In our feature article this week we discussed the current silver shortages and also featured a video when Mike Maloney mentioned how the price of silver had been falling even while there was significant demand for silver globally.
He also explained how this might partly be explained by a rush for cash currently causing people to sell gold and silver positions, as happened in 2008.
However he also made mention of “other factors” that he’d be discussing with someone later.
That someone turned out to be Ed Steer. Formerly of Casey Research but who is now out on his own writing his excellent daily Gold and Silver news column over at edsteergoldandsilver.com. We’re used to reading his column with news items from other people in it so it’s nice to hear from Ed directly. Someone who has been involved in the precious metals markets for 15 years.
In this 2 part interview they cover the topic of why gold and silver are falling in price even while demand is increasing. And how prices are likely being artificially depressed but how this can’t last forever.
Crisis Up But Silver Down? (Part 1) Mike Maloney & Ed Steer – Summary
In Part 1 they cover topics such as:
+ Why the “powers that be” don’t want the precious metals prices rising at the moment.
+ How the worlds largest banks are active in the gold and silver futures markets and affect the price.
+ How electronic gold futures contracts being sold into the market has the same impact on price as selling real physical gold. But the exchange is what sets the world spot price.
+ How the physical price follows this until they “overdo it” and suppress the price too much. You then see a disconnect where shortages develop because the price is just too low.
+ How this has suppressed silver production. Miners can’t make any money and so are forced to mine their higher grade ore. How this decreases the mine life significantly, is not sustainable and so will be reflected in price sooner or later.
+ How low prices are causing less gold to be mined now but also in the future. As if the gold price were to rise a few hundred dollars lower grade ore will be mined and so production will fall dramatically.
+ How excess demand can affect the price of physical gold dramatically as supply lines can empty out in less than a week. So you can see large premiums above the spot price when this happens.
+ How the precious metals price is likely lower than it would be in a free market.
+ Why Silver should be around $100 an ounce based simply on the US govt inflation rate.
+ How the day of reckoning is getting close to hand and it will be interesting to see how high some rallies might be in the future.
Silver Down But Crisis Up? (Part 2) – Mike Maloney and Ed Steer – Summary
Here’s whats covered in Part 2:
+ In precious metals futures, the technical funds/managed money are maximum short and the banks are maximum long. So the only thing we don’t know is whether the banks will stand in front of the next rise in price or not.
+ Who knows how long the banks will be able to keep it up. Only until the last rush into gold and silver.
+ How we’re just seeing the stress cracks in a system that cannot last.
+ How the other 3 times we’ve transitioned from one monetary system to another, the average man on the street didn’t know it was happening. As it only affected large multinational banks and settlement between countries. But how this time it will affect everyone on the planet. As there is no currency on the planet backed by anything.
+ You either default on it or inflate it away. Most likely they’ll inflate it away.
+ How Russia, China and India between them are buying all the mined gold in the world. Leaving the rest of the world to live off scrap or from central bank supplies.
+ Years ago you could go months at a time with no threat to the global dollar standard. But now there are weekly occurrences that seem to indicate we are getting closer to the end game.
+ How the price being managed means gold and silver are on sale. And how this could well be the last chance to get physical gold and silver at this price. Ed reckons the average consumer should be buying as much physical gold and silver as you could comfortably afford to buy without going overboard.
+ You should be buying them with both hands at the moment.