MegaTrends

[Pro-Life]

Isn't this special... The Precious Metals "Reality Put"
Andrew Hoffman | October 19, 2015 - 10:53am

http://silverseek.com/commentary/precious-metals-reality-put-14976

Which brings me to today’s primary topic, which I have been trying to elucidate for several days, but couldn’t properly until today. Which is, the realization that the severe silver shortages encountered last month were due to a so-called “reality put” – in which die hard Precious Metals holders instinctively realize how far to the downside the price can be effectively suppressed. At which point, they jump in, en masse, to scoop up whatever physical metal they can. Which is exactly what happened after the September 2008 paper gold and silver attacks; September 2011’s “operation PM annihilation I”; April 2013’s “alternative currencies destruction raids,” and July 2015’s “Sunday night paper massacre,” among others. This time around, countless thousands realized that silver in the low $14’s was too low for mining companies to survive – and thus, unleashed a buying frenzy catalyzing the highest physical premiums and longest delivery delays since 2009. Gold demand surged as well – particularly in the Eastern hemisphere – and consequently, both metals are on pace to shatter annual consumption records this year.

However, in the past two weeks – ironically, right after the aforementioned, catastrophically miserable September NFP report, Miles Franklin has seen steadily declining demand. And this, with gold and silver prices surging – up 6% and 12%, respectively (validating the massive gold for silver swapping activity we saw in August, including my own). To which, I can only conclude that “goldbugs” like myself are sitting with their “hands on the trigger” to buy more when prices decline – particularly to ridiculously uneconomic prices like $1,100/oz gold and $14/oz silver – whilst laying low as prices rise, due to a combination of complacency, fear of further Cartel raids, and a lack of incremental funds to increase positions.

Unquestionably, Precious Metals’ unique market “inelasticity”; in which people instinctively “buy low” – as opposed to “buying high” in mainstream markets like equities – is a major reason for such unnaturally logical investment activity. Which, in my view, is as powerful a proof that gold and silver are not speculations, but money, as one can find. That said, if there’s one thing Miles Franklin has learned in two decades of bullion trading, it’s that rising prices typically catalyze buying far more than falling prices. And thus, given that demand has slowed as prices have risen, I can only conclude that 1) traditional buyers – like me – have been “trained” to add to positions on price weakness; and 2) very few “new buyers” have entered the market (at least, here in the States), either because the don’t believe the economy is as bad as the data says; or that whatever is wrong can be “fixed” by the Fed. In other words, the recent physical buying explosion – which literally, sold out silver shelves the world round – was solely due to the same two or three percent of investors that have been buying PMs for the past 15 years. Clearly, the “reality put” that 15 years of Precious Metals knowledge has given this group has become a powerful force in supporting prices at current levels. And when the other 97% or 98% of potential buyers finally get past the propaganda and manipulation, look out above – as if supply (particularly for silver) is this strained now, think what it will be when PM buying goes mainstream.

There is more with charts at the link above...