Platinum Market Illustrates Silver Manipulation
Jeff Nielson: Observant precious metals investors would have recently noticed a rare – almost unheard-of – occurrence: a bullion market where prices actually respond to supply/demand fundamentals. No, obviously I’m not referring to either the gold or silver market, but rather the platinum market.
Analysis was provided by a mining website. Unlike the pseudo-analytic drivel spewed by the mainstream media concerning commodity markets; this featured long-term, hard data and cogent reasoning – versus the short-term trivia, empty rhetoric, and fear-mongering we generally get from the Corporate Media.
Specifically, the article noted that recycling in the platinum market had quadrupled over the last decade. Compounding that bearish supply factor, industrial demand has softened considerably, and even jewelry demand has been shown to be more price-sensitive than previously thought.
The combination of these factors has meant that platinum inventories are abundant, and with weak supply/demand fundamentals and abundant inventories, prices have floundered; with the price of platinum now trading below the price of gold (a very unusual situation).
With a concrete example illustrating both supply/demand fundamentals and how markets are supposed to respond to those fundamentals; the extreme/serial manipulation of the silver market appears even more blatant in comparison. Now let’s look at the “fundamentals” in the silver market.
We can begin by looking at the absurdly low, current price of silver. This artificial/suppressed/manipulated price can be illustrated in several different ways. Relative to the price of gold, silver is priced at less than 1/3 of its historical average.
During the nearly 5,000 years in which humanity has been mining/refining gold and silver; the gold/silver price ratio has averaged roughly 15:1. Yet currently (and through all the recent decades of silver manipulation) this ratio has been depressed to 50:1 (or lower).
We know that this is a case of silver being under-priced rather than gold being over-priced through simply examining the supply-side of the gold and silver markets: the miners. Gold and silver miners are experiencing their second “depression” in five years – as the radical under-pricing of silver and gold has made it difficult for established miners to raise capital, and nearly impossible for the junior exploration companies who are the life-blood of the mining industry.
Indeed, silver mining is so severely depressed that despite a six-fold increase in the price of silver over the last decade most of the world’s silver is still produced as a secondary byproductof other mining – while bankrupted silver mines remain shuttered all over the world, and new projects are extremely slow to develop.
Further proof of the suppressed/manipulated price of silver comes from the collapse of inventories, where global inventories plummeted by more than 90% over just 15 years (from 1990 – 2005). Despite the collapse in inventories, the six-fold increase in the price of silver has barely registered any reaction at all on the supply side, where mine-supply limps higher at an anemic rate of about 2% per year.
This is yet more proof of silver price-manipulation, as with any/every commodity market where prices are free to respond to supply/demand fundamentals, we would see prices rise to whatever level was necessary to fuel new supply and discourage consumption – until supply/demand equilibrium is reached. This is the literal definition of a “free market”, something which most of us have never seen in the silver market during our entire life-span.
This brings us to recycling. Here a comparison of the silver market and the platinum market is highly instructive given the many, close similarities between the two markets. Both silver and platinum possess an abundance of superb chemical/metallurgical properties. Both are used in many high-tech industrial applications. And both tend to be used in small quantities in those applications.
Here the similarities end. As already noted, platinum recycling has quadrupled over the past decade, despite the price of platinum having merely doubled over that time-span. In our inflation-ravaged economies, the price of platinum has under-performed versus most other commodities.
In the silver market, those parameters are totally reversed. Despite the six-fold increase in the price of silver over that same time-span, silver recycling has remained essentially flat. The least-worst source for supply/demand data on the silver market is the Silver Institute. Silver-recycling is currently such a minor factor in the supply/demand picture that it doesn’t even record recycling data as a category unto itself.
Instead, silver-recycling is subsumed by the category of “old silver scrap” sales, which primarily consists of ordinary people pawning their sterling silver tableware and tea services. Yet even when we combine the pawning and actual “recycling” of silver into a single category, we see an anemic rise of little more than 25% while the price of silver increased 600%.
Half of that increase occurred in 2011 alone, when the price of silver briefly spiked to a (nominal) 30-year high. With the price of silver now more than 30% below that peak, we will likely see that recycling/scrap-sales of silver fell in 2012.
We live in an era of recycling mania, yet silver-recycling is nearly as depressed as the silver mining industry itself. Why is this? Severe under-pricing of silver is the only possible explanation.
With silver inventories having collapsed while platinum inventories remain abundant; we collectively have a much greater motive/incentive to recycle silver than to recycle platinum. With silver being used in some of our most-important emerging technologies (everything from cruise missiles to solar-panel cells to unique anti-microbial compounds); we have a much greater incentive to recycle silver than to recycle platinum.
Again, there is only one possible explanation as to why platinum recycling is exploding while silver recycling is extremely depressed: the gross under-pricing of silver. In previous commentaries I have pointed out how the permanently depressed state of silver mining is absolute proof of silver price-suppression.
For over 4,000 years most of the world’s silver came from “primary” silver mining. It was only after the price of silver was driven (manipulated) to a 600-year low (in real dollars) that global silver mining collapsed in the 1990’s, with more than 90% of the world’s silver mines bankrupted. Even after the partial recovery in silver prices, most of these mines remain closed.
With recycling being the “other component” of supply, we have completely independent verification of this principle of logic/economics previously expressed. The only possible reason why the supply of silver remains in a permanent state of depression – despite the complete collapse of inventories – is because of the permanent suppression of the price.
With the price of gold also depressed (as evidenced by the struggling gold miners); at its historical average $110/ounce for silver would represent an absolute minimum “fair price” for silver today. However, by the time prices had risen enough to restore health to the silver and gold mining industries; we would more likely be looking at a “minimum price” for silver somewhere in excess of $150/oz – today.
Given the extreme/unlimited (and completely insane) currency-dilution now taking place on both sides of the Atlantic, this “minimum fair price” for silver can only increase exponentially from the $150/oz level. The platinum market provides us with a crystal-clear picture of how the silver market would behave – if it was ever freed from the relentless price-manipulation (and fraud) of the Western banking cabal.
Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada www.bullionbullscanada.com. He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among the most complex (and misunderstood) in the world.
Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.