Well, they're not exactly stealing physical gold and silver, and they're not exactly thieves, either. What's happening is that on global futures exchanges, the value of gold and silver is being diminished by a consortium, or a cartel of bankers, traders, assayers and bullion dealers whose objective is to get the best price on gold and silver for themselves and the worst price for you.
As the r/wallstreetbets crowd trundled into the precious metals space last week and with more effort on Monday, they managed to crack open a Pandora's box of trickery and deviousness that still remains largely outside the public's view. Like Las Vegas, what happens on futures markets largely stays in futures markets, because, as comedian George Carlin suggested years ago, "it's a big club, and you ain't in it."
The redditers, fresh off the smashing success in routing short sellers in GameStop (GME) and other names like AMC Entertainment (AMC) and American Airlines (AAL), issued a challenge to the silver futures market controllers, rallying their troops to buy up shares of silver EFTs, SLV and PSLV, buy shares of miners like First Majestic (AG), Endeavour Silver (EXK), Hecla Mining (HL) Fortuna Silver Mines (FSM) and to purchase and hold physical silver.
At the start, wallstreetbets appeared to be winning. The futures market in Asia opened with a bang, sending silver up about eight percent, from $27 to $29. As day dawned in the US, the bid was wavering between $29.00 and $29.50, before the traders in the futures pits executed one of their classic smackdowns, sending the price reeling below $28 by mid-morning. By the close of trading in New York, silver stood at $28.55, an apparent, but eventually, phyric victory for the redditers.
However, since the reddit horde is mainly US-based, their influence waned in the overnight Asian market, as the controllers send the price of silver crashing as low as $26.30 the ounce. As markets prepare to open again in the US, the silver price hovers again around $27.00. It's apparent that the redditers have bitten off more than they can chew, for now.
It's understandable. They're up against a consortium of central banks, bullion banks, commercial dealers, commercial banks, institutional traders, and establishment operatives who've been at this game for decades. These people are not about to be upended by some upstart social network of millennial punks.
However, the battle has been engaged and it's doubtful that the reddit crowd is going away any time soon. What's more likely is for their roster of players and supporters to expand now that they've demonstrated the power of an organized crowd with a unified purpose.
Perhaps the attempt to smash the silver market was premature and a little bit of chest-thumping bravado. What appears certain now is that weaker hands will sell their silver at a loss to the "diamond-handed" reddit crowd that will remain engaged to some degree. At the very least, what wallstreetbets did for silver was empty the shelves of bullion dealers around the world. Shortages of metal and shipping delays are now common among online dealers like Provident, Scottsdale, Apmex, JM Billion and others. Coin shops in various locales report being sold out of common silver items like Eagles, Maples, and one to ten ounce bars. Many dealers are expressing concern over sourcing future supplies. Some suspended buying on their sites altogether while most list the bulk of their inventory as "out of stock."
A passing glance at the roster of members in the London Bullion Market Association (LBMA) evidences just how tilted the playing field in the precious metals space is towards those who produce and procure gold and silver at the fountainhead as opposed to those who buy them at retail, and this is what wallstreetbets, gold bugs, and silver stackers are up against.
The LBMA, which conducts auctions, "fixes" prices, holds symposiums, and helps to regulate the global trade in gold, silver, platinum, and palladium, are in the business of price control to their benefit and also to serve their ultimate masters, the central banks of the world, particularly the US Federal Reserve, ECB, Bank of England (BOE), Bank of Canada (BOC), Bank of Japan (BOJ), People's Bank of China (PBOC), and the Swiss National Bank (SNB).
The LBMA and the COMEX futures markets seek to ensure that precious metals, especially gold and silver, which are real money, don't become too competitive with the fiat currency of the central banks, which is why gold and silver have been suppressed for many decades and why, as long as the LBMA issues dialy "benchmarks" or "fixes" and futures prices are used as valuation standards, true price discovery in precious metals will never be achieved.
According to LBMA's chief executive, Ruth Crowell, "The LBMA is the world’s authority for precious metals. We’re the standard-setting organisation that defines how precious metals are refined, as well as traded around the world. It’s our job to ensure the quality and the integrity of the metal itself, as well as the market participants."
In other words, the LBMA's job is to control the flow of precious metals, largely to the benefits of their members, of which the general public is not one of them. They are the successors of the London Gold Pool, which collapsed in 1961.
From Wikipedia's entry on the London Gold Pool (emphasis ours):
The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.The central banks coordinated concerted methods of gold sales to balance spikes in the market price of gold as determined by the London morning gold fixing while buying gold on price weaknesses. The United States provided 50% of the required gold supply for sale. The price controls were successful for six years until the system became no longer workable. The pegged price of gold was too low, and after runs on gold, the British pound, and the US dollar occurred, France decided to withdraw from the pool. The London Gold Pool collapsed in March 1968.
The London Gold Pool controls were followed with an effort to suppress the gold price with a two-tier system of official exchange and open market transactions, but this gold window collapsed in 1971 with the Nixon Shock, and resulted in the onset of the gold bull market which saw the price of gold appreciate rapidly to US$850 in 1980.
