Best Financial Markets Analysis Article Most futures traders have learned to accept or pay cash in exchange for rolling their futures contracts out when delivery approaches. Just about everybody now knows that physical delivery cannot actually happen in the silver market.

Not even close to enough actual metallic silver exists to satisfy all of the outstanding futures contracts. Those who trade futures are captured by the paper market and would rather not be part of a default – so they ultimately lose.

Most Traders Stay Silent About Manipulation

Traders typically depend on profiting from a market system as it currently exists, and this explains why so many traders, even the most public and vocal among them, tend to remain silent about the unbalanced structure of the paper gold and silver futures market.

Some traders just turn a blind eye to the situation, while some of them even adamantly insist that the impact of manipulation on the silver market is negligible.

Perhaps if you are a deep pocket long trader who looks the other way and plays the chances of receiving premium over position as an incentive to roll the contract, some money could be made. There have been rumors of this happening - although unconfirmed.

Price Suppression Facilitated by Futures Market

Nevertheless, the fundamentally unbalanced process of the seller of a futures contract being able to make a cash payout in lieu of delivering physical metal simply facilitates price suppression.

Not-for-profit agencies that can print enough Dollars to pay for any trading losses they might incur can use this mechanism to keep silver and other strategic commodity prices artificially low.

As long as such agencies continue to be able to cover their trading losses with manufactured and intrinsically worthless paper or electronic cash, the legitimacy or integrity of the COMEX and the Chicago futures exchanges can be maintained a little while longer.

As GATA and others have been pointing out for years, most miners are also complicit in this price suppression process, as well as those who business it is to evaluate and recommend them.

Key Data Releases Still Shock the Market

Meanwhile, momentum traders will remain subject to what happens on almost every major data release. Consider last week's Non-Farm Payrolls release as an example. One minute before the data release all orders are pulled and trading volume is virtually non-existent in the barren pre-release market.

As the data is released, the algorithmic traders get it first, so they slam large orders into the market. A second or so later, real traders respond by adding to these orders at market and the computerized algorithms start to sweep in their profits. This drives the price as stop loss orders are triggered and slower or more cautious traders start to enter the market.

For the last NFP release, it was well known that the number would be pretty much the same as October’s result. Revisions would also not matter much, now that the U.S. election is over. Nevertheless, when the release actually happened, the gold and silver got slammed.

All of this trading occurs in parallel with the historically loose monetary policy adventure devoted to debasing the U.S. Dollar. Not only will this policy lead to further mispricing for just about everything, but its primary risk will be to awaken the beast of hyperinflation in the United States.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

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.

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

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.