Dear Readers

Back in March I wrote a piece entitled “All the Glitters is not Gold – it’s Silver.”  I recommend a read. Here’s a taster:
 
“The price ratio of Gold to Silver as of today is a staggering 74/1. That means Gold is selling at 74 times more than the price of Silver.  Yet this is on the extremely high side of history and is in many ways an anomaly that draws attention to itself.  In our house we sometimes call paper currency ‘monopoly’ money. It’s not actually ‘real’ but it is useful for trading, as long as everyone else agrees on the value attached to it.  But if the goal is to gain the greatest return over time in that monopoly money, it makes logical sense to at least consider investing in a metal that – sure isn’t as glamorous as gold but – holds a much bigger spring-back potential to its historical ratio value. To put it in perspective, if silver were priced in accordance with its historical value, a 1oz Britannia coin would be priced around £56 each, not £20.55.  So if Silver were to revert to its historical price ratio of Gold today, that would be a 272% increase in price.  Take off the 20% VAT charged in the UK for most Physical Silver investments and that’s still a return of 252%.  Against the backdrop of painfully low interest rates for High Street investments, I wonder why half the country isn’t buying Physical Silver as if it’s going out of fashion.  Add in the advantage Bleyer offer of our low VAT/ VAT Paid Silver Shop and the lowest UK price on 1kg silver coins and we would encourage you to call one of our team to find out more.” 
 
And now three days ago the News broke, somewhat quietly of course, that JP Morgan have been stockpiling large amounts of Physical Silver:

 
“Since early 2012, JP Morgan’s stockpile has grown from less than 5 million ounces of physical silver to more than 55 million ounces of physical silver. Clearly, someone over at JP Morgan is convinced that physical silver is a great investment. But in recent times, the price of silver has actually fallen quite a bit. As I write this, it is sitting at the ridiculously low price of $15.66 an ounce. So up to this point, JP Morgan’s investment in silver has definitely not paid off. But it will pay off in a big way if we will soon be entering a time of great financial turmoil.” (Michael T. Synder, Global Research)

 
This doesn’t surprise me one bit.  For one reason, this information bubbled up quietly 6 months ago:
 
“JP Morgan (JPM) has piled up the largest holding of physical silver in the modern world. Since the silver price peak in May 2011, the bank has accumulated between 100 and 200 million ounces of physical silver (if not more). The equivalent in metric tonnes is between 3,110 and 6,220 tonnes. To put that number in perspective, it surpasses the amounts held by the Hunt Brothers or Warren Buffett (in his investment company Berkshire Hathaway). On a yearly basis, some 100 million ounces of silver reach the investment market, which translates into 250 million ounces between May 2011 and December 2013. That has a value of approximately $5 billion. Given the size of the too-big-to-fail bank, that amount of silver, however large it may seem, is easily affordable.” (Ted Butler, GoldSilverWorlds)
 
What surprises me is this information keeps getting out; albeit very quietly. 
 
Ted Butler explains how this has stayed so quiet: “JPM was able to accumulate so much silver without being noticed through the big silver ETF, SLV. In his weekly commentaries to his premium subscribers, he has explained on numerous occasions that the physical silver holdings in SLV have been largely intact on a net basis, but there was a large “churn” in the holdings, which allows for a large buyer to go unnoticed. For instance, 60 million oz were liquidated in the two months after the price smash in May 2011; they were right away absorbed by a big buyer. The data are available on this site http://about.ag/SLV/. Furthermore, the conclusion that JPM has been the big buyer in physical silver is confirmed by the following facts:

  • The growth of metal in the JPM COMEX silver warehouse over the past three years was 45 million oz.
  • The recent delivery stopped by the bank in December/January COMEX deliveries was 15 million oz.

According to GoldSilverWorld “JPM, being a master in manipulating financial markets, has also (ab)used their ability to set the silver price in the leveraged paper COMEX market, while simultaneously benefiting from lower prices to accumulate the physical metal.”

In Butler’s own words: “Causing the price of silver to be depressed via a concentrated short position on the COMEX along with the ability to crush prices in an HFT second, to then scooping up physical metal (and covering paper shorts) at the self-created depressed prices. What this also highlights is the madness and illegality of having the paper price on the COMEX setting the price in the physical market. If JPM hadn’t been capable of rigging silver prices lower in 2013, it would never have been able to buy back 100 million ounces of short paper contracts and buy many tens of millions of physical silver as well.”

I’ve been saying this for years – that the paper price sets the price for Physical, yet in reality they are two different markets. I’ve also been highlighting for years that one must not panic at the price-falls in the SLV market, if the actual COMEX figure for ounces sold each day is still showing the demand for Physical is high. This is still the case.   

 
It is in many ways the perfect plan – flood the market with paper SLV certificates, this lowers the spot price, scoop up physical metal of real value based on that lower price. It is not illegal. It may be ‘unconstitutional’ and ‘unequitable’, but not ‘illegal’. Yet the system on which it is based is not therefore operating in a true free market.  That is no reason to not take advantage of it, however. I have often wondered, if the SHTF financially speaking, whether these two markets would separate; whether we would see one price for a SLV certificate and one for a Physical Troy Ounce.  The former would contract to almost zero while the later would then ride the free market wave to its Historical Value (see previous March article.) Or at least we would hope to see this, until a new currency had been established. 
 
I have also been saying for years that the ratio of Physical Silver to Paper Certificates is about 100:1. Well, when I started saying it in 2011 I was correct. And stayed correct for a number of years, as far as figures were available. I haven’t said this in an article for about a year but now I do I would like to update that figure.  It is now believed to be around 250:1! 

 

That figure is staggering.  In real terms, it means that if today, everyone who owns SLV in their ETF funds – whether personally or company funds – wanted to take delivery of the Physical Silver their certificate represented, only 1 in every 250 people would ever see their Physical Silver!  And the paper with which they would be left would be worth about the price of the paper on which their certificate was written. Nothing more. And overnight, Silver would then become 250 times ‘rarer’ than it appears now.  It technically wouldn’t be any rarer, but it’s current true rarity would finally be brought out into the open.
 
Here’s why: “The size of the global annual silver market is equal to $5 trillion.” This is from Bloomberg which has “always been a reliable source with their published data; thus it is interesting to compare the size of the silver market as announced by Bloomberg with the size of the physical silver market. And this is where things get interesting… In a recent interview, David Morgan confirmed that the annual physical silver production is of roughly one billion ounces. With silver trading around $20 currently, this represents a $20 billion market for physical silver. So the size of the physical silver market is of $20 billion, whereas Bloomberg is mentioning $5 trillion.” (Fabrice Drouin Ristori  Founder/CEO Goldbroker.com)

 
*Silver as of today is trading at $16.59/£10.77 an ounce, so this widens the incongruence between physical value and paper price even further.
 

In Conclusion – all the above facts would seem to suggest that this is a buying opportunity for Physical Silver (and Gold) in a time when the moves in the paper market are tempting the smaller investor to “shake out weak hands” from the physical market. Bleyer believe that physical precious metals are a traditional form of wealth protection to “hold long.”

Browse both Bleyer’s Silver Bars and Coins, together with this week’s Special Offers.  In addition, take a browse of Bleyer’s Storage Facilities both on and offshore, as well as our Safes and Gun Cabinets.  Specific products also offer VAT and CGT free investments.

Call one of the team today or email sales@bleyer.co.uk to find out more about how you could start buying Physical Silver and Gold coins and bars now – before the financial turmoil hits the markets.

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