While it’s becoming more well known by the day that gold and silver are being manipulated lower due to paper short-selling, many still wonder what will be the spark to change current market dynamics. Today let’s consider the stock market, and how even a small reallocation into silver could send the price soaring.
Recently thestreet.com reported that, “Bloomberg’s World Exchange Market Capitalization index pegs global equity values at a record $76.3 trillion, a tally that tops the $75.3 trillion figure the International Monetary Fund uses to value the global economy.”
Of course that’s just a drop in the bucket compared to the bond and currency markets. And when derivatives are factored in, some analysts estimate the amount is actually in the quadrilions! That’s a lot of money, especially when compared to the size of the silver market.
According to silver expert Ted Butler, “today less than 1.5 billion oz remain in the form of 1000 oz bars (and less than 1 billion oz of that can be documented).”
At current silver prices of approximately $16 per ounce, 1.5 billion ounces comes out to $24 billion. Not a big market that could seemingly handle large investment inflows without moving higher.
Certainly with the way the stock market has soared while silver has languished in recent years it can be easy to lose track of how fast the silver price can move. But go back to the end of 2010 when Ben Bernanke launched his second quantitative easing program and silver rose to $49 in a relatively short period of time.
So what happens if even a small percentage of stock market investors panic based on the continued monetary, fiscal, and political dysfunction that seems to grow by the day? During the last crisis in 2008 the metals initially traded lower. But as time went by and more money was created, a new generation of investors began learning about monetary policy and buying silver.
The never ending paper selling that seems to accompany so many of the mysterious spikes down in price has quelled silver interest in recent years. But while the popping of the mainstream asset bubbles has taken longer to manifest than many precious metals owners might prefer, nothing has changed regarding the underlying fundamentals.
The Federal Reserve is still backed into that corner where it either continues to print in order to support equity, bond, and real estate prices, or raises rates and watches those markets crash. Fed officials including Janet Yellen, San Francisco Fed President John Williams, and Chicago Fed President Charles Evans are already talking about how inflation is too low and rates might need to be lowered again, and ultimately more money printing is likely on the way.
Of course in past years we’ve all been reminded that just because the fundamentals dictate a certain outcome doesn’t mean the rest of the crowd is going to jump in at the same time. However after watching how the price action in the cryptos has created a public mania that brings more attention into the sector, it’s interesting to imagine a similar effect in the silver market.
Even without the paper short position it wouldn’t take a large investment by Wall Street standards to push prices higher. But when you do factor in the possibility of the manipulation being overwhelmed, you’re adding a potentially explosive spark to the market.
So every day you see stocks set new all-time highs, just remember that when even a fraction of that money starts to look for a new home, the impact on the silver price could be one you’ll remember for the rest of your life.
