| | | Silver is one of those that's always been and always will be "contested"...
But, then, when contested, it is the nature of and outcomes in the contest that end up defining reality when "correction to the mean" is always inherently the context, in some time frame. The time frame is the issue, in the old saw... the market can remain irrational longer than you can remain solvent (if betting against the trends that appear to make no sense). It is just as in inflation, where "the solution to high prices, is high prices"... so that in a depression... which is what results from price suppression, the solution to low price is low prices... because, at some point, it forces supply failure... and a lack of physical supply required to meet an actual physical demand... can't be replaced with "printing".
The failure in silver has been forestalled, in large part, through financial engineering... in which the larger companies finance their production with bank loans... and on condition of sales into controlled channels... which enables the suppression. Below market value in metal is subsidized by investors taking losses on mining shares... while mining company management take paychecks from the banks, not shareholders...
CDE is the worst of them... look at long term price charts and the pattern is that of pink sheet P&D operations with serial reverse splits... the result of management pay not being aligned with rigor to returns to shareholders... instead of performance in making payments on debt.
Not all of that is the corruption of CDE management by bankers... much of it is the bankers corruption of the market in the metals trade... and, some is hard reality in an industrial metal under changes in utility.
In the late 80's I was convinced "silver to the moon" because of booming growth in electronics as computers got invented and became useful... and, i was right about computers, but what happened instead in silver is that digital photography got invented along with computers and killed film use in photography... when that was the largest source of demand at >40% versus electronics < 10%. Then computing a pace in growth... where that demand photographic demand would be replaced by electronics growth... That gets you to the late 90's into 2004 - 2009 where that cross occurred... but rather than let silver run, they instead killed the market in 2001 to throttle the pace of that growth back... and again as 2008's GFC... and that in part as computers threatened banks survival by making them irrelevant. Silver soared in that last period... as CDE crashes... because while silver prices climbed over $10... costs to mine it climbed over $14.
I beat up on CDE a lot... and deservedly... not because their short term price performance is much worse than others... but, because it could and should be a lot better than others and is not... because management and baksheesh. But, silver is a hard slog given the "market"... which is why even die hard silver miners (like AG) end up as large percentage gold miners... as made necessary to enable surviving prices manipulated below production cost...
The spike in silver on this chart (below) is the right side of the 1980 - 2011 cup, the decline to 2016 the left wall of the 2011 - 2020 cup, the 2011 right wall in 2020 and the handle both misshapen as the interference from the 1980 and 2011 patterns...
But... reality ? In the period up to 2008 there was still a genuine surplus in metal above ground in result of U.S. policy in the 1800's fostering silver mining... generating a surplus in bullion and coin that lasted until the last of "stockpiles" in the strategic mineral reserves were sold off under Reagan... the Oak Ridge silver being laundered through the banks... all together suppressing the mineral extraction industries ( as Biden is suppressing oil production with massive SPR sales now) for a decade and more. Computing the demand growth curves... versus mine supply plus the contraction of the surplus... sort of the point into the 2000's... but, since then... all about the financiers throttling growth to prevent demand growing... as supply has continued dwindling in parallel with demand shrinkage... closing to zero in surplus... and now, currently... in actual significant physical deficit... as "faux paper silver" is presumed to be "useful" in metal fabrication.
At the same time a century long legacy in overhanging supply in surplus has become an unrecognized but rapidly deepening deficit... we're again caught in the bankers imposition of a cost squeeze with price suppression, even as costs are soaring... while the price suppression is sustained, throttling investment in expansion of production needed to meet current levels of demand... only this time, there is no wide base in a loosely held supply being held in reserves that can cushion impacts of sudden shortages in mine supply.
Reagan ended the price suppression in minerals resulting from "strategic reserves" used to suppress prices... but its taken until now for the stockpiles to dissipate... while the Treasury has "lent" metal from their "reserve" to enable banks in price suppression... as they laundered the Oak Ridge supply through its (contracted) re-fabrication with the banks likely using some of the trade value in paper to pay for it.
The denouement of the suppression trade... for now still a game of chicken between the fraud in the paper trade and the reality of sustained physical demand growth under the rigor of intense cost constraint... still with the parallel in the threat of "demand destruction" being employed to try to limit upside risks. But, go ahead and crash the economy, now, while trying to prevent prices rising... as the context in which that has worked before... no longer exists. Do the same thing now... and it will amplify the impacts in the reverse... as the reality of already extant but unrecognized shortages... without any reserves to draw on... meets a sustained pace in demand in usage... that is essentially price insensitive... while the throttling of the economy fosters massive risks... that work to restore, not prevent, monetary value in silver...
We've been under a creeping growth suppression regime since 2001... are likely to have "hard times" (!!!) for a year or two at least, from here... still without that reducing demand that much... perhaps only growing it as "inflation hedge" and "systemic risk hedge" or "currency failure hedge" when supply is already in deficit... and "can't get there from here" is what that defines in supply relative to demand, now... as there is no longer any intrinsic flexibility left in the market as a "ready reserve" to be tapped just by raising prices a small percent... That former reserve is gone. When economic growth slips its current limitations... as it will... silver will be repriced as an industrial metal... like platinum... or rhodium... in % not dollar terms ?
I've not been in the camp of those predicting $1,000 silver and more... because there is no shortage of silver in the earth... there's only a shortage of silver at prices forced below the cost of production. But, the longer price suppression is sustained now... the deeper deficits will accrue... and, then... with the imposition of an economic depression doing more to impact the financing of new supply than to throttle the demand... we will see the market sustain the trend in supply shrinkage even under demand growth... backing us into a reality (seen already in Feb 2021) in which supply cannot meet demand... and with it taking a few years of prices rising just to foster new investment sufficient to enable starting a 3 to 5 year timeline in fostering "more"... The current pace in new mine development... won't replace the depletion rate in current production...
In a chart correlation to "reality" now... I'd say today is comparable to mid 2010... peak suppression as the banks were failing... then, post 2008 crash they were struggling to fill the black hole in derivatives losses (with QE as "hole filler")... with the suppression trade failing...leading to the Basel III agreement to "punt" and delay, the reversal in the trade (running it higher first) allowed to persist under Basel III until the end of 2021, but began with re-enabling the suppression from a higher base in 2011. Today we're again at peak suppression... post 2020 crash (March) and subsequent peak (August)... but, with the price nominally "the same" now as then... actually is far lower on a real (M2 adjusted) basis... Silver "matching its 2011 high" today... will require it going to $100, not $50 ?
In a chart correlation to the chart history... I'd say 2016 = 2004, 2021 = 2006, and now = mid 2007... with silver likely to double by the end of the year as inflation accelerates... The scale is "bigger" now because dollars are smaller... Given recognition of changed reality in supply dynamics being imposed, the probable failure of the paper suppression scheme, if not the outright failure of fiat currencies... it is not unlikely that silver will rise using the right hand CDE price scale and not the silver comparable scale in its prior price performance...
That won't last... for more than a few years... as higher prices will put known / existing resources back above the waterline in cost of production... so supply will grow... in the time it takes to fund and build the mines... as the solution to the problem of high prices is high prices...
That won't happen, though, as long as obstruction in price suppression or other forms of suppression of development of mining continues to prevent it... so, "it's all political" still...
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