While the Comex utilizes highly leveraged paper contracts to control the price of Silver, physical metal continues to be drained out of the Shanghai Futures Exchange. In just one week, total inventory declined by 24%.
As I mentioned in a earlier article, the Comex is more of a paper trading exchange in which the majority of contracts are settled in cash. However, the opposite is the case with the Shanghai Futures Exchange as the majority of contracts are settled with physical metal.
At the beginning of August, there were 148 metric tons of silver on warrant at the Shanghai Futures Exchange. In just three weeks, 29% of the total inventory was removed. The majority of this decline took place last week when 22 metric tons were withdrawn on Friday alone.
Also, we can see that since the beginning of July, 131 metric tons, or 56% of total silver stocks were removed from the Shanghai Futures Exchange. At this trend, it would only take a few more months to totally wipe out the remaining inventory.
I’ve received emails from some of my readers asking me “What does the continued draw-down of silver at the Shanghai Futures Exchange mean?” Unfortunately, I don’t trade silver in the futures markets, so I don’t really understand the dynamics behind the Asian markets.
So, I recently contacted Turd at TFmetalsReport to see if he might forward my inquiry to London precious metal trader, Andrew Maquire. As many of you all know, Andrew was one of the key players who assisted two JP Morgan whistle blowers to contact Bart Chilton at the CFTC about silver manipulation.
Nothing really came of the silver investigation, but that is no surprise. Regardless, it would be interesting to see what he has to say about the continued removal of physical silver from the Shanghai Futures Exchange. If, I receive a reply, I will publish it in an update.
Physical Silver Investing
Lately, I have noticed on my site and elsewhere there is this increasing percentage of DISILLUSIONED precious metals investors. While I can empathize with investors being frustrated that the price of silver has gone nowhere but lower over the past several years…. it doesn’t mean silver is a lousy investment.
I purchased my first ounce of silver at $4.52 an ounce back in 2002. That price is nearly 5 times less than the current price. Of course the prices of everything increased since 2002, such as the price of a barrel of Brent sweet crude oil which was only $25.
Brent crude is currently trading at $102 a barrel. Which means it’s now 4 times higher than its 2002 price of $25. If you bought silver in 2002, you protected yourself from the ravages of inflation as well as the collapse in the value of the U.S.Dollar.
In 2002, the Dollar Index reached 120… today it’s trading at 82. I don’t know when the Dollar finally crashes… but that time is approaching. The Fed and U.S. Treasury can still prop up that DEAD worthless piece of fiat currency, but a LIE doesn’t last forever.
Fiat Currencies, Lies that Die?
Lastly, some analysts say they have a CRYSTAL BALL as to the time and place when the precious metals will return to new highs. Maybe they do, however I believe it’s impossible to forecast short-term moves in the metals when the markets are totally rigged.
Which is why I FOCUS on the FUNDAMENTALS. Investors need to realize that ENERGY is the driver of the economy, not finance. Furthermore, a growing energy supply allows the global reserve fiat currency, the dollar to survive. So, if you follow that line of reasoning, then this is also true:
Cheap Oil Gives the Dollar Power, Cheap...Not so Much
This is the reason I include energy analysis on this site. I am trying to get it through the THICK SKULLS of the precious metal community that ENERGY is the key to the future value of gold and silver. Unfortunately, many of the precious metal folks are too wrapped up in Gold and silver manipulation that they are blind to the real fundamentals taking place elsewhere.
When the world realizes GLOBAL PEAK OIL is here, valuations of most stocks, bonds and other assorted paper assets will plummet. Why? Because it takes a growing energy supply to power economic growth that gives future value to paper assets. When the global oil supply peaks and declines, valuations go down the toilet.
If you haven’t read my article, THE UNKNOWN FACTOR: How the Global Financial System Will Collapse, I recommend you do so. There is a short presentation by Roger Boyd who explains the Co-Dependent role of Energy & Finance. When one goes down, so does the other.
You cannot value gold or silver to its present cost of production. It is only useful as a tool to provide a base price in a highly manipulated paper market. The huge rise in the future value of gold and silver will be due to the collapse in value of paper assets, not the rise in the cost of production.