaningful relationship: Your data is admirably detailed but it lacks perspective. "
(direct quote from http://www.dictionary.com)

Silver was "canceled" as a monetary metal unilaterally by the U.S. government in 1964.  If this was not due to the destruction of the dollar by a deeply flawed monetary system and an irresponsible expansion of the size and scope of government and government debt, then please tell me why. 

Therefore, until 1964, it is easy to see how silver had a stable ratio to copper because there was a high "industrial" demand for both, if you consider minting the circulating coinage of a nation equivalent to an industrial endeavor, which I do.

If there is no recognition of the moneyness of silver in pre-1964 coins, then please tell where are the stores and places of business that make change in copious amounts of "worthless" pre-1964 coins.  I can find lots of pre-1964 pennies, but no silver coins.  Gee, I wonder why?  Maybe the "silver is an industrial metal like copper" folks can help me understand where all the pre-1964 dimes went.  Perhaps as silver paste for solar cells.  But I digress.

The policy of Keynesian central banks and Keynesian economists is clear, historically recorded by dozens of scholars, and publicly available. 
1.  The business cycle is harmful and must be suppressed with "liquidity" to boost "aggregate demand" during times of recessions and contractions of the economy.
2.  To perform this economic manipulation, correction, "control", correction, "miracle", requires a group of smart people with degrees in economic models produced by Princeton Ph.Ds, using reams of economic "data" and derivative "metrics" created by additional Princeton Ph.D.'s, collected by small armies of government employees and contractors, fed into computers armed with algorithms created by yet more Princeton Ph.Ds, to achieve the utopian world of no business cycles and no recessions.
3.  The number one and singular tool for enacting this utopian vision is fiat currency.  Fiat currency can be created in a number of ways, but mainly from "thin air", digital printing.  Again this is not conspiracy or secret, it is published in official public documents by the Federal Reserve.
4.  The paradigm requires the willing participation of the banking system to expand "liquidity" or "re-capitalization of banks" through amplification of thin air money printing through what I would call the Twin Towers of the financial system:  the fractional reserve system i.e. the privilege of printing money because you hang the word "bank" over your door, and the less appreciated but equally money destruction expansion of credit-money through lines of credit, leverage, and, relevant to our discussion, the creation of naked commodity "paper" options, which like our dollar bills, aren't backed by anything real, only a vague hope and promise that at some point in the future, real i.e. physical assets will show up to back these promises printed out of thin air by banks.

5.  The system only works if the following rules are followed.   Currency must be used like gasoline and an accelerator pedal, it must be created, from thin air as mentioned above, and injected in times of recession, and pulled back as the economy heats up. 

6.  The system falls apart under two conditions- a) a sound money system or "third party arbiter" is in existence that acts as a scorecard and reports to the public i.e. economy that there is not a healthy recovery but merely an injection of thin air fiat dollars to goose demand but in essence chasing after the same amount of true wealth, and b) an alternative "reservoir" or "escape hatch" or "pressure outlet" where all the freshly printed thin air liquidity may run away and hide to exists.  Traditionally, the escape hatches have been foreign currencies and foreign equities, and precious metals and hard assets.

7.  The escape hatch of foreign currencies have been taken away by coordinated money printing i.e. currency destruction by all the developed economies simultaneously.  The lonely outliers, i.e. the Swiss Franc, have been beaten into submission such that even they have unpegged from gold and gone "full fiat".   That leaves basically hard assets and monetary metals as third party signaling devices and escape hatches.  As mentioned above, escape hatches must not be allowed, because thin air liquidity is supposed to go into consumption i.e. aggregate demand to goose the economy.  Fiat that goes into silver and gold is a double whammy (to borrow Jim's term)- it is not being used to buy more Barbie dolls and Mercedes', and more importantly, it is driving up the price of gold and silver exposing the actual currency destruction.

8.  Pulling together 1-7, silver and gold must not be allowed to rise significantly in price.  It may be allowed to rise slowly, unnoticeably with the inflationary tide that is lifting all boats, but not rapidly, in parallel with the real rapidity of thin air money printing.  If gold and silver start to rise exponentially faster than the general level of inflation, it must be suppressed.

For example, if this happens:

 

(note the rise of silver to a not unreasonable $50 per oz in 2011)

then the two subsequent smashes must happen. (pardon my lack of arrow artistry, I think all know what events are referenced).

