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The Chart In Favor of Silver Manipulation

Posted on March 30, 2012 by jerry

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
Gold 16,051,790 Ounces Comex 230,000 69.7 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.


 

  • Mcniel6

    I see the numbers, but I don’t see how they’re evidence of manipulation.

    The first column lacks a unit (dollars? Ounces?) I’m assuming ounces, or, more likely, typical unit of trade: ounces for gold and silver, pounds for copper, etc. Converted to dollars this levels out the numbers a good deal.

    The ratio of daily volume to actual production seems largely irrelevant, as plenty of markets have high trading activity and zero (or minimal) production: land, securities, bonds.

    Perhaps I have missed it somewhere, but I have not heard who is doing said manipulating and what it should mean to metals speculators such as ourselves.

    Can open market actions be termed manipulations?

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