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Eric Sprott: Why Are Investors Buying 50 Times More Physical Silver Than Gold?
The Admiral, Eric Sprott recently put out a piece entitled “Why are investors buying 50 times more physical Silver than Gold?”  This is a short and very interesting piece that I’d like to add my 2 cents worth to.  My short answer as to “why” is because of the paper markets and how they have priced the two metals.  Currently, Gold trades at a 55 to one premium over Silver.  Whether there is 16 times more Silver than Gold in the Earth’s crust or whether there is 3 times or 10 times as much physical Silver above ground or even deliverable does not matter.  It does not matter because the COMEX and LBMA have “priced” Gold at 55 times Silver.

So, since 55-1 is the “price,” physical investors are “voting” with their purses since they in essence get no vote on the paper markets.  In effect the physical buyers are merely “reacting” to the hand that they are being dealt.  If you can purchase 55 times more Silver for the same Dollar… well, so be it.  Gold and Silver are basically being purchased in equal Dollar amounts which as Mr. Sprott points out so well cannot continue forever because far more Gold (Dollar value) is being produced than Silver yet equal amounts of Dollar value are being purchased.  You cannot buy what isn’t available even in today’s “virtual world.”

In fact, I am a little surprised that even more Dollars are not going into Silver because it is “affordable.”  You can purchase more than 5 ounces of Silver with the same cash that gets you a measly 1/10th ounce Gold coin.  Hold these two in your hands and see if you don’t understand what I am saying here.  55 times more metal in one hand will “feel” more valuable than the other.  It’s like going to an all you can eat buffet (not to be confused with Buffett) vs. a five star restaurant.  The five star restaurant may have exquisite food but the odds are you might still be a little hungry after eating whereas you will feel completely full and satisfied after your second or third trip through the buffet line.

Mr. Sprott also points out that Silver trades on the COMEX alone about 300,000,000 ounces PER DAY which is nearly 5 months global mine production.  This is beyond ridiculous!  150 “paper ounces” of Silver trades every day on the COMEX alone for every one ounce of real Silver which is produced.  This figure does not include the LBMA, ETF’s, options or any of the other “convenient” ways to trade Silver.  I might add that the COMEX inventory available for delivery is less than 15% of what  trades every single day so if you do trade Silver and feel that warm fuzzy holiday feeling that your “long” COMEX position represents actual “Silver,” good luck!

As I have pointed out before, Bart Chilton of the CFTC can say whatever he pleases but we are now more than 4 years into an investigation that will never, can never and could never ever go anyplace than under the rug.  Any common sense finding that Silver is manipulated would then by extension include Gold.  Everything on the planet can be manipulated with the EXCEPTION of Gold and Silver!  You can say the Dollar is manipulated and “they” will believe you.  You can the stock market is manipulated and “they” will believe you.  You can say that LIBOR, all interest rates, bonds, economic numbers from unemployment to inflation to GDP are manipulated… that’s OK.  But God forbid should you say that Gold and Silver are manipulated.  Say this and you are a conspiracy nut!  You are a crazy with a tin foil hat on!

The moral to this story?  Gold and Silver “cannot” be manipulated because if they are then the value of all things paper is bogus (which we know they are).  You can fool most of the people most of the time but if they find out that there is no Gold or Silver in the “bank” or that their prices are rigged, even the biggest fool on the planet will panic and we can’t have that now can we?

One last comment, Gold has averaged a 15 time premium over Silver for several thousand years.  Even without an “overshoot,” Silver should outperform Gold in the future by at LEAST 3 to 1 just to get back to the historical average.  Silver is an absolute gift right now and at a deeper discount than anything you’ll find on Wall Street or at any “after Christmas sales.”  You should buy what you can now while product is available because there will be no rain checks when the supply is gone and this is a mathematical surety!