The Disconnect Between Supply and Demand in Gold and Silver Markets

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Apparently, it is standard Wall Street industry practice to send people monthly statements promising that the firm is storing physical precious metals in a vault, charge for the storage, but really never buy or store any real metal...James Conrad

There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver...

Most physical silver, for example, is being reserved for industrial and fabrication use, and investors are simply not able to get any, without waiting for months. Investor oriented shops are bare, and the U.S. Mint has suspended coin production. All available supply seems to be reserved for industrial users. You cannot substitute paper claims for real silver, in industrial use, because paper doesn’t have the physical properties of silver. So, it seems that all available supply is being diverted to industrial users, and, to a lesser extent, aside from the squeeze on lines of credit, also to jewelry fabricators. But, investors are left out in the cold. They can accept paper claims, or nothing. The most interesting mistake that the manipulators have made is in not supplying the U.S. Mint, which has run out of silver, proving that there is a severe shortage...

That being said, the paper claims may have a lot of value, whether or not they are fake. Derivatives dealers can write futures contracts, options, etc., according to CFTC rules, because paper "claims" to vault-stored silver and gold can be used as the legally mandated "cover" for futures contracts. To understand the nature of paper claims, we must travel back in time, for a moment, to a class action against Morgan Stanley (MS). According to the complaint, Morgan Stanley claimed that it bought physical silver, on behalf of various clients, and was storing it, in safe-keeping, in its vault in New York. Allegedly, Morgan Stanley defrauded its clients from Feb. 19, 1986, and Jan. 10, 2007. According to the complaint, it never bought any silver, but, all the while, continued to charge clients big fees for storing the imaginary metal. Morgan Stanley is one of the biggest investment banks in the world. It is one of the major players in precious metals. Yet, according to the lawsuit, the paper claims to vaulted silver it issued to clients was nothing more than a lie. One of Morgan Stanley’s defenses, interestingly enough, was that everything it did simply followed “standard industry practices.”...

Apparently, it is standard Wall Street industry practice to send people monthly statements promising that the firm is storing physical precious metals in a vault, charge for the storage, but really never buy or store any real metal. Morgan Stanley eventually settled the case for many millions of dollars in damages, rather than going to trial. That tends to indicate that they were guilty, as charged. I believe, with good reason, as you shall soon see, that most of the paper claims to silver and gold, now floating about, and collapsing prices, are cousins to the Morgan Stanley silver claims.

...The majority assumes that banks, like Morgan Stanley, are honest, and would not issue fake paper claims...

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