Yesterday, May 1st, here in Minneapolis it was snowing. The buds are ready to burst on the trees – and snow was falling. This makes no sense. And neither does the gold and silver market. We should have weather in the 70s, not the 30s. Gold and silver should be moving up, not down.
The economy is slowing down. Employment is soft. Housing is losing steam. Under these conditions, there is no way the Fed will cut back on QE. The $85 billion a month they are injecting into the economy is NOT ENOUGH to get the economy started or have a positive effect on employment. That is logical. 70s in Minneapolis on May 1st is logical. Mother Nature and the Cartel can throw a wrench into what is normal or logical – but never for very long. We will enjoy the 70s by the beginning of next week. We will enjoy the rise in gold and silver soon as well. Eventually, what is logical and normal will prevail – in the weather and in the precious metals arena.
Ted Butler has a theory about silver. A majority of the world’s one billion ounces of silver bullion is now owned by investors, primarily via the ETFs. The silver is no longer owned by bullion banks and it is not available for leasing. It exists, but it is not available at these low prices and only higher prices will pry it loose from investors.
Due to the record demand for Silver Eagles, the US Mint has become the largest silver user in the world. Shortages have occurred because they cannot source a sufficient supply of blanks to meet the current demand for coins.
Should this turn into a shortage in other forms of silver too, like the bars that are used for industrial purposes, they will panic and start to hoard silver just like the retail investors are now. That will be the event that sends the price into the stratosphere.
What is out of whack now is not a shortage of silver, it is the price. It is too low and that is causing massive demand and shortages.
The demand caused by the huge drop in price is the result of speculators using High Frequency Trading and computer algorithms and not by real events. That is what caused a decline of 15% in gold and 20% in silver in two days. Blame the speculators and their computer programs.
The shortages will abate when the price rises to a level that the owners of physical silver deem high enough to provide their silver. That price is probably over $30, where silver should be trading now. That is what it takes now to buy actual physical silver.