Even Wikipedia is using words like cooperate, interventions, price controls, and even "suppress" in regards to the activity of the defunct London Gold Pool, so can you say, COLLUSION, CONSPIRACY, CARTEL?
After 1980, the gold price was suppressed well enough to get it below $300, but there was a bit of a void, insufficiently filled by the Bank of England. A new, official benchmark organ was needed. Thus, in 1987, the LBMA was formed by the Bank of England (big surprise!). From the LBMA website:
LBMA was established in 1987 by the Bank of England, which at this time was the bullion market's regulator. LBMA took over the roles previously carried out by two separate organisations, the London Gold Market and Silver Market, whose origins date back to the mid-nineteenth century.The world’s trade in bullion is London-based with a global reach of activity and participants. The roots of the London Bullion Market can be traced to the partnership between Moses Mocatta and the East India Company, who started shipping gold together towards the end of the 17th century. Shortly afterwards, while Sir Isaac Newton was master of the Royal Mint, gold in England was overvalued so it became more freely circulated than silver. This increased circulation quickly led to England having a gold based coinage, whereas the rest of Europe remained silver based until the 1850s.
This is what the redditers ran into as they attempted to force the price of silver higher and damage the short-sellers. While they succeeded to some small degree on Monday, overnight Tuesday, the suppression commenced full throttle, sending silver down as low as $26.30 an ounce.
It's worth noting that the price of entry into the silver futures market is a single contract representing 5,000 ounces of metal, or, on a cash basis, about $135,000 if silver is $27 an ounce. The reddit people don't have that kind of money (some may), but the bullion banks, who hold the bulk of short interest, have billions. While this imbalance is daunting, it's going to take more than a few days for the commoners to even put a dent into the institutional money. Any attempt to break this market is going to last months, if not years.
Other methods should be employed, the most evident to be the establishment of another standard, representing the price of gold and silver on the open, public market, like on eBay or through a network of online dealers and local coin shops. Such a standard or benchmark need not be updated in real time. While the price of 1, 10, and 100-ounce silver and gold coins and bars may vary by location, it should be a little more stable, as are the London "fixes", if only to afford some degree of comfort to retail buyers and dealers alike.
A standard valuation metric needs to be established for the common investor, as opposed to the mega-banks and central banks which deal in tonnage rather than ounces. Money Daily has been tracking prices on eBay as a kind of counter-balance to the LBMA and futures markets. The prices tracked every Sunday morning here are taken as a survey of most recent sales and are indicative of prices paid, including "premiums" and shipping, which is often free. when adding the premium over the LBMA's spot price, one can readily see that the prices actual people and dealers are paying and receiving are well-separated from the institutional spot prices. It's actually even more complicated, accounting for the 10% or higher fees taken out by eBay, but that's the game, and plenty are playing.
Circling back to the charges of collusion and conspiracy surrounding the LBMA and futures trading, history suggests that the interests of central banks and their agents are not well aligned with those of the working class or even the investor class.
If the price of an ounce of gold increased from $35 to $850 from 1971 to 1980, what should the price of gold (and silver) really be today. Let's give the gold and silver riggers some credit and "benchmark" the prices of gold and silver to where they were at the end of the Great Financial Crisis of 2007-2009.
Gold advanced from $800 at the start of 2009 to $1400 by the end of 2010. For convenience sake, let's take the middle of that range $1100, as our starting point. Silver took a similar path. On January 8, 2009, silver was $11.12 per troy ounce. On December 28, 2010, silver was pricing at $30.30. The midpoint of those extremes is $20.71. That's our reference point.
So, now we're talking about 11 years of price suppression, longer than the nine years (1971-1980) from Nixon's closing of the gold window to the peak price of $850, a period in which the price of gold increased by more than 24 times.
Applying that 24X increase to prices from 2009-2011, gold should be priced at $26,400 and silver should be $497.04. Adjustments can - and should - be made to have silver recalibrated to aratio of 16:1, 12:1 or even 8:1 to the price of gold, which would render the following silver prices:
Gold/Silver Ratio: Silver Price @ $26,400 gold
16:1 ..... $1650
12:1 ..... $2200
8:1 ...... $3300
Suggesting a GSR (Gold-Silver Ratio) of 16:1 or 12:1 dates back to Byzantine times and even recently. Those are established norms which have been tossed aside by the suppression of the central banks and LBMA. The 8:1 ratio is suggested by the authority of First Majestic CEO, Keith Neumeyer, and others, who attest that to be the current ratio of gold to silver being pulled out of the ground. For every new ounce of gold, eight ounces of silver are found.
It should be clear to everybody that gold - and even more so, silver - is massively undervalued and that the intention of the central banks and their agents of suppression in the LBMA and futures markets is to keep silver priced extremely low because it is money, it is plentiful, divisible, easily recognizable, and has been used as a store of value for thousands of years, just as has gold.
This story is far from over. In fact, this chapter has only just begun.
At the Close, Monday, February 1, 2021:
Dow: 30,211.91, +229.29 (+0.76%)
NASDAQ: 13,403.40, +332.71 (2.55%)
S&P 500: 3,773.86, +59.62 (+1.61%)
NYSE: 14,596.18, +198.98 (+1.38%)
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