Thinking Silver? Talk to the Gold Bugs

NEW YORK ( Bullion Bulls Canada) -- It is a reality of life that those investors who favor gold (and silver) as their preferred asset-class need to have thick skins. On aggregate, Western investors are holding roughly one tenth the amount of gold and silver which they have held (in similar circumstances) in the nearly 5,000 years since we first began refining "good money."

Strip away the "gold bugs," however -- the less-than-5% of the general population who hold virtually all of our gold (and silver) -- and the Average Investor (in Western societies) is only holding approximately 1% as much bullion as in any similar circumstances, in the thousands of years since we first began refining these metals.

This absurd level of under-ownership comes despite the 12 consecutive years of rising gold prices, a statistic unmatched by any other asset class. Obviously "it's lonely at the top."

While the Corporate Media have engaged in an endless stream of juvenile scare-tactics to try to frighten people away from the world's best-performing asset class, probably the most defamatory of these attacks is the continual insistence that gold-bugs are Zealots who worship gold like a "religion."

There are many ways to rebut such a ridiculous smear, however perhaps the best way to do so occurred to me while attending a recent international resources conference in Vancouver. As always, the "gold bugs" featured prominently in this conference.

The commodities professionals who put together such shows first of all recognize the best-performing class of commodities (and all assets) when they see it. Secondly, they understand that the much-maligned gold bugs can be counted on to provide the most interesting and insightful presentations among all of their speakers. It was thus no surprise to see the executive group of the Gold Anti-Trust Action Committee (more commonly known as "GATA" ) being asked to once again share their knowledge with the attendees of this conference.

It was Chris Powell of GATA who actually inspired my own (minor) epiphany, when he first reminded us of yet another scurrilous accusation hurled at the gold bugs by the mainstream media: that they (we) all are "nothing but a bunch of conspiracy theorists." He then pointed out in reality GATA was a non-profit information-gathering entity, which does its research and present its facts to a large-and-growing global audience.

This was not mere assertion. The Gold Anti-Trust Action Committee then went on to demonstrate the truth of that statement by spending most of their allotted time talking about silver. This is not the behavior of zealots. You won't hear devoted Christians saying that while "their god" is good, if you want to see "a really great god" in action you should follow Buddha.

Zealots, by definition, are unwavering believers in their own dogma. Yet not just with GATA, but with most of the "community" of gold bugs, we hear these individuals asserting one-after-another that the real story here is in the silver market.

Understand the enthusiasm these individuals have for the gold market has not wavered in the slightest. Indeed, for numerous, fundamental reasons the gold bugs are more optimistic about the future of gold than ever.

Put another way, these analysts are more pessimistic than ever about the speed with which our servile governments are destroying our economies.

More than anything, gold bugs are "detectives": seekers of the Truth, in a world where the Corporate Media bombard us with a deluge of fear-mongering and outright lies to attempt to ward off investor dollars from entering this sector.

Remember all the years these liars attempted to dismiss gold as a "barbarous relic"?

That lie had to be abandoned . In fact, gold never ceased being treated as "money" by the same cabal of international banking which produces all of our debauched, "fiat currencies": the central banks.

However, it was only after the world's premier gold haters were forced to abandon their relentless gold-dumping (because they ran out of gold), and suddenly flip-flopped and began buying gold at the fastest rate in history that the Corporate Media finally jettisoned this absurd lie.

It was GATA's Ed Steer who produced perhaps the single, most-damning piece of evidence at the conference: a chart showing the extreme, historically unprecedented, and grossly disproportional short positions which exist in these commodity markets.

Courtesy of analyst Nick Laird

The point to note here is that not only do the precious metals short positions dwarf the shorting of virtually all of the world's other commodity markets, but this massive shorting occurs in generally tiny markets.

The largest of these precious metals markets -- the gold market -- is still a relatively small commodities market. However, take away 90% of the "trading," which is just international bankers engaging in currency swaps, and the gold market becomes a tiny market as well.

In other words (in proportionate terms) we're not talking about these short positions being a mere order of magnitude larger than other short positions in the world of commodities (i.e., 10 times as large), but more like one hundred times larger than the average short positions of other commodities. Short positions that are blatantly criminal in nature.

At the end of the 1970's, the infamous Hunt Brothers accumulated a massive (long) position in the silver market. They were subsequently investigated, charged and convicted of an anti-trust violation: attempting to manipulate the silver market.

By Ed Steer's best estimate, JPMorgan's ( JPM) short position -- by itself -- now comprises half of the mammoth short position indicated on the previous chart. This massive, permanent concentration (on the short side) is significantly larger than the size of the crime committed by the Hunt Brothers.

The feeble justification offered by JPMorgan is that it is "hedging" in the silver market. Right. After the price of silver had been driven to -- i.e., manipulated to -- a 600-year low in real dollars, what exactly was JPMorgan hedging against? That the price would go still lower?

That the price of silver would go still lower when there were more new patents for silver than any other metal, and previous suppression of the silver market had already caused inventories to collapse by 90% ?

When an entity enters a market with prices already near a 600-year low, and inventories already collapsed (and with demand strong), and then buries that market under the largest short position (in proportionate terms) in the history of human commerce; it shouldn't require one of the gold bug detectives to explain what is taking place here.

Any reader with the slightest understanding of market fundamentals knows that with any market where prices are at an historic low and inventories have been completely obliterated there is only one direction in which prices can possibly go: up.

Either the "commodities experts" at JPMorgan are entirely ignorant of the most basic of market fundamentals, or their massive, permanent short position in the silver market is the world's most-obvious price-suppression scheme.

There are countless reasons why precious metals analysts continue to favor their asset class. For those investors still unfamiliar with the silver market because they have been frightened off by the serial fear mongering of the mainstream media, it's not too late.

The price-manipulation of the silver market means that prices are still at bottom-feeding lows. Inventories are still obliterated. There is still only one possible direction in which silver prices can go.

And if you want to become a real "expert" on this market, start delving into the facts uncovered by the gold bug detectives.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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