After expanding debt by more than $8 trillion and printing at least $85 billion per month, monitoring the "price" of practically anything is a risky option.
Among other distortions created by price controls, sentiment is particularly vexing for the precious metals market.
The Role of PM Sentiment
First off, the banks that determine prices are trading houses that go months at a time without a trading loss.
Second, the sample used to measure sentiment is based also on an entirely paper affair.
And finally, poor sentiment merely turns away would-be investors, who are mainly of the electronic or paper variety. Sentiment has effect at the margin, but only for the weakest of holders.
The Core Investor
Real physical accumulators are a tiny minority, but their potential influence is far-reaching as physical offtake ultimately leads to a supply bottleneck, particularly with silver, given its vast industrial offtake competing for investment demand.
Furthermore, a slowly growing pool of readily available supply against a relatively small addition of new supply (from mining) results in a higher stock to flow ratio -- a key feature commodity money.
Buying Back Paper to Accumulate Physical
On the surface, the mechanism by which the bullion banks accumulate metal appears to be hatched by geniuses -- if it were not so completely illegal and immoral. Just because is it not "prosecutable" does not make it right.
Using their concentrated short position or corner on the short side of the market, the four biggest bullion banks in the commercial category of COMEX traders use essentially two methods to manipulate prices:
- They use HFT (High Frequency Trading) to spoof algo-controlled (or weak) longs into selling
- They take out the bid-ask stack (or put up enormous positions for sale) in low-volume, overnight trading, triggering stop-losses and more selling.
The result is the not only wild volatility in prices -- moves that have very little to do with market size -- but also a lower entry point buying opportunity for the bullion banks.
This will likely go on as long as these very same banks go unregulated and are celebrated by the investing community for their stellar price performance.