Silver's Three Legged Bull-Run Stool / Commodities / Gold & Silver 2019

A case can be made that silver's current price “stability” –believed by many to be well below where it "should" be – is theresult of at least three interlocking factors.

There are certainly other considerations, but the following seemespecially relevant today…

Our chosen metaphor is the three-legged stool. Take one legaway, and the stool topples. In the case of silver, the outcome is likely to bea violent price rise of epic proportions.

1. Draining the Silver Trading Swamp

In recent months, a series of criminal charges and admissionsamong banks, trading houses and their employees have begun to expose unfairand/or illegal trading practices. They have detrimentally influenced metalsmarkets for many years, according to critics which include Ted Butler and theGold Anti-Trust Action Committee (GATA).

Their illicit activities include "spoofing," i.e.placing, then withdrawing large orders to cause investors to panic/offset aposition, or risk a margin call; creating almost unlimited sell orders in thefutures markets to break a bull rally's back; writing derivatives tocreate/lease out more "paper metal" than is physically produced eachyear; and perhaps even collusion with government agencies to manipulate goldand silverprices as a tool of foreign policy.

Manipulation has become so widespread and blatant that the governmentis now leveling racketeering charges. How it all shakes out is anyone's guess,but this can't help but bring increased transparency in restoring supply/demandbalance to markets sorely in need of it.

2. Mined Supply Constricting

Virtually all the precious metals, some base metals, and thePGMs (platinum and palladium) are currently mired in a series of systemicfactors calling into question the ability of producers to reliably meetmarketplace demands through the end of the next decade.

Declining production grades (in grams, ounces, or pounds/ton)plus a lack of major new discoveries to replace what's mined leads to lowereconomically recoverable reserves.

Longer discovery-to production-timelines – often by many years,due to environmental concerns and country risk – add more complexity andunpredictability to the mix.

Large, already-producing mines in some of the most mineral-richcountries on the globe – Peru, Mexico, Argentina and Chile – face water access,community-relations and country taxation issues. They call into question if agiven project is worth risking additional millions (sometimes billions) ofoperational capital just to keep it going.

These issues, affecting mining around the globe, have for thelast decade weighed on annual metals' production – even as imports to Asiancountries continue at a blistering pace.

3. The Global Debt Trap

The most difficult to quantify, contain, and solve hydra-headedfactor of all... is the global debt overhang/negative interestrate/cash-destruction trap.

This new "river of no returns" is becoming a systemicthreat. It will at some point drive people across the board to one of the fewoptions left: the historic utility and safety of gold and silver.

Global debt now exceeds a mind-boggling $250 trillion. As itrises, waves of money and credit chasing yields have driven rates to historiclows.

Banks penalize saving and responsible business decision-making,via negative interest rates (with 19 European countries now doing so) – andmake the individual's ability to offset inflation impossible.

At some point in the near future, the overburden of mispricedassets will inevitably decline in value. Negative interest rate victims, bethey in savings accounts or underfunded pension plans, will be trapped.

Add to this an outbreak of inflation as massive amounts of moneychases a limited supply of negatively-correlated assets – e.g. goldand silver – and a "run for the gold" lasting multiple years isalmost a certainty.

Issues #1 and 2 above can possibly be contained. But printingmoney to infinity in support of never-to-be-repaid debts threatens a contagionimploding the entire financial house of cards.

European central banks have already sold over €15 trillion innegative interest bonds! Now the proverbial chicken – being penalized at theretail level for trying to save – is coming home to roost.

A government-backed digital currency is the likely next step.Sweden is looking at rolling out its own version called the"e-krona." And, of course, China has an e-currency modeled on therenminbi.

Implications for consumers of moving from positive interestrates and physical cash to a "new normal" of negative rates anddigital currencies are profound – and mostly negative. You will be penalizedfor what you do not spend; and will have virtually no privacy, since every itempurchased with "digital cash" gets recorded.

The core function of interest rates – signaling the viability inmaking business and personal expenditure decisions, will have been completelysilenced.

A recent Money Metals Exchange interview referenced the FederalReserve's ongoing fiat creation, now literally taking place day and night (repomarket lending)...

Perhaps the biggest takeaway from these events is that Fedstimulus is a one-way train... (It) is better understood as an addictive drug.The Fed can never withdraw it without crippling or killing the markets. Plus,there's always the risk of an overdose.

This kind of increasingly clueless monetary behavior weakens theleg of fiscal management that provides an artificial "lid" holdingdown silver bullion prices.

Ongoing investigation (finally) by regulatory agencies taskedwith protecting the public, and keeping banks and trading houses honest,continues to uncover dirt as traders higher up the food chain are indicted forillegal trading practices, weakening supportive leg number two.

The Spark

When, not if, the "Iskra" – meaning "spark"in Croatian, is lit by high volume European and North American retail buying,you can expect supply – the third and final leg keeping silver pricesreasonably stable – to be pulled out from under the market.

As the metaphorical stool tips over, we’ll see higher pricepoints more quickly than most observers now believe possible.

Start protecting your assets by acquiring the insurance benefitsand profit potential that physicalgold and silver now provide.

David Smith isSenior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com aswell as the LODE Cryptographic Silver Monetary System Project. He hasinvestigated precious metals’ mines and exploration sites in Argentina, Chile,Peru, Mexico, Bolivia, China, Canada and the U.S. He shares resource sectorobservations withr eaders, the media and North American investment conferenceattendees.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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