www.silverseek.comSilver Prices in the Event of a Comex Default
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January 4, 2013 - 9:23am
If
and when the Comex silver market implodes, so should the paper market
for silver. Nevertheless, can this happen and will it happen?
Also,
if a Comex default does occur, what are the likely scenarios and
aftermath that will impact silver traders and the price of silver? The
following sections explore the increasingly likely possibility of a
Comex default in further detail.
Inability to Deliver Physical Silver
Perhaps
the most likely scenario of a Comex “default” would involve the
inability to deliver physical silver into its futures contracts due to a
pronounced and protracted physical metal shortage.
In
this case, those holding paper certificates instead of actual physical
silver will probably be settled at the cash value of their position once
the physical delivery problem finally comes to a head.
At
this point, trading in silver futures on the Comex will probably also
be halted temporarily while the market figures out the real price of
physical silver.
Pricing Implications of a Comex Default
Of
course, a Comex default of this type means that you will not be able to
buy silver from the usual markets until the dust settles. Also, when
said dust has finally found a resting place, silver will undoubtedly be
priced much higher.
That
is because the price of silver will be based on the actual amount of
silver metal in circulation, rather than on the inflated amount of
silver paper that has suddenly been turned into paper money instead.
Some
of the silver pricing figures proposed are difficult to believe outside
of a full dollar collapse (on the order of $500+/ounce), but seeing the
price of silver more than double from where it is today would be
trivial in a Comex default scenario.
Indeed,
if silver’s price were only adjusted to the historical 17:1 pricing
ratio with gold, then silver would be trading at roughly $100/ounce,
which is basically triple the current price.
A Comex Default Would Help Discover the True Price of Silver
On
a global basis, the value of money shrinks when compared to the actual
value of silver metal. The discovered price of silver after a Comex
default would therefore rise, but the key is that the result would be a
more accurate and un-manipulated price based on the higher intrinsic
value of physical silver. This is what the silver market currently
lacks.
As silver analyst, Ted Butler,
has pointed out for decades, by virtue of concentration, the paper
metals futures market and OTC derivatives are currently being used to
actively manipulate and interfere with the price discovery mechanism of
silver and gold for profit, with the covert goal of suppressing precious
metal price increases in U.S. Dollar terms.
Nevertheless,
silver is much more strongly manipulated via this mechanism, so the
presumption is that when actual price discovery happens, the market will
see silver's price rise significantly. This is why long-term silver
investors say that silver is on sale.
If
and when a Comex default does happen, traders will also probably see at
least one major bullion bank (J.P. Morgan Chase) require some sort of
extraordinary support, which might be done covertly to avoid exposing
the manipulators acting behind the scenes.
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 http://www.silver-coin-investor.com
About Dr. Jeffrey Lewis / Commentary Author
"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".
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