SILVER PRICE MANIPULATION: Setting The Record Straight


by Steve St. Angelo, SRSRocco Report:

With the silver price now experiencing a correction after running up more than $5 in the past three months, we now see more articles suggesting price manipulation as the bullion banks hammer the metals.  There continues to be this notion put forth by many precious metals analysts that the bullion banks, especially JP Morgan, are controlling the gold and silver prices.

While I have no doubt there is an intervention in the precious metals markets, we must remember that the Fed and central banks are manipulating the ENTIRE MARKET with money printing, bond purchases, debt issuance, and zero (or negative) interest rates.  However, the current price of gold and silver, even with the supposed market rigging, are still priced higher than their overall average production cost.

Unfortunately, the fact that the prices of most goods and services are based on their cost of production tends to be overlooked by the majority of the analyst community… whether they are from the mainstream or alternative media. I can assure you that if you consider the price of a standard pair of jeans (not a high-end name), it would be based on the entire cost structure from beginning to end, when it finally shows up on the retail shelf.

No company can sell a product for less than it costs for an extended period of time, or they will go bankrupt. On the other hand, the market would not pay 100% more than the cost for a typical pair of jeans, if the competition was selling it at 10% over cost.  Economics 101.

Now, if we want to understand the MANIPULATION of the market, we have to realize where the extremely OVERVALUED or INFLATED prices are contained.  As I have stated many times, the majority of STOCKS, BONDS, and REAL ESTATE are where the focus of the Fed and central banks manipulation have been directed.  Why?  Because that is where 99% of the market has invested its funds.

Thus, the overwhelming majority of goods and services, including precious metals, are not overvalued, but this is not true for the majority of stocks, bonds, and real estate.  These supposed assets are extremely overvalued.  Which means, this is where the greatest degree of market intervention is directed.

If we understand that the price of most goods and services are tied to their cost of production, here is a chart of Pan American Silver’s estimated break-even and its profit or loss per ounce:

The WHITE LINE represents the silver price Pan American Silver received that year and the green, and red prices show the estimated profit or loss per ounce (Green = profit, RED = loss).  When the silver price shot up to an average of $35 in 2011, Pan American Silver enjoyed a healthy $9.02 profit per ounce. However, if we look at the majority of years, Pan American Silver made a profit or loss of about $1-$1.50 an ounce.

So, should we expect Pan American Silver to earn $9-$10 profits per ounce a year for an extended period??  That depends on how the market is valuing silver. Currently, and for quite a while, silver has been valued based on its COST OF PRODUCTION.  And we can clearly see this shown in the long-term silver chart:

The lower BLUE-DASHED trend line represents the silver cost of production.  While it was likely much higher in 2011 and 2012, the silver cost of production trendline provides a good floor in the silver price.  If we look at the Pan American Silver chart above, we can see that in 2004, the company lost an estimated 10 cents an ounce and in the 1H 2019 (first six months) it earned a 40 cent profit per ounce.

So, the silver price chart represents the REALITY taking place in the silver industry if we look at the metal as a commodity, based on the cost of production.  However, silver is more than just a commodity used to make Solar Panels and I-Phones. Silver is also a store of value and money.  But, the market is not valuing gold or silver as money currently, BUT IT WILL.

Setting The Record Straight On Silver Manipulation

As I mentioned at the beginning of the article, several analysts are suggesting that the bullion banks are manipulating the silver price… almost as if the silver price was the only metal being manipulated.  Of course, they throw gold in there as well.  Yes, banks have indeed used “Spoofing” and “Other trading tactics” in the gold and silver market for their own gains, but all of that manipulation does not change the simple fact that the current silver price is ABOVE the cost of production.

Now, it would be one thing if the bullion banks and their shrewd precious metals traders were pushing silver down to $8-$10 an ounce. That would likely bankrupt a large percentage of the primary silver mining industry.  However, we have not seen that.

Furthermore, there is this idea that the massive amount of paper silver trading is substantially above the physical supply of the market.  Thus, several analysts state that paper trading does not provide an accurate measure of the physical silver market.  While that may be true, it’s also the case for the other metals and energy.  Silver is not the only asset class with a tremendous amount of notional trading volume.

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