One of the ways that the silver price is manipulated is through the paper exchanges themselves. There are far more silver paper contracts that there are physical ounces. Despite this many investors ask, “Isn’t it normal to have such a disparity between the paper contracts of an asset and the actual supply of the physical asset?” To answer this question two different charts have to examined.
|Commodity||Daily Paper Volume Traded||Units||Exchanges||Daily Physical Production*||Trading Volume / Production Volume|
|Oil||1,122,369,441||Barrels||ICE, NYMEX, ICE Brent||78,000,000||14.3 X|
|Aluminum||7,234,954,585||Pounds||Shanghai, LME||154,440,000||46.8 X|
|Copper||7,242,499,591||Pounds||Shanghai, Comex, LME, MCI||96,400,000||75.1 X|
|Silver||286,120,771||Ounces||Comex, MCI, Tocom||2,000,000||143.0 X|
Source: Barclays, Sprott Research
Notice several things regarding the silver column. First, notice the physical daily production and the daily paper volume trade. The amount of paper silver traded each day is enormous in comparison to the actual supply mined each day. Second, notice the trading volume/production volume is 143. This is multiple times higher than any of the other examined assets.
In the last few months we have seen many examples of the manipulation that takes place. As an example, on February 29th over a ten minute period roughly 1.8 million ounces or $3 Billion, which caused a $40 drop in gold. At the end of the day, these charts are amazing because despite oil and most of the other assets being used as much or more as silver, silver is traded more than any of the other assets. In fact if you add the trading volume of all four other assets together they are only slightly higher than silver.