my little brain still doesn't grasp a fundamental question: If demand is that high, why isn't spot price going up? The article touches on that subject, but not in a way that makes sense to me.
People have spoken here before about manipulation, particularly in the silver market. Sure looks that way. But is there any hard evidence of that? And if not ... why isn't the price soaring according the the standard rules of supply and demand?
Well, the spot price did go up. It rocketed from $740 or so to nearly $900 in less than 2 weeks, 9/11 to 9/23/2008.
The article touches on the most likely explanation: There is plenty of gold if you want to buy a 400 oz bar for $350,000 or so. There's plenty of 1000 oz silver bars as well. What is missing is coins, small bars, and jewelery stock, typically wires and sheets.
IF the market works freely, the higher premiums for these smaller items will cause some of those large bars to come out of the Comex warehouses and go to fabricators, who will turn them into blanks for coins, small bars, wire, etc.
The only evidence I've seen of manipulation is some rather extreme concentration of short positions by 2 or 3 banks in silver and gold futures markets. I find that suspicious but not proof, but people like Theodore Butler think it is. His article
The Smoking Gun is worth a read.
If there is manipulation, it is good news for us small fry, as the purpose of the manipulation is to keep the price down, rather than jack it up, like people like to accuse oil companies. If there is manipulation, it is done via the paper futures market. But if there is manipulation, all it takes is for a few of those people wealthy enough to buy multiple big bars to buy futures contracts, then demand delivery. These could be wealthy investors anxious for a bargain, or fabricators of coin blanks and wire looking to make profits on the large premiums presently in place. In either case, the manipulation ends pretty quickly.
So the price IS soaring, in the form of higher than normal premiums on coins and small bars. That will make metal flow from the large bars to fabricators. This takes some time, things don't happen overnight, but it certainly will happen.
Manipulation arguments aside, the soaring demand for small coins and bars is a very good sign. It means that ordinary people are re-discovering gold and silver. It is no longer the exclusive provenance of central banks, bullion banks, and the hyper-wealthy. This is very good news for sound money and the freedom that comes with it.
The fed and the government have method, motive, means, and opportunity to manipulate the markets, and not just gold and silver. Notice the deafening silence regarding calls for more oversight of the fed, or the Plunge Protection Team aka the President's Working Group on Financial Markets. I have no doubt that these criminals have interfered in the markets from time to time. What I doubt is their ability to maintain significant distortions. Look about you; even the largest credit bubble in the history of mankind is popping right before our eyes. Markets cannot be fooled forever.
Peace,
Silver