Inventory-Fraud Increases in Silver Market

When I first began examining supply/demand data on the silver market several years ago, I was somewhat hesitant to form conclusions, as silver (and gold) have traits which are very different than ordinary commodities – which affects supply/demand analysis. The second factor which made such analysis more difficult was that supply and demand are reported much differently than for ordinary commodities.

Generally, the supply/demand equation for a commodity is very simple: “supply” is the total amount produced, while “demand” represents consumption. When supply exceeds demand, the remainder is added to inventories, while when demand exceeds supply, the deficit must be taken from inventories.

Reporting of supply and demand for the silver market is totally different. While I originally deferred to such reporting as reflecting the different nature of the silver market, it has now become obvious that the convoluted manner in which supply and demand is reported is simply another deliberate attempt at deceit in this market. In fact, when we look at the numbers closely we see a clumsy sham which should not be able to fool a reasonably perceptive 12-year-old.

Regular readers are already familiar with one facet of this fraud, since I have mentioned it frequently in previous commentaries. All of the “silver” (supposedly) held by bullion-ETF's has been added to silver inventories – the major ruse used to hide the fact that silver inventories are over 90% lower than they were 20 years ago. Since I still get questions and remarks from readers who express doubt about my characterization of this as “fraud”, let me explain this scenario slightly differently.

Let me begin with a definition. An “inventory” is the quantity of a particular good which is warehoused and ready to be sold. When an investor decides to purchase an ounce of silver, obviously that ounce is then subtracted from inventories. It should not make any difference how or where that ounce of silver is purchased. However, suppose our hypothetical silver investor has not read my commentaries – and thus does not know that SLV (the largest, so-called silver bullion-ETF) is nothing but a massive JP Morgan sham.

Instead of buying the ounce of silver directly, our foolish investor chooses to purchase a unit of SLV. Essentially, he is designating SLV as his “agent” to buy and store the bullion on his behalf. So, SLV buys the ounce of silver, and it is then subtracted from inventories (like any other purchase). However, immediately after purchase, SLV takes the investor's ounce of silver and dumps it back into the silver inventory – where anyone else in the world can buy that ounce of silver.

Obviously, SLV has turned this into a sham-transaction. If the investor buys the ounce of silver directly, it is permanently removed from inventories (unless/until that investor chooses to sell it). However, with the SLV shell-game, since every ounce of silver “bought” by SLV is immediately added-back into inventories, what this means is that every unit of SLV could (theoretically) simply be the same ounce of silver purchased and re-purchased hundreds of millions of times by SLV unit-holders.