Loading ...(a letter to a friend)
yep, the silver bull market is starting to warm up. i think we are in the early stages of something we have never seen before. the physical shortages which have caused the recent price rises are real, and won’t quickly go away. i think the epicenter of the near-term action will focus on the interplay between the futures (paper) market and the industrial (physical metal) demand. for years (decades?) the price has been set by the paper markets with the background of a surplus physical supply that was built up over several generations, beginning in the latter part of the nineteenth century. the paper market has been the cash cow of the banker/financier/speculator industry, centered in new york and london. this has kept the price so low that only the best (richest ore) silver mining companies could survive. most of the supply has come from byproduct of other mining operations (copper mines, zinc mines, etc).
over the last sixty years, the world has consumed more silver than was being mined (a structural deficit). slowly, the generational surplus stockpile was used up, and the cupboard is getting bare.
december and march are delivery months for the comex (u. s. futures market). i think they may be able to patch the december deliveries together and squeak by with much pissing and moaning. march? less likely. lots of manufacturers use silver and are dependent on those deliveries to keep their factories open producing solar screens, electronics and (- HUSH -) modern weapons. when the comex (likely) defaults on deliveries at the end of march, katie, bar the door! the price will make the recent rises look mild.
eventually the price will rise high enough (fifteen to one against gold? parity? more?) to stimulate the reopening of old, presently uneconomic silver mines, and/or the opening of new ones, bringing increased supply on line to lower prices, or at least stop the rise (classic economic theory). don’t hold your breath. the timelag to open mines is about ten years in mining – friendly jurisdictions. jurisdictions with greenie movements? longer. much longer. don’t even think about how long it would take to get a permit for a smelter.
hold on to your hat. it’s going to be a long, exciting ride. new york? nope. london? nope. watch shanghai!