We have been super-bullish on silver this year. The silver market is very volatile and has earned the nickname “the mule.” Silver does not behave in a predictable fashion. It often disappoints. But if you have the patience and mindset to ride the ups and downs, it will reward you handsomely.

Short-term, the silver market is controlled by JPMorgan and HSBC banks. They have been heavily “short” silver ever since we started buying it. You recently witnessed their “drive by shooting” of the silver market, smashing the price down from $50 an ounce to the low $30s. The mugging took place in broad daylight, right in front of the CFTC and they allowed the bullion banks to run ruff-shod over the paper silver market on the COMEX without any restraint.

If you do not understand the reasons and mechanisms involved, you probably fled the silver market or are afraid to enter into it.
Big mistake!

As long as you own physical silver, paid for and not leveraged, you will come out on top. In fact, the Cartel has just presented you with an opportunity to buy silver at a big discount. You should thank them. We urge you again; do not own paper silver – no SLV!!! Buy coins or bars and take physical delivery. That is how you win this game.

The recent bear raid on silver has left many concerned about the sustainability of its historic run. Silver, being a relatively obscure market for most mainstream commentators, attracted much attention in the ensuing days following the May 1 takedown. Indeed, though the 30% drop in silver occurred over only four days, seemingly all eyes were on silver, with commentators who could’ve cared less about the silver market only a couple of months ago, suddenly tripping all over one another to make the bubble call. Silver bubble 2.0? Hardly.

Anyone who has been fortunate to have been invested in silver over the past few years would unfortunately be used to such blatant takedowns. The Chinese don’t call it the “Devil’s Metal” for no good reason. With so much talk these days about the risks of investing in silver, we think that perhaps it may be timely for us to weigh in on the matter. The silver market is riskier than ever, but for reasons the vast majority of pedestrian commentators have failed to grasp.

There is no doubt that speculative dollars have been flowing into the silver market. We note that in April record trading volumes were registered in the SLV, Comex futures, LBMA transfers, and the Shanghai Gold Exchange futures. In fact, converting the average daily trading volume in the aforementioned silver instruments to the amount of ounces of silver they are supposed to represent, there were on average, over 1.1 billion ounces worth of silver traded every day in the month of April. Truly a staggering number when contrasted against the actual amount of silver available for investment.

To wit, the world will only supply about 979 million ounces this year from mine and recycling of scrap, of which it is estimated that 657 million ounces will be used up for non-investment purposes. So in effect, that leaves roughly only 322 million ounces available this year for investment purposes. Converting to days (recall that at least 1.1 billion ounces traded each day) it leaves only about 1.3 million ounces per trading day of available supply. So, we are essentially trading the amount of physical silver actually available for investment, 891 times over each day! It really begs the question; just what are people trading in these markets?

Consider the largest and most prominent of those markets – the Comex, which we believe has owned an effective monopoly on silver price discovery for decades. In fact, the Comex churned over 800 million ounces of silver futures and options on average each day in April. Indeed, notwithstanding the massive but very opaque over-the-counter silver derivatives market, trading on the Comex dwarfs both the physical and the other (known) paper silver markets, combined. Despite its dynamics being relatively complex and generally not well understood by most, the world’s financial community continues to view trading on the Comex as representative of the fundamentals for the physical silver markets. A market built on a high amount of leverage, both the buyers and sellers of Comex futures and options contracts are able to establish a position in “silver” with pennies on the dollar in collateral and even more astonishingly, no physical silver backing the contracts at all.

Once again we urge you; do not own paper silver – no SLV!!! Buy coins or bars and take physical delivery. That is how you will win the game in the Silver Market.