Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Silver and the Nature of Supply and Demand

Commodities / Gold and Silver 2012 May 05, 2012 - 02:01 PM GMT

By: Dr_Jeff_Lewis

Commodities Many observers of the silver market have wondered why futures prices for silver seem so low when demand for the physical metal continues to increase in the face of an ever dwindling supply of the precious and industrial metallic commodity. 

In essence, the economic model of price determination by supply and demand factors would seem to indicate a considerably higher equilibrium price for silver than what is currently prevailing.


As a result, frustrated silver holders often eventually conclude that the silver futures market is simply being manipulated by those with a compelling interest in seeing the price of silver at unrealistically low levels, perhaps so that they can more easily purchase the physical metal themselves.

How Supply and Demand Theoretically Determine Prices

According to the theoretical supply and demand model of price determination, the price per unit of a commodity will fluctuate until it stabilizes at the level where the amount demanded at that price is equal to the amount supplied at that price. The result is an equilibrium state in terms of price and quantity.

The traditional relationship between supply and demand is often depicted by a graph plotting quantity on the x-axis against price on the y-axis for both the inclining supply curve and the declining demand curve.

These curves generally slope in opposite directions since rising prices tend to both decrease demand and increase supply, while falling prices tend to increase demand and decrease supply of a commodity.

The point of intersection between these curves represents the equilibrium price and quantity for the commodity, which should ideally be the same as the market price.

Covert Silver Market Manipulation Could Eventually Create a Crunch

If the silver market is indeed being secretly manipulated by the use of paper futures contracts to keep physical metal prices artificially low, as some people believe, then the market may well be a coiled spring just waiting to snap and propel silver prices upward.

They argue that if this manipulation ceases, the result could be a substantial market crunch when the forces of supply and demand for silver are ultimately allowed to find their equilibrium point at a considerably higher price level.

For example, if metal futures exchange rules were changed so that all silver futures contracts were required to be settled in physical metal, rather than just having physical delivery be at the option of the future contract’s seller, then any manipulation of the silver market by those excessively rich in printable paper currency would very likely have to stop.

The price of silver would then probably rise to meet its proper equilibrium level, unless more manipulative steps were taken to prevent this from occurring.

***
"In addition to running a busy medical practice, Dr. Jeffrey Lewis is the editor and publisher
of Silver-Coin-Investor.com, where he provides practical information for precious metals
investors".

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Alex Sannet
06 May 12, 15:34
Price manipulation

I agree with Dr. Lewis' comments but have a slightly different view. While I believe market manipulation is responsible for the current price of silver I think it's because the manipulation caused the falsely inflated prices we saw peaking at $48 last year around this time. This is simply the rubber band snapping back. I don't doubt the price will spike again once there is some new opportunity speculators can exploit. And sure enough, those same people who were predicting $100 per ounce silver will once again be shouting it's the end of the world and we'd best prepare.


Kent
06 May 12, 20:06
silver facts

#1 Silver demand is decreasing - industrial usage. 2. Investment(speculative) demand is what sent silver up. Large speculators hold about the same number of long contracts as when silver was $44 Remember producers are almost always sellers as they are now. #. 3. Silver inventories at the Comex are at 11 year highs. Speculators buy as the market rises and sell as the market declines. The producers sell but reduce selling as prices decline. Since prices have been declining the speculators have been liquidating their longs but have much left to sell.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules