Is The Silver Market Really Being Manipulated? King Miners
The biggest difference between stocks and silver is that silver is a market with producers. Stocks are not really produced, they are issued as needed (or wanted) by corporations. That means that most of the time, the supply of a company’s stock in the public market stays the same.
This is not the case in the silver market, where supply and demand are far more dynamic. Supply reacts to changes in demand, and demand reacts to changes in supply, with price acting as the arbiter.
Producers, in this competitive, free market environment, are natural longs, that is they, by the nature of their business operations, always have to deliver metal to buyers.
This is, if you think about it for a second, obviously true since producers exist to deliver supply to buyers.
More importantly, this means that producers are always exposed to falls in the metal’s price. Just like being long a stock means one loses money when its price falls, producers of silver, that is silver miners (and more generally, commodities), earn less when prices fall.
They guard against this by hedging their production in the market.
They can do this in a myriad ways across different markets, but regardless of which financial product they choose to use, they have to hedge by selling. If they sell in the forward or futures markets, they commit to sell at a price fixed at the time they enter the hedging transaction.
This necessarily means that silver miners are almost always sellers in the financial markets.
Why is this important? Because for the “silver is manipulated and suppressed” story to be true, someone or someones must be consistently selling the metal in the market.
The truth is that there have always been consistent sellers of silver in the financial markets, and those are the producers of the metal. Does this mean that the miners are colluding to keep metal prices low in order to boost fiat?
After all, if a global conspiracy existed to manipulate silver prices lower for decades, the producers must be involved, simply because they control supply.
Obviously, the answer to the question is no, because producers would bankrupt themselves if they consistently kept prices low. As explained above, they are natural longs, who lose money when the price of silver falls.
The Reddit Silver Salvo of 2021 is admirable from the standpoint of the “little guy” deciding to make their numbers count and stand up for what they believe in; fighting to regain their monetary sovereignty from what they view as the evil oppression of fiat currency.
But what if, the stories that they have been fed of collusive manipulation by nefarious forces are just that, stories?
Is it not ultimately possible that nobody is manipulating the metal(s) at all, and they, like all currencies in history, have simply come and gone?
To be continued…
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