Silver’s Three Legged Bull-Run Stool

A case can be made that silver's current price “stability” – believed by many to be well below where it "should" be – is the result of at least three interlocking factors.

There are certainly other considerations, but the following seem especially relevant today…

Our chosen metaphor is the three-legged stool. Take one leg away, and the stool topples. In the case of silver, the outcome is likely to be a violent price rise of epic proportions.

1. Draining the Silver Trading Swamp

In recent months, a series of criminal charges and admissions among banks, trading houses and their employees have begun to expose unfair and/or illegal trading practices. They have detrimentally influenced metals markets for many years, according to critics which include Ted Butler and the Gold Anti-Trust Action Committee (GATA).

Their illicit activities include "spoofing," i.e. placing, then withdrawing large orders to cause investors to panic/offset a position, or risk a margin call; creating almost unlimited sell orders in the futures markets to break a bull rally's back; writing derivatives to create/lease out more "paper metal" than is physically produced each year; and perhaps even collusion with government agencies to manipulate gold and silver prices as a tool of foreign policy.

Manipulation has become so widespread and blatant that the government is now leveling racketeering charges. How it all shakes out is anyone's guess, but this can't help but bring increased transparency in restoring supply/demand balance to markets sorely in need of it.

2. Mined Supply Constricting

Virtually all the precious metals, some base metals, and the PGMs (platinum and palladium) are currently mired in a series of systemic factors calling into question the ability of producers to reliably meet marketplace demands through the end of the next decade.

Declining production grades (in grams, ounces, or pounds/ton) plus a lack of major new discoveries to replace what's mined leads to lower economically recoverable reserves.

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