Why are Silver Prices Falling

Why are silver prices falling when traditionally in times of geopolitical and economic upheaval gold and silver bullion is seen as a safe haven asset. This flight to safety should increase demand for silver which should move the silver price higher.

• We have extended “bank holidays” and capital controls in Greece.
• Gold bullion coin sales in Greece have been suspended.
• The Chinese stock market has fallen 30% since the beginning of June. Trillions of Dollars have been wiped of the value of their market.
• Relations between nuclear superpowers Russia and America have deteriorated with Russia’s recent annexation of Crimea and their alleged support for the Ukraine rebels.

It is important to remember that currently the silver and gold price is set by the Comex and is dominated by speculative entities and not the end users or physical precious metal investors. This means that the big banks with large paper short positions are able to move the metal up or down by virtue of their large open positions. The Comex is not predominantly a market where people buy and sell bullion but rather a place where speculators take bets on future market direction.

Mike Malony, CEO of GoldSilver.com believes that we are seeing a similar scenario to 2008 when highly leveraged traders buying more stock than they can afford received margin calls from their brokers and were forced to liquidate their entire portfolios, including their gold and silver holdings. Maloney believes this explains the anomaly between the shortage in the physical silver market and the falling silver prices on the Comex.

[su_pullquote align=”right”]Investors are blindfolded by central bank intervention. We used to think plunge protection was heresy – but now, if your nation doesn’t have a plunge protection team, that’s heresy! – Rick Santelli[/su_pullquote]Even mainstream media outlets like CNBC’s Rick Santelli are openly discussing market manipulation as fact.

Mark O’Byrne from GoldCore.com is of the opinion that prices are being manipulated to protect the large banks that have large open net short positions. O’Byrne speculates that this downward pressure in the paper silver price may also have been engineered to give JP Morgan an opportunity to buy physical silver at firesale prices.

Physical Silver Shortages

• The United States Mint has suspended sales of the popular 1 ounce American Silver Eagle.
• According to U.K. Royal Mint demand from Greece for the Sovereign gold coins was double the previous five month average in June.
• The Gold and silver mining industry is being decimated by a combination of higher production costs and lower spot metal prices which will inevitably lead to supply shortages.

In Conclusion

Falling gold and silver prices make no sense in a capitalist free market economy where as we have discussed above, physical gold and silver is in high demand and short supply.

Record demand and supply constraints must inevitably put upward pricing pressure on physical metal prices.

It is our view that market fundamentals do not support the current stock market valuations in South African and International markets and that both gold and silver show excellent value at current levels.

[su_pullquote align=”left”]At the end fiat money returns to its inner value—zero. – Voltaire[/su_pullquote]The price of silver is being determined by the paper market and like a large inflatable ball that has been held down in a pool, it must at some point rise, the further it is pushed down the faster and more explosive the upward move will be when this happens. When and how high is a more difficult question to answer but we at African Bullion agree with pundits like Jim Rickards and Marc Faber who recommend a 10 – 15 % allocation to Gold and Silver.