Top Ten Reasons to Own Silver #6 (5/11/08)

The Main issue impacting silver is the concentration of a few large and dominating positions in the futures market. There is a concentration issue on the short side which is the opposite of the long side that happened in 1980. The Hunt brothers tried to corner the market in 1980 and the government stepped in and issued new rules to the trading system saying no new buying could occur only liquidation of positions. This dropped the price like a rock because no one could buy new silver. Today the opposite has occurred. The mining companies were forward hedging their production and it kept the price down but now even the mining companies are losing a lot of money due to that practice and are starting to sell in the spot market or not selling as far out so they can maximize their profits.
Now today there are no concentrated long positions on the COMEX silver futures only historic concentrated short positions, government actions won’t work like they did in 1980.
So what could happen if the government stepped in and tried to squelch the rise of silver as it exploded upward and people demanded that something be done. They could put price controls on it but that only leads to a black market and when that does not work they lift the ban and prices explode. The price always moves in the opposite direction of how it was manipulated. Therefore since there is a large concentration of shorts in the silver market trying to keep the price down it will someday bankrupt one of these firms and they will have to liquidate those shorts by the order of bankruptcy and the price will explode. This is purely the law of supply and demand at work. No one entity is larger than the market or can fight Mother Nature and win.
The best advice today is to be way early in laying in real silver, than to be a day late. That this prospect exists today, and it did not in 1980, is bullish beyond words.


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