first majestic silver

Is The Gold/Silver Ratio "Saying" Something?

March 9, 2016

How egregious is the gold Cartel getting, in its final “death throe” stage? Well, here’s the chart I posted yesterday, of the essentially “sixth sigma” similarity between “trading” Sunday and Monday night, as well as Monday and Tuesday morning. Everyone could tell this paper market was rigged with identical algorithms.

Well, it was no different Tuesday afternoon and evening – with PMs again capped and/or attacked at the historical “key attack times” of 10:00 AM EST, 2:00 PM EST, and 2:00 PM; and for the third straight day, with the time and trued “8:00 PM EST algorithm.” In fact, when I looked at Zero Hedge to see if any actual news had emerged to explain the 8:00 PM raid, the top story was…drum roll please…“GLD ETF holdings rise for record 40th straight day!” I.e., the massive institutional demand surge I have been pounding the table about this past month. Which, I might add, drove the PSLV closed-end silver fund to close at a whopping 5% premium to net asset value yesterday. In fact, yesterday’s horrifically blatant suppression was as bad as I’ve ever seen it; as from the second I awoke, throughout the course of the day, the reasons to own PMs – from falling oil and stock prices; to China’s unfathomable plunge in February exports; Japanese 30-year bond yields closing in on negative territory; and the aforementioned surge in institutional buying, was as powerful as ever. And yet, PMs were mercilessly attacked from the second the New York “pre-market” opened, to the second the NYSE closed!

And then there’s today. When, amidst a night in which no material news emerged – other than yet another large API crude oil inventory build – PMs recovered all their “8:00 algo” losses – and actually avoided the “2:15 AM” algo for the fifth time in a row, after having never avoided it for more than a day or two in a row in the past three-plus years. That is, until a prototypical “Cartel Herald” algorithm arrived just before 6 am EST, and bombed prices for absolutely no reason other than to “put them back in their place.”

Yes, it’s that obvious! Let alone, on a day when we learned that India’s 2015 gold imports were nearly at a record level (likely, above said record, when incorporating the enormous black market catalyzed by the 10% import tariffs its psychotic government instituted in late 2013). And as for silver, the world’s largest silver consumer literally blew the doors off the previous record level of imports. Again, despite 10% import tariffs!

Under such circumstances, could any sentient being believe the exact same pattern – of paper attacks the second New York awakens – be considered anything but blatant manipulation?

To that end, “Simon Black” of Sovereign Man published an interesting article yesterday, titled “4,000 year-old financial indicator says major crisis looming.” That “indicator,” in their view, is the gold-silver ratio spiking to its current, utterly ridiculous level of 82x. Their conclusion, per below, is that the only times in the past century it has been this high were World War II, the Gulf War, and the 2008 crisis, per the below chart. And guess what? For once, I disagree with Simon Black entirely!

For one, the gold price was fixed at $35/oz during World War II, so there wasn’t any free-market based “trading” of the gold/silver ratio. Secondly, I’m not sure how the “Gulf War” can be considered a cataclysmic political or economic event – as per the below chart of the Dow Jones Propaganda Average, it doesn’t even register as a blip.

To the contrary, what the Sovereign Man chart is really “saying” is that since the gold standard was abandoned in 1971 – particularly, since the gold Cartel’s current incarnation was launched in the mid-1990s – not only has the gold/silver ratio been significantly above historical averages (between 5:1 and 15:1 for the prior 4,000 years, according to the article), but characterized by extreme volatility – including three spikes above 80:1, and three plunges to 50:1 or below.

Absolutely, Simon Black is correct that the ratio surged during the 2008 crisis, as well as the current, unfolding global crisis (and yet, the PPT-supported Dow is still just 8% from its all-time high). Of course, this time around, global silver demand is at an all-time high, orders of magnitude above any period in history and, according to the Indian import chart above, 3x more than even 2008 – as validated by the below chart of U.S. Mint Silver Eagle demand. I mean, amidst a global economy that has both qualitatively and quantitatively plunged to its weakest level since the Great Depression, what other product, of any kind – aside from gold – can claim a tripling in demand? Let alone, as production has peaked; above-ground inventories vanished; and Central bank money printing, amidst a sea of unprecedented, parabolically rising debt, surged exponentially?

No, my friends, there is one reason – and one reason alone – why the gold/silver ratio has surged to 82:1. Which is, that amidst the unfolding of the worst currency crisis the world has known, the “powers that be” are desperately, in unprecedentedly blatant fashion, attempting to prolong the dying status quo by attacking – with paper futures, options, and ETF algorithms – the “canary in the coal mine” that the tiny, rapidly tightening silver market represents.

Quite clearly, said “Cartel” is on its last legs. And when it comes to silver, my 27 years of financial market experience, including 14 in Precious Metals, makes me as confident as anything I have concluded, that the gold/silver ratio is not sustainable at such lofty, manipulated heights. Whether it ultimately falls to 2011’s low of 35, or something closer to the historic average of 5:1 to 15:1, it’s difficult to conclude anything other than that silver is the most undervalued asset on the planet; even relative to gold, the second most undervalued asset!

P.S. 24 hours from now, the ECB is expected to potentially dramatically expand its psychotic, Euro-destroying NIRP and/or QE programs. Gee, I wonder why the Cartel is so violently suppressing gold and silver!

Courtesy of

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

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