Jeff Nielson: Arithmetic is a harsh mistress. Irrespective of how badly the banking cabal wishes to suppress the prices of gold and silver, and irrespective of how much brute force they are able to apply to the market over the short term with their (illegal) manipulations; the inexorable pull of supply and demand will inevitably overwhelm any/all such operations.
This is not the whimsical theory of some ivory-tower economist, but a simple fact of markets which has been demonstrated to us all in totally unequivocal parameters. Thus back in the “bad, old days” of manipulation – when the banksters still had large hoards of bullion to dump onto the market and crush the price
– the price of silver was pushed to a 600-year low (in real dollars). What did the extreme manipulation of the silver market in the 1990’s reap for the banksters? A 1,000% increase in the price of silver over the following decade.
The misunderstanding of most novice investors in this sector (and a source of tremendous frustration) is that these short-term episodes of manipulation somehow delay (or even prevent) gold and silver prices from reaching their “maximum” levels. In fact the precise opposite is the truth: each and every manipulation operation translates to even higher long-term prices for gold and silver. It’s all just simple arithmetic.
Perhaps the easiest way to illustrate these dynamics is through comparing the gold market and the silver market. While both of these markets have been subjected to extreme manipulation, it is clear that manipulation of the silver market has been much more severe. There are two related numbers which illustrate this point.
Knowledgeable investors know that the long-term price ratio of gold versus silver (i.e. over roughly 5,000 years) has averaged approximately 15:1. This closely coincides with the ratio of the natural occurrence of these two elements in the Earth’s crust (approximately 17:1). Not only did this price ratio remain relatively constant over several millennia, but the fact that the price ratio so closely mirrors the rate of occurrence of the two metals shows that (in relative terms) our species has demonstrated a roughly equal preference for the two metals throughout recorded history.
These facts establish beyond any possible contradiction that over the medium or long term the price of silver must remain at close to a 15:1 ratio versus the price of gold. There is only one factor which could alter this arithmetic: if our preference toward the two metals changed. Has any such change in preferences occurred? Yes. Silver has become much more popular.
This increased popularity comes in two distinct forms. Modern technology has established silver as the most valuable/versatile of all metals, with more new silver-based patents being created than for any other metal. Along with that there has been an even more stunning/dramatic surge in investor demand for silver – a consequence of silver being perennially and extremely undervalued.
In 2011, the United States sold nearly 40 million Silver Eagle 1-oz coins while only selling approximately 1 million Gold Eagles – a near 40:1 ratio. This ratio is more than double the 5,000-year price ratio, and more than double the relative natural occurrence of silver. In other words, over the long-term this demand profile is totally unsustainable – and must result in (first) the total depletion of silver inventories, and (second) a rise in the price of silver sufficient to stifle silver demand sufficiently for balance to be restored.
However, the demand profile of silver is literally only half the story here – and the supply-side illustrates the futility of bankster manipulation in even more absolute terms. Given that silver is 17 times more plentiful in the Earth’s crust, we would expect the world’s mining industry to be producing about 17 times as much silver as gold each year. In fact actual production numbers are nowhere near this ratio.