Dave, I actually agree that there is a component of overall deflation-inflation of industrial metals that 'affects' the price of silver, especially during normal times when the dollar is not being rapidly destroyed and things are relatively stable (in the Keynesian nightmare world, "stable" is a relative word, perhaps relatively less unstable is a better word).

The most challenging issue I have discussing 1-8 above is that all all of these are open secrets, it is publicly available Fed and government policy.  And published Keynesian theses from everyone from Krugman to Yellen.  To me, it's not even a discussion point or controversial.  I tend to listen to what people say, what their follow on actions, and believe that they will do what they say.

Hitler said Germany needed room to expand, and annexed Austria and then Poland.  He said it, he did it.  Even then, most world leaders thought it was incomprehensible for Hitler to expand further into Western Europe.  The rest is history.

Not to make a too clumsy analogy of Yellen to Hitler, but according to the principle of listen to what people are saying and watch what they are doing, the Fed said it is going to create inflation, it must have confidence in the dollar, and it must not have competing monies like silver and gold.  And when they print trillions, and the prices of silver and gold gets crushed and managed into a trading range, dozens believe that it could not possibly be the Fed that is following through on it's words and policies.
It's amazing to me, as I watch this unfold, that we are debating whether the Fed is manipulating gold and silver prices.  Just like in pre-war Britain, learned people were debating the intents and actions of Germany, when all was in plain sight.

The only thing we are lacking is a taped conversation of Yellen talking to Dimon saying "it's okay for silver to rise to the high 20's, and we'll ensure that we don't drop the regulatory hammer on your contract dumps and outsized short position.  Just don't let the price get out of control."  I assume those conversations, probably done through surrogates, are held in private offices or private meetings and for obvious reasons aren't publicized.  Recall this is the 'New Fed' that uses communication as a tool of control and is intensely focused on 'optics', which is a euphemism for propaganda.

Dave, you diminished the monetary interest in silver as emotion.  I've been thinking about that, and don't entirely disagree.  What we disagree on is what "emotion" really is.  What you call "emotion", I call reasoned expectation by investors with precious capital about inflation and currency destruction.  To distill this down, the price buyers pay for silver is based on their expectations of the future.  Call it analysis, or fear, or emotion, these are definitions with no important differences.  The net result is the same.  People buy silver because they believe it will be priced higher in dollars in the future.  The only shoe to drop is to have free and true price discovery based upon actual supply and demand, not on a fabricated Comex and Globex corrupted marketplace.

 

  • Tue, May 06, 2014 - 01:05pm

    #33

    Wildlife Tracker

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    Thanks Dave

This dishonest, uneducated, and near illiterate Jeffrey Christian SOB clone/zero operator will have to explore this further and make some more extensive/detailed charts on this relationship  😉

Jeffrey Christian SOB clone or zero operator are pretty cool internet handles though

  • Tue, May 06, 2014 - 07:15pm

    #34

    Wildlife Tracker

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    I did it! I solved silver!

  • Tue, May 06, 2014 - 09:03pm

    #35

    Wildlife Tracker

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    Does this look about right…

For a top?

Dave you said somewhere around 80ish. That seems like a great guess to me

  • Tue, May 06, 2014 - 09:58pm

    #36

    davefairtex

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    fascinating patterns

Tracker-

Yes, that's what I saw last night too, exactly that pattern, although not that clearly presented.  If it holds, of course.  But its tantalizing, no?  And such lovely cyclicality to it.  An massive move up mirrored by a massive move back down, but with 20 "roughly" acting as support, all aligned on that curve moving up – roughly defined by "peak ore grades" as well as peak cheap oil.

People imagine manipulation when prices don't go the way they expect – in a straight line up, with only very modest deviations, preferably aligned with their favorite metrics such as M2 or BASE.  They want rational, calculated, understandable, predictable.  Unfortunately, the market is comprised of people, who are anything but.  Fear, greed, panic, euphoria.  Anyone who has traded understands this intuitively.

Cycles, I believe things move in cycles.  The central planners (and the goldbugs) may imagine their manipulation works, but I believe such activities will only "work" when aligned with the natural cycles that underly both the market and all of humanity.  They're great at pushing a rock that is already starting to roll downhill.  But try manipulating the public to stop buying cabbage patch kids when they want them – or manipulating the same public to continue buying them once the fad is done.  Good luck with that.

