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The Silver Market: An 'Operation,' Not a Liquidation

We know this could only be massive demand to short silver because of the price action: If these traders had all (or mostly) been leasing silver to go long, prices would have inevitably risen rather than fallen.

Readers need to understand that commentaries of this nature are not intended to frighten them away from the silver market; indeed, they should hopefully have the opposite effect. We have a commodity that is highly coveted by both investors and industrial users, where obvious evidence of price-suppression means we can buy this asset at wonderful "sale" prices.

But what about the manipulation, asks cautious investors? My response to that concern has always been the same: Low prices lead to high prices. In the 1990's, I believe that ruthless price-suppression in the silver market drove prices to a 600-year low (in real dollars) -- below $4/oz. What did that lead to?

First it led to the extermination of nearly all the world's silver miners, decimating supply. Simultaneously, the artificially low price for silver led to an explosion in industrial demand -- in hundreds of new applications. The simultaneous effect of those two changes was to cause silver inventories to plummet by 90% between 1990 and 2005.

And where did that lead us? To $49/oz in 2011. More specifically, it was the major "operation" in the silver market during the Crash of '08 -- where silver was momentarily tugged below $10/oz near the end of 2008 -- which led to the short-term peak of $49/oz in the spring of 2011.

We see a similar, if not identical picture today. What was/is necessary to take the price of silver above $100/oz (to something approaching a current "fair-market value")? Dragging the price all the way back down close to $20/oz. Low prices lead to high prices.

Naturally, this ties in with a piece of "good advice," which investors heeded, once upon a time: Buy low, sell high. The time for investors to be buying silver is not when prices are soaring higher in yet another meteoric rise. The time to buy is after or even during another "bankster operation" in the silver market.

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