There have been a whole lot of swirling rumours suggesting that a whole host of major economic players — including the London Metals Exchange, J.P. Morgan, Bear Stearns and HSBC — are engaging in a conspiracy to suppress the price of precious metals. A whole host of antitrust lawsuits fired off in recent months, based on these theories. Some of these theories have come from the Chinese establishment. Some have come from seasoned metals traders. Some supposedly come from inside the financial system itself.
Personally, I am not really interested in whether the price of silver is being manipulated, because I am a long-term investor, using fundamental analysis to make forecasts. Here’s what I know about silver:
- The current AU:AG ratio is around 1:44; the historical average is more like 1:16
- Silver is a highly-demanded industrial metal used in computers, televisions, mobile phones, missiles, dentistry, medicine, etc
- Silver, like gold, has retained and strengthened significantly against fiat currencies in recent years, all while central banks have engaged in competitive printing.
All of these factors make me significantly bullish on silver in the long term.
If the rumours are true, and J.P. Morgan’s commodities desk, alongside other players, is taking measures to artificially depress the price of silver — and make such a hot commodity available to investors at a discount when we know fair-value is much higher — then I think we should be thankful to them.