 

  • Tue, May 06, 2014 - 10:24pm

    #37

    davefairtex

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    hitler finally arrives, emotion vs rationality

Hrunner-

Hitler said Germany needed room to expand, and annexed Austria and then Poland.  He said it, he did it.  Even then, most world leaders thought it was incomprehensible for Hitler to expand further into Western Europe.  The rest is history.

After much waiting, we finally get a Hitler reference.  I'm invoking http://en.wikipedia.org/wiki/Godwin's_law.  This discussion must have reached its logical endpoint.

Well at least we can agree on one thing: you accept that the trading range of silver:copper from 1900-1964 is the natural, legitimate trading range for the two metals with respect to each other.

Therefore, until 1964, it is easy to see how silver had a stable ratio to copper because there was a high "industrial" demand for both, if you consider minting the circulating coinage of a nation equivalent to an industrial endeavor, which I do.

That's grand, especially in the face of the three wars and the 10-fold rises in silver vs the USD – which are mostly not visible in the silver-copper relationship.  Which is why I like copper as a reasonably good yardstick to answer the question "is silver in a bubble/superspike/something unsustainable?"

What you call "emotion", I call reasoned expectation by investors with precious capital about inflation and currency destruction.  To distill this down, the price buyers pay for silver is based on their expectations of the future.  Call it analysis, or fear, or emotion, these are definitions with no important differences.  The net result is the same.

To quote Reagan – "there you go again."  You imagine the market to be rational.  You WANT it to be rational, as does most of the world.  Of course if it was, if it was all about analysis, calculation, expectations of the future, and so on, there would never be any bubbles.  Its not simply the Fed that causes bubbles, its the willing borrowers who jump right on in.  The Fed plays their part by dangling the carrot, and people's greed and/or fear of missing out on the party does the rest.

I claim that the industrial metals are more grounded in rationality because their aboveground supply is less, and the accountants at all those companies are always calculating the effects of metals prices on P&L statements.  If another metal can be swapped in, they'll do it.  There's little emotion involved.  In contrast, the "investor" element of silver is almost completely fear & greed.  Fear of money debasement, and greed – especially when the price is rising – of wanting to get a position before it gets too expensive and/or the ever-present seduction involved with the perception of making some easy money.  Or the disappointment of being wrong, losing money, getting disgusted, and then finally capitulating and bailing out.

You imagine these silver investors to be Eugene Fama-like rational actors.  I think most are a bunch of lemmings, first all heading one direction, and later, heading in the other, motivated largely by emotion.

One only has to look at Tracker's cyclical silver charts to see all that fear & greed in prices – as the thundering herd first panics in, and then panics back out again.

I do agree with all the points 1-7, and I also agree that the central planners would love to be able to control everything.  I just don't think they can.  Over the longer term, markets go where they want, regardless of what the central planners would like.

Again, just my opinion.

  • Tue, May 06, 2014 - 11:36pm

    #38

    Wildlife Tracker

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    The nature of it is beautiful

I agree Dave. This chart discredits the long-term manipulation theory and it really is beautiful to observe. I'll give you a portion of the credit for the discovery of it 😉

  • Wed, May 07, 2014 - 01:08am

    #39

    Jim H

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    Silver

Dave quoted HRunner below;

Well at least we can agree on one thing: you accept that the trading range of silver:copper from 1900-1964 is the natural, legitimate trading range for the two metals with respect to each other.

Therefore, until 1964, it is easy to see how silver had a stable ratio to copper because there was a high "industrial" demand for both, if you consider minting the circulating coinage of a nation equivalent to an industrial endeavor, which I do.

Neither of these statements fit my own interpretation.  Prior to 1964, Silver was money in a way that had the face value of the coins being higher than the underlying metal value, therefore the metal vs metal relationship was simply that, Ag vs. Cu with no monetary investment pressure to change the relative supply vs. demand.  Ag was functioning as an industrial metal that just happened to be made into coins.  Let me say this differently;  If you wanted to invest in Silver, you would just hoard coins, where the stock-to-flow was high (kinda like Gold then and now).  Today that is not the case… today there is much less Silver around (stock-to-flow) as it is used and mostly not recovered/recycled industrially.  The percentage of total mined Silver being consumed through investment demand is rising rapidly, and this is without broadspread Western participation.

