In Ted Butler's Archive


What has occurred over the past six years has created a unique circumstance strongly suggestive of much higher silver prices. Because prices advanced sharply for all other assets, while silver and gold fell, precious metals are deeply underpriced relative to everything else. Because stock markets are so high relative to precious metals, it would take the smallest percentage of money fleeing the stock market to power precious metals higher.

The price pattern of the past six years has obscured perhaps the most bullish silver fact of all. Very little silver exists or is available for purchase. Let’s face it – a price drop of 75% lasting for more than 6 years is not compatible with thoughts of scarcity or physical shortage. You measure the abundance or scarcity of physical silver in two ways – how much exists and how much is produced. I’ve further refined the equation down to the main form of physical silver that matters – 1,000 ounce bars.

There are between 1.5 to 2 billion ounces of silver in the world in this form. JPMorgan owns at least 600 million ounces of the total. In dollar terms, ex-JPM’s holdings, there are around $15 billion to $25 billion worth of silver in 1,000 ounce bar form. Not only is that a pittance in world investment buying power, it vastly overstates the amount of silver that could be bought. All this metal is owned and only available at what the owners consider a fair price. No more than 10% or so would be available at prices up to $20. World investment buying power is fully capable of buying many times more physical silver than could possibly be made available.

No more than 100 million ounces of new silver is made available to investors annually. At current prices, that’s less than $2 billion yearly, or around 25 cents for each world citizen on a per capita basis. There is not a hint that physical supplies of silver are abundant. Dismal price performance is clearly a function of COMEX futures positioning. In dollar terms, there are hundreds of times more gold available for purchase than are available for silver, making a joke of today’s lopsided silver/gold price ratio. No one would seriously suggest silver is overvalued relative to gold. Given the facts of how little physical silver exists and is available it’s a wonder that the surge higher has yet to occur. This limited physical silver availability means that a myriad of factors are capable of triggering a silver shortage.

The relative valuations of stocks (or anything else) compared to silver suggests that even if stocks don’t sell off sharply, silver is just as likely to catch up to stock valuations. Silver doesn’t need bad news, it just needs the free market to operate without manipulation on the COMEX. Underscoring all this is the towering presence of JPMorgan and the more than 600 million ounces of physical silver it has acquired over the past six years. Not only was the physical silver accumulation a (manipulative) masterstroke, destined to make a great fortune for the bank; it further points to the inevitable circumstance of an outside factor tripping off an investment buying surge in silver. I can assure you that while I never imagined JPMorgan (or anyone else) buying as much physical silver as it has, its purchase validates the entire silver price explosion premise like nothing else and makes any outside factor that may trigger it all the more potent.

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