The view of the silver market from ten thousand feet away shows what is really going on behind the scenes. The manipulation of the market by deep pocket bullion banks with a hugely concentrated combined naked short position has become increasingly evident.
Furthermore, their market spoofing practices that involve dropping their bids to give the indication of a weak market and then quietly buying back their short positions for a profit are well known.
Silver Market Regulation Remains Ineffective
Despite these highly questionable practices, the more realistic silver traders and investors also know that the CFTC’s purported investigation into the manipulation of the silver market will never resolve successfully because the regulators have already been captured by the manipulators.
Most silver market observers — even some of the most influential and bullish members of the analyst community —simply refuse to acknowledge this absolute key to understanding how silver trades and is priced.
Economic Data Effects and Explanations
So, what is the observed effect on perception and the surreal world of market pricing that keeps the price of precious metals artificially suppressed?
First of all, when good economic data comes out, stocks tend to rise and precious metals typically decline. The explanation for this reaction is asset rotation because a better economy means there is less need among investors to own "safe haven" assets like the precious metals.
Nevertheless, when bad economic data comes out, stocks tend to fall but precious metals also decline. The apparent explanation for this is that a worsening economy means more margin calls and greater cash needs that result in the liquidation of precious metal holdings.
Then, when so-so economic data is released, dividend stocks and bonds tend to go up, but precious metal prices again drop. This is explained by the idea that precious metals do not pay a dividend.
Quantitative Easing Effects and Explanations
Quantitative easing, or money printing as it is sometimes called, should ideally dilute the value of a paper currency and therefore increase the value of commodities like the precious metals when expressed in the paper currency.
Nevertheless, when more quantitative easing is announced, precious metal prices fall. This is explained by investors forgoing owning the precious metals when stocks are now expected to outperform. Another explanation is that a QE program signals that deflation is coming, so there would be no need to own precious metals as an inflation hedge.
On the other hand, when no new QE appears to be forthcoming, precious metals also decline. Supposedly, this happens because the paper currency’s value will not be further diluted by more money printing.
Given the prevalence of such explanations, it sometimes seems that silver simply cannot win the game of perception. Nevertheless, what is really going on is that the price of paper silver is being talked, explained and pushed down so that the smart money can buy the physical metal at an artificially low price.
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