  While industrial silver consumption remained virtually flat since 2007, demand in another sector grew substantially.  In just six years, the demand for Official Silver coins increased from 39.7 million oz in 2007 to 136 million oz in 2013.  The 136 million oz figure was provided by the CPM Group in a press release of their 2014 Silver Yearbook.

http://srsroccoreport.com/the-one-silver-factor-the-fiat-monetary-authorities-are-worried-about/the-one-silver-factor-the-fiat-monetary-authorities-are-worried-about/

The past for Silver encompasses different eras that HRunner talked about.. and today, since the paper smash of 2011, is yet another era altogether.. one where investment demand is slowly overwhelming the market, as shown in some of the charts I linked earlier, and the article just above. 

Showing how mining costs create a floor shows… well.. the floor.  And I do think it's interesting that the manipulations have Silver at it's floor today.  The thing that the charts don't show is demand…. and while Dave (and WT?) can argue that price represents the balance between supply and demand… I would argue that price today represents paper futures demand in a (Comex) market that does very little physical delivery relative to all physical delivery.  

You guys seem to have convinced yourself that any future Silver price skyrocket will be the result of an irrational emotional herd action.  I simply don't agree… I think that the future Silver price skyrocket will be the result of natural forces of supply vs. demand forcing the cartel to take their boot off the pricing mechanism, allowing what is now a coiled spring to unwind.  You are looking at painted price charts, painted purposely, especially in the last few years, to make Silver look like a non-monetary, industrial metal, and you are telling us that Silver acts like a non-monetary, industrial metal.  Fantastic.

If Silver is an industrial metal, why do hackers work so hard at their DOS attacks on pro-Liberty, pro-PM sites?  

  I am currently hunkered down in a bunker beneath TBP Central as predator drones circle overhead waiting for me to show myself. The website has been under a relentless denial of service attack since Thursday afternoon. The site is being inundated with over 3 million hits per day that make it impossible for anyone, including myself, from getting onto the site.

http://www.theburningplatform.com/

Why do trolls try so hard to disrupt the dialogue on pro-PM sites, such as this one caught by SRS Rocco?  Who is engaging these trolls if there is not a broader plan to keep the Western psyche off the scent of the best possible investment for their long term financial health?  

http://srsroccoreport.com/the-grand-deception-in-the-precious-metals-industry/the-grand-deception-in-the-precious-metals-industry/

See, the conclusion that markets are manipulated is not a one-mode conclusion… rather it is a conclusion borne of connecting many, many dots.  There is not one chart that tells the story… it is a story of debt-based fiat money and the lengths to which TPTB will go to kick the can down the road of the ponzi that they so profit from.  

If Ben Bernanke spoke for the US, and the US is the IMF, and the IMF is giving the Ukraine a $17B loan, and Ukraine is going to spend $1B of this diversifying their reserves into Gold, then why did Bernanke say he does not understand Gold.. .that's it's just a tradition? 

  http://www.zerohedge.com/news/2014-05-06/and-first-thing-ukraine-will-buy-imf-money
 

 

 

 

                  

  • Wed, May 07, 2014 - 02:12am

    #40

    Jim H

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    Oh, and speaking of that IMF loan to Ukraine…

http://www.blacklistednews.com/IMF_Loan_to_Ukraine_in_SDR%2C_not_US_Dollars/35022/0/38/38/Y/M.html

This is the first that we know of a loan by the IMF, headquartered in Washington, DC, as specifying a loan in SDR (Special Drawing Rights) rather than in the customary US Dollar.  As with most policy changes from Washington, they ease changes into existence, this seems to be the start in the use of SDR’s.

If this is the start in the use of SDR’s, then in return it’s also the start in not using the US Dollar for IMF loans, which are essentially US Govt loans.

The IMF Ukrainian loan press release is viewable here: http://www.imf.org/external/np/sec/pr/2014/pr14189.htm

We should not take this change lightly as this is a strong indicator and precedent of future IMF loans, and perhaps how the US Govt will begin conducting business – being once again that IMF loans are indistinguishable from US Govt loans. 

In a deeper view, several points should be clear:

  1. Ukrainian debtors, such as Gazprom and by defacto, Russia are willing to accept SDR’s
  2. IMF is willing to write the loan in SDR’s
  3. US Govt is complying with its usage in place of the US Dollar

This being true, we have to consider the fact that the dollar is no longer sought after and considered as valuable worldwide, and perhaps won’t be of the same value during the course of the loan as it is today.

Wonder what that emergency FED meeting was about?  Hmmmmmmmmmmmm

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