Ever since the early days of modern British central banking, there has been a routine practice of "fixing" the price of silver.
Because gold prices were tied to currency during the gold standard days, the banks knew that if they issued excessive amounts of credit without buying the gold to back it, the free market would meet that supply by raising the price of precious metals, specifically silver.
Higher silver prices would usher in "paper games," which are nothing new—bankers have been cheating the gold standard since the days of Kubla Khan.
From the instant the global economy turned to a purely fiat system with no tangible assets backing national currencies, the prices of both precious metals soared. It is the market's way of correcting the over-inflated quantity of currency units (see cover image above).
By 1980, gold had briefly risen to a price where it covered 100% of USD money supply. What required $850 per ounce back then now demands a price tag of over $14,000 per ounce.
On a global basis, we're looking at a price in the neighborhood of $23,000 per ounce.
As it stands today, gold merely covers 7% of it.
Silver rigging is not a question of if it's happening anymore: Deutsche Bank agreed to settle out of court and pay $38M in response to a class action lawsuit.
The rising attention of manipulation by silver bullion banks is putting a stop to their behavior.
Banks now fear being accused of market manipulation by regulators, which has resulted in banks being cautious of adding liquidity during the daily auction.
Banks are now unwilling to intervene beyond putting in orders. They fear this might be interpreted as price manipulation, like Keith Neumeyer, our close contact has been saying for many years and in our latest interview.
The result is that the silver market is now unpredictable, and it’s finally free to discover its true value.
An amazing $9.8 trillion of gold paper trading took place on the world's exchanges in 2016, compared with $42 billion in actual physical gold investment.
This was a paper-to-physical ratio of 233-to-1.
However, the amount of paper trading leverage in the silver market is much higher than that.
All the global silver investment demand last year adds up to a tiny $4.4 billion. It was nearly ten times less than all physical gold investments in 2016.
Central banks purchased $7 trillion from 2011 to 2016. If the central banks purchased $1 trillion in just the first four months of 2017, versus the $7 trillion from 2011-2016, something seriously wrong must be going on in the markets.
Regardless, $7 trillion is a lot of money when we compare it to the pathetic $32 billion invested in silver during the same period.
According to the data put out by the 2017 World Silver Survey, total paper silver volume on the world's exchanges was 159,000 Moz. in 2016. In other words, the exchanges traded 180x more paper silver in 2016 than the global mine supply.
Portfolio Wealth Global will be keeping a hawk-eye on this situation as it unravels.
Tom Beck is senior editor of Portfolio Wealth Global. Known as one of the first millennial millionaires in the United States, Beck is a relentless idea machine. After retiring two years ago at age 33, he's officially come out of retirement to head up Portfolio Wealth Global. He brings a vision of setting a new record for millionaires with his seven-year plan to accelerate any subscribers' net worth who will commit to the income lifestyle. Beck delivers new ideas on the marketplace that were once only available to the rich. Traveling the world, he's invested in over a dozen countries, including real estate.
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Charts courtesy of the author.